Why Does Subaru Keep Making the Outback Bigger and Bigger?

2015 Subaru Outback. Source: Subaru

Over the years, Fuji Heavy Industries (NASDAQOTH: FUJHY  ) , the parent company of Subaruhas increased the Outback in size, moving from a smaller, zippier wagon, to a larger, heavier vehicle. Has this been a good move by Subaru or are customers up in arms about the change, refusing to buy the model? 

Although the design of the Outback has changed, it's purpose and practicality has not. As Motor Trend wrote in its review of the 2014 Outback

"[Subaru] moved from selling smaller wagons to making unibody crossovers, and these vehicles resonate with buyers. The company's Forester and Outback have gotten larger over time, but not so large that they scare off loyal Subaru fans."

A deeper look at the Outback
Let's examine how the car size has increased over time, starting in 2000. The blue line represents the overall dimension of the vehicle by combining the height, length and width. The green data represents the vehicle's cargo space. Here are the results:


Source: data from MSN Autos and Motor Trend

As you can see, the Subaru Outback has slowly climbed in both overall size and cargo space. Often times when cars increase in size, handling, fuel economy, acceleration and other performance metrics take a hit.

For instance, in 2008 the Outback's cargo space climbed to ~34 cubic feet from 28 cubic feet. The vehicle's miles per gallon fell from 21.5 in the city and 27.5 on the highway in 2007, to 18.5 in the city and 25.5 on the highway in 2008.

Although to be fair, the miles per gallon in 2010 actually increased slightly from 2009, despite the vehicle gaining in overall size, but its acceleration took a hit.  

But Subaru appears to have recognized the importance of a bigger ride, which is both more comfortable and convenient for American customers. Looking at the vehicle's sales customers would seem to agree. 

Year Outback Sales Change (year-over-year)
2009  55,356 -- 
2010  93,148 68.25% 
2011  104,405 12.1% 
2012  117,553 12.6% 
2013  117,553 0.4% 
2014 (year-to-date)  62,755  Not Available Yet


Currently, the Outback is on pace to top its sales from 2013. Seasonally, the second half of the year has generally been stronger for the Outback than the first half of the year, dating back to 2010, so we'll see if that's the case this year as well. 

As you can see in the chart above, Outback sales increased somewhat drastically in 2010. But the sales spike likely had less to do with the vehicle's size and more to do with the economy, which was in "recovery mode" in 2010. 

Overall however, sales have trended higher over the past five years, indicating that customers do indeed enjoy the added size to their ride. 

Overall trends
While "Americanizing" today's automobiles to be larger and larger is sometimes frowned upon, most enjoy the added comfort and increased cargo space. 

2015 Subaru Outback. Source: Subaru

According to the Wall Street Journal, car sales in 2014 -- as in, actual cars -- are up just 0.4%, when compared to the same time period in 2013. On the other hand, crossover sales are the highest growing segment, with a 12.9% increase in sales, while large, small and luxury SUV sales are up 11.4%, 10.9% and 10.3%, respectively. 

Final thoughts
While customers love the compact size of the older Outback models, the newer ones have perks too. Clearly overall, customers feel comfortable trading up to a larger model, as sales have increased each year as a result. 

Based on strong overall auto sales in the United States and the Outback's tendency to sell better in the second half of the year than the first half, I'm looking for it have a strong finish to 2014 and end the year with a modest sales gain of approximately 5%. Look for the overall trend of SUV and crossover sales to continue higher.

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  • Report this Comment On July 28, 2014, at 5:19 AM, AcuraT wrote:

    The biggest problem Subaru has is not its size - it is how to make enough cars to sell. To that end, Subaru does not want to build a new planet - but Toyota is giong to help out. In a couple of years they will cease to have production at the Indiana plant they joint own with Subaru which it used to co-own with Isuzu when both were much smaller companies. While Isuzu has disappeared from the USA market, Subaru has grown. Growth has stagnated the last few years because they cannot make enough cars to meet demand. When Toyota stops making the Camry in Indiana, that capacity will be given back to Subaru to make more Outbacks, Legacys, Forresters, and any other model Subaru decides to make there. Then sales will go up if demand is there.

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Bret Kenwell

At The Motley Fool I cover consumer goods and industrial companies, and mainly the automakers. I am a long-term investor looking for companies with sustainable and above average growth. I also like to uncover value, dividend-paying companies. Follow me on Twitter @BretKenwell

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