Subaru expects 16.6% profit margin for FY 2016
All new global platform; EyeSight to toll out in U.S.
Fuji Heavy Industries Ltd., maker of Subaru automobiles (hereafter Subaru) achieved record-high net sales and profits in the fiscal year ended in March 2015 (FY 2015) for the third consecutive year. The company's forecasts for FY 2016 include continuingly record-high operating income of JPY 503 billion with a stunning 16.6% profit margin.
The company plans to increase production capacity at Subaru of Indiana Automotive (SIA) from current 200,000 units to 394,000 by the end of 2016. Subaru is also planning to enhance car dealer facility and personnels. In line with the ambitious forecasts, Subaru Global Platform, a standardized architecture that achieves a higher level of safety and weight reduction, will be applied in phases to all models starting with the all-new Impreza which will be launched in 2016. The company will also enhance functions of the reputable active safety system, EyeSight, with a plan to roll it out in the U.S. market.
Subaru (Part 1): Global sales target of over 1.1 million units in 2020 (Jul. 2014)
Subaru (Part 2): Consolidation to a single platform in 2016 (Jul. 2014)
16.6% profit margin forecast
Subaru's financial performance is increasing very rapidly in both sales and profits due to sales expansion in North America and depreciation of the yen. The company ended FY 2015 (March 2015) with record-high global unit sales, net sales and profit for the third year in a row. The records are likely to be renewed in FY 2016. The company forecasts its operating income to be JPY 503 billion for FY 2016, close to that of Nissan and Honda (JPY 675 billion and JPY 660 billion, respectively) that maintain more than three times greater sales scale. Subaru recorded a 16.6% profit margin leaving others far behind (Toyota with second highest profit margin at 10.2%, and average of 8.0% for all Japanese automakers).
Consolidated financial results
|(in millions of JPY)|
|FY 2010||FY 2011||FY 2012||FY 2013||FY 2014||FY 2015||FY 2016 Forecasts|
|Sales in Japan Sales outside Japan Net sales||520,800 907,900 1,428,690||467,300 1,113,200 1,580,563||498,500 1,018,600 1,517,105||671,800 1,241,100 1,912,968||672,100 1,736,100 2,408,129||652,900 2,225,000 2,877,913||565,500 2,464,500 3,030,000|
|Operating income Operating margin||27,350 1.9%||84,135 5.3%||43,959 2.9%||120,411 6.3%||326,489 13.6%||423,045 14.7%||503,000 16.6%|
|Ordinary income Net income||22,361 (16,450)||82,225 50,326||37,277 38,453||100,609 119,588||314,437 206,616||393,648 261,873||495,000 337,000|
|CAPEX Depreciation R&D expenses||56,100 57,100 37,200||43,100 49,800 42,900||54,300 53,700 48,100||70,200 55,900 49,100||68,500 54,900 60,100||110,700 64,800 83,500||130,000 67,000 97,000|
|Exchange rate||JPY/ USD||93||86||79||82||100||108||118|
Source: Subaru's financial results
Aiming for 600,000 U.S. sales in FY 2016
Global unit sales forecast for FY 2016 is set at 928,000 units with a 1.9% year-on-year growth. Subaru plans to sell 600,000 units in North America, which accounts for 64.7% of its global unit sales. The company is concentrating on the North American market.
Subaru's unit sales by region
|(in 1,000 units)|
|FY 2009||FY 2010||FY 2011||FY 2012||FY 2013||FY 2014||FY 2015||FY 2016 Forecast|
Source: Subaru's financial results
Subaru of Indiana Automotive (SIA) held a production capacity of 200,000 units at the end of 2014. Prompted by brisk sales in North America, Subaru is increasing SIA's production capacity up to 394,000 units a year. The plan was moved forward by 4 years aiming for a sustainable growth.
Subaru's production capacity enhancing plan
|(in 1,000 units)|
|Current plan||Initial plan|
|End of 2014||Spring 2016||End of 2016||FY 2021|
Source: Subaru's financial results for FY 2015 (Note) The knockdown plant in Malaysia is not accounted for.
