How Subaru Is Riding the New SUV Boom

Vehicles that blend the attributes of cars and old-school SUVs have been big sellers in 2014. Sales of Subaru's latest Forester are up over 46%. Source: Subaru

What's up in the U.S. auto market? I'll tell you what's up: SUVs and crossovers.

"Crossover" is the industry term for an SUV-like vehicle that is based on a car's architecture, rather than a truck's.

Truck-based SUVs like General Motors' (NYSE: GM  ) Chevy Tahoe used to be the norm. But now, most SUVs are car-based. 

The difference? Today's crossovers -- and most of today's SUVs -- get much better fuel economy and are more comfortable to drive than the SUVs of old. 

They've both been very popular as of late: While U.S. new vehicle sales were up 11% in May -- a jump that surprised analysts -- sales of premium crossovers were up 27%, according to Automotive News, while sales of SUVs rose 26%. And sales of compact crossovers were up 18%.

That trend has been great news for one of the pioneers of the crossover category: Subaru.

A huge jump in sales for Subaru's new Forester
How good has it been for Subaru? Very good indeed: Through the first half of 2014, Subaru's U.S. sales are up 16.3% over a (very good) first-half 2013 result. 

Leading the way is one of Subaru's mainstays, the Forester. New last year, the latest Forester has been a solid hit for Subaru. Sales were up over 46% in the first half of 2014. 

Reviews of the new Forester have been strong. While the 2014 Forester doesn't look all that different from the model it replaced, Subaru's careful, incremental improvements yielded a vehicle that has pleased critics as well as Subaru fans. Consumer Reports gave it 88 points out of 100, its highest rating for a small SUV, and Motor Trend named it SUV of the Year for 2014.

Subaru has also done well this year with its small crossover, the XV Crosstrek. Sales of the XV Crosstrek rose over 34% in the first half of 2014.  

But sales of Subaru's iconic midsize crossover, the Outback, have lagged. What's up with that?

Outback sales have been slow, but that may be about to change
Outback sales are up just 2.4% this year, but the story's not a bad one. An all-new 2015 Outback has just begun rolling out. Subaru's dealers have been selling off the last stocks of the outgoing 2014 model.

The all-new 2015 Subaru Outback is just starting to arrive at U.S. dealers. Here with the new Outback are Subaru's U.S. chief Tom Doll and his boss, Fuji Heavy CEO Yasuyuki Yoshinaga, at the new model's unveiling in New York in April. Source: Subaru

My colleague Rex Moore and I were at the unveiling of the all-new 2015 Outback in New York back in April. We heard Yasuyuki Yoshinaga, CEO of Subaru parent Fuji Heavy Industry (NASDAQOTH: FUJHY  ) , and Subaru's U.S. chief, Tom Doll, explain how important the U.S. market is to Subaru, and how important the Outback is to the company.

The new Outback follows the pattern set by the Forester's overhaul last year: It doesn't look a lot different, but on closer examination a lot of incremental changes make for a substantially improved vehicle. Early reviews have noted that the new model is quieter and more solid-feeling than the outgoing Outback, while still being remarkably capable off-road.

The upshot: The new Outback should boost Subaru's U.S. sales further
The appeal of the Outback is easy to see. Most crossovers tend to have the higher seating positions of SUVs, but the Outback looks and drives more like a station wagon that just happens to have an off-road-capable suspension -- which is what it is. 

At the Outback's reveal in New York, Subaru pitched the it as the vehicle that can take you down rough wooded trails by day, and out on the town at night. 

That's always been a compelling formula for good sales, particularly in parts of the U.S. where snow is an annual concern. As U.S. Subaru dealers get more of the new Outbacks in their inventories, Subaru's sales could well make another nice move up in the second half of 2014.

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Read/Post Comments (6) | Recommend This Article (14)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 20, 2014, at 3:13 PM, jimmy5fingers wrote:

    Let's see, be respectful. OK. Those of you who own Subarus are part of the legacy of Nakajima Aircraft Company. This is the Japanese company during WWII that produced 14 different aircraft employed to kill American troops and countless civilians along the western Pacific Rim. So, on that note, have a nice day!!

  • Report this Comment On July 20, 2014, at 4:14 PM, lumike wrote:

    so you're saying a-bombing them wasn't good enough for you?

  • Report this Comment On July 21, 2014, at 6:34 AM, wingeater wrote:

    Are you also saying that since I'm Jewish, I shouldn't have owned 4 VW's because VW was started by Hitler?

  • Report this Comment On July 21, 2014, at 11:56 AM, RandiRN wrote:

    How those who drive a Mitsubishi? That company built the Zero among other aircraft. After the disclosure of Subaru ignoring an issue with exorbitant oil usage in their 4cyl engines, an issue that led to engine damage among other problems is Subaru's sales just going to keep increasing? The poor owners of those vehicles some paid thousands of $$ to repair their vehicles. As someone who was seriously considering the purchase of a 2015 Outback, this kind of issue has made me rethink my decision.

  • Report this Comment On July 21, 2014, at 2:51 PM, NoVaEarly wrote:

    Randi, Subaru issued a TSB for oil consumption and footed the bill for repairs when it did occur, which was the exception, not the norm. I have had my Crosstrek since October 2012 and other than an odometer that reads 1.4% slow meaning you actually cover more ground that it shows I have had no issues with it. But go ahead, make sweeping generalizations. A few 2014 diesel Chevy trucks burst into flames when they were first introduced. All GM must be garbage then.

  • Report this Comment On July 22, 2014, at 3:23 PM, ramblingfools wrote:

    I have a 2013 Outback and it is hands down the best all around car I have ever owned. It's not a speed demon or a luxury land yacht, but for under $26k its a steal. Also... the car is built in Indiana... your 'Merican car is probably built in Mexico.

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