Firda Dwi Muliawati, CNBC Indonesia
Sunday, 01/10/2023 16:15 IWST
Photo: (CNBC Indonesia/Faisal Rahman)
Jakarta, CNBC Indonesia – The growth in the use of electric vehicles in the Bamboo Curtain Country, aka China, is growing rapidly. This made the Japanese car manufacturer, Mitsubishi Motors, withdraw from the Chinese automotive market.
Reported by Nikkei Asia, increasing challenges in the Chinese market, coupled with a weakening economy that pushed market competition towards the lowest prices, led Mitsubishi Motors to take the decision to ‘close the factory’ in China.
“There is no guarantee that we can make a profit in a competitive market like China. We might make the bleeding worse by trying,” said a Mitsubishi executive as reported by Nikkei Asia, quoted on Sunday (1/10/2023).
The company considers the risk of leaving China as a market, so it considers building a market in China difficult. Mitsubishi will focus as a mid-sized manufacturer and plans to focus on hybrid vehicles and electric vehicles in Southeast Asia and other countries.
Mitsubishi’s departure from the electric vehicle market in China is thought to be followed by other manufacturers. Tokai Tokyo Research Institute Senior Analyst, Seiji Sugiura, said that there would be other mid-sized car manufacturers that would follow in Mitsubishi’s footsteps.
“Mitsubishi took the initiative by withdrawing from a difficult market,” Sugiura said.
As is known, new car sales in China increased 1.5% this year for the January-August period. Despite a slight increase compared to the previous year, when the market was still sluggish due to the COVID-19 pandemic, sales have not yet reached 2021 levels.
When the economy slows down and buying appetite weakens, companies try to maintain sales volume by lowering prices. But it jeopardizes profits in the process.
Sixteen companies representing 90% or more of the Chinese market agreed in July to limit price cuts, but the deal was withdrawn due to antitrust concerns, and the price war shows no signs of stopping.
Intense competition is compounded by the spread of new energy vehicles which account for 30% of new car sales. This changed the industrial balance of power. Japanese automakers’ market share in China has fallen from around 20% in 2020.
Chinese automakers have also improved their quality. Initial problems per 100 new vehicles for Chinese brands declined from 212 in 2012 to 101 in 2019, which puts them within striking distance of foreign brands.
In this competitive environment, mid-sized automakers are reducing or restructuring their operations in China.
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2023-10-01 09:15:02
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