All-new global platform
|Image of platform Source: Subaru materials|
Subaru will standardize its existing platforms. The new global platform will be introduced starting with the all-new Impreza which is slated for launch in 2016 to cut production costs by 20%. But the main goal behind the new platform is to develop safer, more attractive vehicles.
The company reportedly will not introduce compact cars in its model expansion plan. It's record high profits are resulting from concentration in North American markets and not going into emerging markets with a growing demand for low-priced vehicles. The company will maintain the current business model for Subaru vehicles with the high quality.
|Internal combustion engines (Photo: 2013Tokyo Motor Show)|
Subaru intends to achieve top-level environmental performances by 2020. It plans to increase the use of direct-injection engines and consider introducing cylinder deactivation and lean combustion (HCCI combustion) technologies. The company also plans to achieve a net thermal efficiency of 40% or higher and choose best options for Subaru vehicles to maintain their sporty performances.
The company is pursuing electrification with Toyota's support to develop hybrid vehicles that will inherit Subaru's distinctive characteristics and plans to launch its own electric vehicles by 2018 to comply with the ZEV regulations in the state of California, the U.S.
EyeSight to roll out in U.S.
The EyeSight installation rate among applicable models in Japan reached 85% in FY 2015.
EyeSight is available in the U.S. market only in high-end models of five nameplates including the Legacy and the Outback. Subaru plans to increase the availability and increase the installation rate to around 80% in four years.
Advanced safety packages
|Rear vehicle detection||The system uses radar to detect a vehicle approaching diagonally from behind that cannot be seen in a door-mounted mirror. It alerts the driver of the vehicle in his/her blind spots and also warns the driver when changing lanes.|
|Side-view monitor||The image in the driver's blind spot (front left side of a right-side drive vehicle) is displayed in the side-view monitor to help the driver park or pass another car in a tight space.|
|High-beam assist||A monocular camera integrated in the room mirror (with an automatic non-glare rearview mirror) is used to detect a preceding or approaching vehicle ahead and automatically switches the headlamps between high and low modes.|
|EyeSight assist monitor||The EyeSight engagement and alerts are indicated by a lamp located in the front window on the driver's side. The driver can check the EyeSight engagement with the least eye motion while driving.|
Source: Subaru's press releases of April 16, 2015 and June 30, 2015
Production Forecast by LMC Automotive: Subaru's production will be 910,000 units in 2018
|(LMC Automotive、June 2015)|
According to LMC Automotive's forecast (June 2015), Subaru's light vehicle production will be 952,000 units in 2015, up 5.2% from 2014 but will decrease to 912,000 units in 2018, down by 4.2% from 2015.
Production in Japan in 2015 will be 717,000 units, up by 0.8% from 2014 but will decline to 533,000 units in 2018, down by 25.7% from 2015. Meanwhile, production in the US will increase significantly from 2017 and will be 373,000 units in 2018, up by 97.5% from 2014.
In May 2015, Subaru announced that Subaru of Indiana Automotive's production capacity will be 400,000 level at the end of CY 2016 with the original plan moved up.
LMC Automotive comments; "As for this year, over 90% of Subaru's vehicles are produced in Japan and the US with fewer than 5,000 units assembled in Malaysia. On the back of positive sales in the Japanese and US markets, utilization rates at their production sites in Japan and the US have been near or above 100% in recent years. Thus, for the carmaker, capacity expansion has become an increasingly pressing issue. To solve the capacity problem, Subaru has decided to enhance its US facility and make more room by discontinuing production of the Toyota Camry in the autumn of 2016. Subaru plans to start production of the Impreza and XV Crosstrek in 2016 and 2018, respectively."
LMC Automotive also comments; "As a consequence, LMC Automotive expects that Subaru's Asia-Pacific production will increase by 0.8% in 2015, then decrease gradually, remaining at around 500,000 units over the long term as production in the US progressively increase."
Subaru's production forecast (LMC Automotive)
|Source: LMC Automotive "Global Automotive Production Forecast" (June 2015)|
|(Note) 1.||Data indicates figures of only small-size vehicles, including passenger cars and light commercial vehicles with gross vehicle weight of under 6 tons.|
|2.||All rights reserved. Reproduction of any data will require permission of LMC Automotive.|
|3.||For more information or inquiries of forecast data, please contact LMC Automotive.|
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