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Mitsubishi Motors, with a market capitalization of $3.35 billion, reported a significant drop in profits for Q1 2025, with operating profit plunging 84% to ¥5.6 billion. Despite stable retail sales, net sales decreased by 3% year-over-year. The company faces challenges from foreign exchange rates and tariffs, which have negatively impacted financial performance. Mitsubishi’s stock price saw a 5.25% increase, closing at ¥320.5, reflecting some investor optimism. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculation.
Key Takeaways
- Operating profit decreased by 84% to ¥5.6 billion.
- Retail sales remained stable at 194,000 units.
- Foreign exchange rates and tariffs significantly impacted profits.
- Stock price rose by 5.25%, closing at ¥320.5.
Company Performance
Mitsubishi Motors experienced a challenging first quarter, with operating profit dropping sharply by 84% compared to the previous year. The company maintains a solid financial foundation with total revenue of $19.23 billion in the last twelve months and a healthy current ratio of 1.38. Despite these challenges, retail sales held steady, suggesting resilience in consumer demand. The company is navigating intense competition, particularly from Chinese manufacturers, and adapting to market transformations. InvestingPro subscribers can access detailed financial health metrics and exclusive ProTips about the company’s competitive position.
Financial Highlights
- Revenue: Decreased by 3% year-over-year.
- Operating profit: ¥5.6 billion, down 84% from the previous year.
- Net income: ¥0.7 billion.
- Retail sales: 194,000 units, stable compared to the previous year.
Outlook & Guidance
Mitsubishi Motors is maintaining its current earnings forecast for the fiscal year, despite the challenging market conditions. The company’s financial health score of 2.67 is rated as GOOD by InvestingPro, with a notably strong Altman Z-Score of 6.24 indicating low bankruptcy risk. The company is preparing for new model launches in the second half of the fiscal year and monitoring the impact of Japan-U.S. tariff negotiations. The tariff rate has been adjusted from 25% to 15%, which may provide some relief. Discover more insights with InvestingPro’s comprehensive research report, available for over 1,400 top stocks.
Executive Commentary
Kentaro Matsuoka, Executive Vice President, commented, "The automotive industry is currently undergoing significant transformation," highlighting the need for strategic adaptation. He also emphasized the importance of stabilizing the business by reviewing and strengthening the company’s foundation. On the subject of tariffs, Matsuoka noted, "We are not in a position to be unilaterally optimistic."
Risks and Challenges
- Foreign Exchange Rates: Continued volatility could further impact profitability.
- Tariffs: Ongoing negotiations and adjustments remain a concern.
- Competition: Increased pressure from Chinese manufacturers.
- Market Conditions: Sluggish markets in Thailand and Indonesia.
- Strategic Adaptation: Need for flexibility in pricing and model launches.
Full transcript - Mitsubishi Motors Corp CFD (7211) Q1 2026:
Kentaro Matsuoka, Executive Vice President, Mitsubishi Motors: Thank you for your participation in our FY25 financial result meeting. While you are busy scheduled, I am Kentaro Matsuoka, I’m Executive Vice President. Yesterday it was reported that the tariff negotiation with the United States has reached an agreement and it is hoped that this will mitigate future impacts. However, the ultimate tariffs that went into effect in April have already had an impact on our sales activities in the U.S. market. In addition, there is a growing trend to compensate for declining sales in a market such as the U.S. by expanding sales in other regions, leading to the increased competition in various markets. As a result of these circumstances, we recognize that the sales environment surrounding our company is more challenged than ever before. These business conditions were the main reason for our challenging first quarter result for FY25.
As shown on the slide, although net sales decreased by only about 3% year-over-year, operating profit decreased 84% year-over-year to ¥5.6 billion. Ordinary profit was ¥4.8 billion and net income was ¥0.7 billion. Retail sales were 194,000 units, similar to the previous year. Please turn to page four. On this slide you can see the factors behind the year-over-year change in operating profit for the first quarter of FY25 in terms of volume mix and selling price. It delivered an operating profit increase of ¥7.8 billion, driven by strong wholesales in ASEAN, Japan, Europe, and other regions as well as improved selling prices. In North America, sales expenses reduced operating profit by ¥9 billion mainly due to an increase in incentives in multiple markets.
In line with intensifying market competition, procurement cost and shipping costs improved ¥1.1 billion in total as deterioration and inflation effect was reversed, finding a reduction in procurement cost and shipping cost. R&D expenses increased as planned, resulting in a ¥0.8 billion decrease in operating profit. Other items improved ¥6.3 billion due to improved quality, cost, and general expenses. Foreign exchange rates had a negative impact of ¥20.9 billion as the overall trend moved in an unfavorable direction. Compared to the same period last year, tariff effects were ¥14.4 billion. Please turn to page five. I would like to explain our global sales volume. Declines in ASEAN, Oceania, and Europe were offset by increases in Latin America, Middle East and Africa, and Japan, resulting in the overall retail sales volume similar to the same period last year. Next I will explain the situation by region. Please turn to page six.
