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Subaru is a niche Japanese automaker focusing on light SUVs and crossovers. The company is unusual in the sense that its main market is the United States, yet it produces most of its vehicles in Japan.
The reason for Subaru’s success is clever marketing and an excellent products. The vehicles are fuel-efficient, safe and reliable with strong off-road performance. Consumer Reports ranked Subaru as the best overall auto brand in 2022.
And customers are fanatic about their Subarus. The brand recently topped JD Power’s US auto brand loyalty study in 2021 for the third year in a row.
The company enjoyed great success until 2016. Margins rose significantly thanks to new model releases, strong US car sales and a high plant utilisation rate. Another key factor was the fact that the Japanese yen depreciated against the US Dollar from 2012 to 2015.
Since then, Subaru’s profits have weakened. I believe that there are three primary reasons for the weaker earnings per share:
The utilisation rate at Subaru’s Indian plant dropped after Subaru took over the second line from its shareholder Toyota.
The US auto market flat-lined from 2015, making it somewhat more difficult to grow.
During COVID-19, Subaru has experienced significant production issues. Since the company relies on just-in-time manufacturing, it did not have enough inventory to weather the storm in terms of semiconductor chip shortages.
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