Subaru’s unexciting road to success

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So what is it about Subaru?

Their cars don’t get eye-popping fuel economy. They’re an also-ran in California, the nation’s biggest car market. They don’t sell hybrids, super-hot sports cars or other attention-grabbing metal. And good luck wringing a rebate out of the dealer.

‘It’s not an exciting brand,’ said Todd Turner, president of Car Concepts, a Thousand Oaks consulting firm. Subaru owners ‘get a reliable, albeit not very flashy, mode of transportation. The people who drive Subarus don’t really care what you think about what they drive.’

All of which makes it surprising that Subaru managed to achieve sales growth in 2008 in a U.S. new-car market that was, literally, a car wreck. It wasn’t much of a gain — just 0.3% compared with 2007. But it was a stellar performance when compared to the double-digit declines racked up by almost every other automaker. (Rolls Royce and Mini were the only other marques that saw an increase in U.S. sales last year, with gains of 28% and 27%, respectively.)

And Subaru did it while offering the lowest incentives of any major car maker — an average of $889 per vehicle versus an industry average of $2,566, according to Edmunds.com.

Subaru, a product of Tokyo-based Fuji Heavy Industries, did it by focusing on a small lineup that includes the Impreza and Legacy sedans, the Forester and Tribeca SUVs and the Outback, which is sort of a station wagon with a bit of SUV thrown in. All feature all-wheel-drive.

The vehicles tend to be mid-priced with sedate styling, high safety ratings, EPA city/highway mileage ratings in the low 20s and high reliability ratings from Consumer Reports.

It’s a package that attracts a high-income demographic of college-educated professionals (lots of medical folks, who apparently appreciate the all-weather capability), more than a few lesbians (About.com’s Lesbian Life ranked the Forester as the No. 1 vehicle for gay women) and impressive loyalty among owners.

‘We attract well-educated people who buy a vehicle that does what they need it to do and are comfortable in their own skin,’ said Michael McHale, a spokesman for Subaru of America Inc.

Subaru’s retention rate, at 50.5%, is only slightly better than the industry average of 48% recorded by data tracker J.D. Power and Associates. But Turner contends that many Subaru owners sell their old cars to friends or family and pay cash for their new Subarus, and thus don’t show up in surveys as repeat buyers who do trade-ins.

Turner said Subaru owners tend not to shop other brands when looking for a new vehicle. ‘That gives the company a continuity that’s a little bit unique in a down market,’ he said.

A major driver of Subaru’s sales last year was the redesigned Forester, which helped boost the model’s sales by almost 37% compared to 2007. The sporty WRX version of the Impreza also helped lure a younger generation of buyers to the Subaru clan.

Subaru also has worked hard to cultivate a green image. Its manufacturing plant in Indiana, for instance, is engineered to produce zero landfill waste.

Despite these successes, Subaru, unlike other Japanese carmakers, hasn’t conquered California. Its all-wheel-drive vehicles are more popular in New England and the Rocky Mountain states than in the Sunbelt, and its market share in California is less than its U.S. market share, which hit a high of 1.9% in December. For the full year, Subaru sold 187,699 vehicles in the U.S.

Despite predictions of continued tough sledding in the new-car market this year, Subaru hopes to maintain its current sales level, McHale said.

—Martin Zimmerman