Subaru bursts into American mainstream

There's something about Subaru that's turning hundreds of thousands of Americans a year into "Subaruians."

The company is recording record sales and becoming one of the most reputable names in the automotive industry, thanks to its lineup of all-wheel-drive lifestyle vehicles and extremely loyal customers.

"I love the way they drive," said Berkley resident Molly Campbell, owner of a 2012 Subaru Outback. "You can feel it hug the road better with the all-wheel drive."

Campbell, 31, and her family — husband Scot; daughter Arya; and dog Murphy — have owned three Subarus, and she doesn't believe her family will ever drive anything else.

She's a typical buyer for the Japanese brand: She's well-educated, a mother, pet owner and cyclist who doesn't necessarily consider herself a car enthusiast.

Subaru reports half its owners own pets and are three times more likely to have active lifestyles that include biking, kayaking or hiking.

"A nice thing about a 'Subie' is for a lot of our owners it's a part of their life," Subaru of America Senior Vice President of Sales Jeffrey Walters said in an interview. "Whatever it is they like to do, it helps them do it better."

That connection has the brand on track for its sixth consecutive year of record sales, according to Edmunds.com senior analyst Jessica Caldwell.

"They identify with the car and continue to buy them," she said. "The cars are really well-built, and it's just a slightly different feel than other vehicles."

Owners of Subarus don't just identify with their cars — they love them, Campbell said.

Subaru's Walters said that was the inspiration for its "Love. It's What Makes a Subaru, a Subaru" marketing and advertising campaign that launched in 2008 and has been a home run for the brand — attracting more people to the brand than ever before.

"What we've seen over the last 24-36 months is amazing," said Tom Lucido, Millward Brown Digital director of automotive client services. "Their rise in the last three years has been astounding."

Millward Brown Digital supplies information to Subaru and other automakers about shopper trends. According to the company, searches for Subaru on car-shopping websites such as Kelley Blue Book and Edmunds.com have doubled in the last 18 months.

The increased traffic comes as Subaru increased its ad spending from $170.3 million in 2010 to $225.7 million in 2013, according to Kantar Media. The market research said spending this year is at $129.4 million through June, in line from the same time period a year ago.

Analysts say the only U.S. brand to come close to Subaru's connection to customers is Jeep. However, Edmunds' Caldwell said Jeep and Subaru resonate with buyers in different ways, describing Subaru offering "a mainstream lifestyle, rather than an extreme lifestyle."

Edmunds reports that Subaru through October has the sixth-highest loyalty rate of all U.S. brands at 53.6 percent. That compares to the industry average of 44.9 percent and industry leaders Honda and Toyota, both at 60.6 percent.

Flourished in recession

The downturn in the late 2000s forced two Detroit automakers into government-backed bankruptcies and crippled others. Meanwhile, Subaru flourished.

The company, a subsidiary of Japan transportation conglomerate Fuji Heavy Industries, increased sales 41 percent and market share 1.1 percentage points from 2007-10. It also was the only major automaker that didn't lose sales in 2008.

Walters said Subaru buyers were less affected by the recession because many could actually afford more expensive cars — but they drive less-expensive Subarus because they want to.

"We were fortunate," he said. "We didn't have serious issues at all."

Subaru households earn an average income of $100,000, according to the company. That compares to other mainstream brands that average $80,000-$85,000.

Subaru has continued to grow following the recession, even as bigger automakers expand lineups and pump more capital into new technologies.

Sales from 2010-13 increased 61 percent. The company this year expects to sell 500,000 cars, which would be its sixth consecutive sales record. Through October, Subaru sales were up 20.3 percent to about 418,500 cars — making it the 10th-best-selling brand in America between Dodge (485,469) and GMC (404,961). The U.S. industry leader is the Ford brand with nearly 2 million cars and trucks sold.

Felipe Mendiola, co-owner of Hodges Subaru, said the sales success is simple: "It's a very good car. It doesn't have any frivolous items. Everything is very functional."

The recent success has trickled down to the Ferndale dealership. Hodges, which expects to sell more than 600 cars this year, is set to move to a new, larger facility about a mile south on Woodward in 2015. Plans for the building are underway, according to Mendiola.

"Our biggest problem right now is we just don't have the inventory," said Mendiola, a Subaru dealer for 24 years. "It's a situation Subaru has to rectify."

Rectifying concerns

Mendiola's inventory concerns are Subaru's biggest problem right now — one that any automaker would love to have instead of overcapacity.

The company has a large plant in Lafayette, Indiana, and another in Japan. Both are running at or near capacity, and the company is working to increase production, according to Walters.

"We could sell more if we could get more," he said. "We're still looking for the extra cars and incrementally increasing our capacity."

Due to capacity constraints, Subaru expects sales next year to increase only 8 percent to 540,000 cars — while still impressive, much slower than its double-digit sales gains in the last three years.

Subaru plans to increase production domestically to 300,000 cars in 2016 through new investments and no longer producing the Camry for Toyota in its Indiana plant. Subaru currently imports about 45 percent of its cars.

Another concern Subaru and all automakers face is the government's aggressive 2025 fuel economy standards of 54.5 miles per gallon.

The automaker distinguishes itself by making its entire lineup all-wheel drive, excluding the rear-wheel-drive BRZ. However, that feature tends to hurt fuel economy.

Subaru's 2015 lineup has four cars that achieve 30 miles per gallon combined or more, according to the U.S. Environmental Protection Agency. Walters said Subaru is developing new technologies to make its popular boxer engine and all-wheel drive more efficient. For now, other automakers likely are keeping an eye on the niche brand.

"I'd imagine other automakers are looking to see what Subaru did," Caldwell said. "They're definitely someone other automakers are watching."

mwayland@detroitnews.com

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