Toyota's Silent Subaru Stake Pays Off

2014 Subaru Forester Courtesy Subaru

Toyota is arguably on top of the car world. The company reported an unprecedented profit of 1.8 trillion yen ($17.6 billion) for the 12 months ended March, a surge of almost 90 percent.

Buoyed by a weak home currency, the Japanese giant has been selling more cars than any other company in the world: 10 million in 2013. But Toyota’s hottest cars don’t carry its name or even a Lexus badge, for that matter. Subaru, a company in which Toyota owns a 16.5 percent stake, is putting Toyota sales to shame.

Drivers worldwide bought 21 percent more Subarus in the 12 months ended March than in the year before, far outpacing a 2.7 percent increase in Toyota’s annual sales. In North America, Subaru notched a 28 percent sales gain, compared with Toyota’s 2.4 percent. analyst Jessica Caldwell worked at Subaru until 2006. She says that the past couple of years the company has done a good job of pushing its cars beyond the Northeast, the Northwest, and the Rocky Mountains, its traditional geographic sweet spots. Caldwell also said the company has tuned up its advertising. Most notably, the company is making a shameless—and funny—play for dog-owners in a recent campaign. “They kind of hit the right emotional chords for a lot of folks,” Caldwell said. “That might not necessarily sell a lot of cars, but it gets people talking about the brand.”

Subaru’s new Forester SUV is particularly hot, and the company is winning a whole new group of buyers with its XV Crosstrek, an all-wheel-drive hybrid that hit dealerships in the summer of 2012. And for Subaru’s parent, Fuji Heavy Industries, the weak yen that came to Toyota’s aid has been particularly powerful. The Japanese company sells roughly half of its cars in the North America, compared with only 28 percent of Toyota’s vehicles.

Toyota doesn’t talk much about its Subaru ties. And the sibling brand is certainly a narrow niche, accounting for a sliver of the volume the industry leader stamps out. But Toyota’s Subaru buy certainly has borne fruit in recent months. Earnings from “affiliated companies” surged 37.5 percent in today’s annual report. That’s 318 billion yen that did not come from a Camry or Prius.

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