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Subaru's fortunes sinking - can they turn it around?
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Am I the only one who hopes they fail with this strategy and move closer to what they traditionally have been? Or at least keep 1-2 model lines around that reflect their past?
If you live around rural new england or the mountain states, you'll notice an almost endless supply of early/mid 90's subarus in various states of repair tooling around, for good reason. Tough as nails, reasonably comfortable, can hold a bunch of stuff, cheap to run, and handle great in bad weather. The kind of car that you don't have to "think" about (or worry about when you park).
As Subaru's own marketing research shows, we buy these cars not because we can't afford upscale cars, but because we don't -want- to pay for extraneous features that may or may not offer 'value' over the long-haul. If we wanted to buy a BMW with iDrive (gag), or a Mercedes that has more sophisticated brain than the HAL9000, we would have.
Bob
Stop using that word, already. :mad:
"Specifically niche targeted" sounds more like it.
Sorry, pet peeve of mine. I hate that word.
-juice
I hope for Subaru's sake that they always keep something like the Forester around. Click and Clack once described it as "A sensible pair of shoes", and I think that perfectly sums it up. It would be a shame to see it go.
Prices will always move up, be it Subaru or any other product. What I think we'll see is a much wider gap between base Subarus and top Subarus, in terms of pricing, than what has been the case in the past.
Bob
Sounds fair.
Reponse to a few things above...
varmint mentioned the Tribeca might be too expensive for the typical Subaru buyer, but demographics are different than you might think. Generally speaking Subaru owners can afford a lot more, they just choose to pay less and get more value with a Subaru. We get plenty, plenty of ex-luxury car owners in the Subaru Crew.
We did a letter writing campaign to SoA that I organized, and I was *SHOCKED* to read all the job titles: Director, Senior VP of this, Principal of that, Partner, etc. These folks could afford a Mercedes easily.
What they are used to seeing, though, is Subaru offer a similar alternative for less money. The H6 Outback with 2 moonroofs and heated leather and AWD is selling to the guy that is cross shopping an MDX. Not an Accord. At least not when you're talking the higher-end Outbacks.
So they're shopping for $35-40k vehicles and buy one for $28-33k or so.
The Tribeca will have the same strategy. Sure it will serve loyal owners stepping up, but it will also capture the buyer who feels a little sticker shock when they see what a loaded RX330 costs.
Shoppers can afford a Tribeca, in fact I'd argue they can afford far more than a Tribeca, they merely choose to spend less.
varmint also asked me what the difference was, between selling a less profitable mix and using incentives.
What I mean is that they indeed are selling more H6 and turbo models, the mix is definitely shifting towards more well equipped models.
Even with those incentives I'm sure transaction prices are higher. Our Legacy wagon was $17,827, today we'd have to spend over $20 grand to get the same thing. And remember, sales volumes are up slightly. Prices are up maybe $2000 per transaction on average (just a guess), after rebates.
They had incentives before, so that has not changed.
Of course on a $33,000 vehicles you will see deeper discounts than you did 3 years ago on a $20,000 vehicle.
But I still disagree with the statement that they are selling a "less profitable mix" of vehicles. That's not the problem at all.
-juice
Bob
I know a few Highlander Limited buyers that owned RX300s earlier, but could not swallow the pricing on the RX330 today.
Subaru will get some of those. The RX is more avant-garde styled, the Highlander might be too conservative for some. Plus the Tribeca's interior is nicer, closer (if not better than) the RX's.
-juice
No Navi, but just about every other luxury touch that you would need.
I don't know that he would recognize a Subaru if it ran into him, though...
regards,
kyfdx
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That's what i mean by Subaru delivers VALUE & of course SAFETY & UTILITY !
Though the XC90 is more competitive, so that's a harder task for the Tribeca. For instance, the XC90 has side curtain air bags for all 3 rows.
