Electric Vehicles And Urbanization Will Unlock New Global Markets

Key Takeaways

• Expanding electrified vehicle offerings and global model rollouts position Mitsubishi for accelerated growth and improved margins as emerging market demand rises.
  
• Alliance synergies, flexible sales models, and strategic tariff reductions support sustained profitability and diversification in rapidly urbanizing and competitive markets.
  
• Heavy reliance on traditional vehicles, increased competition, and tariff pressures threaten Mitsubishi Motors' profitability, market share, and limit global revenue and earnings growth.

Catalysts

Engages in the development, production, and sale of passenger vehicles, and its parts and components in Japan, Europe, North America, Oceania, the rest of Asia, and internationally.

• Analyst consensus notes that tariff negotiations with the U.S. will mitigate some of the recent headwinds, but the reduction to a 15 percent tariff-lower than initially expected-could provide greater-than-anticipated upside to Mitsubishi's North American operating profit and margin recovery as the year progresses.
  
• While analysts broadly acknowledge expansion of new models and sales strategies in ASEAN and emerging markets, robust demand for hybrid and electric vehicles like the XForce and Outlander PHEV is likely underappreciated, potentially accelerating revenue growth and meaningfully boosting net margins as consumer preferences shift towards electrification.
  
• Mitsubishi's rapid rollout of globally strategic new models-such as the Destinator SUV, with plans for staged launches across Southeast Asia, South Asia, Latin America, the Middle East, and Africa-positions the company to capitalize on rising demand in fast-growing markets, delivering volume-driven revenue expansion and greater regional revenue diversification.
  
• Deepening technology and cost synergies within the Renault-Nissan-Mitsubishi Alliance are set to accelerate electrified powertrain development and lower R&D and capex needs, supporting long-term improvement in operating leverage and profitability.
  
• Mitsubishi's focus on flexible pricing models, recurring revenue streams via mobility solutions, and improved dealer collaboration positions the company to capture new high-margin business opportunities in urbanizing markets, supporting sustained growth in earnings and return on equity.

Mitsubishi Motors Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Mitsubishi Motors compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Mitsubishi Motors's revenue will grow by 5.6% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 0.4% today to 4.9% in 3 years time.
• The bullish analysts expect earnings to reach ¥160.2 billion (and earnings per share of ¥108.85) by about September 2028, up from ¥12.3 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 4.9x on those 2028 earnings, down from 46.1x today. This future PE is lower than the current PE for the JP Auto industry at 11.2x.
• Analysts expect the number of shares outstanding to decline by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.02%, as per the Simply Wall St company report.

Mitsubishi Motors Future Earnings Per Share Growth

Risks

• Mitsubishi Motors is facing heightened global market competition and increased need for sales incentives, which has already resulted in lower operating profit and will likely compress both revenues and net margins if the company is unable to maintain pricing power.
  
• The imposition of increased automotive tariffs, particularly in the United States, has caused a significant financial burden through higher costs and disrupted sales, with uncertain future impacts that may continue to weigh on profitability and constrain earnings for the foreseeable future.
  
• Mitsubishi remains heavily reliant on traditional internal combustion engine models and has only a nascent presence in the electric and hybrid vehicle segments, risking market share loss and potential revenue declines as the global transition to EVs accelerates.
  
• Intensifying competition from Chinese and other automakers, especially in the ASEAN and global markets, is forcing Mitsubishi to rely more on price-based strategies, likely leading to lower selling prices and ongoing margin pressures, which could hurt both top-line revenue and bottom-line profit.
  
• Persistent underperformance or slow recovery in key markets such as ASEAN, Oceania, and Europe, combined with only modest gains in emerging regions, limits Mitsubishi's global sales volume growth, thereby placing long-term constraints on revenue expansion and overall earnings potential.

Valuation

• The assumed bullish price target for Mitsubishi Motors is ¥528.28, which represents two standard deviations above the consensus price target of ¥415.0. This valuation is based on what can be assumed as the expectations of Mitsubishi Motors's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ¥550.0, and the most bearish reporting a price target of just ¥360.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be ¥3262.1 billion, earnings will come to ¥160.2 billion, and it would be trading on a PE ratio of 4.9x, assuming you use a discount rate of 11.0%.
• Given the current share price of ¥421.9, the bullish analyst price target of ¥528.28 is 20.1% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.