Mitsubishi dealers: Hope for more alliance-developed vehicles

Richard Herod III, incoming chairman of the Mitsubishi National Advisory Board, says U.S. dealers look forward to more vehicles developed jointly by Mitsubishi, Nissan and Renault, following up on the successful launch in 2021 of the redesigned 2022 Mitsubishi Outlander, on a shared platform with the Nissan Rogue.

Herod, 44, is managing partner at White Bear Mitsubishi in White Bear Lake, Minn. He is vice chairman of the dealer board; his term as chairman begins during the 2022 NADA Show.

Mitsubishi Motors North America had a successful sales year in 2021, despite low new-vehicle inventory late in the year because of the industrywide computer-chip shortage and other problems with the supply chain.

U.S. sales were 102,037 in 2021, up 17 percent from 2020. Since 2007, the brand has topped 100,000 U.S. sales four times — in 2021, 2019, 2018, and 2017. U.S. sales for the brand peaked at 345,111 in 2002.

Special Correspondent Jim Henry spoke with Herod. Here are edited excerpts.

Q: What do dealers know about when Mitsubishi production and inventory levels will come back in line with demand? What do dealers expect in terms of inventory and days' supply this year given the chip shortage?

A: Transparency of inventory has been something that's been very obvious. We have a monthly webinar with the Mitsubishi dealer body, with the pipeline in view: "This is what it looks like is coming, in the next three months." Now, maybe it isn't any earlier than I wanted to hear, but at least I know what's coming.

What's nice is, we all know what the situation is now. We're selling everything, as fast as we have it: "In February, this is how many; in March, this is how many in the Northern region," etc. It's not fast enough to keep up. But in December, Mitsubishi set a record for the most Outlanders ever sold in the U.S. It's surpassing all expectations.

But the total number seems to be improving. The total number for 2022 is cautiously optimistic. But it's from a low-low for inventory.

How are Mitsubishi dealers coping with the inventory woes? What are they doing to bolster their used-vehicle business or other areas of the dealership's business to contend with lower new-vehicle volumes?

We have to get extremely creative with customers that have time issues. We have a waiting list. For us, we have a waiting list for the Mitsubishi Mirage, the Mitsubishi Outlander Sport. I can remember no time in the last 12-year history, having a waiting list for the Mirage. But we do now because it's affordable. Customers say, "Why buy a 7-year-old Civic for 15, 16 grand, when I can get a brand-new Mirage?"

With used cars, OK, how do we create different streams of vehicles we can source? We are a KBB Instant Cash Offer Buying Center, based on KBB leads. These customers are interested in selling. We have "The Bear Buys" program — our mascot is the White Bear. That allows us to purchase and pick up within 24 hours. We go anywhere a customer is. We get videos of the car, pricing information, the customer is in and out in less than half an hour.

We drive all over the Twin Cities to purchase vehicles. We are doing a better job of meeting the customer where they are at — in the driveway, anywhere. We have driven an hour away to pick up a car.

Other things we've done, and these are more pandemic-related, include free home pickup and delivery for service. If a customer needs an oil change, we can deliver that to them. It tells the customer you care about them, by giving them options.

How are Mitsubishi dealers handling new-vehicle pricing? Are they generally sticking with sticker price or adding market adjustments?

Mitsubishi has been really good about letting dealers transact at the price they need to, to make deals happen.

I believe MSRP represents a great value. There are vehicles we sell at MSRP. We're up against Honda, Toyota, Mazda, Kia, Subaru. We offer a market price that's competitive.

We're a one-price store. We allow the customer to choose what they consider a great value. We don't pay salespeople on commission, per se. They get rewarded for great CSI scores, or for hanging up great Google reviews. They get rewarded for volume, they don't get rewarded related to the price of the car. This allows us to sell a good amount of volume.

How many Mitsubishi dealerships are in your market?

There are four in the state of Minnesota; three in the Twin Cities. We represent the St. Paul marketplace. We've been very fortunate the last six or seven years, we've had the No. 1 small SUV in the market, the Outlander Sport, and the Outlander Plug-in Hybrid has been the No. 1 PHEV in St. Paul.

How are Mitsubishi dealerships performing from a profitability standpoint?

Mitsubishi Motors dealers have been blessed with the Mitsubishi Outlander. We're seeing more affluent buyers. We're seeing cross-shopping from mainstream brands, the Honda Passport, the Honda Pilot. We have never seen the volume of Outlander like we're seeing today. As inventories improve, the sky's the limit. The Outlander has been a hit from day one — the car, the price, the packaging. If we had more, we'd sell more. I can't wait for the plug-in hybrid.

Is there a common platform for the Outlander, another model that's a corporate cousin?

It's a result of the cooperation among Mitsubishi and Nissan and Renault. The Nissan Rogue shares a common platform, but you don't see badge engineering.

Where is it built?

