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Subaru slashes parts prices to ready China production

BEIJING – Subaru Auto (China) Co., Ltd. announced slashes in its components and parts prices for Subaru cars in the Chinese market in late May. Prices of body parts were cut by up to 40 percent. After the price adjustment, Subaru parts prices are now almost equivalent to the prices of those locally made parts for use in B-Class cars.

The move is believed to be an attempt to prepare for local production of Subaru cars in the world’s largest auto market.

An executive from Fuji Heavy Industries Ltd., the maker of Subaru-brand cars, told Dow Jones Newswire on May 31 that the company may offer vehicles in emerging markets through its partnership with Toyota Motor Corp.

“We do’t have any concrete plans at the moment, but it would be natural for us to source more models from Toyota,” he said. Toyota now owns a 16 percent stake in Fuji Heavy.

The executive admits that it is difficult to meet burgeoning needs in emerging markets like China and Russia.

Currently Fuji Heavy introduces the Subaru Impreza, Forester, Outback, Tribeca and Legacy models to China. Subaru has seen exceptional sales growth in the Chinese market last year. Its 2009 sales surged 86 percent year-on-year to 35,300 units, ranking third among imported car brand names after Benz and BMW. A source from Subaru China noted that its “China sales have been climbing rapidly and our total parc here will reach 100,000 units soon. The price cut on parts indicates Subaru’s determination to further explore the Chinese market.”

The Japanese automaker has already put China production on the agenda, according to the same source. And the Legacy will probably be the first model to enter local production. “Only one model will be produced locally at the beginning, while others will remain imported,” said the source.

At present Subaru vehicles are only produced in its U.S. and Japan plants, and are never enough in supply to satisfy demand in the world market.

However, the Fuji Heavy executive mentioned above revealed that the company needs to sell at least 100,000 vehicles per year to begin local production in China. The Japanese automaker has set a sales target of 50,000 vehicles in China this year.

Fuji Heavy, Japa’s eighth largest automobile producer by sales volume, expects its operating profit this year to recover to 94 percent of pre-financial crisis levels as its vehicle sales in the U.S. are growing at a burgeoning pace.

 

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