Japan's Mitsubishi Motors Corp <7211.T> said it will end production at its only western European plant, in the Netherlands, at the end of this year, a move that was expected as its sales in Europe have dropped to a third of their peak.

The Netherlands Car, or NedCar, plant makes the Colt subcompact and the Outlander sports utility vehicle, but accounted for less than 5 percent of Mitsubishi Motors' global output of 1.1 million vehicles in the year to last March.

With demand in western Europe expected to remain sluggish, carmakers have been shifting focus to eastern Europe and other emerging markets where projected sales growth rates are higher.

NedCar's output has slumped to 50,000 vehicles a year compared with peak capacity of 200,000.

Speculation had been rife that Mitsubishi Motors could close the plant, which employs about 1,500 people, after it had said it would stop making the Colt in Europe at the end of 2012.

The Japanese firm said it had not yet decided what to do with the plant. It will supply vehicles to the European market from Japan and Thailand.

Last week, Mitsubishi Motors booked an April-December operating profit of 38.51 billion yen, but posted an operating loss in Europe of 11.4 billion yen ($148.85 million).

Its sales in Europe hit 340,000 vehicles in 2007/08, but last year dropped to 218,000.

Mitsubishi Motors is building a new factory in Thailand and studying increasing production in China and Brazil, where sales growth is projected to be higher than in developed nations.

Local rival Nissan Motor Co Ltd <7201.T>, which operates a car plant, Britain's biggest, in the northeast of England, said last month it will build a $2 billion plant in Mexico to boost sales in the Americas.

NedCar, based in Born, started in 1991 as a three-way venture between Mitsubishi Motors, Volvo and the Dutch government. Mitsubishi Motors became the sole shareholder in 2001 after buying out its partners.

($1 = 76.5850 Japanese yen)

(Additional reporting by Nobuhiro Kubo and Mayumi Negishi; Editing by Michael Watson and Ian Geoghegan)