While Volkswagen remains obsessed with selling enough cars to become the largest automaker in the world, Subaru remains content with being one of the smallest.
This is the tale of two opposite strategies, and it seems to be paying off for the smaller underdog while the larger champ slowly falls to its knees.
Volkswagen has entered desperation mode and is giving away cars in order to boost its sales numbers. That’s almost a literal statement, as $39/month lease deals on the Jetta have popped up around the country.
Subaru, meanwhile, routinely sells out of its production runs and has no need to slash prices or offer major incentives.
Subaru supplies what the market demands, while Volkswagen tries to create a market and inflate demand. Guess which business model is more profitable?
Subaru’s business strategy has resulted in a tremendously successful niche. Active people who love the outdoors flock to Subaru’s rugged all-wheel-drive capability like mosquitos gathering over a flat lake.
Subaru owners also happen to be fiercely loyal, which is a quality all other automakers try to duplicate with varying levels of success. That’s one of only a few things Subaru does very well. Bloomberg said:
The list of things Subaru doesn’t do remains long. It doesn’t have a luxury brand like Honda’s Acura or Toyota’s Lexus. It still doesn’t make a giant SUV, or a truck, or a super-expensive “halo car” designed to drum up interest from teenagers and the Top Gear crowd. Its sedans aren’t particularly popular and the company doesn’t make much of an effort to sell cars in Europe, the Middle East, or South America, like Nissan or Ford does. Kansas is the closest thing it has to an emerging market. Subaru still can’t meet demand. By the end of next year, Subaru’s factories in the U.S. and Japan won’t be able to produce more vehicles.
Compare that to Volkswagen’s strategy of selling cars in nearly every world market while trying to move as much metal as possible. Can you guess which company has the highest profit margin in the industry?
There’s obviously room to grow for Subaru, which could expand production, introduce new models, and give the likes of Toyota and Honda another genuine competitor. But should it? The small Japanese company could indeed become more mainstream, but doing so would likely result in diminished quality, vanilla styling, and reduced capability. In short, it could cost the company everything that makes Subaru… Subaru.
Subaru is one of the few brands with a distinct personality. It should stay small and cater to its adoring crowd rather than becoming just another faceless automaker. Agree?