Although Akio Toyoda rejoined the board with about 85% of support at the shareholders' meeting, the approval rate was the lowest in five years (96% last year). In Japan's consensus-based corporate culture, even a negligible drop in support for Akio Toyoda, who is at the center of a storm, would be considered embarrassing by those involved. The whole drama was about Akio Toyoda not believing the world is ready to go fully electric. He has cited insufficient charging infrastructure, shortage of battery materials, and the reliance on carbon-emitting fossil fuels for power generation in many countries as reasons for refusing to commit to electrifying the entire product portfolio. Rather, he prefers to adopt a more cautious approach to driving the electrification of Toyota Group's products.
In addition, Nissan's COO Ashwani Gupta has announced that he will leave the Japanese automaker on June 27, mainly because Nissan and Renault are negotiating the restructuring of their alliance. Nissan's CEO Makoto Uchida wants to conclude the negotiation with Renault as soon as possible, but Ashwani Gupta is urging that the terms of the alliance restructuring should be treated more prudently. The heaviest focus of the negotiation between Nissan and Renault, in addition to changes in the percentage of cross-shareholding and voting rights (Note 1), encompasses Nissan's planned investment in Renault's EV division, Ampere.
Nissan is a pioneer in the development of EVs in the international auto arena. The Nissan Leaf was launched as early as in December 2010 and won the 2010 Green Car Vision Award in the same year. It went on to win the 2011 European Car of the Year, the 2011 World Car of the Year, and the 2011–2012 Car of the Year Japan for two consecutive years. The Leaf was the best-selling electric car up until 2019, with more than 600,000 units sold to date. Given Nissan's EV dominance in the alliance, we can't comment on whether it is the cause of Ashwani Gupta's disagreement with Nissan's negotiation with Renault, ultimately resulting in his inevitable departure from the company.
Another Japanese carmaker, Mitsubishi, is mired in rumors about ending its business in China. President Takao Kato cleared up the rumors at a press conference in early May, saying the company had no plans to withdraw from the Chinese market. Despite "facing difficulties in China," Mitsubishi will resume production at the company's only plant in China, Changsha, in June as planned. However, Mitsubishi's Chinese joint venture partner, Guangzhou Automobile Group, no longer listed Mitsubishi in the April production and sales snapshot. In response to the "delisting" in the report, GAC said to outsiders that Mitsubishi's production and sales numbers accounted for a relatively small percentage and were therefore placed in the "other" category without being listed separately.
The figures show that GAC Mitsubishi only sold 3,969 units in China for the first quarter of 2023, a 58% decline year-over-year, and even after the debut of the redesigned Outlander in December 2022, sales did not improve. As a consequence, the Changsha plant had to halt production from March 8 to May in order to rebalance its parts inventory.
Mitsubishi's predicament in China may be due to the failure to align products with the pace of electrification in the Chinese car market. Mitsubishi's new energy products, the Eupheme PHEV and EV, were both discontinued in 2020, whereas the Airtrek EV, a China-only electrified product, was not available until 2022, but the product was a flop in the intensely competitive Chinese market because of its lack of core selling points, increased prices and reduced features, with total sales of less than 1,000 units in the first 18 months after its launch. These news stories have fueled speculation that Mitsubishi's exit is imminent.
In fact, whether or not Mitsubishi will exit the China market has been on the table since Takao Kato took office in June 2019. At the annual general meeting in June 2020, he forthrightly said that he would phase out Mitsubishi's operations in China and Europe, among other markets. Nonetheless, Mitsubishi later officially denied all speculations, "There is no plan to exit the China market," and further stated, "Mitsubishi will prioritize the reduction of fixed costs through structural reform to improve profitability in each country while effectively utilizing limited resources."
However, considering Mitsubishi's current sluggish sales figures in China, even though it posted its best operating profit since 2015 in fiscal 2022, the company recognized non-operating expenses of 12.1 billion yen in China and a special loss of 10.5 billion yen out of the 190.5 billion yen profit disclosed in its financial report. With all the above news factored in, Mitsubishi's next move in China is actually quite clear. (Note 2)
According to the financial reports published by Japan's seven largest automakers for fiscal 2022 (April 2022 to March 2023), each Japanese brand recorded its best profit figures since fiscal 2015. While the Nikkei has just hit a record high in 30 years, Honda is the only one whose stock price hit a new high since 2015 despite the new high in profit. On the other hand, there are three brands, Nissan, Mazda and Mitsubishi, whose stock price was less than half of the 2015 high (based on the closing price on June 16). The three brands underwent a decline of 16-40% in sales in China last year (2022 vs. 2021), and the decline deteriorated to 40-65% in the first quarter of 2023. Toyota and Honda, despite their better stock performance, both experienced a nearly 30% decline in sales in China.
Japanese brands are facing a common problem in China: their weak EV product line is leading to a significant decline in brand competitiveness. This is a major concern, as China is the world's largest single market for automobiles. A decline in this market will affect investors' confidence, which may be the real reason why the stock price does not reflect the excellent profit figures. I will continue by discussing this issue from the perspective of other auto market changes.
Note 1: The Nissan-Renault alliance was originally structured with Renault holding a 43% stake with voting rights, while Nissan held a 15% stake with no voting rights, but now in the negotiation, Nissan expects to cross-hold 15% of Renault with voting rights, which would give both companies equal voting power in the alliance.
Note 2: Japan's Yomiuri Shimbun reported on May 29 that Mitsubishi Motors would extend the shutdown of its Changsha plant in China until after June. The report also quoted sources as saying that there is no hope of resuming production at the plant.
About the author - Kenny Liu
Graduated from Dept. of Aeronautics and Astronautics, Cheng Kung University in 1988, started his auto industry career since July 1990 after two year military service. Starting as a service engineer and a temp technician, product marketing specialist in Peugeot/ Daihatsu, marketing and dealer channel specialist in VW LCV from March 1992, then field manager in GM Taiwan from Feb. 1994, sales and service / parts head in Ford Lio-Ho from Sep. 1998 till retirement in May 2019. Kenny then started to work for JLR Taiwan as sales/service head and consultant/ lecturer. After that, he was invited to work at a Suzuki dealer of Taipei as the general manager until April 2022.