Subaru expects 16.6% profit margin for FY 2016

All new global platform; EyeSight to toll out in U.S.

2015/08/04

Summary

Exiga crossover7
Exiga crossover7

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.

Sales & Operating profit

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.

Related reports:
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
JPY/ EUR 132 114 108 106 133 140 125

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
USA 188 227 279 280 358 478 570 600
Canada 19 23 28 28 33
North America 207 250 307 309 390 478 570 600
Ratio 37.3% 44.4% 46.7% 48.2% 53.9% 57.9% 62.6% 64.7%
Japan 179 171 158 172 163 182 163 144
China 26 49 62 48 50 45 54 50
Europe 57 37 48 39 46 47 47 50
Others 87 56 81 72 75 74 77 84
Global 555 563 657 640 725 825 911 928

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
Japan 629 632 632 650
U.S. 200 218 394 400
Global 829 850 1,026 1,050

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
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
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)

Subaru's production forecast 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)

2012 2013 2014 2015 2016 2017 2018
Total 740,341 824,987 905,031 952,474 925,726 954,237 912,329
Japan 555,425 650,974 711,434 716,991 686,359 599,286 532,837
USA 184,783 169,163 188,921 230,944 233,233 348,717 373,124
Malaysia 133 4,850 4,676 4,539 6,134 6,234 6,368
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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