LOS ANGELES - After shelving a decision three years ago to enter the Canadian market, Mitsubishi Motor Sales of America Inc. will begin sales there after all, starting in 2003.
Mitsubishi last week said it will begin with 51 dealerships selling an expected 20,000 vehicles a year, growing to 150 dealerships selling 38,000 vehicles within five years. That level would give Mitsubishi a 2 percent share of the 1.5-million-unit Canadian market.
Canada is the only major market in which Mitsubishi does not sell vehicles.
Interestingly, the three top executives behind the move - COO Pierre Gagnon; Senior Vice President Greg O'Neill; and Randy Sears, North Central regional director who will become Canada general manager - are Canadians.
Sears' career includes 20 years with General Motors of Canada and two years as general manager for a Saturn-Saab-Isuzu dealership in Victoria, British Columbia.
Industry analyst Dennis Des-Rosiers, president of Des-Rosiers Automotive Consultants in Toronto, says Mitsubishi faces three stiff challenges in entering Canada:
1. Canada's largest vehicle segments are compact car, compact van and pickup, but Mitsubishi lacks a minivan and pickup. 'They have a product issue right off the bat, so there will be a struggle filling those product gaps,' DesRosiers said.
2. Exchange-rate-adjusted, new-vehicle transaction prices in Canada on average are $4,000 (Canadian) less than in the United States, with an even larger gap for upscale models. That makes it harder for dealers and distributors to make profits.
3. Canada, with 3,500 dealers, already has too many.
'How do you manage to add another 150 dealers to a market that already has 1,000 too many? They won't have trouble getting the dealers, but it's the level of competition that's the trouble,' he said.
DesRosiers predicted a break-even point of 20,000 units a year for Mitsubishi. 'The challenges can be overcome,' he said.
Carlos Gomes, senior economist for Scotiabank in Toronto, says Mitsubishi will be entering a market that is relatively stronger than the U.S. market.
'In the U.S., the replacement cycle of the 1990s has largely run its course. But in Canada, our volumes only started to pick up in 1996,' Gomes said.
'We're still left with quite a number of old vehicles on the road, and that should bode well for sales once the economic conditions start to recover.'