By on August 3, 2017

2017 Subaru Impreza Limited - Image: SubaruGlobal Subaru operating income rose 19 percent to $1.06 billion in the quarter ending June 30. Net income was up 4 percent to $733 million on an 11-percent revenue increase to $8.9 billion.

Why?

Subaru’s long since gone to look for America. And while U.S. auto sales keep on slowing — falling for a seventh consecutive month in July 2017, for example — Subaru’s U.S. sales keep on rising. July, in which Subaru begins the current fiscal year’s second quarter, was Subaru’s 68th consecutive year-over-year monthly increase.

The U.S. market generated six out of every ten global Subaru sales between April and June.

According to Subaru chief financial officer Toshiaka Okada, “There is a shift to SUVs from sedans,” Automotive News reports. “In that sense, that is a tailwind for us. As we mainly focus on SUVs, the growing popularity of SUVs is a good thing for us.”

But Subaru isn’t just experiencing improved U.S. sales because of its three-pronged crossover lineup. The launch of the new Subaru Impreza has been a particular success by Impreza standards, as well. Through July, year-over-year Impreza volume is up 45 percent as Subaru now generates its Impreza supply from the company’s Indiana assembly plant.2018 Subaru Outback - Image: SubaruUtility vehicles are Subaru’s mainstay, however. The Outback, Forester, and Crosstrek — a trio of high riders — rank No. 1, No. 2, and No. 3 on Subaru’s U.S. sales charts. Collectively, the trio is up 8 percent this year despite the Crosstrek’s transition into a new generation this summer. The three crossovers account for 71 percent of Subaru’s U.S. volume.

Outside the U.S., Canadian sales in Subaru’s first fiscal quarter were essentially flat, Automotive News reports, while Chinese volume plunged 16 percent and European volume fell 4 percent. China and Europe account for just 3 percent of the brand’s global volume. Subaru’s Japanese sales rose 30 percent, but there, too, Subaru generated substantially less volume in the entire quarter than Subaru USA reports each month.

Yet the positive impact Subaru’s U.S. efforts had on the company’s bottom line would have been even better had the market not taken a downturn and become more competitive. Sure, Subaru is selling more new vehicles than ever before, but they’re also resorting to a rapidly escalating level of discounts the company didn’t have to utilize in the past. Subaru is still notoriously tight-fisted when new vehicle purchase negotiations begin — incentives in July were lower than any other major automaker and 72-percent below the industry average, according to TrueCar.

But Subaru incentives were also 51-percent higher in July 2017 than in July 2016, an additional $342 per-vehicle discount that ate into what would otherwise have been even more substantial black ink improvements.

Not surprisingly, Subaru is content at the current incentivization levels, well below rivals as they are. “Overall, our incentives stay within our expected levels. For now, we are not going to change our incentive program significantly going forward,” Okada says, “as our sales have been good.”

[Image: Subaru]

Timothy Cain is a contributing analyst at The Truth About Cars and Autofocus.ca and the founder and former editor of GoodCarBadCar.net. Follow on Twitter @timcaincars.

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21 Comments on “Subaru Quarterly Profits Rise Because Of America, But It Could’ve Been Even Better...”


  • avatar
    gtemnykh

    The new Impreza hatch looks really sharp, I just wish they went back to putting the 2.5L NA motor in it. That in a basic-ish trim with a manual transmission for $20k-ish list price would be a tempting proposition. I hear they are working on improving NVH, interior quality, and seat comfort. The last Outback I drove (a ’15) was quite good on this front

    • 0 avatar
      EAF

      S.O.A. extended warranty on some of their short blocks to 8 years or 100k miles. Of course you have to prove oil changes as well as fail an oil consumption test (which they cheat on).

      These are the reasons Subaru sites for why their boxer engines consume engine oil;

      • When the incorrect oil viscosity is used (viscosity other than 0W-20 in the case of these specific vehicles)

      • When engine braking is employed (use of the transmission’s gear ranges to decelerate while using the engine to apply resistance)

      • When the engine is operated at high engine speeds (continually or under frequent, hard acceleration)

      • When the engine is operated under heavy loads (frequent carrying of heavy cargo, passengers or trailer towing)

      • When the engine idles for long periods of time (may be related to frequent use of a remote engine start system)

      • When the vehicle is operated in stop and go and/or heavy traffic situations

      • When the vehicle is used under severe temperature conditions (cold or hot)

      • When the vehicle accelerates and decelerates frequently

      GTEMNYKH WTF is this? Really? I cannot, for the life of me, understand how people with internet access buy SOA products.

