Posted by: David Welch on December 29, 2009
Well, it is the holiday season so I figured I would take a break from the woes at General Motors, Honda’s hybrid malaise and Toyota’s quality snafus to pen up some good news. Take a look at Subaru. In the U.S sales are up 14.4% through November and will easily top 215,000 cars for the year, notes Automotive News.
Yes, even in this wretched car market, a company is growing. Subaru did a few things to get the growth. First, the company has renewed its entire lineup other than the B9 Tribeca in the past two years. They also spent a lot to market the cars even as the economy was hitting the skids, says James N. Hall of 2953 Analytics Inc. When the competition pulled back, Subaru hit the accelerator, Hall said. By taking to the airwaves, Subaru got on a lot more shopping lists.
To close more deals, the company slashed prices on its cars. Until 2006, Subaru used to try to sell its cars at 5% to 10% more than rival Japanese models, Automotive News said. Now they undercut their chief competitors in head-to-head comparisons. That has helped the company move the metal. But it could be tough to get that pricing back. Most companies are trying to get better pricing to improve margins. That has helped Honda and Toyota reap big profits for years. GM and Ford are both trying to do the same thing now. Subaru is moving in the opposite direction. That could diminish their brand image if they drop prices too low.
The real test comes when the newer models start to age. Car companies typically spend more on advertising when they are launching new models. If Subaru pulls back on marketing but sales stay strong, then the pricing play will go down as a success. If Subaru can’t sustain the growth, then the company will have a dual problem with flat or falling sales and weaker pricing. But make no mistake. The company’s sales show that Subaru is headed in the right direction. The unique brand with a strong image for rugged, all-wheel drive cars looks like it is catching on.