Subaru's EV Marketing Spending Soars, But Sales Remain Stagnant
Subaru's EV Ambition: High Spending, Low Returns
Stepping Up the EV Game: Subaru's Expanded Electric Portfolio
Subaru has dramatically broadened its electric vehicle offerings, now featuring three distinct EV models in its American fleet, a threefold increase from the previous year. This expansion is a welcome development for brand enthusiasts who have eagerly awaited more electric options from Subaru.
The Cost of Promotion: A Look at Subaru's Marketing Investments
The introduction of new electric vehicles has necessitated a significant boost in promotional activities. In the last financial quarter, from April to June, Subaru’s marketing budget for its electric models—the Solterra, Uncharted, and Trailseeker—was three times higher than that allocated for its conventional gasoline cars. This aggressive spending aims to raise awareness and drive demand for its burgeoning EV range.
Disappointing Returns: EV Sales Lag Despite Marketing Push
Despite the substantial financial outlay, the sales performance of Subaru's electric vehicles has fallen short of expectations. For instance, the company reportedly spent a staggering $9,650 on marketing for each Solterra sold during the April-June period. Similar high expenditures were observed for the Uncharted and Trailseeker, at $9,155 and $8,982 per unit respectively. In stark contrast, marketing costs for a popular gasoline model like the Outback averaged only $3,036 per sale.
Financial Impact: Declining Profits Amidst High EV Marketing Costs
The disproportionate spending on EV marketing without a corresponding increase in sales has taken a toll on Subaru's profitability. The company's operating profit plunged by 44% in the first fiscal quarter, dropping from $472 million last year to $263.2 million. Furthermore, US sales of the Solterra decreased by 21% in the first half of the year, while the recently launched Uncharted and Trailseeker models collectively achieved only about 2,500 sales by the end of June. Overall, Subaru's total EV sales in the US from January to June stood at just over 10,000 units, a mere fraction of its total vehicle sales, which also saw a 4.5% decline compared to the previous year.
Strategic Reevaluation: Adapting to Market Realities
Subaru's traditional approach is characterized by financial prudence. However, the current strategy of heavy investment in EV marketing, particularly after the discontinuation of the $7,500 federal tax credit for these vehicles, signals a departure from its usual cautious stance. The company has already acknowledged a $362 million impairment charge due to slowing EV demand and has postponed the production of its proprietary EV in Japan, indicating a need for strategic adjustments to navigate the evolving electric vehicle market.