New Import Duties Could Body Slam Subaru
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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trump pretty much showed his empty hand today while putin body slammed him on camera. These tariffs will go away soon.
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.