By on July 16, 2018

Subaru is a once-tiny manufacturer that grew in leaps and bounds thanks to high demand from the United States. The automaker is the eighth best-selling brand in the region, despite being a scrappy upstart, and has managed multiply its volume many since the 1990s. But, like any business loaded into a cannon with the word “success” emblazoned on the side, it can’t continue streaming through the clouds indefinitely without encountering some turbulence.

Subaru may be in for troubled times.

With the U.S. threatening new tariffs on imported cars, the automaker may have to readapt its strategy. Subaru may be an increasingly popular brand for the region, but it’s not one that’s built primarily within its borders. North America accounts for 71 percent of Subaru’s world volume, but a lot of those vehicles have to be shipped in from overseas.

“Half our sales are exports from Japan,” Subaru President Tomomi Nakamura explained this month. “We take the U.S. tariff issue very seriously. It wouldn’t be so easy to move production from Japan to the U.S. just to avoid the impact from a proposed tariff hike.”

Toyota, which builds the majority of its vehicles for the North American market within its borders, has already said that new tariffs would increase prices. Meanwhile, Mazda is making a fuss that it may have to withdraw from investment plans within the United States, claiming the tariff threat would be detrimental to the wellbeing of automakers. Honda has been relatively quiet — possibly because it builds a larger percentage of its cars inside the U.S. than some historically American companies.

Be that as it may, all companies will have to take a bite of the shit sandwich if these tariffs come to pass. But Subaru’s reliance on imports may make for an unpleasantly sizable portion. Nakamura has only been president of the company for a month (due to the Japanese inspection scandal) but he understands the American market — his previous position was CEO of Subaru of America. He knows the Western market is essential for the brand’s health and future growth. But he’s not sure what can be done right now.

The automaker’s goals revolve around improving technology and strengthening profits through sales. Subaru may build a good product, but it’s often lacking in the advanced technological wizardry offered by other brands — which some might not see as real problem. However, it intends to change that by tapping Toyota for help with electrification and implementing vehicle connectivity in the coming years.

According to Automotive News, Subaru’s corporate strategy has placed an emphasis on modernizing its fleet as quickly as possible. It intends to place the majority of its lineup on a digital network, while also introducing a new hybrid model and Level 2 autonomous highway driving capabilities sometime in the early 2020s. It also wants a new SUV to help bolster global sales. But its immediate plan just involves moving metal in the United States.

“We still view this region as a frontier market for us,” Nakamura said. “We will continue measures aimed at the Sunbelt region, where the ownership of Subaru cars is still low.”

All of this is costing the company money. Research and development isn’t cheap, even with help from another automaker, and trying to boosts its business in the Sunbelt could be an expensive prospect if customers don’t respond. At this point, Subaru can really only stay the course and hope things work out (as Americans keep buying). Shifting production away from Japan is unrealistic — and potentially foolish, since it doesn’t know what the U.S. will actually do on the tariff front yet. But if the nation does decide to persist with economic warfare, Subaru may have to postpone its upward trajectory and prepare itself for a beating.

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56 Comments on “New Import Duties Could Body Slam Subaru...”


  • avatar
    JohnTaurus

    I’d hardly call Subaru a “scrappy upstart”, they’ve been selling cars here since the 1970s, it just took them a few decades longer than Honda, Toyota and Nissan to find mainstream success. Hell, Kia is more of a “scrappy upstart” in this market, having been here since only 1994. That term really belongs to Tesla more than anyone else.

    • 0 avatar
      NormSV650

      “The maker of the Forester SUV has won over U.S. drivers with its socially responsible image. Another key to success: Its supply chain relies on hundreds of migrant workers who are far cheaper to employ than Japanese laborers.”

      https://www.reuters.com/investigates/special-report/japan-subaru/

      • 0 avatar
        FreedMike

        Thanks for the laugh, Norm. Remind me again…where’s that Envision that you pimp all the time made?

        Oh, that’s right…China. And no worker ever gets mistreated there. Not ever.

