Rebounding Mitsubishi swings back to profitability on hot new Outlander crossover

TOKYO – Rebounding Mitsubishi Motors Corp. bounced back to profitability in the latest quarter and lifted its full-year outlook on a better sales outlook as business picks up in the U.S.

The redesigned Outlander crossover fueled a U.S. sales surge, while the global microchip shortage had the positive side effect of crimping production, helping Mitsubishi clear inventories.

As a result, Mitsubishi was able to pull in new, higher-level customers with the Outlander while boosting profitability, CFO Koji Ikeya said Tuesday while announcing financial results.

The Japanese automaker swung to an operating profit of 10.6 billion yen ($95.9 million) in the fiscal first quarter ended June 30, reversing an operating loss of 53.3 billion yen ($482.1 million).

Mitsubishi also reported net income of 6.1 billion yen ($55.2 million), compared with a net loss of 176.2 billion yen ($1.59 billion) the same quarter the year before.

Global sales shot up 65 percent to 230,000 vehicles in the quarter, driven by a doubling of volume in North America and Southeast Asia and a near doubling of sales in Australia and New Zealand.

Revenue increased 88 percent to 431.9 billion yen ($3.91 billion) in the three months.

Easing the chip crunch

Because of the lingering semiconductor shortage, Mitsubishi had expected to lose 80,000 vehicles in the current fiscal year that began March 31. Amid the chip crunch, global inventories fell to 290,000 units in June, from 490,000 units in March 2020, before the hit.

But the chip shortage is expected to ease starting the autumn, enabling Mitsubishi to make up about half the shortfall. So, for the full fiscal year, it now expects a total loss of only 40,000 units.

One benefit of lower inventories was that it enabled Mitsubishi to rein in incentives and advertising costs, boosting profitability as it rolled out the redesigned Outlander in April.

In the April-June quarter alone, U.S. sales of the Outlander more than doubled to 6,954 units, from 3,020 the year before. The restyled offering, with updated technologies, helped Mitsubishi attract a better base of customers with higher credit scores, said Yoichiro Yatabe, executive vice president for sales.

The arrival of the Outlander also drove U.S. sales of the brand’s three other nameplates, Mitsubishi said. Total retail volume rose 106.2 percent to 25,146 vehicles in the April-June period.

Regional results

Mitsubishi’s North American business was able to notch a regional operating profit of 2.4 billion yen ($21.7 million) in the three months, erasing a 11.2 billion yen ($101.3 million) operating loss from the year before. Sales in Europe rose 20 percent to 36,000 units in the quarter.

“The effect of structure reform and restrained incentives, based on the tightening of inventories due to semiconductor shortages, led to an improvement in profitability,” Ikeya said in the briefing. “Going forward, we will work to maximize the effect of new products such as new Outlander.”

Results were buoyed by Mitsubishi’s structural reform program — a drive to restore profitability through cost cutting. The company had wanted to reduce total fixed costs by 20 percent over a two-year timespan, but it achieved the goal in just one year. A ramp up of digital marketing in regions such as the U.S. helped Mitsubishi rein in costs. Overall, structural reforms added 10.7 billion yen ($96.8 million) to Mitsubishi’s quarterly operating income.

Ikeya said Mitsubishi is making good progress toward its goal of deriving half its global sales from electrified vehicles in 2030. It has already introduced the Eclipse Cross PHEV compact crossover, its second plug-in hybrid, and it plans to release the redesigned Outlander PHEV in the second half of the current fiscal year ending March 31.

Meanwhile, an all-electric minivehicle geared toward the Japanese market is expected to land the following fiscal year.

“We continue to focus on product innovations and introducing new models,” Ikeya said.

Looking ahead, Mitsubishi upgraded its full-year outlook, citing better than expected sales, stricter control over sales expenses and a boost from favorable exchange rates.

It now expects to rebound from a big operating loss in the previous fiscal year to a 40.0 billion yen ($361.8 million) operating profit in the current fiscal year ending March 31, 2022. That marks an improvement over its previous forecast for an operating profit of 30 billion yen ($271.4 million) this fiscal year.

Mitsubishi expects global sales to increase 21 percent to 967,000 units in the current fiscal year, up from its initial outlook of 957,000 vehicles.

Naoto Okamura contributed to this report.