      • 0 avatar
        Dave M.

        Maybe we like the way they drive in various conditions. Anyway my 2.5 is at 90k miles here in hot, humid, crowded Texas, and my 7k synthetic oil changes have shown no abnormal oil usage.

        Plus it kicks ass in the rain.

      • 0 avatar
        bullnuke

        @EAF – Yeah, the Subaru list of don’t’s and why’s is pretty ridiculous but no more so than the silly lists created by the legal department and used by other manufacturers to explain some failing in their vehicles. The difference is that Subaru, regardless of this list, will replace the short block and do it as many times as required to correct oil usage issues at no cost to the owner and the warranty was extended, as you point out, to 8 years/100k miles. The Subaru trip wire for short block replacement is 12 ounces of 0-20w oil consumed over 1200 miles. From comments from the B&B here at TTAC this is rather small compared to the folks owning other makes (BMW for one comes to mind) that have trunk-mounted racks to carry spare containers of motor oil. I may be wrong but I don’t believe that BMW replaces anything to correct their issues without cost to the owner. If you have any evidence of Subaru dealers cheating on the oil consumption test (more than Google-searches), contact Subaru and let them know.

      • 0 avatar
        ToddAtlasF1

        I could write a book about why I think Subaru engineers are old-school Japanese social conservatives who signed up to build rally cars and are frustrated that the company instead found success building station wagons for collie fondlers. They seem to detest their customers, and the oil consumption illustration is merely one manifestation of their contempt. I had a customer whose 2012 Outback won’t take fuel at the pump. Common knowledge is that it’s caused by a collapsed fuel filler pipe. Hers looked just fine from the outside. It turns out that Subaru developed a nine inch length of rubber hose that maintains its outside diameter and rigidity while collapsing internally and choking fuel flow between giant abscesses that run most of its length. It must have taken some effort to construct a hose with a failure mode invisible from the outside. That must be why Subaru drivers get to pay $92.55 for this short length of diagnosis-proof, failure-prone rubber hose!

      • 0 avatar
        Jack Denver

        These are the reasons Subaru sites for why their boxer engines consume engine oil:

        • When the vehicle is started cold in the morning

        • When you accelerate from a standing start

        • When the vehicle is started when hot

        • When you accelerate going uphill

        • When you decelerate going downhill

        • Any time the engine is run when the tank is less than 7/8 full

        • Any time the engine is run when the tank is more that 1/8 filled.

        • Any time at all

      • 0 avatar
        gtemnykh

        There was a an early run of FB series engines with some serious oil consumption, this I’d tie directly with the switch to the water-like 0W-20 synthetic oil, as well as everyone’s focus on ekeing out engine efficiency through lowering of friction, part of this was new lower-tension piston rings. Kind of a double whammy. Volvo 3.2L I6s had the same issue, and I think even some early 2.5L Toyota 4cyls had this same problem. Now, boxers have traditionally always used more oil than an inline engine on average, just the nature of the beast I suppose. My understanding is that they’ve got the oil burning under control now.

        There are some other traditional weak spots on Subarus, everyone knows about head gaskets on EJ series motors and cooked front CV boots that spray grease all over the exhaust manifold. I’d say a few others are short lived wheel bearings on 05+ cars, higher than average predisposition to emissions-related CELs, and rattly interiors. Having said all that, I’d have zero qualms buying a Subaru and driving it for 7-10 years and selling it on. They have extraordinary resale values, and you’d be getting rid of it right before the risky time frame when those mileage/age related issues might crop up. For a decade I’d enjoy a vehicle with incredible value for money and surefootedness, and more recently, some of the better interiors in the mainstream class. This is a weird thing to latch onto but Subaru has perhaps the best quality seat cloth of anyone right now. Very reminiscent of plush 1990s velour.

    • 0 avatar
      jh26036

      You mean the old motor that can barely muster MPG that a modern F150 can do without breaking a sweat.

      The 2.5 was a lot of fun in the old GC cars. That’s really where it ends.

      • 0 avatar
        gtemnykh

        No I mean the current FB25 out of the Outback/Forester rated at 26/31 in a heavier, boxier vehicle than the Impreza.

