TOKYO -- Subaru is on pace for its eighth straight year of record U.S. sales. Yasuyuki Yoshinaga, CEO of Fuji Heavy Industries, the Japanese company that makes Subaru cars, is racing to meet the booming demand with large capacity increases.
At the same time, he is underpinning future models with a new global platform that debuts in the redesigned Impreza and prioritizes safety, handling and performance. Fuji Heavy also is getting serious about electrified drivetrains with a plug-in hybrid and electric vehicle in the pipeline.
The rampant expansion wasn't painless -- this year saw a spate of recalls for Subaru. But Yoshinaga says he is pre-empting bigger problems by dispatching a special quality envoy to the U.S.
Yoshinaga, 62, speaking through an interpreter, sat with Asia Editor Hans Greimel on Nov. 7 to discuss Subaru's sales outlook, future products, thoughts about quality and the strategy for China.
Q: Has the U.S. peaked, and what is the outlook for next year?
A: I'm feeling it has already peaked out. The sales trend will not dramatically decrease. High demand will continue for a while, but it probably won't climb beyond where it is now.
Have you adjusted your U.S. sales targets because of the flattening market?
No. The original target for the 2016 calendar year was 615,000 vehicles, and given the current trend, we will be able to achieve that level. We are planning to sell 670,000 vehicles in the 2017 calendar year. We began increasing capacity for the Outback at SIA [Subaru of Indiana Automotive, Fuji Heavy's U.S. assembly plant] in July, and production of the Impreza just began there on Nov. 1. We have increased supply, and that means we can also increase our sales target. If we achieve that target next year, that would make it 10 years of increasing sales, and nine straight years of record sales.
How long can Subaru continue to grow? What's the U.S. outlook for Subaru in 2021?
In our "Prominence 2020" midterm business vision, we're forecasting 800,000-plus sales in North America by fiscal year ending March 2021.
How many sales in the U.S. then?
Dealers say the only thing holding back higher sales is tight capacity.
What we're short of is the vehicles that are made in Japan, such as the Forester and Crosstrek.
Do you wish you had increased capacity for the Forester in the U.S., instead of the Impreza, to tap demand for crossovers instead of cars?
I think we made the right decision. The Impreza comes as both a four-door and five-door and is a base model using our new global platform.
When can output reach full capacity of 394,000 vehicles at Subaru of Indiana?
We should reach full capacity in January.
Do you see a price war brewing in the U.S.?
I feel price competition is getting tougher. The industry-average incentive level is rising to $3,400 to $3,500. But at Subaru, we're not seeing any big impact. Our incentive level was previously around $900, and currently it's around $1,200. It increased by a few hundred dollars, so that's not a big deal for Subaru.
What was the reason for the recalls this year?
Firstly, quality is our top priority. Unfortunately, we had the recalls this year. One reason is that Subaru's sales increase is seeing sudden and dramatic growth. That's true for Fuji Heavy, but also the suppliers' production output is also greatly increasing. This is one of the areas where we should now be keeping watch more strictly than ever.
Subaru fell in Consumer Reports' reliability study. How are you addressing it?
I dispatched a quality officer from Fuji Heavy to be a lead quality officer in the United States. That was in April. He is Masashi Takahashi. He was the top officer in global quality assurance. He is based in Fuji Heavy Industries U.S.A., at the same location as Subaru of America, in New Jersey.
What is his mission?
He's starting with visiting retailers.
When a recall happened, FHI would do recall analysis from a technical point of view, but we lacked a view to see the actual trouble and inconvenience that our retailers and customers were experiencing. We've created this position so that FHI can receive the voices of the market and respond to them more quickly. FHI was short on listening to and grasping the voices of the market.
What concrete results have you seen from adding the position?
It will take a little more time until we see concrete outcomes. Subaru's rapid sales growth has caused strain to our U.S. production and to our suppliers. It's not something for which you can expect immediate outcomes in just a short time.
Subaru wants to introduce an electric vehicle in 2021. Will that car be a small-volume compliance car for only limited markets?
We'll be sure to comply with regulations. But at the same time, the overall industry is now shifting its electrification focus toward EVs. We are in the age where we cannot just go on launching EVs only as regulation compliance cars.
Will the EV technology be developed internally or borrowed?
We will develop an original system, but using batteries and motors supplied from outside.
Will the 2021 EV be introduced in the U.S.?
Yes, it'll be introduced in the U.S. Environmental regulations are getting stricter around the world. Launch timings might vary from country to country, but it'll be introduced globally.
You'll have an EV and a plug-in hybrid by 2021. You will have one model for each?
The plug-in hybrid will be launched in 2018, so there could be several plug-in hybrid models by 2021. But at the time of launch, we'll start with one model for each.
Will the EV and plug-in hybrid you are planning be all-wheel drive?
It's not decided.
Of the EV and PHEV, which will have bigger volume?
Research firms say the plug-in market will be bigger for the time being, but the EV market will be on the increase in the future, and we agree with that projection. Looking at the recent technology trend, I'd think EV would be the mainstream.
Has Subaru given up on assembling vehicles in China?
We have no plans. But I'm not saying we have given up.
But your China sales outlook is flat through 2021, despite China's being the world's biggest market and one that is still delivering relatively robust growth.
China has vehicle production capacity of over 50 million, including foreign manufacturers. But annual sales in the industry are between 25 and 26 million, with an operating rate of 59 percent. That's causing a fierce price war. As Subaru is in the middle of improving its supply shortage around the world, there's no need to jump into this price war in China now.
Long term, don't you need to grow in China to be a serious global player?
It's just like how we've grown in the U.S. Our efforts in the U.S. were never about "just setting higher target figures" or "just seeking higher volumes." As our U.S. team worked hard to communicate our brand values, more customers liked what we offered and what our brand stood for, and the volume followed.