Mitsubishi Motors said Tuesday it will withdraw from the Chinese market amid a sales slump while investing up to €200 million ($212 million) in Renault's electric vehicle venture in an effort to speed up the development of zero-emission vehicles.
The Japanese automaker halted production in China in March amid stiff competition with local brands, and will stop selling cars as soon as the inventory runs out.
Mitsubishi had been making mainly gasoline-powered cars at a factory in Hunan Province under a joint venture with Guangzhou Automobile Group.
Its vehicle sales in China for the first eight months of this year fell 47.6% from a year earlier to 12,497.
The announcement comes as an industry-wide shift to EVs is accelerating worldwide. Japanese carmakers, often seen as slow to embrace EVs, are struggling to maintain their presence in the global market amid growing competition from overseas rivals like Tesla and BYD.
Mitsubishi's decision follows Nissan's announcement in July that it will invest €600 million in Renault's venture as part of its partnership review with the French automaker.
The latest investment plan means the three alliance partners will join hands in launching the new EV company, named Ampere. Previously, Mitsubishi was not clear on its interest in the firm, although it kept saying it was considering investing in it.
The company said it will expand its battery-powered vehicle lineup through the venture, adding that it plans to sell EVs produced by Ampere under its own brand in the European market.
Mitsubishi is not alone in being hit by falling sales in the Chinese market. Sales of Nissan for the January-August period fell 26.3%, Honda dropped 24.0% and Toyota marked a 5.1% decline.