This year, Subaru of America, Inc., a wholly-owned subsidiary of Japanese conglomerate, Fuji Heavy Industries Ltd., celebrated its 45th anniversary in the United States market since its arrival in 1968. Known for its distinctly quirky styling, unique Boxer® engines, and its symmetrical all-wheel drive system, a product of the company’s successful efforts in the World Rally Championships, Subaru has always distinguished itself from other automakers through its penchant for unconventionality. As a result, the carmaker has fostered somewhat of a cult-like following for itself among American consumers, ranging from enthusiasts who favor Subaru’s “fast and furious” sports cars to pet owners who enjoy the reliability and convenience of the brand’s family-friendly all-wheel drive sedans and station wagons. For years, the automaker’s vehicles represented niche products recognized and appreciated only by a select crowd, but over the past few years, as others have caught onto the merits of the company’s cars and SUVs, sales have begun to take off and reach new heights. With demand as high as it has ever been, new opportunities now coincide with new challenges, however, and Subaru finds itself at a crossroads between sticking with its niche player status or stepping up into big boy territory.
Ten years ago, Subaru fit the exact profile of a small automobile manufacturer, with a product portfolio consisting of only four models and a market share of 1.1%. In 2003, the Impreza, Legacy, Forester, and Baja models totaled 188,822 deliveries, and over the next five years, although the B9 Tribeca would be introduced and the Baja discontinued, not much had changed as sales and share would remain relatively flat. After the release of the Outback in 2008, however, business would pick up significantly and by 2012, the company had a seven model lineup with sales of 338,453 and a market share of 2.3%. Over the course of a decade, the brand increased its sales by over 79% and more than doubled its market share, which is currently causing the auto industry to take notice, but as the carmaker attains newfound levels of sales and success, it is beginning to outgrow its smaller stature. Thus, with opportunities abound and growth showing no signs of stopping, Fuji Heavy has decide whether to forego the chance to pursue becoming a major player in the marketplace or ride the momentum it has built to this point.
These days, with business booming like never before, production at Subaru’s Lafayette, Indiana plant, which currently builds the Legacy, Outback, and the soon-to-be discontinued Tribeca, is above its annual 170,000 unit capacity. Profitability continues to climb, posting new records, and with plans to produce the Impreza at the U.S. plant, beginning in late 2016, the expectation is that the company balance sheet will continue to improve as the fourth-generation Impreza has gained in popularity to the tune of 81,799 deliveries in 2012, a 98.6% jump above its prior year tally. Through July 2013, Subaru has continued its impressive run, totaling 240,591 deliveries, an outstanding jump of 27% versus last year. Also, the new XV Crosstrek and BRZ have already combined to sell 32,913 more units than last year, year-to-date, and have done well to successfully raise the company’s sales tally. The results have been better than Fuji Heavy expected, with company president, Yasuyuki Yoshinaga, admitting that he is concerned about the automaker becoming too large, but it remains to be seen if Subaru can remain disciplined and resist the seemingly limitless potential in front of it.
Earlier this month, Yoshinaga echoed the sentiment that the brand is at a fork in the road, stating, “We’re at a major turning point for Subaru,” but also shared that heavy discussions have taken place among company leaders regarding whether to maintain the status quo and continue with existing models, going forward, or expand the product portfolio and increase opportunities in new markets. Executives from both Subaru and Toyota, Subaru’s largest shareholder, will open talks through the end of the year to decide what direction the brand will take for its long-term future. However, with the automaker being backed by Toyota, opinions differ on whether that means it is best that the smaller carmaker leans on its partner to assist in its expansion or be content with focusing on smaller volumes and higher profits with Toyota’s support. At current volumes in the United States though, Subaru of America has already outgrown its headquarters, located in Cherry Hill, New Jersey, and is exploring new locations within the neighboring Philadelphia area. With the current issue of having employees split between the headquarters, the company’s residence since 1986, and a supplemental building nearby, Subaru is clearly cognizant of the potential need for additional space in the future and is looking for a location that will hold 600 employees, while also being able to support further growth. While a new headquarters is inevitable, it will be interesting to see how Fuji Heavy and Toyota’s plans for Subaru’s future growth will impact the American subsidiary’s search for the appropriate amount of office space.
Having recently gained significant traction in the U.S. marketplace, Subaru now faces a dilemma unlike any it has encountered, but is one in which many of its competition wish they had. The brand has an opportunity escape the shadows of its larger peers and become a major factor in the industry, but it remains to be seen if it takes advantage or not. Nevertheless, the excitement continues for the automaker, with the much-anticipated reveal of the next generation WRX and STI, now disassociated with the Impreza, coming in 2014. In addition, an even sportier, more powerful BRZ STI is expected to make its introduction as well, and is likely to continue to raise the profile of the brand by displaying the company’s engineering prowess. While there is currently much to be excited about for the up-and-coming carmaker, it was not long ago when Subaru quietly went about its business and few would notice, however, things have quickly changed and the brand is one to watch in the near future. Even with its World Rally Championship days behind it, Subaru knows a thing or two about what it takes to win, and with sales and profits racing ahead, the competition is surely checking their rear-view mirrors.