Mitsubishi’s surprise announcement in July that it will throw in the towel and exit Europe highlights the wide-reaching problems that Japanese manufacturers – with the notable exception of Toyota – are facing in the region.

Ever more stringent local emissions and technical legislation combined with the region’s desire for ultra-sophisticated smaller cars has recently made Europe a far tougher place to do business, especially if all your big markets are elsewhere.

Mitsubishi said it will leave after the current generation of cars finishes production to concentrate on its profitable South-East Asia market, bringing to an end its run in the region that began in 1975. It follows out of the door Japanese small car specialist Daihatsu, which left in 2013.

Subaru is now barely clinging on, selling just 13,359 cars across Europe in the nine months to the end of September, according to figures from Jato Dynamics. Suzuki, meanwhile, has had to sharply adjust its line-up to meet new legislation, resulting in a drop of 40% in sales across the region, far worse than the pandemic-induced overall market fall of 29%.

Nissan, too, has fallen low after regularly competing with Toyota for the title of number one Asian maker in Europe, posting sales of less than half those of Toyota in the first 10 months of the year. Its market share in Western Europe was cut to 2.5% as Toyota raised its share on the back of hybrid growth to 5.4%, according to data from European car makers’ association ACEA.

Honda’s sales, meanwhile, reached just 40,640 in the same period, albeit with a sales drop more in line with the overall market at -33%.

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The Japanese car makers are driving against a harsh combination of headwinds. “From emissions regulations to tough market conditions, premium segment pressure and domestic competition pricing, they’re facing a nightmare scenario when it comes to the question of viable profitability in Europe,” said Sammy Chan, senior analyst at LMC Automotive.

The toughest of these headwinds right now looks like emissions, with the threat of fines from both the European Union and, from next year, the UK under its carbon-copy emissions regulations. “With CO2 targets so stringent in Europe, a clear BEV [battery-electric vehicle] strategy is needed to flourish in the next decade,” Chan said. “It can’t be said that Mazda, Suzuki and Subaru have identified BEV strategies in Europe at this moment.”

These aren’t problems that are unique to Japanese manufacturers, but the fact remains that Europe is at best a secondary market for most of them. Suzuki, for example, makes just 14% of its sales revenue from Europe and Subaru is predominantly a North American company. Add in production for many models in Japan, where a strong yen has kept export prices high for many years, and it looks gloomy.



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