      • 0 avatar
        Sub-600

        Where does the “socially responsible image” come from? Do they even offer a hybrid? I’ll never understand global warmists driving around in these things. If anything those little overtaxed engines are among the poorer performers in their class. Maybe if you and your golden retriever give a blind drifter a ride it offsets the pollution.

        • 0 avatar
          Art Vandelay

          It’s the love.

        • 0 avatar
          Jeff Waingrow

          Couldn’t agree more. And I’d probably be something akin to your “global warmist”. Subarus generally have mediocre gas mileage, and as you say, don’t even offer a hybrid. On top of that, all wheel drive eats into mileage, and many people have little or no need for it. Locally, I see mostly single individuals driving Outbacks, which have evolved into pretty large vehicles. Meanwhile, I’m getting 35 miles per gallon in my GTI Sport on regular gas. So who’s the true tree-hugger?

          • 0 avatar
            srh

            Right, but good luck getting close enough to any trees to hug them with 5-inches of ground clearance.

            Tree hugger is used as a synonym for “people who like the outdoors”. And there are precious few vehicles with the combination of mild off-roadability, mileage, cargo capacity, and price as Subarus.

    • 0 avatar

      Tesla is The Evil didn’t you know that?

  • avatar
    TW5

    71% of their sales are in the US, yet 50% of their automobiles are imported from Japan. Who’s fault is this?

    Tariffs are not the only risk for businesses. Exchange rates are also a big deal, yet Subaru never moved most of their production to the US because they knew the Japanese central bank and government had a target currency exchange rates that they would pursue via aggressive dollar buying. As a result, Japan still holds over $1T in US treasuries, just a hair behind China.

    Here is the world’s smallest violin playing just for you, Subaru.

    • 0 avatar
      Sub-600

      BAFO will somehow claim that the North American market means nothing to Subaru. The other 29% will be higher profit models or something. Oh, and he’ll say “chicken tax”.

      • 0 avatar
        TW5

        “Shifting production away from Japan is unrealistic — and potentially foolish, since it doesn’t know what the U.S. will actually do on the tariff front yet. But if the nation does decide to persist with economic warfare, Subaru may have to postpone its upward trajectory and prepare itself for a beating.”

        Mass disillusionment is the default setting. BAfO is one of many. There is a reason we are taught Canterbury Tales rather than macroeconomics or personal finance. We are more useful to the bureaucracy and plutocracy when we are programmable.

        Maybe I should just join a hedge fund, and sell out my country for a half million dollar paycheck. Seems like the prudent thing to do.

  • avatar
    87 Morgan

    I interviewed with Subaru 6 or 7 years ago, at their HQs in Cherry Hill NJ.

    They were very proud of the fact that Subaru North America employed less than 1k people. I was told that the top floors were for Japanese execs ONLY. No eye contact or communication permitted.

    I think my odds of securing the job expired when I asked the hiring manager how he felt about the fact his employer really didnt like him?

    Subaru: an amazing marketing company with a side hustle of designing and building mediocre cars.

  • avatar
    tomLU86

    My roommate in college had a mid-70s Subaru. He would make sure to park on a hill, so we could push start it..

    I think Subaru is a hit because they offer honest, unpretentious cars.

    I think a base Forester represents a lot of useful value. Fortunately for me, they dropped the manual trans, so I won’t be tempted

    Subaru today is a little like Honda was 25 years ago.

  • avatar
    bullnuke

    If Subaru, which builds 650k units of two of its models and sources around 50% of content for them in North America, is going to have problems then the Mazda brand is as good as a dead.

  • avatar
    ernest

    Subaru has simply replaced the market niche Volvo held for decades. I seriously doubt it’ll make much of a difference- although that Southern Tier might be a harder nut to crack than they envision.

    We KNOW Subaru is stronger than we think when Mercedes Benz starts copying their ads.

    • 0 avatar
      thornmark

      Subaru is cheap awd – they own that

    • 0 avatar
      Arthur Dailey

      Agree with Ernest, it seems that Subaru has largely assumed the role previously held by Volvo. Similar demographics and image.

      Also Subaru is primarily a manufacturer that sells in English speaking nations. Perhaps a ‘buy-out’ by one of their larger hedge funds or corporations might be in order?