-juice
KarenS, "Subaru Crew: MPG-Real World Numbers" #1, 16 May 2005 10:33 am
While a few lead foots with turbos do poorly, most people report mid 20s, even high 20s, as average.
-juice
1. Base Legacy at 20k with AWD & Std equipment
2. OB XT that i just bought, i could not think of any other car coming close to this. UTILITY is the mantra here. nothing else offers.
3. WRX, there is no/little competition
4. Forester doesn;t have true competition either. Perfect for women.
I agree that Subaru makes unique vehicle. And I would agree that Subaru makes unique vehicles that fit their niche with terrific accuracy. But I'm not sure I agree with everything on your list.
I can get the same utility out of a CR-V, Escape, Equinox, or Santa Fe as people are getting from an Outback.
And the RAV4 is a perfect competitor for the Forester. The Tucson is another than comes very close.
In short, there are very few products which compete directly with Subaru's dominant sellers. However, there are plenty which bookend them.
I'm willing to bet they could sell more vans than they do Tribecas.
A truck is a good idea with some merit for later on. But unibody, AWD trucks are the trucks of the future. Even Honda's Ridgeline is a niche vehicle. Of course, Honda has at least 5 mainstream sellers to support the occasional foray into niche markets. Subaru does not. So, while I agree that a truck is a good idea, I think they have bigger fish to fry.
I don't think Subaru needs something smaller than the Impreza. They just need an inexpensive, base Impreza that doesn't suck. They need something that will attract a broader audience and get someone other than the loyalists into the showroom. And it needs to be inexpensive to draw in the youth.
I live, work, and vacation in Subaru's biggest market. My immediate family has owned 4 of their products (older ones). When I drive into the woods of NH or VT, I see plenty of Subaru's. While there are likely a few wealthy folks who chose to drive a Soob, rather than a Mercedes, those are not the people I see driving them.
"As Subaru's own marketing research shows, we buy these cars not because we can't afford upscale cars, but because we don't -want- to pay for extraneous features that may or may not offer 'value' over the long-haul."
Exactly. It's like Subaru is chasing a niche demongraphic within their niche market.
Try buying property in New York, Connecticut, Southern New Hampshire, or S. Vermont and you'll see what I mean. And it's not just property, it's the general cost of living. Being in the DC area, I'm sure you know what I mean.
With respect to the less profitable product mix, the situation in New England is exactly what I'm talking about. Subaru is now trying to sell up-market version of their base cars. They tried to make the H6 an incentive for buyers to climb into the more profitable/loaded vehicles and they had to drop it. Demand didn't meet supply. So they moved the H6 into lower models.
BTW, a $2,000 increase in price over the past few years is not far from inflation. When you consider that they're moving cars with $4,000 worth of extra equipment to get that 2K, it just doesn't add up.
-Brian
Anyone know if Subaru qualifies for the GM supplier pricing? I recently started workign for a large vendor.
A 9-2X for 10K off sticker is hard to imagine, and would be tough compition for a WRX if I decided I wanted one of them instead!
Maybe I better get pushing that hot button...
2020 Acura RDX tech SH-AWD, 2023 Maverick hybrid Lariat luxury package.
Also spif up the dealers. hard to feel "premium" when you have to wade throught the Dodge/Kia/Mitsu salespeople to find the Subes in the back.
Although I do like the herndon, VA Sube dealer. Must be the smallest dealership I ever saw (although Rhinebeck NY comes close). Seems to be a former gas station or something!
2020 Acura RDX tech SH-AWD, 2023 Maverick hybrid Lariat luxury package.
And.. most families that make $70K-$100K here.. .buy new SUVs, pickups and Camcords... Not too many used cars for people in that demographic.. Maybe for their teenagers..
regards,
kyfdx
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My anecdotal data says the opposite. Most of my peers at work are in that range or higher and a good percentage of them (including me until last year) buy late model used cars. We've purchased two lease turn-ins and an ex-rental, each had 30K miles or less and was 25-35% lower than the new car price. Hard to beat that kind of deal. It's only since our youngest got out of college that we've gone back to new cars.
