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Mitsubishi Motors’ balancing game in China

With recent government approval, Mitsubishi Motors’ joint venture with Guangzhou Automobile Group Co., Ltd. (GAC) is expected to be officially established in September and the first locally produced model will be the Mitsubishi ASX, a city SUV.

The 50:50 JV will be based on the existing facilities of former Changfeng Motor based in Changsha, Hunan Province, which was Mitsubishi’s JV partner but has been acquired by GAC.

According to Mitsubishi Motors president Osamu Masuko, GAC-Mitsubishi will expand future vehicle lineups into Mitsubishi passenger cars.

However, such planning may cause discontent from the Fuzhou-based Southeast (Fujian) Motor, Mitsubishi’s other passenger car joint venture in China, in which Mitsubishi holds a 25 percent stake. Currently Southeast makes the Lancer, Galant, Zinger and Lancer EX.

Compared with leading JVs in China, Southeast has seen disappointing performance over the years. In 2010 it sold 31,850 Mitsubishi cars, down 77 percent compared with a year earlier. To turn around, Southeast has been talking with Mitsubishi on new model introduction, especially the introduction of Mitsubishi’s SUVs. Understandably this is because the average growth rate of the SUV segment in China from 2007 to 2010 has been over 100 percent, two times higher than that of passenger cars. But given the promise made to its new partner GAC, Mitsubishi is unlikely to introduce an SUV model to Southeast in the near future.

For Mitsubishi, teaming up with a new and more powerful partner may offer it new market opportunities in the world’s largest vehicle market. But like quite a few multinational companies in China, it will have to deal with trying to balance its relations between two partners.

As one of the earliest Japanese automakers to place a foothold in China in the 1980s, Mitsubishi has been very successful in selling technology to China. Its two engine JVs in Harbin and Shenyang have been China’s largest gasoline engine suppliers for a slew of local assemblers such as Brilliance, BYD, Geely, Chery, JAC, Great Wall, Zhongxing, etc.

However, Mitsubishi has been much less successful when it comes to vehicle production and sales. It has never been in a strong position to establish a 50:50 vehicle assembly joint venture until now. The Japanese automaker has missed so many golden opportunities in the past decades as China’s auto market rocketed from annual sale of 140,000 units in 1978 to 18.06 million in 2010.

Mitsubishi plans to sell 500,000 vehicles annually in China by 2015. To reach such a goal it has to rely much on Southeast since the first GAC-Mitsubishi vehicle, the ASX SUV, will not hit the market until the second half of 2012 and future Mitsubishi cars will come out the earliest in 2013.

Mitsubishi has to delicately balance its relationship with the two partners as far as introduction of new vehicles are concerned. As a relatively smaller global player, Mitsubishi will find it harder to do so, compared to global leaders such as Toyota, Volkswagen and Honda.

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