Fuji Heavy Industries Ltd., known for its Subaru marque, stopped production of minivehicles on Feb. 29, ending more than five decades as a leading maker of small-engined cars.
The company, one of the pioneers of the sector in the late 1950s, will instead focus on small and midsize cars, and expand overseas production near to key markets such as the United States and China.
Production of the Sambar minivehicle at Fuji Heavy’s factory in Ota, Gunma Prefecture, was halted at the end of February and will begin production this month of the Subaru BRZ and the 86, sports cars jointly developed with Toyota Motor Corp., which has a capital alliance with Fuji Heavy.
Fuji Heavy President Yasuyuki Yoshinaga said on Feb. 28 that stopping production of minivehicles, which are defined as cars with up to 660cc engines, was a new beginning. The company will continue to offer minivehicles under its badge, but those cars will be made by the Toyota subsidiary Daihatsu Motor Co.
Fuji Heavy is instead preparing to expand output in the United States and China, markets in which it has been performing well.
It is particularly vulnerable to the strong yen because a large number of its exports are built in Japanese factories, and a key challenge will be shifting production abroad. The company is almost certain to record lower earnings for the fiscal year ending this month.
It is, however, expected to record 38 billion yen ($475 million) in operating profits, largely generated by sales of small and midsize cars, which have larger profit margins than minivehicles.
Fuji Heavy has manufactured more than 8 million minivehicles since it rolled out its first model, the Subaru 360, in 1958, five years after the company was founded.
Minivehicles accounted for slightly more than 30 percent of new car sales in Japan last year, and some other Japanese automakers are heading in the other direction to Fuji Heavy, trying to expand their lineups of minivehicles because of steady demand. In late December, Honda Motor Co. began production of its first new minivehicle in five years.
However, profit margins in the sector are narrow because of low prices and development costs. Fuji Heavy has been rolling out about 600,000 vehicles annually, but minivehicles share of that total has declined in recent years to slightly more than 10 percent in fiscal 2010.
The company decided to pull out of the sector four years ago after it concluded that the cost of developing a full range of models ranging from minivehicles to regular passenger cars was too much for a company of its size.
Smoothly shifting production overseas will be a key challenge for Fuji Heavy, which currently has only one factory outside Japan. It is targeting a record 700,000 global sales in 2012.
It sold a record high of 267,000 vehicles in the U.S. market last year, but its U.S. sales target for this year is an even more ambitious 320,000 units.
Sales of its Legacy and Outback models, built in its factory in Lafayette, Indiana, are strong, and exports of a new version of the Impreza are surging.
It is considering increasing the capacity of the factory in Indiana, and also expects sales in China and Europe to grow by double digits from 2011 levels.
Fuji Heavy’s plan to build a new factory with an annual production capacity of 150,000 vehicles in China, which was announced in July, has been stalled because of problems with Chinese government officials.
(This article was written by Kaname Kakuta and Hiroaki Kimura.)
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