Texas dealer goes all-in on plan to revive Mitsubishi's image

DALLAS — Before the brand logos were installed on Doug Baum's $13.5 million dealership along a busy stretch of Interstate 35, there was local speculation that a BMW or Audi franchise might be setting up shop. The shiny black facade and ample greenhouse of the 37,000-square-foot building oozed premium retail.

In fact, the Lewisville Autoplex owners were putting the final touches on a ground-up Mitsubishi Motors store that would debut the automaker's design program intended to make its dealerships more visible.

Yes, Mitsubishi, whose top Google predictive searches include "is Mitsubishi still in business" and a brand that has long suffered from auto reviewers who gleefully rip its aging platforms.

"Just because our cars may not be $50,000, there's no reason why we can't give that [premium] type of treatment," Baum, whose father was a Chrysler dealer, said last week. "Right now, this is the prettiest store as far as I'm concerned on I-35."

Not only is Mitsubishi Motors doing a respectable business, Baum said, but it's rapidly constructing a new identity in the U.S. that will come as a surprise to the doubters. "We feel our investment is a very, very safe bet," he said of his 5-week-old store. "We definitely believe in the reinvention of the brand, the quality of the product."

But beyond brand image, new product and marketing schemes, Baum, whose family has a second Mitsubishi store in nearby Hurst, thinks Job 1 is just letting the community know that Mitsubishi is still alive and kicking.

Baum sold around 700 new vehicles last year at his franchise's previous location and expects deliveries to rise 20 percent at the new high-profile facility. Lit up at night, the giant Mitsubishi lettering and red diamond logo serve as a beacon bolstering the visibility of the brand.

His auto complex also has a thriving used-vehicle business that includes lifted pickups and Teslas scooped up mostly from California. The cavernous service center works on all makes and models. The used-car and service operations help draw buyers who may not even know Mitsubishi still sells cars, since that remains a significant problem.

Walk-in traffic is also up sharply at the Autoplex, which sits next to a Nissan store and near a Toyota dealership. Mitsubishi sales staffers aren't intimidated by their better-known Japanese rivals. "Just drive the car," Baum said of his sales strategy. "If I pulled the names off the back, you wouldn't know the difference."

Mitsubishi's lineup consists of just three crossovers (including a plug-in hybrid version of the Outlander), along with the tiny Mirage sedan and hatchback that are among the cheapest new cars in the U.S.

While Mitsubishi dealers and executives acknowledge that the marque badly needs new vehicles, brand visibility remains a major challenge in the short term.

"We still suffer from an awareness issue across the United States," said Fred Diaz, who took the helm as North American CEO of Mitsubishi Motors last year after running the truck division at Nissan North America. "Some people don't even realize that Mitsubishi actually sells vehicles in the United States," he said during a tour of the Lewisville store last week.

Diaz is leading the charge to raise brand awareness through facility upgrades, innovative marketing and fresh products, partly by platform-sharing with Nissan. He's doing it with a management team that's almost entirely new, and he plans to move the North American headquarters to suburban Nashville by year end, putting it near Nissan's corporate offices.

Mitsubishi joined the Nissan-Renault alliance three years ago after Nissan bought a controlling interest in the automaker, and dealers have been clamoring for some jointly developed vehicles to update the Mitsubishi lineup ever since. The first will be the new-generation Outlander next year on a platform shared with the Nissan Rogue.

The brand's push for greater awareness includes a new ad campaign focused on the relative scarcity of its vehicles on American roads. The "Small Batch" theme is meant to invoke a carefully crafted product that's not for everyone.

"We have to admit to ourselves that, in this market, we're a niche player in an industry that is expected to be relatively flat in the near future, so if we want to maintain our momentum and grow, we're going to have to change the way we think and act as a brand," said Kimberley Gardiner, who was named chief marketing officer in January.

To raise its profile and gain market share, Mitsubishi also needs greater geographical diversity of its dealer footprint, which suffered after a sharp sales decline in the 2000s. Sales fell from around 345,000 in 2002 to just 54,000 in 2009. But sales in the last decade have grown, coming in at 118,074 last year, and deliveries are up 5.6 percent in the first half of 2019.

Despite the brand's ongoing struggles, new stores are opening at a fairly brisk clip: North End Mitsubishi in Canton, Mass., in June; Lawrence Mitsubishi in Lawrence, Kan., in April; and Roger Kehdi Mitsubishi in Tigard, Ore., in February.

Diaz said Mitsubishi added 34 U.S. dealers last year and more this year for a total of 375, covering 61 percent of key U.S. markets. Diaz is looking to increase that coverage to 90 percent of those markets by expanding to about 450 stores.

Mitsubishi also has to move up from the bottom of the market to improve margins.

"We need more customers that are coming in that are more upmarket and better credit customers," said Diaz. "Right now, we have a lot of credit-challenged customers. ... We love them and we love that they buy our products, but what brand doesn't want to have even stronger credit customers?"

Diaz promises a lineup of new or significantly freshened vehicles by the end of 2020 that could have broader appeal. The freshened Outlander Sport is weeks away from hitting showrooms and includes design elements that will find their way to the rest of the lineup, he said.

Greater market visibility also brings greater scrutiny, and Mitsubishi's current offerings receive middling marks from auto critics such as Consumer Reports. "Every one of its models is an also-ran in our road tests," it summarizes on its website. "Reliability is mixed, and owner satisfaction is not encouraging."

Whether Mitsubishi will be able to stick it out long term in a competitive U.S. market is another matter. Worldwide, the automaker sold 1.22 million vehicles last year for an 18 percent gain, but less than 10 percent came from the U.S.

Takao Kato, the automaker's new CEO, said in April that Mitsubishi Motors "would probably not" leave the U.S. given the market's size and importance.

Analysts said Mitsubishi has the advantage of being part of a larger automotive alliance in terms of survival, but carving out a niche is going to be tough.

"The big issue for them is they are a small brand in the U.S., and it's really a question of why should a consumer pick a Mitsubishi over a Nissan or a Toyota," said Jessica Caldwell, executive director of industry analysis at Edmunds.

One possible outcome is that Mitsubishi changes just enough to stay in the market without making any significant moves in terms of volume or brand image, said Karl Brauer, executive publisher of Autotrader and Kelley Blue Book.

"They may get a little bit bigger, but more importantly, they'll probably get more cost-effective because of the partnership with Nissan," Brauer said. "I think that's a smart play, and there's nothing wrong with that."