Subaru dealers expect vehicle inventories to remain tight across all product segments in 2014.
But with the brand's U.S. sales more than doubling in the past five years, it's a problem the dealer body doesn't mind having, said Phil Porter, chairman of the Subaru National Dealer Advisory Board.
Subaru's U.S. sales rose 26 percent in 2013 to 424,683 vehicles. Porter, who owns Subaru dealerships in Connecticut and Florida, expects the brand can top 450,000 vehicles in 2014.
Porter spoke with Staff Reporter Amy Wilson.
Q. How was 2013 for Subaru dealers?
A. It continues to amaze me. I don't know how else to say it. Seemingly, every car the manufacturer can build gets sold. We just can't catch up on a days supply basis ever.
Can Subaru repeat such sales growth in 2014?
While a 30 percent increase might be hard to obtain, I fully expect we'll have increases. A realistic number for '14 that we'll be looking for is 450,000 to 460,000.
Has the company told dealers that is the target for '14?
No. But I would expect that's about what we'll look to get accomplished.
The company has talked about selling 500,000 in 2015. How do dealers view that goal?
We're poised for growth. During this time of amazing growth, we have identified some necessary fixed-ops expansion requirements, and the manufacturer has stepped up to the plate with a fabulous program to assist dealers to make investments in service capacity and people capacities and technician capacities to be prepared for this big unit-in-operation growth that we have. So dealers are preparing frankly to sell whatever the manufacturer can provide to us in terms of production.
What kind of fixed operations investment does the factory expect from dealers?
It's an ongoing analysis by individual dealers what investments and capacity adjustments they need to make. It's a very generous assistance program. While it's the dealers' responsibility to be prepared to take care of their customers, the manufacturer is assisting, and it's an amazing gesture on their part.
What does Subaru expect in terms of capacity -- for example, the number of bays?
They're just analyzing on a per-dealer basis, based on their exact unit-in-operation counts and where they expect them to be all the way through 2016. If you're talking about a guy who built a building even 10 years ago, based on sales at that time, this triple-digit growth over the course of the past six years simply means there's more capacity needed in a lot of cases.
Are you doing your own project?
I'm starting my project in mid to late January in Jacksonville. I'm expanding my showroom by about 10,000 square feet and adding sales desks. I'm adding lifts in the service department. I'm adding the capability for a third service writer, so I certainly can take advantage of the program, and it will be beneficial to the employees and to my customers.
Are Subaru dealers able to afford the expansion?
Given the growth we've had, it's necessary for dealers to make the investment to take care of all the added customers.
We don't have unreasonable wait times [in the service department], but I don't want to be in the position that I would have an unreasonable wait time. That's what Subaru is reacting to: Let's fix it before it's broken.
What are Subaru dealers' major concerns?
For the most part, most Subaru dealers are ecstatic with their relationship with the manufacturer. There's an executive group that's been there for a long time, and they're very proactive and reactive to dealers and dealers' concerns.
Top of mind with Subaru dealers is production capacity. They have addressed that with an announced expansion of the plant in Indiana, which is due to come on board in '16. That gives the dealers some peace of mind that the production capacity will be there for this continued growth.
What vehicle lines are most short?
In parts of the country, every single one of them. The new Forester, having been named Motor Trend SUV of the Year, is just in very short supply all over the country. But every product line is doing very well.
What will the factory do in 2014 and 2015 to reduce inventory shortages?
There's a confidence that we can reach sales goals with the existing capacity of the manufacturer.
So supplies will be tight for the next couple of years?
It's not the worst thing to happen in the world, to have one car too few. There's a fine line between one car too few and five too many.
What is missing in the product line?
The seven-passenger vehicle. Tribeca will cease production [in early 2014]. We have requested the manufacturer to replace that with a suitable seven-passenger. Our customers are young and with young families. When the families grow, we just need a vehicle to keep them with the brand that allows more space.
Have you lost customers because of that or do they choose a second vehicle from another brand?
I certainly think that happens. But, worse, because we don't have a seven-passenger vehicle, we don't get consideration from people who are in that market. It's under study, and they understand the need for the vehicle.
Should Subaru enter other segments?
No, our vehicles have more and more mass appeal and the segments we compete in are perfectly suited to the brand.
You have a redesigned Outback and Legacy in 2014. What do you expect from those launches?
Great things. The new vehicles are very exciting. It is going to take the Outback to the next level. And the Legacy, they just did an amazing job with that car. That's a very tough segment, but with the styling on that car, it gives us a real opportunity to compete. The styling changes will allow us to get more consideration. It's roomier, but it is also designed more competitively.
Do you know about the pricing?
No. But our expectation is it will be competitive with others in the segment.
Are dealers satisfied with pricing and incentives?
Other brands are trying to pursue the outdoorsy market. Are you concerned they could encroach on Subaru's turf?
No. It's a compliment that they recognize our success. A lot of things that work with our brand won't necessarily translate to other brands. I saw the Chevy Colorado move pretty outdoorsy. Well, that's a pickup truck with some racks on it. Ours really has the reputation for go-anywhere, do-anything capability with a carlike drive. With a Volkswagen, with a Chevy, with a Nissan, whatever it is, you make a compromise if it isn't a Subaru. That's my opinion.
Are Subaru dealers profitable?
Are your new-car sales profitable?
Does our supply situation turn into wild new-car profits? The answer is we're profitable, but we still have to compete to sell cars against other brands.
Subaru's chief said recently he wants to eliminate weaker dealers and recruit stronger ones but keep the overall dealer count about the same. Are dealers concerned? How does the factory do that in a fair way for existing dealers?
If there is a Subaru dealer who is not experiencing big growth and investing in buildings and people and taking advantage of a very hot product right now, he may want to look to do something else. I don't know how you define who's a weaker dealer. But if there are any Subaru dealers out there right now who aren't experiencing some growth and profitability, then I get why they might not want to be Subaru dealers. If you can't make it now, you're not going to make it.
Are dealers happy with the marketing message?
Yes. This Love campaign that we've been six or seven years at has really hit home with our owners and potential customers. It's perfect for the brand.
What do you think of the level of spending?
It's increased year over year with our sales, and dealers overall are very satisfied.
Do dealers want anything in terms of improving Internet-related marketing or doing more with social media?
If there's one strength of Subaru marketing nationally, it's their Internet marketing. They do a very good job with it and are very progressive. Their percentage spent on the Internet versus traditional media continues to grow. Almost 30 percent [of the marketing budget].