Subaru will build its first facility for electric vehicles in Japan

Subaru Corp (7270.T) announced that it plans to create a specialized electric vehicle (EV) facility in Japan in the late 2020s as part of a $1.9 billion investment to meet the rising demand for battery vehicles in its key North American market.

Subaru, which is best recognized for the Outback crossover, has historically had a significant presence in the United States, and on Thursday (May 12) cautioned that its United States dealers have only a record low stockpile of roughly 5,000 vehicles left, indicating a supply-chain crisis.

It expects to start a mixed-production unit of gasoline and EVs (electric vehicles) in the new factory around 2025, followed by an EV-only line in 2027. Subaru has never done anything like this before. Other Japanese manufacturers have yet to openly announce plans to create electric vehicle manufacturing. Japan’s automakers are ramping up their electric vehicle manufacturing in an attempt to catch up to Tesla Inc (TSLA.O), which is currently the fastest-growing area of the industry.

Tomomi Nakamura, Subaru CEO, stated, “The market for electric vehicles has changed quite rapidly during the last year.  Within the next five years, it intends to invest $1.93 billion (250 billion yen) in electrification. Nakamura declined to say whether the new facility will manufacture Toyota Motor Corp (7203.T) vehicles or how many would be produced.

Subaru made the news on the same day that it started taking orders for the Solterra, its first mass-produced electric vehicle, which was developed in collaboration with Toyota in Japan. Subaru, on the other hand, outsourced the car’s manufacturing to Toyota, which has just released its first battery-electric vehicle.

EVs which accounted for only 1% of passenger vehicle sales in Japan last year is significantly more prevalent in Toyota’s home market. Nonetheless, the market is rapidly expanding, with international automakers such as Tesla Inc (TSLA.O) making visible advances on city streets such as Tokyo.

Toyota is going to lease the bZ4X SUV (sport utility vehicle) for the first four years for the equivalent of $39,000, which includes insurance, repair fees, and a battery guarantee. There is an extra cost if you cancel within the first 48 months.

While EV adoption has been a bit slow in Japan, that is changing, and Christopher Richter, a CLSA analyst, believes Toyota could lose market share by concentrating on a leasing plan rather than a purchase model.

Subaru’s full-year operating profit dropped by 12% to $701 million (90.45 billion yen). It forecasted an operational profit of  $1.9 billion (200 billion yen) for the current fiscal year, which began in April, more than doubling the previous year.

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