Mitsubishi: Vehicle affordability is a ‘bright spot'

Minnesota dealer Richard Herod III says Mitsubishi is "in an extremely bright spot" compared with other automakers when it comes to vehicle affordability.

"The beauty of Mitsubishi is the value. … It's core to our brand," said Herod, managing partner at White Bear Mitsubishi in White Bear Lake, Minn. "Mirage is one of the least expensive new cars you can buy in the U.S., and it's almost the most fuel-efficient nonhybrid on the market."

Herod, who is chairman of the Mitsubishi National Advisory Board, also pointed to the brand's bestselling Outlander crossover, including the new plug-in hybrid version that went on sale in late November. Mitsubishi's second-generation Outlander PHEV is priced from $41,190, including shipping.

"I think that we're going to sell a lot of them," he said of the Outlander PHEV. "So, in a nutshell, there are really no worries about vehicle affordability because value is really a part of what we offer."

Herod, 45, spoke with Staff Reporter Audrey LaForest about the outlook for Mitsubishi dealers. Here are edited excerpts.

Q: What do Mitsubishi dealers expect in terms of inventory and days supply for 2023?

A: They are hopeful. The last couple of months, dealer stock has definitely been more replenished than it has been, so I would definitely say dealers have a positive outlook about how inventory is going to look.

How are dealers coping with the inventory constraints?

There's really not a lot we can do about it other than sell what we have on the ground, make sure that we have bulletproof used-car operations and bulletproof service operations. When you're in a mode of selling every single car that you can that comes in, normally it's, "Which one do you want? Do you want the red one, the black one or the white one?" And now it's, "Do we have one?" But I think that over the next few months that situation is going to improve, and customers will have a greater selection.

Has Mitsubishi helped its dealers with programs or tools to get through this low-inventory period?

During COVID, Mitsubishi stepped up with support. The regional teams have done a good job working closely with all of us. Leadership has done a good job of regular communications, and they've continued marketing and advertising throughout to keep traffic up.

We all know that we need to concentrate on the after-sale side at the moment to keep customers coming in. We have to make sure that we can service that customer if we don't have the exact car right now.

How are Mitsubishi dealers handling new- vehicle pricing?

Mitsubishi has been very clear that they believe the new Outlander — and all the Mitsubishi vehicles — represent a good value at MSRP. At White Bear Mitsubishi, we have a policy where we don't charge over MSRP for new vehicles. We believe that making a long-term investment in the customer by charging them a fair price can help pay dividends into the future.

What has Mitsubishi been telling dealers about pricing and markups?

They've been very clear that they expect dealers to sell at MSRP and not apply special markups. At the end of the day, the OEM can only encourage and direct. You really have to balance what's best for that dealer: long-term customer satisfaction or potentially higher initial profit?

Are punitive actions taken for dealerships in the network charging above sticker price?

Mitsubishi has been very clear about what their expectations are from us in terms of selling at or below MSRP. I'm not aware of any actions they've taken against any dealers.

How are Mitsubishi dealerships performing from a profitability standpoint?

Mitsubishi dealers today, just like every other new-car dealer, have been experiencing record financial profits. For us, we've enjoyed the last couple of years. They've been fairly robust. I would assume that most of the network is profitable.

How have Mitsubishi's sales incentives changed during this time of decreased inventory?

Like everyone else in the industry, incentives have dropped considerably as we've all just struggled to get inventory. Why would a manufacturer incentivize a sale when there's nothing to buy? But at the same time, staying close to what the market is doing has allowed Mitsubishi to really thrive over the last year and a half. We have been able to make sure that we are competitive. I would suspect that we're going to remain in this mode of incentives until industry levels of supply change.

What is Mitsubishi signaling to dealers about its position on direct sales or having more control in the consumer transaction?

All the conversations that we have with the dealer board with Mitsubishi relate to Mitsubishi selling through a dealer channel, so I've heard no conversations about Mitsubishi having a desire to sell direct to consumer.

What do Mitsubishi dealers think about the possibility of changes to the traditional franchise model?

I don't know of any conversations that have occurred like that. From a dealer's perspective, the ability for a consumer to have a point of contact with whom they bought the vehicle from, where they can trust that they can maintain and service that vehicle, that's going to continue to be an important part for consumers.

Having after-sale service of the vehicle is almost as important as having a quality product.

