Japanese carmaker Mitsubishi Motors will cease production in China, restructuring its local joint venture with GAC Group against the backdrop of the popularity of electric vehicles, the rise of Chinese brands, and the price war in the world's biggest auto market.

Mitsubishi and Mitsubishi Corporation will sell their 30 percent and 20 percent stakes in GAC Mitsubishi to GAC for CNY1 (14 US cents), the Chinese state-owned auto giant said yesterday. Shareholders will inject up to CNY1.6 billion (USD218.9 million) in the JV to settle debts and compensate suppliers and distributors, it noted.

GAC Mitsubishi intends to sell equipment with an appraised value of about CNY442 million (USD60.5 million) to GAC's new energy vehicle unit GAC Aion, the Guangzhou-based firm added. The JV will also lease it land and plants for CNY130 million per year, with mass production scheduled for June next year, it said.

Restructuring GAC Mitsubishi can maximize the revitalization and utilization of its core assets, solve the bottleneck of GAC Aion's production capacity, save time and investment costs for building a new factory, seize the market opportunity to develop NEVs, avoid the dissolution and liquidation of the JV, and assist the re-hiring of employees, GAC pointed out.

GAC, Mitsubishi, and Mitsubishi Corporation will hold GAC Mitsubishi's sales unit, increasing its registered capital by CNY450 million and continuing to provide spare parts and after-sales service to GAC Mitsubishi car owners.

GAC, Mitsubishi, and Mitsubishi Corporation set up GAC Mitsubishi in 2012, holding 50 percent, 30 percent, and 20 percent stakes, respectively. The JV's annual sales reached a record high of 144,000 units in 2018 but have declined each year since. By the end of March, its assets totaled CNY4.2 billion, while liabilities reached CNY5.6 billion, falling into operational difficulties.

With GAC Mitsubishi's Changsha plant, GAC Aion's annual capacity will reach 600,000 units. The company sold 351,000 cars in the first nine months of this year, up 93 percent from a year earlier, while setting a production and sales target of 1 million vehicles for 2025.