      • 0 avatar
        gtem

        Yep, agreed with both of you. They occupy an enviable position of being seen as mostly no-nonsense functional cars with a high value quotient, and are generally purchased by people with higher incomes and levels of education than average. From a mechanic’s perspective, in spite of the flat four arrangement that complicates spark plug changes and has had historic issues with head gaskets, they remain some of the better liked cars as far as being simple and easy to work on relative to many other makes and drivetrain layouts.

        I’m not sure how I feel about the long term prospects of the Ascent with a highly turbocharged 4cyl pulling around that much weight through a CVT, but it is a compelling package as one of our next vehicles. We also like the Outback, and one of the final Foresters with a stick shift is pretty appealing at the moment (assuming the seats aren’t torture).

        It’s surprising to hear that 50% of their sales are not US-made, since at this point it’s just the WRX and Forester that are still made in Japan. Locally it seems like I mostly see Outbacks around, and Subarus are only now selling like hotcakes in Indiana, right where they are manufactured.

  • avatar
    IBx1

    Full-page coverup ads (from “justuno”) on the home page that constantly pop back up and have to be closed 5 times, combined with a broken log-in system, are a quick way to lose readership. Keep ads on the sides and don’t force me off here.

  • avatar
    VW4motion

    trump pretty much showed his empty hand today while putin body slammed him on camera. These tariffs will go away soon.

    • 0 avatar
      SSJeep

      Not because of US-Russia trade. US-Russia is a drop in the global bucket and is mostly one-way from Russia to the US. Goods sent from Russia to the US include vodka, crab, seafood, and petroleum product. Exports from the US to Russia include technology, medical devices, and medicines. The US wont suffer if it has to drink Titos and consume domestic crab.

      • 0 avatar
        Sceptic

        SSJeep – Wrong. Just two examples:
        US aerospace is dependent on Russian rocket engines and titanium parts. Boing had to stock up on Russian made parts for the Dreamliner in case of sanctions.
        Russia is a large producer of precious and rare earth metals. Your catalytic converter would double in price if not for the supply of Russian platinum.

        • 0 avatar
          Arthur Dailey

          The Russian economy is smaller than that of Canada.

          https://www.weforum.org/agenda/2018/04/the-worlds-biggest-economies-in-2018/

        • 0 avatar
          SSJeep

          Sceptic, you are incorrect on both. The US imports platinum from South Africa mostly, not Russia. The US also produces about 3% of the worlds platinum and runs a platinum surplus – so much so that the US mint strikes platinum eagles for investment purposes. Titanium is also produced by the US but largely comes from China and South Africa.

          In the event of a platinum supply constriction, cat con manufacturers will just switch to palladium.

          Please research before calling others out falsely.

    • 0 avatar
      thornmark

      empty hand – not really

      and you can tell by the hysterical reaction of the MSM/DNC – they do confirm Trump’s prediction of their coverage – the most crazed since Trump won in 2016 when they said it was impossible

      • 0 avatar
        30-mile fetch

        Yes, hysterical reaction from MSM/DNC sources such as The Drudge Report, Fox News (except that pathetic hypocrite Hannity who is brown-nosing hard enough to assess the President’s polyps), Paul Ryan, John McCain, Lindsey Graham, Bob Corker, Jeff Flake, GOP strategists, and former members of his own administration.

        http://thehill.com/homenews/administration/397338-trump-stuns-the-world-at-putin-summit

        http://thehill.com/homenews/administration/397306-five-takeaways-from-trumps-jaw-dropping-performance-with-putin

        But don’t believe any of it. Unlike Putin’s press, the American free press truly is the “enemy of the people” and this doesn’t have any spooky analogues in history.

        https://www.bbc.com/news/world-us-canada-39015559

        https://www.bbc.com/news/world-us-canada-39015559

      • 0 avatar
        Sub-600

        The Industrial Media Complex is predictable but I was surprised to a U.S. Senator from Tennessee calling for a military coup, that was at least original. Schumer’s paranoia has reached new heights, he’s now “convinced” the President is being blackmailed, lol. The President keeps winning and living, rent free, in the heads of liberals. Chris Matthews is days, if not hours, from an aneurysm, lol.