The Outlander is built in Japan. Some of the features, there's this Japanese term — omotenashi, which means, "Japanese hospitality" — that you can really see in some of the features. Like, there's a button at the back where if your hands are full, you can operate the tailgate with your foot. OK, some others may have something similar, but it's a very thoughtful feature. It feels like you're in a Land Rover. The Outlander is a complete game-changer.

How have Mitsubishi sales incentives changed during this time of decreased production? How do you anticipate them evolving as production and inventory numbers improve?

Mitsubishi Motors North America has been following the current trends in the market reduction of incentives, as everyone has. As market conditions change, we expect Mitsubishi to follow.

We have an amazing lease offer on the new Outlander. We have seen other manufacturers completely abandon leasing. Because of great residual values, it makes the new Outlander a very affordable vehicle to lease.

The current incentives seem to match what's necessary to sell vehicles, what is required in the market, to sell what you need. I believe Mitsubishi is doing what they need to do. But it doesn't take a rebate to sell the new Outlander.

What is Mitsubishi doing to promote sales of used vehicles, including with its certified pre-owned program?

Mitsubishi has a very competitive CPO program, one of the longest CPO programs. The original warranty is 10-year/100,000-mile powertrain, the new-vehicle warranty 5-year/60,000 miles. There's no deductible for covered repairs. It keeps the customer coming back to the dealership for service.

How are the skills needed for sales employees at Mitsubishi dealerships changing in an increasingly digital sales environment? Is Mitsubishi helping dealers navigate these changes?

Customers are walking into the store, knowing more than ever before. The path to purchase is no longer linear: "Find, drive, buy." And the last thing we need is the customer knowing more about the vehicle than the salesperson. Interpersonal skills are highly valued.

One thing Mitsubishi does is an Outlander Expert Certification Program. The employee has to do a walkaround video and upload it to Mitsubishi for review, to be certified as an expert from Mitsubishi's perspective.

We also have salespeople doing interactive videos, where people can make requests via email, chat, any way they want to do it. They can send a person a video, "These are the things you said are important to you." Customers are starting to request those videos from us.

Mitsubishi training is predominantly virtual, digital … it gives you the ability to quickly compare vehicles, vs., say, a Honda CR-V or a Nissan Rogue. You can very quickly look up towing capacity or whatever.

Is Mitsubishi adequately advising and providing resources for its dealers on how to prepare for the rollout of electric vehicles?

Mitsubishi Motors has been on the forefront of EVs. They had the i-MiEV since back in 2011. We've had charging stations at the dealership for almost 12 years.

The plug-in hybrid Outlander, which is still the old body style, is still a strong player for us, but I can't wait to get the new one, coming later this year. It's got a larger battery pack and greater electric range; it's due in the second half of this year.

Are Mitsubishi dealers concerned about legislative efforts to allow startup EV manufacturers to sell directly to consumers? What is Mitsubishi signaling to dealers about its position on such legislation or its interest in direct sales or having more control in the consumer transaction?

Mitsubishi Motors North America, the dealers are in partnership with them. They ask our input through the dealer council, and they make it clear, we're part of their business case.

For instance, with ClickShop, it's designed for the customer to remain our customer. There're really no complaints there.

What the future brings, how they're managing the business of EVs, at this point, there doesn't seem to be any cause for concern.

Has there been any change in Mitsubishi's facility image programs? What do dealers want to see change with regard to these programs?

Mitsubishi introduced a new program about two years ago, It's been fairly well received. We have big and small stores, and a lot are transitioning into the Mitsubishi brand. It seems to be a very dealer-friendly program. It allows for a common theme or style. It makes sure Mitsubishi stores look as close as possible alike, but it doesn't seem as restrictive as other brands, as to exactly what you need to do.

What's missing in the lineup? Do you want a pickup? Has there been any news on the possible sale of Mitsubishi's global pickup in the U.S. or a version of the Frontier?

I haven't heard anything about that. Everybody mentions it, but it doesn't seem to get any traction. Dealers would love a truck to sell; the U.S. is a truck-heavy market. A truck larger than the Outlander, dealers would think they died and went to heaven. But the new Outlander is killer. The brand absolutely nailed that car. For now, sure, we'd like more.

Obviously, the next product we know is coming is the Outlander PHEV, which we expect to be another home run.

I would love to see a truck. I would love to see a larger SUV. I would love a vehicle that's in between the price of the Mirage and the Outlander Sport. There is a lot of dealer excitement to hear announcement of investment in future platforms with Mitsubishi-Nissan-Renault, for EVs and hybridization. I'm excited for what the future brings.

How are Mitsubishi fixed operations performing?

Mitsubishi builds a really good car. Because of that, warranty repairs are not as frequent as I've experienced with other brands. That puts a lot of pressure on dealers to be in a convenient place, for regular service, oil changes. Parts and service is a huge focus of our business, it's super important. We offer express oil changes without an appointment, we do something like 1,000 a month. People are in and out in less than 45 minutes. We provide a car wash when a customer comes in for an oil change. We do everything we can. Service helps sell that second, third, fourth car.