Subaru sees 52% slump in Q1 profit

TOKYO: Subaru Corp yesterday 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% in the first quarter ended June from a year earlier to 57.6 billion yen ($517.38 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% of its total, fell 13.9%, pushing overall global sales 12.3% lower to 237,900 vehicles.

In particular, US 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 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 US — as advocated by the 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.

Subaru maintained its forecast for full-year profit to slide 21% to 300 billion yen in the year through March, due to the impact of a strong domestic currency and higher US marketing expenses.