        And does the average F150 really get 20 city/27 highway (ish) “without breaking a sweat” like an older EJ25 Impreza? C’mon now.

        • 0 avatar
          Dan

          I’ve never driven an EJ Impreza but the EJ Forester that I borrowed for a ski trip 5 years back was running at red line in 2nd just to maintain 72 up the hills of I-88. Got 22 MPG over that 1100 mile round trip.

          My F-150 has averaged 22 mpg over the past 10 tanks and on the one road trip that I’ve taken it on I got 24.

          • 0 avatar
            gtemnykh

            Dan that strikes me as quite a cherry-picked scenario although if you live in a mountain state then perhaps less so. In mixed driving in more moderate terrain, I think a modern F150 averages a solid 5mpg less than even an older Subie. The weight/displacement differential is just too big to ignore IMO.

          • 0 avatar
            Dan

            gtemnyk, I was amazed, in a bad way, by the entire experience. I was seeing 16 mpg on the tank average for close to two hours while it thrashed its heart out up the hills. It was in 3rd nearly all the time, which turned a smidge under 4K at 75 and that wouldn’t hold speed up the steeper grades. Even the tanks on flat ground were only in the lower 20s. That powertrain was truly a time capsule of the bad old days of 20 years ago, clunky 4 speed and all.

            Consumer Reports claims a 5 mpg mixed, 6 mpg highway advantage to that Forester over the F-150 2.7L vacuum cleaner edition that I have now, and on flat ground at 65 mph I have no reason to doubt them. But between higher speeds, grades, and a heavy, loaded trunk that sure didn’t show up for me.

            The couple hundred vehicles on Fuelly show just a 3 MPG spread (’16 F150 2.7: 18.4, ’09 Lesbaru: 21.5) so while my experience was certainly an outlier, it wasn’t an outlier in an uncommon direction.

            The Impreza of that era was lower, lighter, and more aerodynamic and would surely have done quite a bit better. But the Forester was what we were in and it was a fish out of water on the interstate.

          • 0 avatar
            VW4motion

            @Dan,
            You’re a little bit of drama queen talking about how horrible your Subaru experience was 5 years ago. I see old and new Subaru’s drive up and down he canyons every day Utah. If your scenario was even close, I wouldn’t be seeing so many damn Subaru’s in Utah.

  • avatar
    I_like_stuff

    I know AWD is a 4 letter word around here, but when you live in a mountainous area where snow in April is not uncommon…..they’re nice to own. In my neck of the woods I’ll see 3 of them in a row in a parking lot sometimes. I’ve never been a huge fan myself, but I can sort of see their appeal. For $25K you get a well equipped Outback.

    • 0 avatar
      PrincipalDan

      My sister-in-law (PHD in Pharmacology) just traded her 2009 Tiguan (her love of VW has run deep) for a 2017 Forester. I haven’t had an opportunity to rib her about buying the “official vehicle of Santa Fe” – although she lives south of Albuquerque. (Seriously though I think an independent and competent Subaru mechanic could become a millionaire if he took up residence in Santa Fe.)

  • avatar
    VW4motion

    Subaru is building some of the best products right now. This is not surprising to seem them with increased profits. Profits will continue to increase with the updated Outback and new Ascent coming out next year.

    • 0 avatar
      gtemnykh

      This. Driving a ’15 Outback after being fairly ambivalent about Subarus and their poor NVH, rattly interiors, and uncomfortable seats for a long time was an eye opener. I honestly think the Outback 2.5i Premium has one of the nicest interiors on the market for an MSRP of $27k or whatever it is. Engine power is probably the final big breakthrough they need, I can see their FB20 turbo motor from the Forester XT really waking up the Outback.

  • avatar
    AndyYS

    In a few months I am going to be test driving a bunch of mid-sized cars and the Subaru Legacy will be one of them.

  • avatar
    jacob_coulter

    They’ve come a long way and are much better than they were.

    I owned a WRX and got rid of it because it was so cheap feeling. I loved the performance, but tired of a car that felt like a tin can.

  • avatar
    JerseyRon

    “Through July, year-over-year Impreza volume is up 45 percent…”

    Do you mean the Impreza hatchbacks? I thought overall Impreza sales (combined sedan and hatch) were only up 29.9%.

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