Mitsubishi's Exit from India: Reasons and Impact

Key Takeaways

• Mitsubishi Motors halted all Indian operations in early 2024 after a decade of losses.
• Weak sales, high import duties, and delayed EV incentives were the main drivers.
• The shutdown affected roughly 1,200 workers and two dealer networks.
• Competitors like Mahindra & Mahindra and Tata Motors leveraged local sourcing to stay profitable.
• Future foreign entrants must align closely with India’s localisation and emission rules.

When discussing the Indian auto sector, Mitsubishi Motors Corporation is a Japanese automobile manufacturer that entered India in 1998 and built a small assembly plant in 2008. After more than 20 years, the company announced the Mitsubishi India exit in February 2024, shutting down production, sales, and service operations. Understanding why this happened reveals a lot about how the Indian automotive market works today.

1. A Brief Timeline of Mitsubishi in India

Below is a quick look at the key milestones:

1. 1998 - Mitsubishi starts importing models like the Pajero and Lancer.
2. 2005 - Launches the first locally assembled vehicle, the Outlander.
3. 2008 - Opens a 40,000‑sq‑ft plant in Gurgaon with CKD (completely knocked‑down) assembly.
4. 2015 - Shifts focus to the Eclipse Cross SUV to chase the growing SUV segment.
5. 2020 - Sales dip below 2,000 units, the lowest in a decade.
6. 2024 - Announces complete withdrawal, citing unsustainable losses.

The timeline shows a pattern: initial enthusiasm, a push for localisation, then a steady decline as competition intensified.

2. Core Reasons Behind the Exit

Multiple factors converged, making the Indian market unprofitable for Mitsubishi.

2.1 Sluggish Sales and Market Share Erosion

From 2018 to 2022, Mitsubishi’s annual sales in India fell from 3,200 units to just 1,800 units, a 44% drop. Maruti Suzuki the market leader with over 50% share and Tata Motors a home‑grown rival that embraced electric‑vehicle (EV) launches ate up the SUV space where Mitsubishi tried to compete.

2.2 High Import Duties and Limited Localisation

The Indian government imposed a 30% import duty on fully built units (CBUs) and a 15% duty on CKD kits. Mitsubishi’s Gurgaon plant assembled about 70% of parts locally, far lower than the 80‑90% achieved by Mahindra & Mahindra. The cost gap meant Mitsubishi cars were priced 10‑12% higher than comparable domestic models.

2.3 Regulatory Hurdles - BS‑VI and EV Policies

In 2020, India switched to BS‑VI emission standards the toughest Asian norms, requiring costly engine upgrades. Mitsubishi’s diesel‑powered Outlander needed a redesign that never materialised. Meanwhile, the FAME India Scheme a federal incentive for EV purchases offered modest subsidies, but Mitsubishi had no EV-ready models ready for the market.

2.4 Currency Fluctuations and GST Burden

The Indian rupee weakened against the yen by roughly 12% between 2021‑2023, inflating component costs. Additionally, the Goods and Services Tax (GST) of 28% on luxury vehicles further eroded margins on Mitsubishi’s higher‑priced SUVs.

2.5 Dealer Network Strain

Mitsubishi ran only 35 authorised dealers nationwide, while rivals maintained networks of over 200 outlets. Limited reach meant low brand visibility, especially in tier‑2 and tier‑3 cities where most new car sales now occur.

3. The Fallout: What the Exit Means for Stakeholders

3.1 Employees and Suppliers

Approximately 1,200 plant workers received severance packages, but many skilled technicians faced limited alternatives in Gurgaon’s auto‑parts hub. Local suppliers lost a steady order stream of CKD components, prompting some to pivot to Tata or Mahindra contracts.

3.2 Dealers and End‑Customers

The 35 dealers were given a six‑month window to sell off existing inventory. Buyers who took delivery after the announcement now worry about spare‑part availability, though Mitsubishi pledged a ten‑year warranty on parts sourced globally.

3.3 The Indian Market Landscape

With Mitsubishi gone, the SUV segment’s competitive intensity slightly eases, giving Mahindra, Tata, and even foreign players like Kia more room to capture price‑sensitive buyers. The exit also serves as a cautionary tale for other Japanese marques considering a low‑localisation strategy.

4. Lessons for Future Foreign Entrants

Foreign automakers eyeing India can extract three actionable insights:

• Localisation matters. Achieving at least 80% local content reduces duty exposure and aligns pricing with domestic rivals.
• Align product launches with policy cycles. Launching EVs or BS‑VI‑compliant models soon after regulatory changes prevents costly redesigns.
• Scale dealer networks quickly. A broad footprint in emerging tier‑2 cities captures the bulk of growth, as the metro market is now saturated.

5. Comparative Snapshot: Mitsubishi vs. Domestic Rivals (2022)

The table highlights how Mitsubishi lagged on localisation and dealer reach, contributing directly to its higher price point and weaker sales.

6. What’s Next for Mitsubishi Globally?

While the Indian chapter closed, Mitsubishi continues to focus on its core markets-Japan, Southeast Asia, and the Middle East. The company is doubling down on electric SUVs like the Outlander PHEV, planning launches in Europe and Australia where EV subsidies are stronger. Analysts predict a modest 5% global revenue dip in FY2025‑26, offset by cost‑saving measures taken after the Indian shutdown.