The freshly inked Inflation Reduction Act could complicate the market prospects of a key Mitsubishi crossover set to arrive in the U.S. in late November.
The law, designed to spur domestic EV production and reduce reliance on foreign supply chains, alters the eligibility rules for a $7,500 federal EV tax credit. Automakers must now assemble EVs and plug-in hybrids in North America to qualify.
This means the Japan-made plug-in hybrid electrified Outlander loses eligibility for the federal incentive. That's troublesome, as the small automaker struggles to maintain relevancy in the U.S.
Mitsubishi dealer Grant Petersen Jr. said the loss of the tax credit on the redesigned model is "concerning."
In the near term, Mitsubishi will likely have to absorb some of that $7,500 and lower the compact crossover's MSRP to keep it competitive, said Petersen, CEO of Bronco Motors Family of Dealerships, which operates Bronco Mitsubishi in suburban Boise in Idaho.
Mitsubishi Motors North America CEO Mark Chaffin acknowledged the loss and said the new EV incentive rules complicate product plans for the entire industry.
"There's a lot more questions than answers right now," Chaffin told Automotive News. "Like the rest of the OEMs, we're waiting for further clarification and expecting to see the details that come out of the Department of Treasury later this year."
Chaffin said the loss will not alter launch plans for the redesigned Outlander PHEV. But "mid-to-long-term, we'll have to monitor market conditions and see where it goes," he said.
Nor is Mitsubishi tweaking the Outlander PHEV's pricing, which has not been disclosed.
"We remain confident that [losing the tax credit] won't make a big difference in the sales success of this vehicle," he said. "We think we're going to have a hard time keeping up with the demand."
Mitsubishi dealer Ryan Gremore said limited inventory at launch could blunt any adverse effect of a higher price on the Outlander PHEV.
"Demand will outweigh the supply," said Gremore, president of O'Brien Auto Team in Normal, Ill.
Mitsubishi Outlander PHEV U.S. sales peaked shortly after its debut. 2021 — 2,250 2020 — 1,964 2019 — 2,810 2018 — 4,166 2017 — 99 Source: Mitsubishi Motors North America
Once early adopter demand is satiated, the absence of a federal incentive could have implications.
Dealer Ayman Moussa said price is the selling point for Mitsubishi, which lacks the brand equity that larger, more established automakers Toyota and Ford have.
"That advantage at this point has gone," said Moussa, co-owner of Carnamic, which operates three Mitsubishi stores in the San Francisco Bay area. "That may become an issue." AutoPacific President Ed Kim said the loss, which effectively increases the model's price by several thousand dollars, will put a "major damper" on Mitsubishi's hopes for the Outlander PHEV's success.
"Mitsubishi won't be able to rectify this issue without manufacturing the vehicle and battery pack in North America," Kim said. "Because it shares a platform with the Nissan Rogue, perhaps [the Outlander PHEV] could be built in the U.S. alongside the Rogue. But doing so will take years to implement."
Chaffin was guarded about such a solution.
"I can't answer questions regarding U.S. production," he said.
The Outlander PHEV was the first mainstream plug-in hybrid crossover when it arrived in the U.S. in late 2017. Sales peaked at nearly 4,166 vehicles the following year. But the model got overshadowed as more prominent brands brought competition to the segment.
Since the Toyota RAV4 Prime arrived in late 2020, it has dominated the compact PHEV crossover market. RAV4 Prime sales were 12 times that of Outlander PHEV sales last year.
Kim said without competitive marketing capabilities or distribution, Mitsubishi lost its first-mover advantage on the Outlander PHEV. The Japanese automaker is now seeking redemption with its second-generation Outlander PHEV.
"This PHEV is more than an SUV for us," Chaffin said. "It represents a paradigm shift for Mitsubishi Motors; it is our gateway to our EV transformation."
The new plug-in hybrid electrified crossover is based on the redesigned 2022 Outlander gasoline model. It features a 2.4-liter four-cylinder engine, paired with a more powerful electric motor and beefier 20-kilowatt-hour battery.
Roomier and more refined than the outgoing model, the new Outlander PHEV has the flavor of a Land Rover. The packaging of its new platform allows for third-row seating, giving the hybrid seven-passenger capacity. The interior includes new materials and advanced infotainment technology.
Dealer Moussa expects the redesigned PHEV to lure new buyers to the brand, similar to its predecessor.
"Customers who made $300,000 to $400,000 a year in Silicon Valley were buying Mitsubishis," he said.
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