Mitsubishi: ‘Old product is hurting us’
There’s no hiding it – Mitsubishi has some of the oldest products on the market, and the company’s global chief operations officer reckons that’s his biggest focus under the stewardship of the Renault-Nissan Alliance.
Mitsubishi COO Trevor Mann told media this week in Sydney that he wants to see shorter life-cycles and more investment in research and development – meaning newer cars that drive up to the standards of the classes in which they compete.
“Generically, I think we’ve got to start looking at managing the life-cycle and therefore the model age,” Mann said.
“I think one of our advantages is that we’re strong in SUVs and we’ve got a lot of them. How to make sure that we get good lifecycle on the core of our models is the number one priority. What we need to consider how to fix is the passenger car segmentation that we have,” he said.
“This is the balance you need to take,” Mann said when considering the potential impact of ‘old cars’ in the showroom.
“A lot of people talk about the Pajero as a good thing – and I think the advantage of that type of vehicle is that they’re all square boxes. Obviously the technology can’t be outdated, but the style of the vehicle and the people that buy them – apart from what they expect of the vehicle if they go off-road – I think they like the square, rugged image of the vehicle.”
When it comes to the Renault-Nissan Alliance, Mann suggested that the cost to essentially buy in to a segment is lower, because the brand doesn’t have to bear the burden of the entirety of the costs.
That in turn means that Mitsubishi can make its cars drive better, offer better levels of safety and technology, and still ensure that the brand has its own distinct identity – his boss, Carlos Ghosn, the chairman and CEO of the Alliance, wants exactly that.
“The investment that we’re making now from an R-and-D point of view, from this year, our financial year 2017, is much higher than it has been in the recent past,” Mann said.
“I thought that was a weakness when I came to the company. If you look over the last few years, we’ve been really investing about 3.5 to 4.0 per cent of our revenues in R-and-D. If you look at the industry average, it’s around 5.0 per cent. So what we’ve embedded in the plan from now is at 5.0 per cent.
“In theory, that 5.0 per cent can give us more bang for our buck in terms of the new platform development that we’ll be going into in the future, because we’ll be able to share the costs of the platforms with Renault and Nissan. That should allow us to have a better life-cycle management of our products, including the existing products that are around today.”
One example Mann gave was that Mitsubishi sells about 100,000 Outlanders globally per year, while Nissan sells five or six times that many X-Trails (that includes the Rogue, its name in the North American market). So the maths is easy – it takes Nissan a fifth of the time to make a profit.
On the flipside – and the reason Mitsubishi has so many older products – the costs of the platforms and technologies have been well and truly amortised after a decade on sale (the Lancer, for instance) and that means higher profit margins. Indeed, Mann said that’s one of the reason Mitsubishi Australia is held in such high regard in the company’s collective mindset.
“If you’re in a market and you’re performing reasonably well, and your profit level is higher than your average profit for your company, then every additional one you can sell makes the company a profit.
“That is the case for us here in Australia. We’re performing much better than the average performance in terms of the profit to volume ratio. This is why it needs to be one of our focus of attentions in the coming years,” he said.
Mann made it clear, though, that the company won’t rest on its laurels.
“It’s got to be the focus of our attention: we’ve got to make sure that we don’t drain it, but we feed it. We’ve got to make sure that we support the market where the brand is strongest, and generating the highest volumes and the best profits, and that’s what we’re going to do.”
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