(EXPANDED FROM 11/3/2022)
Mitsubishi’s U.S. sales have somewhat stabilized in recent years, but they are still well below seven other entry-level Asian brands. That’s quite a fall for a brand that in the year 2000 ranked No. 4, behind Toyota, Honda and Nissan.
For all the media puffery about Mitsubishi’s supposed comeback, it strikes me as a failed brand. And that raises the question: What went wrong?
A few years ago Paul Niedermeyer (2020) offered an interesting theory. He suggested that the Japanese automaker made a big mistake when it entered the U.S. market by teaming up with the Chrysler Corp. In the early-70s rebadged Mitsubishis were sold through Dodge and Chrysler-Plymouth dealers. This contrasted with the strategy used by Toyota, Nissan and Honda, which got their start in the U.S. by launching their own brands and dealer networks.
“Mitsubishi missed out on the best years in which to create a strong U.S. operation,” Niedermeyer (2020) argued. “And they never fully caught up with the others as a consequence.”
This theory makes intuitive sense, but let’s test it with the sales data.
Despite late start Mitsubishi did well — for a while
Mitsubishi didn’t begin to sell cars under its own brand and dealer network until 1982. That was more than a decade later than its two closest rivals, Subaru and Mazda. Even so, by the end of the 1980s Mitsubishi was outselling Subaru. Within another decade the brand would outsell Mazda as well.
The graph below shows how Mitsubishi’s golden years were 1999-2003. During that time period the automaker averaged over 300,000 units per year in the U.S. But then sales collapsed. In 2009 Mitsubishi sold less than 54,000 units.
Analysts blamed a number of factors. Perhaps the most significant one was a reckless effort by Mitsubishi’s financing arm to goose sales by loaning to an unusually high proportion of credit-risky buyers. Meanwhile, a recall cover-up scandal in Japan may have tainted the brand’s reputation in the U.S. as well (Wikipedia, 2020).
Mitsubishi got too big for its britches
An additional factor spurring Mitsubishi’s downfall may have been that the automaker vainly tried to compete model for model against Toyota, Nissan and Honda. Mitsubishi simply did not have the resources to keep up. The stacked graph below shows how the automaker was a marginal player even at its peak.
The next graph gives a more granular sense of why this happened. Beginning in the early-80s, the Toyota, Honda and Nissan brands saw their sales soar above Mitsubishi, Mazda and Subaru. (Note that these figures do not include the luxury brands introduced by each of the “Big Three” Japanese automakers.)
For example, Honda — which as late as 1971 sold under 10,000 units in the U.S. — topped 1 million for the first time in 2000. Even in its peak year of 2003 Mitsubishi sold only 346,000 units.
The mismatch in scale can also be seen when you compare individual models. Mitsubishi’s entry into the mid-sized family car field, the Galant, peaked at 97,000 units in 2002. That was only one fourth of the Honda Accord’s volume.
Things only got worse from there. By 2009 the Galant had tumbled to under 12,000 units. This wasn’t nearly enough volume to support a competitive design. Thus, the car was discontinued in 2014. A similar pattern occurred with the automaker’s other once-promising models, such as the Eclipse and Lancer.
Subaru overtakes Mitsubishi by focusing on AWD
Subaru made the same mistake as Mitsubishi in the late-80s when it tried to compete directly against first-tier Japanese automakers. Sales fell almost in half from 1986 to 1994.
Unlike Mitsubishi, Subaru did not keep beating its head against the wall. Instead, the brand shifted back to pioneering new niches. Since 1997 Subaru has focused entirely on a relatively narrow range of all-wheel-drive vehicles. This strategy has been wildly successful. As a case in point, from 2009 to 2019 sales more than tripled to 700,000 units.
Meanwhile, Mazda has adopted a hybrid strategy. It has continued to compete in a few high-volume fields while also offers niche vehicles.
The positive side of the coin is that Mazda has maintained fairly consistent sales in the 300,000-unit range. The negative side of the coin is that the brand has not experienced a post-2010 recession boom like its larger competitors. This is despite having entries in fast-growing CUV fields.
Hyundai and Kia show late entry can be successful
Another useful set of data is how the Korean brands Hyundai and Kia have fared in the U.S. compared to Mitsubishi.
Hyundai entered the U.S. market in 1986. That was four years after Mitsubishi launched its own brand and dealer network. Initially, Hyundai’s sales were higher than Mitsubishi’s on the strength of its entry-level Excel models. However, quality issues resulted in Hyundai sales hovering below Mitsubishi’s up through 2001. From then on, Hyundai volume mostly moved upwards.
Kia had a much slower start than Hyundai but surpassed Mitsubishi in sales in 2003. By 2019 Hyundai and Kia were both selling upwards of 600,000 units. In contrast, Mitsubishi barely surpassed 121,000 units.
A key takeaway from this crowded graph is that Hyundai and Kia managed to establish themselves as almost full-line brands in the U.S. despite being later entrants than any of the Japanese automakers — including Mitsubishi.