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But whatever, maybe for Subaru a steady state or reduction in sales with more per-unit profits is a good game plan.
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
After the test drive I was sold. The turbo was magnificent. The interior was close enough to Audi, Volvo, Lexus. The wagon had enough utility. And I felt that I was getting Japanese reliability which was lacking in Audi/Volvo. I have not been disappointed. And I'm loving the fanaticism of the Subaru owners. It borders on cultish. I can't resist checking the boards and reading the interesting posts of the regulars. Any questions that people ask get quick, witty, informative responses. Compared to the whining and complaining I hear on Audi boards it is very refreshing. You guys have me worrying that the darn company may fold. When did I ever care if the company that made a car I purchased went bankrupt?
Subaru reminds me of the way I felt back in 1969 when I bought my first car, a Volkswagon Beetle. I loved that car for ten great years but never was able to duplicate that feeling until now with this Outback.
Keep in mind, I'm not saying that $70-100K is pocket change. Even here in NE. It's just that most people on those wages are buying more modest cars (like the Subarus of old). I have no doubt they are buying a lot of the new higher content Subarus, but they're not paying what Subaru wants to get for them. Hence the "less profitable mix" quote from that earlier article.
I really think a big part of Subaru's appeal has been providing everything the buyers want and nothing they don't. As posted earlier, Subaru's are "sensible shoes". They are a practical car for the people who don't necessarily want all the bells, whistles, and gizmos. Trying to move into the spiked high heels market doesn't make sense to me.
Not going to happen. At least, not a for a while.
Subaru has been increasing sales steadily. They are not losing ground. It's just they aren't gaining any ground, either! They seem to be growing at the same speed as the market. That seems odd to me given how good their products have become.
An awful lot of Subaru's predictions have not come close. And companies do act on those predictions. So I think concerns over their strategy are legitimate... Especially when you consider how successful other companies have been in recent years.
I do agree that some of their predictions have come back to haunt them. This time I don't think that will be the case. In the past it seems like they were making predictions, but that the company didn't really have a clearly defined image of who they were, or that there didn't seem to be a really focused goal in mind, other than to survive until next year. I think that's different now. I think they finally know who they are (and who they aren't!), and now that they've tasted some real success in the market, are much more confident that they can succeed. You know failure can be a great teacher, and lord knows they've been down that path a few times.
Sensible shoes? Yeah that's part of their image, but they can be so much more than that too. I really believe that.
Bob
Twenty years ago SOA (then a US-listed company, considered a "high flyer") was on a roll. According to this, SOA was on a trajectory that would produce sales of 183,242 in 1986. What were last year's sales? According to this, SOA's sales were 187,402, surpassing their 1986 record by a mere 4,160.
People here should take a look at the Randal Rothenberg book, Where the Suckers Moon, subtitled The Life and Death of an Advertising Campaign. It's all about SOA.
I guess the point I'm making is that Subaru has been moving in the right direction for the most part over the last decade. Yeah, it would have been nice if the gains were larger—but they are gains, and not losses. Last year was their best sales year. I'm betting this year will be even better, and the following year better still.
Bob
I do wish Subaru weren't moving to this scheme where you have to buy a huge package of stuff including leather seats to get a moonroof. Not that the Impreza gets a moonroof any which way.
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
2. It is true in my case as well. I am a Director of Finance, I can easily afford a lux. But i enjoy driving Subaru the most. I just bought an OB XT Ltd. I didn;t even consider anything else becasue i didn't think anything comes close to OB XT Ltd.
Most crossovers are big & OB still enjoys a unique niche. I don;t think All Road is a competition with 15k higher & Volvo XC70 is too big to consider.
This tells me that Subaru's research is accurate & they are doing right things. I like their goal of being Premium but NOT Luxury....because subaru customers wouldn't pay for lux.
