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backCHINAtalk June, 2012

China Automotive Monthly: Executive Summary - May, 2012

How Subaru Lost its JV in China.

Rumors started in 2011, when Fuji Heavy, as well as several other global carmakers, chose against having their vehicles locally produced in China. They were said to be seeking a local partner to establish a joint venture. The logic was: who does not want to sell more units in the world’s biggest market? Or, frankly speaking, who does not want to earn more?

Some Chinese companies were involved in the rumor with Fuji. Great Wall, well known for its SUVs, was one possible candidate, as Subaru’s most popular model in China is also the Forecaster SUV. Beijing Auto (BAIC) was also closely linked because the company needed to expand its territory to compete against other state-owned giants, such as SAIC, FAW and Dongfeng. Huatai, Youngman and several other names were also mentioned; however it was eventually revealed that Chery was the last remaining company. The JV would use Chery’s new plant in Dalian for the first model, likely to be the Forester. Chery can learn a lot from Subaru’s engine technology and may even develop a new brand based on this.

Unfortunately, according to Fuji’s latest announcement, the company has dropped plans to manufacture vehicles in China, after failing to secure the Chinese government’s approval for a joint venture. Following the let-down, Fuji Heavy cut its global sales targets and instead decided to increase its manufacturing capacity in the United States and Japan.

After failing to create a joint venture, Fuji Heavy will now be forced to continue importing cars into China. Unfortunately, with the high import tariff and the strong Yen, the competitiveness of Subaru branded vehicles has dropped compared to their locally assembled competitors. Forester sales dropped 12% in 2011, while almost all its rivals such as VW Tiguan and Honda CR-V achieved remarkable growth.

To download 8-page report, please click here.

Source: LMC Automotive - GAI

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