Sammy Chan, Senior Analyst

03 September 2020

Mitsubishi driven out of Europe

Mitsubishi recently announced a freeze on the introduction of new products in Europe. A new plan labelled ‘Small but Beautiful’ will allow the brand to focus on other core markets, where market share is greater, in the medium term.

So, why withdraw from Europe and why now?

In terms of the timing of the exit, the pandemic may well have accelerated the decision. However, pressure had already been building on multiple fronts for the least-mentioned brand of the Renault-Nissan-Mitsubishi Alliance. Last year may have been Mitsubishi’s best year of sales in Europe since 2007, but 171,000 units in 2019 still represented less than 1% of the region’s market share.

“To move forward in Europe, manufacturers are under pressure to meet emissions regulations with increasingly strict CO2 targets.”

The Mitsubishi Eclipse Cross was one of the key drivers for the brand’s sales over the last two years, but its 1.5L petrol engine also emits between 177-196 g/km of CO2 (depending on the specification), which puts it closer to Porsche Cayman (185 g/km) territory than a comparable competitor like the Renault Kadjar (110-138 g/km). To move forward in Europe, manufacturers are under pressure to meet emissions regulations with increasingly strict CO2 targets. It was announced that the Suzuki Jimny would be axed from Europe, due to emissions regulations, and this could well have been the fate of some Mitsubishi models, even if the brand remained in Europe.

Sales of less polluting (and therefore often smaller) models might help to alleviate this issue. However, the brand’s hands are tied by relatively weak sales of the Mitsubishi Mirage hatchback in Europe, which peaked at a mere 39,000 units last year. One of the Mirage’s main appeals is its price, but even in that respect it is undercut by the more successful Dacia Sandero. We already forecast pressure coming from Premium brands, to take share from Non-Premium, but with Economy sales rising from Dacia, it seems that Mitsubishi has been caught in the crossfire.

Perhaps the brazen approach would be to simply increase the price of your vehicles, to make up for any fines related to the emissions targets. The jointly developed Subaru BRZ and Toyota GT86 sports cars are almost identical, yet, at the time of writing, the BRZ starts at £32,020 and the GT86 at £29,005. Toyota, though, has the luxury of having an assortment of hybrid and electric vehicles to help reduce overall fleet CO2 targets.

Each of the above factors – from emissions regulations to tough market conditions, Premium segment pressure, domestic competition, and pricing – poses a nightmare scenario when it comes to the question of viable profitability in the European market. To confront all of them together, though, makes market exit an appealing alternative.