It is good to keep in mind who Subaru's customers are in NA. My personal story is this. My 250 year old cape on the Maine coast cost me 73K three years ago. That makes my ten year mortgage 520 a month with 20K down. I am a 33yr. old male, single, and my dog does not work. I make 30K on a great year, but have money in the stock market.
My 04 legacy wagon costs me 330 a month. Quite a substantial number, but is a joy to drive. In midcoast Maine every other car is a forester or outback, most new.
I think it is good to keep in mind that all New Engladers aren't in the Ney York or Boston suburbs, or stuck in islands of influence such as Pomfret CT. Granted, prices are rocketing............
Frog
Not so with the Tribeca, as every Tribeca including cloth-seat base-level 5-passenger models, comes standard with a moonroof.
Bob
Besides, the Tribeca owner will make a bunch more than the WRX owners, who would also be a lot younger (and more likely single, thus single income).
Finally, I'm willing to wager that Tribeca will have the highest percentage of leases of any Subaru, in fact Subaru is backing residuals big-time. Lease payments range from $320 to $380 or so. So someone making $70k can easily qualify for that.
I'm not a fan of the concept of leasing but Subaru wants a piece of that pie, and it's really been missing out so far. Read any of the threads and lease shoppers end up with an Audi because VW/Audi takes more risks on residuals.
-juice
Some Sube models over the past few years have better visual design than others, but even though I'm a fan, I think Subarus are boring to look at. The brand as a whole suffers from generic, unimaginative styling. The new Tribeca, with the so-called Alfa nose treatment, will not solve this problem. I think the Tribeca is ugly and contrived.
Subaru should take a close look at newer models from Volvo and Audi. The V50 and the new A3, for example, are great designs - their clean, strong lines differentiate these models and suggest speed, good handling and high quality. These cars have real style, and indicate to customers that Volvo and Audi build advanced, cutting-edge products.
The car market is as competitive as it has ever been and has entered a rapid shift toward fuel-efficient, high-value vehicles. Good styling is not a frill in this environment. Subaru builds great cars, but in order for them to sell to their potential, they have to be visually differentiated from the competition.
Tell the 600 people who pre-ordered one without even a test drive.
Styling is subjective, and you really have to realize that is just an opinion, no more, no less. Subaru wanted this controversy, they have not even advertised yet and people are talking about it.
From that standpoint it has been very successful so far.
And you guys keep saying it's former Subaru owners, but think about that - the brands that win the RL Polk awards for owner loyalty retain about 40% of buyers. That means SIXTY PERCENT bail, and on brands like Subaru, since the Forester seems to win that award repeatedly.
But 60% of 150-200k owners per year buy something else. Tribeca can capute those buyers. Think about this - over the last 10 years that means more than 1 million customers have left the Subaru brand. Tribeca only has to capture a tiny fraction of those to be a success.
V50 and A3 are both small, the back seat is a tight fit for me. A3 I can't fit in at all. I rode in a V50 to and from NY for the auto show and it was not comfortable. I could not sit behind my tall buddy at all.
I've gone on similar trips in a Forester and was much more comfortable, in fact even road noise intrudes less. The Legacy is bigger than any of these. And while most find the styling very likeable others criticize it for being too bland (you just can't win).
I do think the A3 is styled smartly, but seriously, step inside, it is a very small car.
Earlier varmint mentioned the Legacy added $4000 of content for a price $2000 higher, but I beg to differ.
Compared to our 2002, the 2005 adds an aluminum hood and tailgate, turn signals in the mirrors, and projector beam headlights. That's about it. Same powertrain, tranny, AWD system. I can't imagine it costs $4000 more to build. Maybe $1000 more, if that.
The turbos didn't have predecessors, so it's hard to say. The H6 models did, but they had similar content back then. Subaru didn't need to add much of that. They just tuned the engine for more HP. The VDC model actually gave up the pricey MacIntosh stereo, for instance.
