Here Come the BEVS at Subaru

Subaru’s new CEO Atsushi Osaki says the company is going to catch up in a hurry with battery-electric vehicles by introducing four new crossover BEVs by 2026.

The strategy, laid out in Subaru’s reporting of fiscal-year earnings, remains a bit unspecific about whether these models will be electrified versions of Subaru’s current products or new models. But Osaki says all four vehicles will be built in Japan, thus eliminating their eligibility for U.S. tax credits to U.S. buyers.

One executive with knowledge of the product plan says the four BEVs will be a mix of both new model names and BEV versions of existing models. All four models, say sources, will be developed on the Solterra platform developed with Toyota, which owns a stake in Subaru.

Subaru, culturally, is a company driven in part by frugality and practicality, owing in part to its comparatively small size and global volume. Despite the penalty for manufacturing in Japan, Subaru reckons manufacturing at converted plants will save it a lot of money on the front end of the BEV transition, though it will create a pricing disadvantage in the showrooms.

Subaru’s strategic plan, discussed by Osaki and chairman Tomomi Nakamura, calls for building 400,000 EVs annually in 2028. Production will be met by expanding its Oizumi plant in Japan with a dedicated EV line that will produce 200,000 BEVs per year. Production will also come from the Yajima plant, which would achieve 200,000 vehicles per year by 2026.

The four new crossovers will be offered in North America, which is Subaru’s largest market. Seventy percent of Subaru’s global sales are in the U.S. The Japanese automaker’s overall goal is for 40% of its sales to be made up of BEVs and hybrids by 2030. In 2022, Subaru sold 556,581 vehicles in the U.S., according to the company. It’s going to be a test of Subaru’s customer loyalty to see if the company can maintain share and sales momentum while being at a $7,500 deficit to its rivals with EVs. The Inflation Reduction Act provides $7,500 tax credits at point-of-sale for BEVs so long as the vehicles are built in the U.S.

“I wonder if American consumers choose their cars solely based on tax breaks,” says Nakamura during the investor call. “Our U.S. customers are quality customers. We have a higher ratio of customers buying Subarus with cash, and we also have low loan and lease rates. We also keep our incentives at low levels. We will try not to rely only on the subsidy program.” Nakamura also notes customers in the U.S. can get around the IRA requirement by leasing BEVs sourced abroad, and the tax credit is passed along to the lessee by the leasing company.

Subaru has a solid price-to-value proposition for its mainstay models: Ascent, Outback, Forester, Impreza and Crosstrek. A little over a decade ago, Subaru sales slid hard when the brand’s pricing got out of hand relative to competitors. Then-Chief Operating Officer Tom Doll infamously took on management back in Japan to lower prices, which set off a surge in Subaru sales and popularity.