Preserving Iconic Status with Niche Market Share

The vision that Antonio Barceló, President of Subaru Mexico, has for his brand’s future in Mexico is an original one. By 2017, Subaru aims to capture 1% of the Mexican sales market, representing around 10,000 vehicles sold. This target has been carefully chosen to maintain Subaru’s exclusive status. “Subaru is a niche player; we do not want to follow in the footsteps of our competition like Nissan or other big players,” said Barceló. “Our strategy is to attain a target market share of between 1% and 3% in countries including Australia, the US, Canada, Japan, and China. Subaru does not want to position itself in the 10% to 20% market share segment. We construct our brand as a niche player and it is important to maintain that distinction.” This strategy is evident in the way Subaru carries out its manufacturing. The company’s two main manufacturing plants are in Japan and the US and a cautious approach is taken to regional investment, with a capacity of 1 million vehicles being seen as the optimum level.

However, despite these two plants being based in Subaru’s largest markets, the carmaker sees expansion into surrounding developing economies as natural for two main reasons: to increase vehicle sales, and to establish a competitive supplier and manufacturing base. As a major manufacturer and exporter of cars, Mexico is perfectly positioned to benefit from this strategy. Subaru currently holds 2.7% of the US market and sees neighboring Mexico as a market worthy of more aggressive commercial strategies. “Subaru wants to recreate its US success, where sales have doubled over the past four years, in Mexico and establish a strong base in the country,” says Barceló. He adds that beyond this, Subaru’s headquarters in Japan see Mexico as a market with very high potential in its own right. Barceló points to the fact that a decade ago both Brazil and Mexico had yearly car sales of 1 million but today Brazil sells more than 3 million units while Mexico’s internal sales remain frozen at the same level. Subaru believes that growth in the Mexican internal vehicle sales market is inevitable. One major obstacle that Subaru has to overcome is the time needed to build up its brand awareness as one of the newest entrants to the Mexican market. “We are undertaking a big marketing campaign to support brand awareness, and develop an understanding of Subaru as a premium Japanese brand offering the highest technology and safety standards,” explains Barceló.

Fortunately for Subaru, the brand’s success in the World Rally Championships has gone some way to positioning it in the minds of Mexican consumers as a performance brand. Further pillars of this strategy will be to expand the dealership base from 15 to between 30 and 35 dealers, and to keep introducing new models and technologies. In 2014, five separate Subaru models will hit the Mexican market. “Introducing a model every couple of months will give our brand a dynamic image that is not common in small brands like ours,” states Barceló. The company believes that its core focuses of technology, safety, boxer engines, all-wheel drives, and CVT transmissions will differentiate the brand. “The boxer engine is one of the key advantages present across all our vehicles, and is part of the Subaru’s brand culture. It gives the vehicle a center of gravity that leads to smoother driving and safety conditions. The engine is also located below the feet, making it safer in case of a crash,” says Barceló. Much of Subaru’s R&D is focused on solutions aiming to prevent collisions. It is working on its own version of eyesight technology, which sees two cameras mounted on the rear-view mirror that detect approaching obstacles and automatically decrease the car’s velocity. This is already on the road in the US and Japan, and is soon coming to Mexico. Subaru’s vehicle safety technology is not being pushed merely for its own merit, with Barceló explaining that “technology is one of the strategies used to maintain market share, given how attractive it is to customers.”

This confidence is based on the appeal of its technologically advanced cars in the US, especially the Impreza WRX and WRX STi. Barceló believes that this has led to significant brand loyalty for Subaru, pointing out that 60% of the OEM’s clients in the US come from direct recommendations by Subaru owners. It is this loyalty bred from the premium driving experience that Subaru hopes will be replicated across the Mexican market. Defining Subaru as a premium brand also means providing first class after sales services, and this aspect is not being neglected, with Barceló explaining: “If one of our cars spends more than three days in a workshop, we will lend another one to the customer. We are launching this strategy in Mexico to help us support our warranty repair time.”

Subaru currently has no plans to open a facility in Mexico but recognizes that additional facilities may well be created as the brand grows around the world. One of the challenges facing each OEM working in Mexico is how to boost its locally sourced content. Looking ahead, Barceló accepts that the company may not always be able to count on its technology and components coming from Japan. “In the US plant, some components are already being sourced from US suppliers. Subaru’s production volume will continue to grow and it will be increasingly important to source components and parts locally.”