No way did COGS (cost of goods sold) go up $4 grand. Given the price of the MacIntosh equipment (retail value was something ridiculous like $4 grand) I'd venture to guess the cost of the VDC went down slightly.
-juice
It goes without saying that styling is subjective. I'm only stating my own opinion.
600 pre-orders for the Tribeca is good news, but not earth-shattering. This fact on its own will not turn around overall sales trends.
Your points about the interior of the A3 and the V50 are well-taken, though I don't think these models are directly comparable to the Forester. We don't need to get into a debate about this, as it is all subjective. I raised the A3 and V50 because they are good, eye-catching designs, and these cars are similar to some existing Subaru models.
I just think it's worth pointing out that Subaru's styling does not match the excellence of the company's drivetrains and engines. The brand offers high standards of safety, handling and performance at comparatively low price points. But most Sube models lack visual appeal. If you don't think this is important, consider how well Chrysler has been doing lately in comparison with GM and Ford. The 300 Hemi, the Magnum, the Charger, etc succeed on a number of levels, including styling. These cars were designed to attract attention and create brand excitement. They are the reason why Chrysler is actually growing market share in a stagnant market, and why it is the only North American automaker which makes profits from its manufacturing operations.
If subaru can get through the 90s without any differentiating product. now they have some many products not only luring customers from mainstream brand but also from lux brands.
what use is of this thread ?
New england & northwest alone are enough to keep subaru live. Simple. Close this thread please.
I think the recent history is the most interesting. Subaru has made some predictions and failed to meet them. Yet, for perhaps the first time in many years, Subaru products are making headlines and earning some much-needed attention for the brand. Then there's the fact that they are branching out from the tried and true niche they formed in the 1990s. I think the advances made by Hyundai and Nissan in recent years have over-shadowed what's going on at Subaru. Certainly those two have been more successful. But that doesn't mean Subaru's attempts should be ignored.
The question is... If Subaru's wealthy buyers are people who can afford high-content cars but don't want them... why is Subaru trying to market high content cars?
The '95 Outback wagon was probably the single best marketing idea anywhere in the automobile industry in the whole decade (considering how little it cost Subaru to implement and how much it brought them in sales). How can you say they had no differentiating product? The Outback went on to be aped by Volvo (XC70), then Audi (Allroad), the two companies searcherboy mentioned above. You could even argue that it paved the way (with its instant popularity) for many other companies including Toyota and Honda to begin offering unibody variants of existing sedans (crossovers) and marketing them to existing SUV customers.
The Outback is responsible for the majority of the resurgence of Subaru sales since the early 90s. Certainly, the WRX made a big splash (critically, and in sales the first few years) when it arrived in 2001, and yet even as recently as last year, Subaru could not make the 200K sales that were the BASELINE of the five-year plan that was formulated in 2001 (let alone the hoped-for increases).
But I must say that since this thread was opened, I have become somewhat more heartened for Sube's future prospects after the current fiscal year. I do hope they sell some Tribecas. There are so many utterly disposable car companies open for business in North America - Mitsu, Isuzu, and Pontiac for starters - but Subaru is not one of them IMO. I would hate to see them fall prey to the GM giant.
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
*shiver*
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
Saab fans don't like them because they're not real Saabs with all the quirky character they've come to expect. These cars will have to get their buyers from outside the Saab ranks. But the brand is something of a red-headed step child at the moment. GM doesn't have the footing to make it what it should be and Saab doesn't have any other life lines left.
The way I see it, a number of things would have to fall into place for a Saabified Tribeca to become a problem for Subaru.
1. It would have to happen fast... no more than a year after the Tribeca is released.
2. The vehicle would have to be completely Saabified, with all the little Saaby quirks the customer base has grown to love.
