August 3, 2017 / 4:20 AM / 2 years ago

With a bit of love, Japan's Subaru soars in U.S. while rivals falter

TOKYO (Reuters) - As many automakers struggle with slowing demand in the U.S. car market, one of Japan’s smaller automakers has managed to buck the trend by sticking to an unconventional marketing strategy, along with a little “love”.

Newly manufactured cars of the automobile maker Subaru await export in a port in Yokohama, Japan May 30, 2017. REUTERS/Toru Hanai

Subaru Corp (7270.T), Japan’s No. 6 automaker by global sales volume, posted on Thursday a 17.5 percent rise in its quarterly operating profit to 119.3 billion yen ($1.08 billion), buoyed by higher sales in the United States, its biggest market.

With worldwide sales roughly one-tenth that of compatriot Toyota Motor Corp’s (7203.T), Subaru reported a 12.3 percent jump in U.S. sales for the quarter, even as many of its rivals have been hit by both an overall slowdown in the U.S. market from record levels last year and a growing preference for bigger vehicle models, versus the sedan.

Subaru’s sales gains contrasted with the 5.7 percent drop in North American sales at Japan’s No.3 automaker Honda Motor (7267.T) and a 6.0 percent fall at Mazda Motor Corp (7261.T).

Like most Japanese automakers, Subaru sells more sedans than trucks and SUVs in the United States, but even as sales have dwindled for smaller models, its outperformance in the world’s No. 2 auto market after China was driven largely by strong demand for the recently revamped version of its Impreza sedan.

The new model is more fuel efficient than its predecessor and carries more advanced safety features. But with it and its other models like the Outback and the Forester, Subaru has departed from selling cars as high-performance machines, marketing them instead as lifestyle products.

Its marketing strategy in the United States, which accounts for around 60 percent of its global sales volume, for years has focused mainly on affluent and liberal-minded consumers, with advertisements featuring slogans such as love and inclusion which have won over consumers living largely on the west and east coasts.

“We use ‘love’ as a keyword in our marketing. In the past we focused on selling cars based on their performance, but for years we’ve been promoting our cars as something which will make our customers’ lives more fulfilling,” CFO Toshiaki Okada told reporters at a results briefing.

This strategy has worked for the tiny automaker - monthly sales in the United States have climbed on a year-on-year basis for 68 straight months.


Along with a boost in U.S. production capacity last year, Okada said this strategy would “help our numbers going forward”, while cautioning that U.S. selling incentives would increase this year as competition remains fierce.

Subaru produces just over 1 million vehicles annually at its plants in Japan and the United States, compared with Toyota’s roughly 10 million at plants across all major continents.

Toyota is expected to announce a 16 percent drop in its quarterly operating profit, according to analysts surveyed by Thomson Reuters I/B/E/S, while Nissan (7201.T) last week posted an almost 13 percent slide in profit, dragged by rising incentives to sell its cars in the United States.

Meanwhile, Suzuki Motor Corp (7269.T), which does not sell cars in the United States, posted on Thursday a 44 percent jump in its first-quarter operating profit, boosted by a 14.3 percent rise in vehicles sales in its biggest market, India.

Reporting by Naomi Tajitsu; Editing by Himani Sarkar and Muralikumar Anantharaman

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