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Japan's Subaru books worst quarterly profit in five years on US sales slump
[TOKYO] Subaru Corp on Monday reported its lowest quarterly profit in over five years, driven by a slump in demand for one of its popular sport utility vehicles (SUVs) in the United States before an updated model launches later in the year.
Operating profit at the smallest of Japan's major automakers fell 51.8 per cent in April-June from a year earlier to 57.6 billion yen (S$707 million), as a rise in US sales incentives also weighed on Subaru's bottom line.
The result compared with a 63.6 billion yen average of seven analyst estimates compiled by Thomson Reuters I/B/E/S, and was Subaru's weakest quarterly profit since January-March 2013.
The automaker said US sales, which comprise more than 60 per cent of its total, fell 13.9 per cent, pushing overall global sales 12.3 per cent lower to 237,900 vehicles.
In particular, U S sales of Subaru's Forester SUV fell during the period, as customers held back from buying until a revamped model is launched in the coming months.
Subaru has also been increasing buying incentives in the United States, including for the Forester and Outback SUV crossover, as it tries to expand in the world's second-largest vehicle market in the face of competition with much bigger rivals. That raised marketing costs in the first quarter.
Subaru has been increasing vehicle production at its US plant to address a jump in demand for its cars over the past few years, but it still imports roughly half of the cars it sells in the country from Japan.
As a result, a rise in auto import tariffs in the United States - as advocated by the US President Donald Trump - could have a significant impact on Subaru as it would raise the cost of selling vehicles in the market.
The Trump administration has imposed tariffs on steel and aluminium. Those tariffs were having limited impact on materials costs at Subaru, which locally procures the majority of such materials for its US-made vehicles, Chief Financial Officer Toshiaki Okada said at an earnings briefing.
He declined to comment on any possible impact of US tariffs on autos and auto parts.
Subaru maintained its forecast for full-year profit to slide 21 per cent to 300 billion yen in the year through March, due to the impact of a strong domestic currency and higher US marketing expenses.
At home, Subaru in April said employees had manipulated mileage readings on vehicles for the Japanese market, adding to domestic compliance failings it revealed a year earlier. The latter incident prompted Subaru to appoint a new president.