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After achieving unprecedented sales growth that resulted in record earnings and production capacity constraints, parent company Fuji Heavy Industries Ltd. and Subaru’s largest shareholder, Toyota, began mulling last August whether to have Subaru compete on a larger scale with higher volumes or maintain its niche status and greater profit margins. At that time, I wrote a blog post covering Subaru’s upward trajectory during the past decade, along with the dilemma it faced, and nine months later the company revealed its ambitions for the next several years in presenting its new business plan, Prominence 2020.

 

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As the only automaker to improve its sales volume in the United States for six years straight, Subaru has done a lot to raise its profile and acceptance among mainstream consumers. Incredibly, Subaru has seen its deliveries increase year-over-year in each of the past 29 months, dating back to December 2011. Through the first four months of 2014, the Japanese company’s sales have expanded by nearly 22% compared to the 3.1% for the industry, making it by far the fastest-growing brand aside from Mitsubishi, an automaker with only one-sixth of Subaru’s volume. What makes Subaru’s rise different from other success stories is the company’s meticulous and deliberate approach to satisfying its loyal customer base. In doing so, the automaker has avoided the temptations of expanding too quickly, only to see itself fall as a product of its own aspirations, just like so many others have.

Staying true to its roots, Subaru opted to forego the high visibility and grandeur of advertising during the NFL Championship this past February, and instead chose to connect with its pet-loving consumers by airing four commercials during Animal Planet’s Puppy Bowl. The decision to utilize the smaller yet more focused platform speaks to the company’s awareness of its vehicles’ drivers, including their makeup and passion for animals and the outdoors. Subaru knows it takes much more than high-priced ads during a major sporting event to establish a link with its target customers, who the brand calls “experience seekers.” Consequently, the automaker increased its utilization of digital tools as a part of its marketing strategy and between 2011 and 2013 expanded its spending on internet and social media from 15% of its entire marketing budget to 25%. Also, Subaru was able to grow its internet leads by 400% and simultaneously raised its closing ratio by 50%, which means it not only expanded its reach on the internet, but also converted prospective buyers into customers at a higher rate.

In addition to achieving its previous business plan’s goals two years ahead of schedule, the moves Subaru made up to this point have translated into record profits, as was announced recently for the fiscal year ending March 31, 2014. Now with a new midterm plan in place, the company has its sights on reaching 600,000 sales in North America by 2020 and will raise the annual production capacity of its Lafayette, Indiana manufacturing facility as a means to accomplishing its objective. By the conclusion of 2016, the plant is expected to turn out 310,000 units a year, which may be raised further to 400,000 units after 2017. Coinciding with this change was the decision between Fuji Heavy and Toyota to move production of the Toyota Camry from Subaru’s Indiana plant to Toyota’s Georgetown, Kentucky plant to free up 100,000 more units of capacity for Subaru.

In an effort to increase economies of scale, Subaru will commence the utilization of its Subaru Global Platform, a modularized platform that will serve all of its models beginning in 2016. With Prominence 2020 calling for 20% cost reduction, the company intends to streamline its manufacturing processes and introduce more cost-effective vehicle designs, in addition to introducing its new platform. Subaru will make alterations to its powertrains as well, incorporating direct injection into all of its gasoline engines by 2016 and making the technology standard in the brand’s upcoming boxer engine. The brand also plans to add cylinder deactivation technology to its powertrains and adjust their combustion cycles to make them leaner as the company aims to improve the fuel efficiency and emissions of its vehicles.

With a wave of momentum pushing sales higher than ever and a new midterm plan acting as a roadmap to its future success, there are many reasons to believe Subaru will be able to elevate itself further in the next few years. The discontinued Tribeca will be replaced by a new seven-seat SUV developed for North America as a part of Prominence 2020 and will fill a hole in Subaru’s lineup, bringing it closer to achieving its sales targets. If Subaru’s recent track record is any indication, however, the brand will take every precaution to ensure that when it is ready to introduce its new SUV, it will have produced a model in which it has the utmost confidence will be a winner. While Subaru has a history of being fast at the race track, just like in the story of the tortoise and the hare, its current success as an organization is the result of a slow and steady approach. It’s with this level of discipline that the small Japanese brand can avoid the pitfalls encountered by many fast moving brands before it and remain on its path to prominence.