Subaru Defies All Logic

Subaru seems to be able to do the impossible. In an industry where conventional wisdom says an auto maker needs to produce 6 million vehicles a year to achieve the economies of scale necessary to survive, Subaru only sells about 750,000 cars. And yet Subaru is on a tear.

For the last five years, the little Japanese auto maker has run from one sales record to the next. Someone forgot to tell it that the Great Recession had crippled the global economy. And when other Japanese automakers were struggling with exchange rates, Subaru consistently posted tidy profits. Compare that to Mazda, a Japanese automaker with twice the sales volume but struggling financially.

All this success has triggered a deep debate inside Subaru. Should it remain a niche player? Or should it expand its production base and go after the big boys?

I hope the company proceeds carefully. It has several issues it needs to resolve no matter which way it decides to go.

Design. Subaru’s styling is not particularly handsome or well resolved. I know it’s customers do not see it that way, but if Subaru wants to keep bringing in new buyers every year it needs to borrow a page out of  Kia’s book and make its cars and CUVs look gorgeous.

Interiors. Subaru’s interiors look too low cost to my eye. Lots of hard, grey plastic, wrapped in cheap-feeling materials, held together with flimsy looking stitching. Just as General Motors discovered, a little bit more investment in the interior can yield amazing results.

Connectivity. Subaru’s interfaces with its infotainment and navigation systems are some of the most awkward in the business, with the dinkiest little buttons I’ve ever seen. The latest models are better in this regard, but they are not world class. Why not be the best?

Until Subaru fixes these items it should not consider expanding its production base. And even at that, it ought to consider moving its products more upscale rather than just making more. With Saab having vacated the market there’s an open psychographic slot it can slide into.

Ford is making an interesting move in Europe that could point the way for Subaru. Ford is offering an upscale trim line called Vignale across its model line that features more luxurious materials, unique styling cues and special customer treatment such as home or office pick-up for any service issues. This provides prime customers a better buying experience, without committing the company to a massive investment in new models, and without leaving behind those customers of more modest means.

By developing its own Vignale line Subaru could test higher price points before committing to a big investment in plants and platforms. I think it would make a fascinating experiment and I bet it would yield good results.

Ask anyone at Subaru why they’re so successful and they’ll tell you it’s because they really know their customer. And they do. But customer tastes change, and other automakers are always ready to attack those who are successful. If Subaru can make itself a moving target it’s going to be hard to catch. And that could be the key to keeping the good times rolling.

John McElroy is editorial director of Blue Sky Productions and producer of “Autoline” for WTVS-Channel 56, Detroit, and “Autoline Daily,” the online video newscast.