Subaru Q2 2025: Sales hit record high, profits halved
Produced by Zhineng Auto
Q2 2025(Fiscal Year 2026 Q1)Subaru delivered a seemingly contradictory report card: sales soared, but profits fell significantly.
Global sales reached 244,000 units, up 15.1% year-on-year, with Forester, Crosstrek, and the new hybrid models performing well, especially in the US market. Operating profit, however, fell 16.2% year-on-year to 76.4 billion yen.
The impact of additional US tariffs began to show, combined with yen appreciation and raw material cost pressures, putting this Japanese car company in a dilemma of "selling more, earning less".
The full-year forecast is even more brutal: operating profit is expected to halve to 200 billion yen, with tariffs swallowing 210 billion yen in profits.
Facing a deteriorating external environment, Subaru can only rely on improving production efficiency, optimizing sales mix, and cutting costs to maintain the bottom line. Whether these internal measures can offset the impact of geopolitical and exchange rate shocks remains unknown.
The market sees a company with continued sales growth, but behind the financial statements is a difficult balance between survival and profitability.
Part 1
Subaru Quarterly Performance and Market Analysis
In the first quarter of fiscal year 2026, Subaru's vehicle production reached 247,000 units, up 3.3% year-on-year, with combined sales of 244,000 units, a significant increase of 15.1% year-on-year.
From a regional perspective
◎ Domestic sales in Japan remained at 24,000 units, roughly flat compared to the previous year, with slight fluctuations in passenger and mini car sales, showing stability in the domestic market.
Overseas market performance was more prominent
◎ US sales reached 171,000 units, up 25,000 units year-on-year, becoming the main driver of growth, especially with strong demand for the Forester and Crosstrek models,
◎ Australian market sales jumped from 9,000 to 15,000 units, showing strong growth momentum,
◎ European market saw a slight decline,
◎ Chinese market recorded 1,000 units on a low base, with a small scale.
Overall, North America remains Subaru's core market, accounting for more than 70% of total sales, and its performance directly determines the company's overall performance.
From a revenue perspective
◎ First-quarter consolidated revenue was 1.21 trillion yen, up 11.2% year-on-year, with overseas revenue growing the most significantly, reaching 1.059 trillion yen, accounting for more than 80%,
◎ Operating profit was only 76.4 billion yen, down 16.2% year-on-year.
The contrast mainly comes from the impact of US tariffs, which began to exert direct pressure on profits from the middle of the quarter, with a single impact of 55.6 billion yen.
Increased R&D expenses and rising fixed manufacturing costs also dragged down overall production activities by about 12.2 billion yen, while sales growth and sales mix optimization contributed a positive effect of 57.5 billion yen to the company, but it was still not enough to fully offset the negative impact of the external environment.
In terms of regional profit distribution
◎ Although domestic revenue in Japan increased by 47 billion yen to 258.6 billion yen, operating profit sharply decreased from 74.9 billion yen to 35.5 billion yen, showing the impact of cost pressures and exchange rate fluctuations.
◎ North American revenue increased by 74.6 billion yen, but operating profit was only 18.7 billion yen, down more than 50% year-on-year.
◎ In contrast, profits in other regions maintained slight growth, but the scale was limited, contributing little to the overall picture.
The performance of the US subsidiary is particularly typical, with net sales increasing by nearly 100 billion yen year-on-year, but operating profit falling to 80 million dollars, and retail sales dropping from 169,000 to 154,000 units, showing signs of channel pressure and rising market incentive costs.
In terms of cash flow
◎ The company's first-quarter operating cash flow reached 147.2 billion yen, a significant increase from the previous year, directly reflecting sales growth and improved working capital management.
◎ However, due to increased capital expenditures and R&D investments, net cash outflow from investing activities expanded to 102 billion yen.
◎ Nevertheless, free cash flow turned positive at 45.2 billion yen, reflecting the company's ability to generate cash despite profit pressures.
As of the end of June 2025, the company's cash and equivalents stood at 1.55 trillion yen, with a net cash balance of 1.16 trillion yen, maintaining a stable overall financial structure.
Part 2
Subaru Full-Year Forecast and Future Challenges
Subaru expects:
◎ Total production for fiscal year 2026 to be 900,000 units, with consolidated sales of 920,000 units, down 16,000 units from the previous year.
◎ North American market sales target is 725,000 units, slightly lower than fiscal year 2025, but the company plans to achieve a retail target of 675,000 units for the calendar year 2025 through inventory digestion.
◎ From a market distribution perspective, domestic sales in Japan are expected to grow slightly to 110,000 units, but other overseas markets will decline by 16,000 units, showing a trend of global market structure adjustment.
In terms of profit, full-year operating profit is expected to be 200 billion yen, down 50.7% from the previous year.
The biggest impact factor remains US tariffs, expected to hit as high as 210 billion yen for the year, swallowing more than half of the profits. At the same time, raw material costs and exchange rates will also bring negative impacts of about 75 billion yen and 24 billion yen, respectively.
Although the company plans to offset about 125.7 billion yen of pressure through production efficiency improvements, sales mix optimization, and cost reductions, it is still difficult to compensate for the huge impact of the external environment, and Subaru's profit performance in fiscal year 2026 will be at a low point in recent years.
Subaru's management has not solely relied on sales growth but has formulated countermeasures from multiple aspects such as production layout, cost control, product transformation, and capital operations to mitigate the impact of tariffs and exchange rates while laying the foundation for the electrification era.
● Production and Supply Chain Optimization
◎ North American localization production: To cope with US tariffs, the company plans to gradually shift Forester production to the Indiana plant in the US(SIA), reducing import dependence and thus lowering the direct impact of tariffs on costs.
◎ Capacity allocation adjustment: The Yajima plant in Japan is accelerating the transformation of the electric vehicle production line, expected to form large-scale EV production capacity within the next two years to support the global market layout.
◎ Increase in localization rate of parts: In the North American and Southeast Asian markets, the company is promoting more local procurement of parts to reduce dependence on cross-border trade for costs and exchange rates.
● Electrification and Product Strategy
◎ Launch of new energy models: Starting in 2026, Subaru will simultaneously launch multiple hybrid and pure electric models in Japan and North America to enhance competitiveness in the new energy market.
◎ Co-development: Continue to deepen strategic cooperation with Toyota, sharing electric vehicle platforms and powertrain technologies to reduce R&D costs and accelerate product launch speed.
◎ Brand differentiation: Emphasize the traditional advantages of "boxer engine + four-wheel drive technology", combined with new energy power, to create a differentiated electric SUV market positioning.
Subaru's full-year operating environment presents a pattern of "steady sales, profit pressure".
Strong product power and overseas market demand supported sales, but US tariff policies and unfavorable exchange rate changes almost completely weakened profit performance. By increasing R&D investment and capital expenditure, actively deploying electrification and future capacity expansion, short-term sacrifices in profit are inevitable for medium- to long-term development.
Summary
Subaru's current situation is a microcosm of the entire Japanese automotive industry: sales figures can be impressive, but profits are easily swallowed by policies and exchange rates. Tariffs, exchange rates, raw materials, these external variables are no longer "temporary noise", but key factors determining the fate of Japanese automotive companies.
Subaru chooses to continue betting on efficiency and cost control, hoping to navigate through cycles with refined management. The deeper question is whether Subaru's product and market layout is sufficient to provide a real moat in the new global competitive landscape?
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