That was the headline in an article that appeared in the Wall Street Journal , May 30, 2013. It’s difficult to imagine a headline that would have been less imaginable a few years ago. After all, Subaru has a well-earned reputation of producing vehicles that appeal to a niche crowd of New England liberals.
Subaru realized that this core demographic was both an asset and a liability. On one hand, these buyers have sustained the brand for decades, on the other hand, the types of vehicles coveted by that demographic were largely unappealing to mainstream US buyers.
This is a familiar dilemma for many foreign automakers, especially small ones like Fuji Heavy Industries, which owns and produces Subarus. Expanding to foreign markets is a difficult endeavor and one way to minimize risk and cost is to export domestic market products with as few changes as possible. That approach is particularly prevalent in capital intensive industries such as automotive manufacturing. For reference, Subaru’s Japanese competitors all started its sales operations in the US by exporting Japanese market models. While global automotive tastes are slowly becoming more homogenous, there are still strong regional preferences that prevent models that do well in one market from achieving similar success elsewhere.
Courtesey of SubaruForester.org
With this in mind, Subaru realized that it needed to de-emphasize its Japanese roots and customize its offering to the US market. The company was able to do this somewhat easily since it has been building vehicles in the US for decades. A prime example of Subaru’s success has been the Outback. This model has been sold in the US for many years, largely unchanged from its Japanese twin. In essence, the Outback has always been an all-wheel-drive station wagon. Station wagons have limited market appeal in the US, where customers favor higher-riding SUVs and cross-overs. Instead of abandoning the Outback name and goodwill, the company instead morphed the product into a cross-over that still resembles a wagon but with a higher ride height. The company took the same approach with its very popular Forrester model. It capitalized on the name and basically copied the cross-overs from Honda and Toyota to arrive at its bestselling model. Overall, Subaru has enjoyed a 34% sales increase in May 2013.
Instead of struggling in the US market as other, smaller Japanese auto manufacturers Suzuki and Mitsubishi have, Subaru is thriving. It’s a lesson that other manufacturers are following as well. As much as US car enthusiasts have praised BMWs over the years, selling European models only got the company so far. To drive sales, BMW capitalized on its brand, started producing vehicles in the US and expanded its product line to include models for US buyers, namely SUVs. Similarly, many manufacturers tweak their models for the Chinese market, with long wheelbase models.
Of course, brand expansion can easily lead to lead to oversaturation and a loss of core values. This affects niche and luxury brands more than mainstream brands. However, for Subaru the danger is real. Now that many consumers embrace Subaru models as an alternative to other Asian brands, will the brand lose it core customer base? Most likely, they will lose that core customer base and its rapid expansion will more than make up for it.
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