3. Saab would have to recover some dignity with other products.
On the other hand, it's possible that production a Saabeca might force SIA to put the Subaru version of the vehicle on a 6 or 7 year model cycle. That could be trouble in the long-term.
premium enough to lure lux buyers.
True enough. But compare the population of Boston with coastal Maine.
I'm only describing the bulk of the NE market, not every single niche. I know there are exceptions and extremes. A starting salary for a professional position given to a fresh-from-college new hire in the Boston area is roughly $50,000. We're talking 22 year-olds with a four year degree. But that's not the norm everywhere. My own company starts new hires in the low 30's.
With the exception of the WRX, Subaru's base of customers is the small family. These are people who are established, have children, and have put the Ramen noodles away for good. Those starting salaries are where these buyers were many years ago.
"you can't just look at one (expensive) region and extrapolate that to the whole country." - Juice
I haven't. I'm only giving a picture of their biggest market. The marketshare numbers I keep seeing tossed around are something like 7% in the NE, and a fraction of a percent everywhere else (excepting Denver, or something like that).
""If subaru can get through 1991-1994 (the years when they almost went broke and sales dropped to almost nothing)without any differentiating product"
(italics are my edits)?
In that case, I strongly disagree. They don't ever again want to be in the financial position they were in during the dark years.
varmint: "1. It would have to happen fast... no more than a year after the Tribeca is released.
2. The vehicle would have to be completely Saabified, with all the little Saaby quirks the customer base has grown to love.
3. Saab would have to recover some dignity with other products."
As to number (1), I believe almost exactly a year will separate them as currently planned, so that is not good news. As for number (2), this will not be a rebadge like the TB and Impreza, supposedly. But since the Tribeca is a lot like a Saab owner would expect a Saab to be already, I would think as long as they put in lots of sound insulation to mask the noise of the boxer engine, they might well accomplish number (2) as well.
Number (3) is what I am banking on: that Saab is such a damaged brand at this point that no-one will go shop there, and 9-6/Tribeca rebadges won't sell. Problem is, GM has lots of money for tons of advertising and cash rebates, which make the Saab versions of Subaru cars look much more appealing, even to people that would normally buy the Subaru.
If they do the Saabeca, Subaru should put every ounce of its reserves into remodelling the Tribeca early (say, after 3 years, 4 at most), to leave Saab selling an outdated model.
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
But they're not. At least, not any faster than anyone else. Subaru's sales are growing at the same pace as the population. Subaru's marketshare has been at about 1.1% since 2001. In fact, it probably goes back to when they introduced the Forester.
"New england & northwest alone are enough to keep subaru live."
That reminds me of a line from one of the Matrix movies... "There are levels of survival we are willing to accept."
Personally, I'd rather not see Subaru become an automotive cockroach. Up to now, Toyota, Honda, Nissan and most of the other growing companies have not needed to invade Subaru's niche directly. They've found other, more profitable (mainstream) markets to penetrate. Honda had their hands full getting into SUV/Cross-overs. Nissan has been busy getting into big trucks. Hyundai has been busy getting into mainstream sedans. But eventually, someone else is going to see value in exploiting the niche where Subaru resides.
The way I see it, Subaru has two choices (more or less).
1. Flee the niche. Find another niche (like turbo AWD sport cars). Obviously, there would be big consequences for such a move. There'd be a loss of the existing customer base, a loss of revenue as the transition is made, and the costs of remaking their image. Of course, someone will find them there eventually. Not an attractive path.
2. Fight for the niche. Subaru would have to create products that are far better than anything else in the niche. Not just better... FAR better. Kinda like the way the Accord and Camry stood above the pack in the 1990s. Or like the BMW 3 Series dominates its class. Not an easy path.
Option 3 would be try to accomplish both. And I think that is what they're trying to do. Part of the product line is fleeing the sensible shoes niche and moving into new territory. The turbo models and "premium" oriented cars represent this branching out move. The other is redesigned vehicles like the new Outback/Legacy.