Also see ‘Mitsubishi tanked in U.S. due to epic mismanagement and lack of vision’
That said, Subaru’s sales from 2017-2020 ran neck and neck with Hyundai and Kia. This occurred despite Subaru having a narrower lineup of vehicles. This shows how a smaller automaker can be successful by focusing on niches rather than trying to compete with bigger competitors model for model.
So should Mitsubishi have gone it alone in the 1970s?
Now that we’ve run through the relevant sales data, let’s go back to Niedermeyer’s theory. Would Mitsubishi have been better off building its own distribution system in the U.S. rather than tying its fortunes to Chrysler?
We should start by noting that Mitsubishi benefitted from more than getting a quick foothold in the U.S. market. In 1971 Chrysler bought a 15-percent stake in the Japanese automaker and distributed its vehicles worldwide, although that declined with Chrysler’s disposal of almost all of its foreign holdings in the late-70s. Mitsubishi also supplied Chrysler with engines (Hyde, 2003).
When Mitsubishi later launched its own U.S. distribution network, it proved to be competitive with Subaru and Mazda. One reason why may have been that Mitsubishi was already a known quantity even though its cars had been rebadged. In addition, the marketplace was fluid enough in the 1980s and 1990s that you could ramp up a new distribution network fairly quickly.
A countervailing argument is that Mitsubishi might have been able to grow its sales well above that of Mazda and Subaru if had gone its own way in the early-70s. A key reason why is that Mitsubishi’s products might have sold better at the automaker’s own dealers. In the 1970s, typical Chrysler dealers likely emphasized bigger cars because they generated greater profits than smaller cars. Another consideration is that Mitsubishi could have also better controlled the quality of dealer service if it built its own network.
An independent Mitsubishi could have plausibly grown into an almost full-line brand akin to Hyundai. Or it could have enjoyed a similar level of success as Subaru in recent years by focusing on niche markets. At the very least, Mitsubishi should have done at least as well as Mazda.
That said, I don’t see in the data direct evidence that Mitsubishi’s failure in the U.S. is primarily a result of its tie-up with Chrysler. A series of bad decisions around the turn of the century would appear to have had a bigger negative impact. The biggest mistake of all would appear to have been overextending its limited resources with a range of “me-too” products.
A new beginning or the end?
Every once in a while Automotive News publishes a story that suggests Mitsubishi is making a comeback (e.g., Iliff, 2020; Greimel, 2022). The automaker invariably points to new-found economies of scale from a “strategic partnership” it entered into with Renault and Nissan in 2017 (Wikipedia, 2023). The tie-up has resulted in the second-generation Outlander sport-utility vehicle being placed on the Nissan Rogue’s platform (Iliff, 2020).
Last spring Mitsubishi projected that North American profits would soar due to lower incentives, better foreign exchange rates and solid sales of its Outlander plug-in hybrid crossover Greimel, 2023). In the U.S. sales did increase 3 percent in the 2023 calendar year to almost 89,000 units. That was somewhat better than the dismal levels of 2012-13, when they hovered around 60,000 units. However, over the last two years sales have dropped off from roughly 101,000 units in 2021 and more than 121,000 in 2019.
What’s the problem? Could it be that the automaker doesn’t stand out from the crowd . . . at least aside from the Outlander’s bizarre front-end styling?
Mitsubishi seems to think that it is worth staying in the U.S. market, where in 2022 sales represented about 10 percent of the automaker’s total global output. That ain’t nothing, but Mitsubishi is now such a marginal player in the U.S. that it could very easily be washed away in the next recession.
What’s tragic is that Mitsubishi could have been somebody. And perhaps it still could if it pioneered new market niches in the U.S., such as a modern simple car (go here for further discussion).
NOTES:
This story was originally posted on July 24, 2020 and expanded on Oct. 3, 2022 and Feb. 9, 2024. U.S. sales figures are from carsalesbase.com (2022) and Automotive News (2023).
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RE:SOURCES
- Automotive News; 2023. “U.S. light-vehicle sales by nameplate – 2023 vs. 2022.” Dec. 25 issue: pp. 62-63 (subscription required; print edition).
- carsalesbase.com; 2022. Accessed Nov. 3.
- Greimel, Hans; 2022. “Mitsubishi bounces back to profitability.” Automotive News (subscription required). Posted July 28.
- ——; 2023. “Rebounding Mitsubishi expects North American profitability to surge.” Automotive News (subscription required). Posted May 9.
- Hyde, Charles K.; 2003. Riding the Roller Coaster: A History of the Chrysler Corporation. Wayne State University Press.
- Iliff, Laurence: 2020. “Mitsubishi promises next-gen Outlander in 2021.” Automotive News (subscription required). Posted July 22.
- Niedermeyer, Paul; 2020. Comment in “Curbside Classic: 1973 Mitsubishi Colt Galant (A50) 16L GS – Preserved For Posterity.” Curbside Classic. Posted 8:55 a.m., July 23.
- Wikipedia; 2020. “Mitsubishi Motors North America.” Page last edited July 19.
- ——; 2023. “Renault–Nissan–Mitsubishi Alliance.” Page last edited Dec. 3.
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