        • 0 avatar
          30-mile fetch

          And there’s your confirmation bias in full flower. I provide links to criticism from conservative media outlets and Republican legislators and strategists, and you completely miss it. Bounces off like tennis ball against a brick wall. Boing! Your head then generates irrelevancy about Chuck Schumer (duh, opposing party is of course opposed to the president. See every administration in recent memory), Chris Matthews, and the Industrial Media Complex nonsense you’ve been programmed to reflexively snarl at because it provides information that doesn’t align with your outlook. Complication is most unwelcome.

          But hey, what’s it like hearing your President use the words of Stalin and Mao to stifle dissent? Yeah, I know. With you guys its either starry-eyed worship of Trump and unrequited hatred of “liberals” or we have TDS, right?

          I’ll stop hijacking the thread now.

          • 0 avatar
            Sub-600

            Republicans always run from Trump, until they realize he’s right then they come back. That’s hardly an Earth shaking development. Abolish ICE, military coups, this stuff is the gift that keeps on giving. Trump is crazy like a fox.

  • avatar
    Wheatridger

    What if it turns out that Subaru’s technical progress was stalled by the siren song of the flat-four engine? Just like Volkswagen, who kindly provided Subaru with many so many of its customers over the years. VW stick with the basic Beetle layout for too long, it’s now believed. Subaru’s showing the same lack of diversity in its powertrains now, and it could hurt them.

    • 0 avatar
      ernest

      Nah… this pony isn’t tired of the run yet. Subaru’s brilliance, as already pointed out, is marketing, not engineering.

    • 0 avatar
      bullnuke

      I’m wondering what the problem with an opposed ICE is for everyone? Porsche has used it longer than Subaru as have Continental and others in the aviation industry. Inline engines are pretty ancient. My 1940 9N Ford uses one as did the old T-models before it. The usual comments of “it takes two of everything – heads, manifolds, etc.” doesn’t make sense – so do V6 and V8 engines.

      • 0 avatar
        stuntmonkey

        > I’m wondering what the problem with an opposed ICE

        TTAC tropes. The comment section pretty much works like clockwork, you can pretty much auto-populate everybody’s beefs and biases with an AI based solely on the post title most of the time.

        • 0 avatar
          bullnuke

          Agreed stuntmonkey. I only ask the questions sometimes to see if anyone really, really has some personal information to support negative comments made that may be useful to others. I am routinely disappointed…

      • 0 avatar
        Advance_92

        The advantage of short length, low profile and decent balancing are offset by something else. Maybe the complexity of components like the cylinder heads and timing which is longer to route than a V.

        It also is usually longitudinal, which means on Subarus and 911s it’s hanging ahead or behind an axle so you have to design the car around that weight distribution.

        Head gaskets were a Subaru specific problem for the non-turbo 2.5 motors from the late 90s to the late 2000s. They’re time consuming to replace but shouldn’t really go bad; Subaru was using crappy gaskets from the factory.

        • 0 avatar
          bullnuke

          Thanks for not being a troll, Advance_92. This is rather the thoughtful type of response that I really enjoy seeing on any of the topics here. It gives me a different perspective on issues.

      • 0 avatar
        TW5

        @ bullnuke

        Two of everything is a legitimate complaint, particularly regarding four-cylinder engine that have few length issues in longitudinal mounting. Furthermore, the oil tends to pool on one side of the cylinder in an opposed layout, creating lubrication difficulties that must be solved. Opposed cylinder engines are space inefficient and heavy. This is particularly problematic for front-engine mass produced vehicle because the engine is jammed between the front wheel wells. Other opposed cylinder vehicles have the engine aft of the rear wheels (old 911’s) or midship (Ferrari 512TR).

        There are many reasons boxer engines are not used for mass-produced front engine vehicles. I’m not opposed to them necessarily, but to pretend they don’t have drawbacks is absurd, particularly now that everyone needs space in the engine bay for hybrid drive systems.

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