TOKYO -- Mitsubishi Motors will build a 10 billion yen ($92 million) plant in China to supply engines for locally built Outlander sport utility vehicles.
At present, the carmaker imports engines for the SUVs from Japan. The plant will have an annual production capacity of some 150,000 units.
The plan comes as demand for SUVs and electric vehicles grows sharply in China. Mitsubishi Motors hopes the new plant will help it adjust to changes in the world's largest auto market and enhance the competitiveness of its SUVs, which it has positioned as a key revenue earner.
GAC Mitsubishi Motors, a joint venture with Guangzhou Automobile Group, will build the plant in China's southern Hunan Province, with construction expected to start by the end of this year and engines to begin rolling off the line by December 2018.
The company has so far obtained nearly all the engines used in the Chinese-assembled SUVs from Japan. The new plant will allow the engines to be supplied locally, enabling Mitsubishi to compete more effectively with Japanese rivals such as Toyota Motor, Nissan Motor, Honda Motor and Mazda Motor, all of which make engines in China.
IHS Automotive estimates China's auto sales will reach 30.2 million vehicles by 2020, up 10% from 2016. Sales of SUVs are forecast to grow 28% over that period, outperforming the overall market.