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Subaru of America sells record 46k+ cars in January is it recovers from pandemic

Yahoo Finance’s Alexis Christoforous and Tom Doll, Subaru of America, Inc. CEO and President, discuss how the company is recovering from the pandemic as it pledges 100 million meals to Hunger Relief Organization Feeding America.

Video Transcript

ALEXIS CHRISTOFOROUS: Subaru of America just had its best January in the company's history with sales of more than 46,000 vehicles. Like many in the auto industry, Subaru is looking to bounce back after a challenging 2020. Joining me now is Tom Doll. He is CEO and President of Subaru of America. And, Tom, good to have you on the show again. What a way to start the year, huh, with these record sales numbers. Tell us what drove the momentum for you in the month of January.

TOM DOLL: Well, really if you track-- if you look at Subaru, our momentum actually goes back to last July. Really the last six months of last year through January, we were essentially on a 700,000 unit pace. So really after the pandemic happened back in March and we recovered as we came out of April and into June, the market just seemed to recover dramatically. And we've of course gone along with it. And we're so happy that we were able to gain another tenth of market share last year and also gain another tenth of market share in January. So for us, it's very exciting.

ALEXIS CHRISTOFOROUS: Tell us what consumers are looking at in terms of your vehicle lineup. Where was the most strength? Was it in SUVs? Was it in sedans? What did you see?

TOM DOLL: Just like you said, it's mostly SUVs. All of our SUV lines are doing extremely well.

We had a record with our Crosstrek line. It was the first time that we sold over 10,000 vehicles in the month of January. Also our Forester. Forester was our leading seller. We sold over 13,000 Forester models.

So our SUVs, including the Outback and the Ascent continue to do very well just like it is for the entire industry. Sedans, as you mentioned, not so much. People are actually shifting their buying preferences from sedans into larger and midsize SUVs.

ALEXIS CHRISTOFOROUS: True confessions. My first car ever was a Subaru Legacy back in the day. And the reason I loved it so much was I was starting out in this industry and changing jobs in radio, moving from one place to the other. And I was able to fit all my stuff in the Legacy. But you don't have that brand anymore, do you?

TOM DOLL: Oh, no, we still sell the Legacy sedan. In fact, I'd love to get you into another one. And if you're up in New York where we are, up in this North Jersey, New Jersey area, I mean, Subaru, great car to have over the last couple of days for sure, given all the snow that we've had.

ALEXIS CHRISTOFOROUS: Yeah, definitely great in the bad weather. At the time, I was living in Connecticut. So I can attest to that.

What about the outlook for the year? I mean, is this a rebuilding year for the auto industry in general coming off of a historically bad year? What do things look like for you at Subaru?

TOM DOLL: Well, we're fairly bullish on the market for this year. In fact, coming out of December and looking at the January results, I would think that this year, the market for the industry would be somewhere around 16 to 16.5 million vehicles, which would put us up significantly versus the 14.5 million that we had in calendar year '20. So I'm looking for over the second half of the year, particularly with all the stimulus that's currently out there, plus the stimulus that's coming, I think the second half of the year could be extremely strong. And what we're trying to do is to build ourselves, build our inventories and so forth to be in a position to be able to capture that late spring, early summer market, which for Subaru was traditionally a very strong selling season for us. So we're very excited about 2021 and the prospects that it offers.

ALEXIS CHRISTOFOROUS: In terms of stockpiling and inventory. We know that it was challenging there, especially early on in the pandemic for lots of different industries as it relates to their supply chain. What are things like for you right now and how many months of inventory, if at all, do you have?

TOM DOLL: Well, right now we probably have somewhere between a 45 and a 48 day supply, which is where we like it. Most industry observers like to have probably like around a 60 day supply. But we like to think that's a little bit too much. We like to work with a little bit less day supply. It keeps a lot of pressure off of incentives and other forms of bad habits that can creep into this industry.

