TOKYO — Subaru plans to open the taps on its tight factory supply and drive U.S. sales to another record high for a 12th straight year in 2020 as it moves beyond quality problems.
Global CEO Tomomi Nakamura says nailing quality is still a top priority. But the Japanese carmaker will ramp up production at its plants in Indiana and Japan to relieve razor-thin inventories that crimped Subaru’s U.S. sales growth to some of the slowest levels in years.
In an interview with Automotive News last month, Nakamura predicted U.S. sales would reach 700,000 for 2019 and climb again to between 720,000 and 730,000 units in 2020. That would represent a remarkable 12th year in a row of record U.S. sales for the all-wheel-drive niche player.
Subaru’s U.S. sales growth shows no signs of ending. The company expects volume in its most important market to keep galloping ahead through 2025.
“There is still growth possibility in the United States,” Nakamura said.
He said there is more sales opportunity in regions where Subaru is still a small player, as well as in markets where it is established.
“We think it is still possible for us to grow in the U.S. Sunbelt,” he said. “We think that’s a frontier market for us. But it’s not just the Sunbelt. There is also the Snowbelt, especially the Northeast.”
Subaru’s optimism about the U.S. is good news for dealers struggling with low inventories. It also reflects Nakamura’s belief that Subaru can achieve up to 850,000 U.S. sales in the fiscal year ending March 31, 2026, as the CEO outlined in his STEP mid term business plan. STEP stands for “Speed,” “Trust,” “Engagement” and “Peace of Mind and Enjoyment.”
Nakamura wants Subaru’s U.S. market share to hit 5 percent by then, which he said could equate to volume between 810,000 and 850,000 vehicles, depending on how the market evolves.
Subaru’s U.S. sales rose 3.0 percent to 700,117 vehicles last year. The brand began December with only a 24-day supply of vehicles, the lowest in the industry.
Nakamura said some hot-selling nameplates, such as the Crosstrek, have inventories as tight as 12 days. The company is targeting average stock of around 45 days.
“We will be revamping our inventory around that number,” he said. “We may be able to hit an overall average of 45 days’ supply in the near future.”
Nakamura’s projected 2020 U.S. sales bump will come partly from the full-year impact of the redesigned Outback crossover and Legacy sedan launched in 2019. Production of those vehicles at Subaru of Indiana Automotive will ramp up in 2020 after a slow rollout.
To safeguard quality during the start of production for these nameplates, SIA’s production pace slowed to 380,000 units a year in 2019. But that should increase to 410,000 this year, he said.
Meanwhile, output from Subaru’s plant in Japan will normalize following a slowdown required to overhaul quality procedures in the wake of a spate of costly and embarrassing recalls.
“That will help capacity,” Nakamura said.
Quality issues have dogged Subaru since late 2017.
The problems emerged when the company disclosed that uncertified workers had for decades carried out tests of new cars for the domestic market.
The scandal deepened when Subaru also admitted that its final inspectors had faked fuel-economy and emissions data in some cases. Recalls to address cheating on the final inspections, combined with a spate of callbacks for various other glitches, spiraled into the hundreds of thousands of vehicles.
Nakamura returned to Japan to take over as president of the parent company in 2018 after being CEO of Subaru of America, and he immediately began tackling the problems.
“I was beginning to worry about the issue of quality shortly before I moved back to Japan. We were having more recalls,” he said during a media roundtable in December. “I laid out quality improvement in the STEP midterm plan not because of the final-inspection issue, but because I had already been concerned about that, even when I was in the U.S.,” he said.
“I thought this would be the biggest hindrance to our U.S. sales growth.”
The company said it would spend more than $1 billion over five years to improve quality. The fix partly called for slowing production and implementing new quality measures and training procedures. Subaru also will set up a so-called “quality assurance laboratory” in Japan to redouble its efforts on matters such as testing, diagnostics and troubleshooting.
Last month, Subaru issued ¥40 billion ($365.2 million) in corporate bonds to help ease pressure on its cash reserves as it steps up outlays for quality expenses.
“We made quality reform our most important activity,” Nakamura said. “All that contributes to improving the quality of the vehicles we are developing right now.”
Looking ahead, Subaru has several new offerings in the works.
It is working with partner Toyota Motor Corp. to develop a full-electric crossover that will debut in the first half of the 2020s. Subaru also will use Toyota’s gasoline-electric technology in its next-generation hybrid vehicles, adapting the system to its own all-wheel-drive layout.
The Japanese carmakers, which deepened their cross-shareholdings in September, also are prepping a next generation of their rebadged sporty small car, the Toyota 86 and Subaru BRZ.
Subaru, meanwhile, has dangled a new global SUV for release in the early 2020s. Nakamura remained mum about that vehicle. He said Subaru is working with retailers to pinpoint the white space in the brand’s lineup that might be covered by the new entry.
But the SUV’s main market will be the U.S., Nakamura said. The U.S. accounts for two-thirds of Subaru’s global sales.
“Our retailers are saying that they can sell more … to bring more vehicles over,” he said. “We show new models to our retailers at an early stage and receive their feedback. That helps generate a sense of unity between us, which is a source of strength.”
Naoto Okamura contributed to this report.