Automakers Are Finally Figuring Out What Subaru Knew All Along
Subaru of America's new vehicle supply of 2022 Subaru Forester compact SUV, Outback midsize SUV, Crosstrek subcompact SUV, and other models just dropped to a four-day supply, according to the Automotive News Research and Data Center. How does Subaru deal with the new car shortages during supply chain issues?
A report from Automotive News reveals it's not all that new for Subaru of America as they have been used to tight vehicle supplies. Subaru retailers learned from years of selling supply-contained Subaru Forester, Outback, and Crosstrek to squeeze inventory by selling deeper into the production pipeline.
photo credit: Boise Subaru
Data compiled by Cox Automotive reveals Subaru had the tightest inventory of any automaker at 38 days at the end of February 2021. Subaru of America has always liked to keep its new model inventory low. Before the pandemic, Subaru of America CEO Tom Doll said, "We like to keep it low, and one less is better than one more."
Keeping inventory low allows Subaru to keep its incentives low and price its new models at or near Manufacturers Suggested Retail Price (MSRP). Low inventory also helps Subaru keep its resale values the highest in the industry.
photo credit: Boise Subaru
Other automakers like Honda are just now figuring out what Subaru has known all along. The Automotive News (by subscription) report says, "Before the pandemic-induced vehicle shortages that have become the norm in the auto industry, dealership lots were full of cars and trucks in nearly every color and trim, waiting for consumers to choose one like a loaf of bread at the supermarket."
American Honda Motor's Dave Gardner told AN, "Retailers are thriving despite the supply struggles," he said. American Honda has traditionally had 300,000 new vehicles nationally inventories, plus 100,000 in the pipeline. That's now gone, but the scarcity has brought financial benefits. "If you're able to take a significant part of that overhead out of the equation, I think you make this a much more efficient and profitable business for all concerned," he said.
Subaru has operated under this business philosophy for over a decade. Subaru Corporation CEO Tomomi Nakamura told Automotive News, "Due to the COVID-19 situation, our sales efficiency improved quite a bit, and we learned a lot. The system to sell from the inventory pipeline has been strengthened," he said.
Subaru of America was able to tweak its sold-order system to improve visibility of what vehicles were in the pipeline and match them more quickly with retailer and customer orders, Nakamura said. This helped the automaker better manage low stocks, and it has become the new norm for operating at a more efficient pace when the industry recovers in the coming months.
"Despite the low inventory, our sales efficiency, the amount of inventory versus the number of sales at the end of the month, is extremely high, at the top of the industry. And the model turn rate, how fast those vehicles sell, is also at the top of the industry," he said.
When will Subaru's inventory levels improve?
"We still have uncertainty in front of us, considering the semiconductors situation," Nakamura said. "So it might be difficult to recover that in January. So we are seeing a gradual increase in inventories and gradual recovery of supplies. And that is going to take about a year."
Subaru of America's new 2022 Forester, 2022 Outback, 2022 Crosstrek, and other new car inventory will improve. Nakamura said Subaru is expecting "a gradual ramp-up" of Forester, Outback, and Crosstrek, its top three selling models.
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Denis Flierl has invested over 30 years in the automotive industry in a consulting role working with every major car brand. He is an accredited member of the Rocky Mountain Automotive Press. Check out Subaru Report where he covers all of the Japanese automaker's models. More stories can be found on the Torque News Subaru page. Follow Denis on Facebook, Twitter, and Instagram.
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Photo credit: main image Boise Subaru