Mitsubishi Electric Enhances Collaboration to Develop Innovative New Services

31 Jul, 2024

Mitsubishi Electric Enhances Collaboration to Develop Innovative New Services

Mitsubishi Electric faces challenges in China’s factory automation and Europe’s air conditioning market. Investors are focused on whether the company can successfully raise product prices to recover from a testing scandal that damaged its reputation. The company projects record profits for the year ending March 2025 but anticipates a 13% drop in group net profit to 50 billion yen for the current quarter.

Factory automation and air conditioning drive 80-90% of Mitsubishi Electric’s operating profits. However, the economic slowdown in China is delaying recovery in factory automation, and reduced subsidies in Europe are affecting air conditioning sales. The company has been raising prices for air conditioning systems in North America since April, leveraging its products' superior energy efficiency.

Mitsubishi Electric’s image suffered in 2021 due to fraudulent testing on train equipment. The outcome of price hike negotiations will reflect the company’s competitiveness and the market environments in China and Europe.

To achieve medium to long-term growth, Mitsubishi Electric is promoting collaboration between its businesses and creating new services. The launch of Serendie, a digital technology platform, and strategic M&As, like the acquisition of Norwegian elevator distributor Uniheis, aim to unify customer data and expand sales channels.

Mitsubishi Electric’s profitability and capital efficiency are recovering post-scandal. The current mid-term plan targets a 9% ROE by March 2026, with plans to allocate 600 billion yen to shareholder returns over five years. However, the company must focus on increasing earning power this fiscal year to achieve this goal.