The Japanese manufacturer will begin mixed powertrain production at its Yajima plant north of Tokyo in August, marking the first time it has built internal combustion, hybrid, and battery-electric vehicles on the same assembly line.

The move forms part of what Subaru calls its new “ultra-efficient production” strategy, designed to enable the relatively small manufacturer to respond quickly to fluctuations in demand and external shocks, such as tariffs and currency movements. The retooled production line will build the hybrid and petrol-powered Subaru Forester alongside the new Subaru Trailseeker and its sister model, the Toyota bZ4X Touring electric SUV.

Subaru suspended one of the Yajima plant’s two production lines in August last year to prepare for the changeover, with production of the Trailseeker and bZ4X Touring commencing in February. 

Managing executive officer Ikuo Watanabe told Automotive News this week that the flexible manufacturing system would ultimately allow Subaru to shift production volumes between its Japanese plants and its manufacturing facility in Indiana in the United States.

“That is what ultraefficient production is all about, and that is the vision we are aiming to achieve,” he said.

“We will be able to adapt to changes; be it tariffs or exchange rate fluctuations.”

The strategy comes as several global automotive manufacturers reassess ambitious EV investment plans amid softer-than-expected demand.

Subaru last month recorded a ¥58 billion ($A600m) impairment charge after delaying production of an independently developed electric vehicle in Japan. 

Fellow Japanese manufacturer Honda recently announced ¥1.5 trillion ($A15.5b) in write-downs after cancelling several EV programs and pausing production plans. 

“Demand trends are uncertain and we cannot predict which powertrain – battery electric, hybrid, or internal combustion engine – will sell well and when,” added Mr Watanabe.

“Making an investment decision on one specific technology poses the greatest risk.” 

Subaru declined to provide a breakdown of the production mix planned for the Yajima facility or indicate how much output would be destined for export markets, including the United States. 

The Yajima plant has an annual production capacity of approximately 400,000 vehicles across its two lines. The second line continues to build the Forester and Outback.

Subaru’s deepening alliance with Toyota is also central to its electrification strategy.

The Trailseeker is one of four jointly developed EVs between the two companies, alongside the Solterra, Uncharted, and Getaway, with Subaru saying the partnership has allowed it to expand its EV range while keeping development costs under control.

Production flexibility will extend beyond Yajima. 

Subaru plans to introduce mixed and bridge production at its new Oizumi plant, due to open as early as 2028, and is also evaluating similar production arrangements at its Indiana (US) factory.

In a further sign of changing market realities, Subaru has abandoned plans for the Oizumi facility to manufacture only electric vehicles.

Instead, the new factory will begin production with internal combustion-powered vehicles before introducing EVs later, depending on market demand. 

Subaru says the new plant will rely heavily on modularisation, automation, and technologies such as physical AI and robotics, describing the facility as a “software-defined factory”.

The company believes software-driven production systems will allow manufacturing lines to be reconfigured through updates rather than expensive physical overhauls.

As part of the strategy, Subaru aims to halve production processes and reduce costs by ¥200 billion ($A2.1b) by the end of the decade.

Subaru’s profitability has come under intense pressure in recent times as US tariffs, changing emissions regulations, and slowing EV demand force the Japanese manufacturer to rethink its strategy.

The company has slashed its operating profit forecast by almost 70 per cent, with tariffs alone expected to cost ¥229 billion ($A2.4b) this financial year alone.Subaru has also written off billions of yen in emissions credits and delayed investment in a dedicated EV production facility, instead pivoting towards more flexible production of hybrid and petrol-powered vehicles.

Despite the challenges, Subaru says it remains committed to electrification, continuing production of its Solterra, Trailseeker, and Uncharted alongside a growing range of petrol-electric models.

According to finance publication, Glitchwire, Subaru’s consolidated financial results for the financial year ending 31 March show. 

• Revenue rose despite weaker sales volumes Subaru’s full-year revenue increased 2.1 per cent year-on-year to ¥4.785 trillion ($A49b), helped by improved pricing and a model mix that offset lower global vehicle sales and currency headwinds.
• Profitability collapsed. Operating profit plunged 90.1 per cent to ¥40.1 billion ($A410m), while net profit attributable to shareholders fell 73.1 per cent to ¥90.8 billion ($A814m). Higher costs, additional US tariffs, increased research and development spending, and EV-related impairment charges heavily impacted earnings.
• Subaru’s reliance on the United States remains a major risk about 70 per cent of Subaru’s global sales come from the US market, where sales weakened during the year and new tariffs added significant pressure to profitability.
• The company has cut its outlook sharply Subaru recently revised its earnings forecast, slashing expected operating profit for the year ending March 2026 by 69.2 per cent to ¥40 billion ($A358m) due to weaker vehicle demand, US market softness, and disruptions to exports.
• Electrification plans are being reassessed Subaru has taken a $US362 million ($A524.3m) impairment charge related to delaying its independently developed EV program and is increasingly pursuing flexible production strategies that allow it to build petrol, hybrid, and electric vehicles on the same lines to better respond to changing market demand.

Subaru Australia’s sales performance in 2026

Locally, sales of Subaru models are down 22.1 per cent year-on-year with total sales to the end of May of 11,915 units (down 3385 units). The Japanese importer has lost 0.64 market share points across the same 12-month period, now holding a 2.5 per cent stake overall.

Subaru Australia has sold just 362 examples of its Impreza small car YTD, down 53.0 per cent on May 2025 and well behind the segment-leading Toyota Corolla with 6277 unit sales. Sales of the related WRX are likewise down, slipping 29.8 per cent to 623 units.The sports-segment BRZ coupe is also feeling the showroom pinch with just 302 unit sales recorded in the year-to-date (down 17.3 per cent).

Looking at the higher volume SUV segment we see Subaru’s sales woes continue.

The small Crosstrek SUV has sold 3574 units YTD (down 19.7 per cent), the medium Forester SUV 4641 units (down 8.4 per cent), and the large Outback SUV 1898 units (down 47.9 per cent). Only sales of the electric Solterra SUV are up, growing 258.6 per cent to 398 units.

(Ed: sales data for the newly arrived Trailseeker and Uncharted are currently unavailable).

By Matt Brogan