Slim margins make duty drop unlikely

SUBARU is unlikely to pass on the federal government’s five per cent duty cut on imported passenger cars to consumers early next year, due to cost constraints.

It has effectively ruled out matching Mazda’s price cuts, introduced last month in a pre-emptive marketing strike before the import duty is reduced from 10 to five per cent for passenger cars from January 1.

Speaking at the launch of the Outback diesel and Liberty Exiga people mover in Canberra earlier this month, managing director Nick Senior hosed down speculation that his company would lower prices to reflect the import duty fall.

Calling it “very unlikely”, Mr Senior revealed that Subaru Australia has been under constant pricing pressure over the past 12 months, and that the duty drop would be sorely needed to help the company and its dealers achieve healthier margins.

“We've been working in an environment of extreme margin pressure for the last 12 to 18 months,” he said.

“I think that's well acknowledged – and although we haven't finalised our strategy, it's unlikely that there'll be a change.

“We’ve seen a lot of extra equipment built into Liberty and Outback a whole lot of changes in equipment levels over the last 12 to 18 months and we need get back to some reasonable margins in our vehicles.”

Left: Subaru Australia managing director Nick Senior. Below: Subaru Outback.

On the subject of more profitable vehicles, Mr Senior said the higher-end versions of the latest Liberty and Outback models had had a strong sales start.

“There has been a very strong acceptance for our new Liberty model – particularly the top-end Liberty GT. The 2.5i Premium models with SatNav are in extremely short supply, and also the 3.6R.

“We are very pleased with the reception of the Liberty – we sold over 700 in October, which is the strongest Liberty sales for several years.

“It’s been a similar story with Outback – the highest monthly sales in October for the year – indeed for several years with more than 500 Outbacks sold.” Subaru says it expects the early sales rush to settle down to around 450 Outbacks and 250 Liberty wagons a month, with the new diesel and Exiga (which falls underneath the Liberty umbrella) contributing around 100 and 75 respectively to each model.

“Both will attract more customers to the brand, with particularly strong interest (for the diesel) from our rural markets, which is vitally important from Subaru’s point-of-view.

“Hopefully I am a little conservative on those figures ... but the biggest problem over the next few months will be supply of Outback diesel.” While he acknowledges that this year’s sales tally will be down about seven per cent on 2008’s record result (about 36,000 units versus 38,492), Mr Senior is still satisfied with the 2009 performance.

“Given that the industry is down by around 13 to 15 per cent on last year, we are very happy with that result, especially as we have only had new Liberty and Outback on sale for the last three months,” he said.