China: Subaru to postpone plans of local joint-venture production image

Fuji Heavy Industries, the parent company of Japanese automaker Subaru has decided to put its plans for localized Chinese production of cars through a joint-venture with partner Chery Automobile on hold for the time being.

Fuji was the only global player from Japan that lacked Chinese government approval to start model manufacturing through a joint venture and planned to band together with Chery to build Subaru cars. Now, according to Akira Mabuchi, executive vice president in charge of the company’s China plans says the company is not going to start local production of cars “even if Chinese government approves” the plan, revising the strategy as the executives forecast that sales would not be high enough to bring profitability. The Chinese auto market, the world’s largest, has seen the slowest sales growth pace in years in 2014 and the market is further expected to plateau in 2015 because of the feeble economical growth.

Fuji Heavy turned out to be Japan’s best-performing automaker in 2014, has shown lower interest in the Chinese market for two main reasons. The country’s economy is expected to expand at the slowest pace since 1990 in 2015 after the auto delivery increase slowed from 14% in 2013 to 6.9 percent last year. Additionally, Subaru has been outperforming the overall American sales, and its largest auto market is expected to post even stronger growth this year. According to an interview taken late last year to Yasuyuki Yoshinaga, president of Fuji Heavy, Subaru is focusing on expanding production capabilities in the US at its sole assembly factory and China’ plans to build a new production facility won’t be put into motion before the current mid-term expansion strategy concludes in 2020.

Via Bloomberg