Japanese conglomerate Fuji Heavy Industries' (NASDAQOTH:FUJHY) automobile arm Subaru is enjoying great demand for its cars in the U.S. Models like the Forester, Outback, Legacy, and XV Crosstrek are some of Americans' favorites. But demand for another popular model -- the Impreza -- is being tested.
Growth in the U.S. small-car segment has somewhat stalled due to tight consumer spending, and Impreza is one of the victims. But Subaru seems determined to push up Impreza's sales and is aiming to localize the model's production to boost profitability. What's Subaru's game plan?
Subaru Impreza in the U.S. -- then and now
Currently in its fourth generation, the Subaru Impreza was introduced in 1993 as a compact car and was available as a four-door sedan, a five-door hatchback, and an Outback sports version. Initially, the cars were available in both front-wheel and all-wheel drive, or AWD, versions. Debuting as a replacement of the aging Loyale (called the Leone in Japan) compact, Impreza soon impressed Americans with its engine performance, safety features, low maintenance, and mileage. Impreza's performance over the past 10 to 11 years has been quite uneven, though sales improved significantly after each new-generation model was introduced.
2012 was a big sales year for the car, and coincided with the launch of the fourth-generation model. The fully redesigned 2012 Impreza featured a roomier and more stylish interior, standard AWD, improved safety measures, better mileage, and a powerful four-cylinder engine. The prime differentiator between it and similar offerings in the compact-car market was the AWD. 2013 saw a dip of 6% in sales, this time probably due to the slowing demand for small cars in the U.S. as buyers' preference shifted to SUVs.
In 2014, sales are up 7.2% to 64,329 units through September, although volumes have weakened in the third quarter. The car's overall sales performance is much higher than the 1.5% growth for the compact segment as a whole in the first nine months of the year. Most compact cars are showing a dip during this period. Honda's Acura ILX is down 15.8%; General Motors' Buick Verano, down 6.1%; Ford's Focus, down 6.6%; Volkswagen's Golf, down 13.8%; and Volkswagen's Jetta, down 7.4%.
Subaru has witnessed increased sales with every new-generation model. Since the current generation is just two years old, Subaru is bringing in its 2015 Impreza with a few tweaks that could boost the car's demand.
2015's Impreza will offer something more
The 2015 Impreza will be an upgraded model of the fourth-generation car that was introduced in 2012. It will feature a sportier exterior with a broader and quieter interior. Subaru has gone further in reducing engine friction, which will help in boosting fuel efficiency in an AWD car. With the core 2.0i Boxer engine, the new Impreza would travel 31 miles per gallon combined -- 28 mpg for city and 37 mpg for highways.
Subaru is adding its innovative EyeSight driver assistance technology in this model. The technology is used in Impreza models sold in Japan, but will be included in the U.S. Impreza for the first time. The EyeSight technology analyzes pictures taken by wide-angle cameras placed on the windshield. After the system's computer analyzes the pictures, if it senses a possible collision, multiple safety elements become active and alert the driver, preventing the collision. The Impreza's features also include adaptive cruise control, pre-collision braking, and a vehicle lane departure warning.
Priced at $18,990 for the entry-level sedan ($500 more for the hatchback), the new Impreza could hit showrooms this November. The price of the CVT-only (continuously variable transmission) premium model and limited-edition model (with leather upholstery and high-end audio system) will start at $21,790 and $23,090, respectively.
Sales could jump again
Typically, AWD cars are big fuel guzzlers, but Subaru has tried its best to meet the EPA-rated fuel economy with its 2015 Impreza. With 31 mpg combined mileage, the new Impreza will be well ahead of all the available AWD cars in the U.S.
Another advantage will be the car's affordable pricing. Despite being a little pricier than its 2014 model, the new Impreza is much more economical than the other AWD compacts. The Nissan Juke comes in a little over $22,000 and the Toyota Matrix around $19,000. This could make a big difference.
All-wheel drive is essential in the winters for a hassle-free ride on ice-laden roads, and hence winter is the right time for introducing new models. Moreover, Subaru is going to start building the Impreza in the U.S. starting in 2016 at its Indiana plant, once the expansion there is completed. Local production will help the company polish its competitive edge.
Subaru is bracing for a fifth straight year of improving sales in the U.S. It's constantly on its toes, striving to enhance consumer experience with newer lineups. With the new Impreza, Subaru hopes to take sales higher and see an even growth path.
ICRA Online and Eshna Basu have no position in any stocks mentioned. The Motley Fool recommends Ford, General Motors, and Tesla Motors. The Motley Fool owns shares of Ford and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.