Subaru knew that the combination of new tariffs, the delayed U.S.-Japan trade deal, and an about-face in U.S. environmental regulations would all conspire to reduce the company's profitability. Its Q3 earnings report, released earlier this week, paints a picture of a company struggling to adapt to the new landscape. With three quarters in the books, Subaru is now projecting a 70% drop in operating profit compared to the previous year. The decline wasn't unanticipated, but its magnitude was. Subaru was previously projecting a 51% drop in operating profit for its current fiscal year; that number has obviously ballooned. The company's revenue is also expected to fall by 63%, with a 15% tariff in place on vehicles imported from Japan eating into its profits. Subaru expects to incur an additional $280 million in import-related costs this fiscal year, $280 million more than anticipated. To mitigate the impact, Subaru shifted production of ...
Subaru knew that the combination of new tariffs, the delayed U.S.-Japan trade deal, and an about-face in U.S. environmental regulations would all conspire to reduce the company’s profitability. Its Q3 earnings report, released earlier this week, paints a picture of a company struggling to adapt to the new landscape. With three quarters in the books, Subaru is now projecting a 70% drop in operating profit compared to the previous year.
The decline wasn’t unanticipated, but its magnitude was. Subaru was previously projecting a 51% drop in operating profit for its current fiscal year; that number has obviously ballooned. The company’s revenue is also expected to fall by 63%, with a 15% tariff in place on vehicles imported from Japan eating into its profits. Subaru expects to incur an additional $280 million in import-related costs this fiscal year, $280 million more than anticipated.
To mitigate the impact, Subaru shifted production of the redesigned Outback to Japan and eliminated the base model, keeping the rest of the wagon’s pricing structure relatively intact. This move freed up capacity in Indiana for the lower-margin Forester, which would have been hit harder by tariffs if Subaru had to import it. The company can now also open up production of the WRX, which was severely limited last year.
However, Subaru’s sales have yet to recover from the market downturn that followed the expiration of U.S. EV subsidies in September. The company blamed the weather for the 9% decline in January, but it’s clear that Subaru faces an uphill battle to regain traction. The company’s sales have been stagnant, and the market is becoming increasingly competitive.
Despite the challenges, Subaru isn’t losing money in America; it’s just making less than it used to. The company’s financial performance is a stark reflection of the auto industry’s turmoil, and it’s a wake-up call for automakers to adapt to the new reality. Subaru’s Q3 earnings report is a reminder that the industry is facing unprecedented headwinds, and it’s essential for companies to be proactive in addressing these challenges.
COMMENTS