Mitsubishi, an Unlikely Electric-Vehicle Pioneer

With the i-MiEV minicar, Mitsubishi Motors is the first major automaker to begin mass-producing EVs

By Ian Rowley

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Compared with Japanese rivals Toyota (TM) and Honda (HMC), Mitsubishi Motors (7211.T) isn't renowned for its environmentally friendly lineup. Indeed, while Toyota was creating a market for hybrid cars with the Prius, Mitsubishi struggled to survive following an ill-fated tieup with Daimler (DAI) and Chrysler. The company has only made an annual profit four times this decade, and in the year ended March 2009 it lost $590 million on sales of $21.1 billion.

Yet when it comes to electric vehicles, Mitsubishi has emerged as an unlikely pioneer. At a time when global sales are plunging, this month the Tokyo automaker will begin the first deliveries of its i-MiEV to customers in Japan, making Mitsubishi the first major player to begin mass production of EVs.

While initial production this year will be limited to 2,000 and on a lease-only basis, Mitsubishi is taking orders from retail customers who are willing to pay around $33,000. As the company ramps up production, exports to Europe will follow in late 2010 and to the U.S. in 2011 or 2012. In Europe, Mitsubishi will also build EVs for PSA Peugeot Citroën (PEUP.PA), which already sells two SUVs based on Mitsubishi's Outlander and shares a factory with the Japanese carmaker in Russia.

Green Is a Necessity

For Mitsubishi President Osamu Masuko, the automaker's plans for green cars are a necessity. "We have to understand that the automotive industry is facing a big change; the business model that worked for the last century will not be sustainable in the future," he said in a recent interview at the company's Tokyo headquarters. And with reserves of oil diminishing and growing customer interest in alternative energies, Masuko, who has been using a chauffeur-driven red-and-white i-MiEV for a year and a half, reckons developing environmentally sound products is key to the company's survival. "We need to show concrete actions on how Mitsubishi Motors will meet these [challenges]," he says. "It's important to take the first step."

Mitsubishi could certainly do with a boost. The automaker is pushing ahead with its electric plans at a time when the wider auto industry is in crisis. With sales depressed in most markets, Mitsubishi expects worldwide sales to plunge 17%, to 836,000 vehicles, during the current financial year, down from 1 million last year. In the U.S., June sales slipped 42%, to just 4,362. And even if sales recover, analysts aren't confident of a quick return to profit. Andrew Phillips, an auto analyst at KBC Securities in Tokyo, projects that Mitsubishi will make a net loss of $211 million during the current year and make only a small $105 million net profit by March 2011. "Their foremost priority is survival," he says.

The i-MiEV, based on the popular Mitsubishi 660cc i minicar, is just the beginning. Masuko says the company will follow up with a slightly larger electric vehicle of a similar size to the Honda Fit or Toyota Yaris compacts, and a commercial vehicle based on the i-MiEV.

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