Subaru-Maker to Raise Profit Forecast on Strong U.S. Demandby and
Subaru to raise North American sales target as demand rises
Fuji Heavy to forecast record profit in 2016-2018 plan
Yasuyuki Yoshinaga has a problem that other automaker bosses would love to have. Subaru’s cars and crossover models are in such demand that customers have to wait months to get their keys, prompting the carmaker to ramp up its capacity ahead of schedule.
Fuji Heavy Industries Ltd., which owns the Subaru brand, will raise its North America sales target and project a record profit for its next three-year business plan running through March 2018, President Yoshinaga said in an interview in Tokyo on Monday. The carmaker is on track to post a fourth consecutive record annual profit this year and said this month it plans to almost double its U.S. capacity to about 400,000 units starting in the summer of next year.
Subaru is known for its all-wheel-drive vehicles among enthusiasts and has gained market share in the U.S. as job growth, available credit and affordable gas prices encourage shoppers to replace aging models, especially with SUVs. Demand in North America is so strong that it’s allowed the carmaker to stay out of the incentive-spending war that’s occurring in China, and probably cut its sales target there, in order to protect its profit margins, Yoshinaga said.
“I’m really happy about the sales momentum,” Yoshinaga said. “The risk for us is not being able to make enough cars.”
Fuji Heavy’s shares rose 2.6 percent as of 11:20 a.m. in Tokyo trading, headed for the biggest gain in a week. The benchmark Topix Index climbed 1.3 percent.
Subaru dealers had 18 days supply of cars and trucks on their lots as of Nov. 1, compared with the 69 days average for the industry, according to Automotive News, a Detroit-based trade publication. Subaru spent $695 in incentives for each car sold, compared with the industrywide average of $3,108, according to market researcher Autodata Corp.
“Subaru has established its position in the U.S. market as a reliable brand,” Takeshi Miyao, an analyst at researcher Carnorama in Tokyo, said by phone. “The Subaru boom won’t be temporary and I expect their sales will remain strong going forward.”
In Japan, there’s an average waiting list of 2 1/2 months for its models, Yoshinaga said. Dealers in the U.S., its largest market by sales volume, are also urging the carmaker to expand its capacity to cut down on delivery times, he said.
Subaru is well-positioned to weather any decline in demand if the Federal Reserve raises interest rates in the next few months, as the carmaker has more orders than it has capacity to fill, he said.
Fuji Heavy’s shares have risen 16 percent this year in Tokyo trading, compared with the 12 percent gain in the Topix index.
Subaru, which earlier this year put on hold its plan to start China production, is cutting exports to the world’s largest auto market and shipping more of its cars to the U.S. to meet demand. It’ll probably sell 47,000 units in China this year, missing a target of 60,000 vehicles, he said.
“We are fine with just selling cars to consumers who really like our brand for now,” Yoshinaga said. “But in the long term, we still want to increase sales in China when the market stabilizes.”