First I will explain the ASEAN Oceanian regions. In ASEAN markets, while interest rates have been falling, recovery has been slow in Thailand, Indonesia, and TIV remains sluggish. In contrast, markets in the Philippines and Vietnam are relatively stable, the situation bifurcates by region. Furthermore, in addition to the entry of new competitors such as Chinese companies, sales competition in other ASEAN countries is intensifying as automakers seek to compensate for the delayed market recovery in Thailand and Indonesia. Even in this challenging environment, we have focused on expanding our market share by implementing a range of sales strategies such as launching new models and strengthening our collaboration with dealers and finance partners. In addition to carefully implementing sales activities, we’ll continue to aim to expand our sales share and improve profitability by launching new models in a timely and strategic manner in market segments where growth is expected.
Next, in Australia, which accounts for the majority of the Oceania region, persistently high policy interest rates led to a slight year-over-year decline in automotive demand. Additionally, the exclusion of BEV from tax incentives posed challenges for our core models. Although competition remains fierce, we will rebuild our market advantage by enhancing our competitiveness centered on the new Triton, which now has a complete lineup. Please turn to page seven. Next is Latin America and the Middle East and Africa. In Latin America, in the backdrop of economic recovery in major countries, automotive demand has remained robust. In this environment, we increased our year-over-year sales by expanding sales of newly launched models. We aim to maintain the sales momentum and achieve further growth through upcoming new model introduction.
In the Middle East, automotive demand has been solid, particularly in the GCC countries, and a previously sluggish pickup truck market in Saudi Arabia is showing signs of recovery. In contrast, our sales in the UAE, Saudi Arabia, and Kuwait remained flat compared to the previous year, primarily due to our inventory mix, price competition, and delivery delays. Going forward, we intend to penetrate the market through flexible pricing strategies and strengthen cooperation with local distributors centered on model renewal. Please turn to page eight.
In Japan, the domestic automotive market has maintained stable demand and the sales of Delica D:5 and Outlander PHEV performed strongly, allowing us to achieve the sales results that outpaced both TIV and our own prior year results. As a result, our market share has steadily expanded. To further grow our sales volume and market share, we will work in close cooperation with our dealers to strategically strengthen our sales capabilities. In North America, we were also significantly impacted by external factors such as a surge in U.S. demand ahead of anticipated tariff-driven price increases, followed by a subsequent market correction and contraction. In Canada’s electric vehicle sector, due to the suspension of electric vehicle subsidies, we will continue to respond flexibly to these evolving conditions. In Europe, our sales were challenged by a combination of factors including sluggish demand in major countries, intensified competition, and strong price pressure.
Looking ahead, our focus is on expanding the sales of Outlander PHEV, for which full-scale sales have now commenced, and we are preparing for new model launches scheduled for the second half of the fiscal year. Please turn to page 10. As was announced yesterday, the Japan-U.S. tariff negotiations have reached an agreement on the focal issue of automobile tariffs. The agreement stipulates that the 25% additional tariff in effect since April of this year will be adjusted to 15% inclusive of the existing base rate. This agreement itself contains a positive element as the tariff rate is lower than initially feared. However, the impact of these tariffs on business has been multifaceted and we are not in a position to be unilaterally optimistic. Specifically, as we have already explained, in the first quarter when the additional tariff took effect, we incurred significant tariff repayments.
Furthermore, as an indirect consequence, global sales competition has intensified as many companies shifted their export focus to other regions. Considering all these factors, it is difficult to fully assess the entire impact at this stage, given that there are both positive and negative factors at play. We will maintain our current earnings forecast for the time being. Once our detailed assessment is complete and we have a clearer outlook, we will promptly inform you of any necessary revisions. We appreciate your understanding. Next, I will explain the business highlights. Please turn to page 12. On Thursday, July 17, the new mid-size SUV XForce made its world premiere in Indonesia. The model was exhibited at the 32nd Indonesia International Auto Show, which started Wednesday, July 23, where sales also commenced.
The XForce is the third in a series of global strategic models from Indonesia following the crossover MPV Expander and the compact SUV XForce. It is scheduled to be rolled out globally in stages starting with the ASEAN region and expanding to South Asia, Latin America, the Middle East, and Africa. Please turn to page 13. The full-scale sales of XForce have commenced with the new addition of the hybrid electric vehicle model. This model is the company’s second HEV following the Expander series, which was launched in Thailand in February 2024. Furthermore, following their gasoline model, the HEV model has also received the highest five-star rating in the ASEAN NCAP Safety Performance Assessment. Since its announcement on March 20, it has shown a strong start, receiving about 5,000 pre-orders, which has exceeded the expectations amid the low price of HEVs from Chinese EVs.
We will continue to leverage this model to capture new growth opportunities in our Thailand business. That concludes the explanation. The automotive industry is currently undergoing significant transformation, driven not only by the recent developments in tariffs but also by the continued expansion of Chinese manufacturers and the evolution of new technologies such as AI. In order to address these issues, we will continue to stabilize our business by reviewing and strengthening our business foundation with a sense of urgency. Thank you for your attention.
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