If you have yet to see a commercial or a billboard or any sort of ad for the 2017 Subaru Impreza, you’re most likely living in a cave.
Subaru is spending a huge amount to launch the new compact sedan and hatchback. And it’s working. Subaru Canada’s sales are on fire.
Canadians bought 1,159 Impreza sedans and hatchbacks last month, pushing Subaru Canada to its best-ever monthly sales of 5,523. Subaru Canada’s sales are up nearly 10 per cent this year, notes DesRosiers Automotive Consultants. At this rate, Subaru’s Canadian unit in 2017 will surpass last year’s record sales of 50,190.
But spending on the Impreza launch and Subaru’s overall push to grow at a frightening clip are costing the tiny automaker dearly. Indeed, Subaru Corp.’s operating profit slid 27 per cent in the just-ended fiscal year. That ended three straight years of record operating profits.
The irony is that as sales have jumped — the tiny Japanese carmaker exceeded annual sales of 1 million units for the first time – profitability has taken a hit.
Subaru officials have conceded that the perils of rapid expansion have hurt Subaru’s quality – long a point of pride and a key to customer loyalty. Subaru Canada issued 16 safety recalls in 2016. In the latest Consumer Reports Auto Reliability Survey, Subaru dropped to “reliable” from “more reliable.”
Indeed, for the first time since 2010, Subaru has slipped out of CR’s Top 10 brands. Subaru also ranks below average in J.D. Power and Associates’ latest quality studies.
The quality problem has been noticed by CEO Yasuyuki Yoshinaga. He has noted the quality problem and vowed to do better.
In Canada, Subaru’s Ted Lalka says Subaru is tackling quality and growth issues head-on. The vice-president for marketing, product management and customer experience says a key piece in the quality drive in Canada is to ensure dealers have an adequate supply of parts to fill orders. Subaru Canada is also doubling down on training and technical support for its dealers.
Subaru, says Lalka, has not expanded its dealer network in a conscious effort to increase dealer profitability. This should translate into better customer support at the dealer level.
“Rather than add dealers, we’re increasing throughput so dealers can afford to invest in facilities and technology,” says Lalka.
The size of Subaru Canada’s problem is told in two numbers: 4,200 and 50,190.
The latter is how many vehicles Subaru sold in Canada in 2016, the former Subaru Canada’s sales in 1994. In 22 years, it has gone from life support to the automotive equivalent of a deep-breathing triathlete racing in one of the “Ironman” triathlons it has used to bolster its brand image.
At the very centre of Subaru’s turnaround: “Don’t try to imitate someone else,” says Ted Lalka, “We’re not trying to be Honda or Toyota and we never will again,” he adds, referring to a lack of focus of the early 1990s that led to annual sales of 4,200.
“We’re an attitude,” says Lalka. “We’re for people looking for something different.”
Still, Subaru is not shy about its ambition to increase share in the compact car segment with the all-new 2017 Impreza. The company wants to grow the all-wheel-drive Impreza’s share from the current two per cent. The marketing plan calls for an emphasis on design and engineering changes, including the third-generation version of the EyeSight safety system. The base AWD Impreza starts under $20,000.
“This is absolutely the biggest spend on a (launch) campaign we’ve ever had,“ says Lalka
The Canadian media effort includes television, full digital, cinema and print. It’s been developed in Canada with Subaru’s agency of record, Toronto’s Red Urban. The all-Canadian effort is grounded in a new 30-second television spot and four 15-second ones. Tagline: “Never Sit Still.”
“We’re underperforming with two per cent share,” says Lalka. Compact car sales fell seven per cent in 2016, but “a lot of vehicles” are being sold in that segment.
The compact segment (343,817 sold in 2016) is the third-largest in Canada, trailing only compact sport-utility vehicles (406,116 in 2016) and large pickups (344,559). Canadians buy three times as many compact cars as intermediates (118,662 in 2016).
The numbers suggest Subaru has room to grow the Impreza, with 2016 sales barely exceeding 7,400. Honda sold nearly nine times as many Civics (64,552) and Hyundai and Toyota six times more Elantras and Corollas, respectively (48,875, 45,626). Subaru expects the Elantra sales mix to be two-thirds four-door hatchback, one-third sedan.
The trick is to grow without sacrificing quality and customer service. And that’s the challenge ahead for Subaru in 2017.
“Subaru is not where we want it to be,” says Lalka. “We want people to know where we are today, not where we were 25 years ago.”