While the manufacturer is responsible for producing a quality product at a competitive price, I believe the dealership network provides the customer a way to continue to interact with a local trusted dealer adviser that can help them through their ownership process. I believe that the current distribution system that allows customers to have a local dealer to hold accountable for their vehicle service, as well as a partner in maintaining their vehicle, that's a more consumer-friendly approach, and that distribution system has worked very well over a long period of time.

What's missing in the product lineup?

For the last year, you would joke and say, we could have sold every single car that we had, and we did sell every car we had, so the thing that was missing was just more cars. If we had more Mirages, if we had more Outlander Sports, if we had more Eclipses — if we had just more product — we would have sold more cars this last year. However, the shortage of vehicles isn't anyone's fault. The supply chain has been disrupted, and I think Mitsubishi did everything they could to keep production going.

The thing that we're looking forward to as a dealer body is a refreshed Outlander Sport, and we look forward to maybe a vehicle that is larger in size than the Outlander. Now that we have a lot of customers coming in with a three-row vehicle, if a larger SUV was available, I think the dealers would be excited to see that. Dealers are excited to learn about the potential future of all electric vehicles in the U.S. I think right now, the plug-in hybrid is a good middle ground for Mitsubishi to have as a strategy, but I think as we look forward, dealers remain hopeful that because the sales performance of the U.S. over the last two years has been so robust, we're excited to see what else we can do with additional products and enhancements as we enter the next few years.

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

Mitsubishi certified pre-owned vehicles offer one of the longest warranties available by a certified manufacturer program. It allows the dealer to reinstate the 10-year, 100,000-mile powertrain warranty that the first owner of a new Mitsubishi receives. A lot of manufacturers or competitors offer just a seven-year, 100,000-mile powertrain, but for Mitsubishi to offer a 10-100 on top of the generous five-year, 60,000-mile comprehensive warranty that's on the vehicle, I think it's a really good offer in the market.

Has Mitsubishi launched or proposed an online platform for the sale of used vehicles?

Not at this time. Not that I'm aware of.

Would dealers support such a platform?

For us, our No. 1 selling used vehicle at White Bear Mitsubishi is a used Mitsubishi, so the easier we can make access for dealers and having those vehicles sold through dealers who know what they were like brand new, I think is a better experience for the consumer as well. Any efforts we can make to enhance certified pre-owned vehicle sales I think would be welcome.

What is Mitsubishi requiring of dealers when it comes to digital retailing?

Mitsubishi has a digital program where they have preferred providers, and they allow dealers to choose whatever digital retailing tools that they would like to use. They let us dealers choose what works best for us in our market, but they do offer their dealers a lot of flexibility in how they want to digitally market their own brand.

Does Mitsubishi have its own branded digital retailing tool?

ClickShop is what Mitsubishi uses to allow customers to calculate payments using incentivized rates and residuals for financing and leasing options. For a car manufacturer, they give a lot of power to consumers to investigate their choices before they enter a dealership.

Has there been any change in Mitsubishi's facility image programs?

No. Mitsubishi unveiled the visual identity program to us a few years ago, and a lot of dealers in the country have signed up for the image improvements to their facilities.

Should the programs' requirements around facility size/amenities be reduced or changed?

I wouldn't call Mitsubishi's program extremely burdensome. A lot of manufacturers require dealerships to build a brand-new building. Mitsubishi gives guidance as to what they want the facilities to look like, but most of the upgrades do not require a dealership to build a brand-new facility. It's signage and treatments and colors and stuff like that. I believe Mitsubishi's identity program is very reasonable.

After an industrywide decline in leasing volume, what is Mitsubishi's plan to promote leasing in 2023?

Our two highest-volume models, the Outlander and Eclipse Cross, both have leasing programs available at this time. As leasing becomes more preferred by consumers, it's quite possible that in the next few years — just with rising vehicle costs and interest rates — that leasing may come back into favor in terms of being an affordable alternative. Given that we currently have leasing programs on our two highest-selling vehicles gives me hope that we'll continue to have programs going forward.

How are rising interest rates affecting the sale and financing of new or used vehicles at Mitsubishi dealerships?

As interest rates continue to be dynamic, it certainly does affect how vehicles are sold. Because our vehicles are in a more affordable price range, the difference of interest rates today versus a year ago has made some impact on a payment but not as drastic of payment as if you were selling $80,000, $90,000, $100,000 vehicles. Because Mitsubishis start under $20,000 with many in the mid to high $20,000s, we still live in a very affordable environment. Interest rates and leasing programs and whatnot are going to be key to buyer affordability moving forward.