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Customer LoginsFHI to boost vehicle output capacity in US and Japan, considers wider development tie-up with Toyota
To meet strong demand for its vehicles in the United States, FHI plans to expand its annual vehicle output capacity by nearly 100,000 units by the end of March 2019 in Japan and the US.
IHS Automotive Perspective
- Significance: Fuji Heavy Industries (FHI) plans to boost its annual vehicle output capacity by nearly 40,000 units in Japan and by over 50,000 units in the US by end of March 2019.
- Implications: Subaru has been experiencing a growth phenomenon in the US market in recent months/years and announced last year significant investments in its local plants to add capacity and maintain this momentum.
- Outlook: According to IHS Automotive data, FHI produced 517,551 units at its Yajima plant in Japan, followed by 225,999 units at its Lafayette #1 plant in the US during 2015. Total production of the automaker reached 951,758 units in 2015, up 5.6% y/y. Over the coming years, we forecast this figure to grow consistently to 2019 to reach over 1.14 million units.
Fuji Heavy Industries (FHI), the producer of Subaru-brand vehicles, plans to boost its annual vehicle output capacity by nearly 100,000 units by the end of March 2019, reports the Nikkei, citing the company's president Yasuyuki Yoshinaga. The capacity expansion is targeted in its domestic market of Japan by over 40,000 units and by over 50,000 units in the US. Commenting on the reason behind the planned capacity increase, Yoshinaga said that automobile sales have been positive in the US and the "momentum is expected to continue".
Yoshinaga also elaborated on FHI's plans to introduce electric vehicles (EVs) in 2021 and said that the company will develop and manufacture EVs on its own. "We have no plan for joint development," Yoshinaga said. However, the company may consider the possibility of procuring batteries from other companies. Furthermore, FHI is keen to widen its existing product development partnership with Toyota. Both companies are seeking to deepen their co-operation on hybrid technology, with discussions currently ongoing on development of second-generation models for the Toyota 86 and Subaru BRZ sports cars. Both these models may carry engines developed by FHI. "Considering the large-scale investment required, developing environmentally friendly technology independently presents an obstacle," Yoshinaga added.
Outlook and implications
Regionally, Subaru accounts for a relatively small share of the North American market − about 3% in 2015 − but has earned strong customer loyalty and has increased its market share from nearly 2% in 2010. North America became Subaru's most significant region in 2008, when sales were higher than in Japan. Subaru has gone from selling 36.5% of its global volume in North America in 2005 to 64.3% in 2015, while its home market has dwindled to 17% of sales. The US is the key market and the automaker has been witnessing brisk sales in the country over the past few years, with sports utility models such as the Forester and Outback boosting its sales volume. The Subaru brand is now in the top ten selling nameplates in the US passenger car market. To meet this increasing demand, the automaker has already announced plans to expand its Lafayette plant in the US. The plant's production capacity is expected to grow to 394,000 units per annum (upa), up from 200,000 upa. The plant will also add production of a three-row crossover in 2018, effectively replacing the dropped Tribeca.
While announcing its last fiscal year results, FHI revealed sales targets for the current fiscal year, ending March 2017. The automaker expects the growth momentum for global vehicle sales to continue and it hopes to breach the one-million unit mark for the first time in its history in fiscal year 2016-17. FHI says that its global vehicle sales are expected to increase by 9.6% year on year (y/y) to nearly 1.05 million units this fiscal year on the back of further growth in North America and other regions. Although FHI expects better sales in fiscal year 2016-17, a key concern for the company has been its excessive reliance on Japan as a manufacturing base. During times of a weak Japanese yen against the US dollar, this over-reliance has worked exceptionally well in boosting corporate earnings. However, this double-edged sword punishes earnings unduly at other times. This is being addressed, with the expansion of its Lafayette plant.
According to IHS Automotive data, FHI produced 517,551 units at its Yajima plant in Japan, followed by 225,999 units at its Lafayette #1 plant in the US during 2015. Total production of the automaker reached 951,758 units in 2015, up 5.6% y/y. Over the coming years, IHS forecasts this figure to grow consistently to 2019 to reach over 1.14 million units.
Toyota is FHI's largest shareholder, and owns 16.4% of the company. The Subaru-Toyota relationship was established in 2005. The decision to further widen its tie-up with Toyota will help FHI to gain more access to hybrid technology and will save on costs. The joint-product development studies will also help Subaru to meet zero-emissions vehicle (ZEV) regulations in the US.
Meanwhile, as part of FHI's strategy to enhance the Subaru brand, the company announced plans in mid-May to rename itself as Subaru Corporation with effect from 1 April 2017, following a shareholders' vote scheduled for 28 June. Although FHI's history dates back to 1917, it has been using the current name only since 1953. The decision comes as FHI is widely known for its Subaru-brand vehicles.
About this article
The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.