So we try to keep our inventories in that 45 to 40 day range. And as you pointed out, when the pandemic first struck in March, early March through the middle of May, we had to unfortunately close our factories down. And then it did take some time for the supply chain to catch back up again.

But I would say by the end of June beginning of July manufacturing in our supply chains picked back up. And really, we were able to hit our numbers and exceed our numbers in a couple of months over that second half of the year as I said. And remember, the second of the year, we were selling at about a 700,000 unit pace. So in effect, we've really recovered. And January's a good indication because we set a record in January.

ALEXIS CHRISTOFOROUS: Yeah, Tom, what do you think might lead to the momentum here in terms of what people are going to be looking for? Are you still thinking that SUVs are going to be the car of choice for people?

TOM DOLL: SUVs and trucks are the main drivers of the market right now. As you point out, sedans, particularly entry level sedans, are having a little bit more of a difficult time because the buyer's in that-- the demographic of the buyer that's in that segment is more affected by what's been happening in the general economy. But people that are buying trucks and SUVs they're less affected than the normal person that might work at a restaurant or a bar or something like that. So SUVs and trucks are going to continue to drive the market in 2021 for sure.

ALEXIS CHRISTOFOROUS: What about Subaru's plans for EV cars, electric vehicles? We just hear about every major automaker coming out with their plans. GM getting pretty aggressive there. What are Subaru's hopes for the EV space?

TOM DOLL: Well, just like everybody else, we're going to be having to offer our version of electric vehicles and hybrid models as we get out into 2023 and 2024, just in order to be able to comply with the fuel economy and cafe requirements, as well as greenhouse gases. So I think our president at Subaru corporation in Japan has gone on record as saying that 40% of our sales volume by 2030 should be either coming from hybrids or electric vehicles.

So the targets that a lot of manufacturers have put out there by 2035 would seem to be doable depending upon how the market reacts. And right now the big issue, for us anyway, is more affordability than it is technology. So we have to make sure that we can bring the products out at a reasonable and affordable price for those Subaru customers that are in the market. But we're really excited about the future of electrification and hybrid.

ALEXIS CHRISTOFOROUS: Are you collaborating with anybody in particular on your EV efforts there at Subaru?

TOM DOLL: We have a relationship with Toyota. Toyota and Subaru have cross ownership with each other. And we're utilizing some of the Toyota technology along with a Subaru proprietary technology to develop our version of the all-wheel drive Subaru vehicle that the market really wants and demands, critically our customers who like to take our vehicles off road, do a lot of camping and hiking and that type of thing. But we do have a joint venture with Toyota.

ALEXIS CHRISTOFOROUS: In terms of people spending power, we know that consumer relief spending plan, still trying to make its way through Washington, could include a check for $1,000, perhaps $1,400 for most Americans. If and when that check comes down the pike, Tom, what might that mean for you there at Subaru?

TOM DOLL: Well, we definitely think that any type of stimulus that's going to make the people feel more comfortable in spending and getting out looking at vehicles, looking at cars, and hopefully they'll look at a Subaru, is great for the economy and it's great for us. Because we know that if people are going to be out there in the market, we're going to get our share of that marketplace. And hopefully as people become more familiar with the Subaru brand and they understand all of the great things that our products provide, our great resale values, our highest honor retention, we're the number one brand for honor retention in the entire industry. We're Kelley Blue books most trusted brand for six years in a row, low cost to own.

So our products bring a lot of value to the customer. So we're very confident that if these checks, these stimulus checks continue to go out and then the economy continues to improve as I think it will over the second half of the year, you could see a real boom in the car industry over the final six months of the year once we clear the pandemic, and once we're out of this pandemic period and some of the coronavirus lockdowns that we're in certain areas of the country right now.

ALEXIS CHRISTOFOROUS: All right, well, again, congratulations on those stellar January sales numbers. Tom Doll, president and CEO of Subaru of America, good to see you.

TOM DOLL: Thanks, Alexis.

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