Where Is a Turbocharged Subaru Headed in 2014?

Subaru, the automotive unit of Fuji Heavy Industries (NASDAQOTH: FUJHY  ) had a stellar 2013. Its sales growth in the U.S., which is its largest market, outpaced the industry by nearly three times. Subaru's other claim to fame was that it outsold Volkswagen (NASDAQOTH: VLKAY  ) in the U.S. -- not bad for a niche automaker!

For the last five years, Subaru's sales have been going through the roof, and each successive year has been a record sales year. Management soon may have to make a decision about whether Subaru will remain a niche player or turn into a mass producer. As the company starts another year, let's find out where it's headed in 2014.

2014 Forester 2.5i, Source: Subaru

Sales growth should continue
Subaru's sales went up 26% to 424,683 units in 2013 over the previous year's sales volume. The numbers look even more impressive considering that 60% of Subaru's sales have come from buyers who are new to the brand.

The Forester crossover, which went through a makeover last spring, saw 62% sales gain, and both Outback and Forester sales topped 100,000 units. The BRZ coupe, XV Crosstrek, and WRX all enjoyed sharp rises. However, the automaker should get ready for a bigger challenge in 2014.

Model

Units Sold 2013

Units Sold 2012

% Change

     Forester

 123,592

  76,347

    61.90%

     Impreza

  58,856

  68,175

   (13.70)%

      WRX

  17,969

  13,624

    31.90%

     Legacy

  42,291

  47,127

   (10.30)%

    Outback

 118,049

117,553

     0.40%

     Tribeca

   1,598

   2,075

      (23.0)%

        BRZ

   8,587

   4,144

   107.22%

XV Crosstrek

  53,741

   7,396

   626.60%

TOTAL

 424,683

 336,441

    26.20%

Company sources 

According to a Bloomberg survey, auto sales for 2014 are estimated to be around 16 million, up from 15.6 million in 2013. Although the forecast for gains in sales is flatter for the current year, carmakers are coming up with big launches to attract more buyers and increase their market shares. This suggests that competition will intensify in the U.S. auto market.

Ford (NYSE: F  ) recorded 11% sales growth in 2013 in the U.S. and sold 2.5 million units. It plans to launch as many as 16 new models in North America this year in order to continue the trend upward. Volkswagen is licking its wounds after the core VW passenger brand suffered a nearly 7% drop in sales in 2013. It intends to make a comeback with six new models and the much awaited new seven-seat Crossblue SUV that will be built exclusively for North American markets. 

Ford's redesigned Taurus is slated to arrive at the showrooms in mid-2014, while Volkswagen will launch the new version of its popular compact SUV, the Tiguan, late this year. Both these cars shall give tough competition to Subaru in the SUV and crossover segment.

Subaru however is unfazed by the threats. Management has set a goal of attaining 500,000 in sales by 2016, which factors in 6%-8% growth this year and another 7%-8% growth next year. In view of the current sales trends and the upcoming launches, the company could achieve its targets comfortably.

Plenty of excitement coming up
Subaru shined in the limelight at the 2014 Detroit Auto Show with the WRX STI -- its turbocharged rally car that enjoys a cult following. The company will initially offer a limited edition of 1000 cars in "WR" Blue Pearl paint and gold wheels. Fans are thrilled with the new features that Subaru has added like the stiffer chassis with firm springs and the new torque-vectoring system. There will also be three automatic AWD modes, and one manual mode with six adjustment levels. The 2015 WRX STI will be in the showrooms in spring, and pricing is expected to remain in the $35,000 range.

2015 Subaru WRX STI Launch Edition. Source: Subaru

At the same time, the standard 2015 WRX will also come to the market. Car enthusiasts were slightly disappointed at the Los Angeles Auto Show in November when Subaru showed the 2015 WRX model that would go into production. This was relatively subdued compared to the dazzling concept car that Subaru showcased at the New York Auto show last March. A concept car typically provides clues about future styling and features -- rarely the same car goes into production.

But it is unlikely that there would be a dearth of buyers for the WRX. It is one of Subaru's iconic models, which saw 32% sales growth (excluding STI) in 2013. The improved structure, edgier styling, more power, and sturdier chassis of the 2015 WRX wouldn't go unnoticed.

At the 2013 Los Angeles Auto Show, Subaru had also unveiled its new Legacy concept. If the Japanese carmaker retains some characters from the concept when releasing the new model, then this family sedan could have a really sporty look.

Parting thoughts
With each new generation of its vehicles, Subaru's ability to cater to the tastes and preferences of the U.S. market is becoming more and more evident. Despite its small size, the company has demonstrated its ability to stand out among bigger industry players. Subaru's Forester redesign was a big success and if the company can repeat the same feat with the WRX or the Legacy sedan, then it come as little surprise if Subaru achieves its sales target well in advance.


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