Subaru is making some significant changes to its production strategy in response to new tariffs affecting the automotive industry. This shift is particularly relevant for the Canadian market, where Subaru has traditionally relied on vehicles manufactured in the United States. However, with the recent imposition of a hefty 25 percent tariff on U.S.-made cars entering Canada, Subaru is pivoting to minimize costs and maintain its competitive edge.
Why Is Subaru Moving Production to Japan?
In 2024, Subaru sold over 68,000 vehicles in Canada, with a notable 26 percent—around 17,700—coming from its U.S. factories. The new tariffs, introduced as part of ongoing trade tensions, have forced Subaru to rethink its logistics. By the time the 2026 model year rolls around, Subaru plans to produce only 10 percent of its Canadian-bound vehicles in the U.S. This strategic move aims to sidestep the financial burden of the tariffs, allowing Subaru to keep prices stable for Canadian consumers while protecting its profit margins.
Tomohiro Kubota, Subaru Canada’s CEO, explained that this shift will help the company “minimize the impact of the counter surtax.” Currently, production of the popular Outback model for the Canadian market is still happening in Lafayette, Indiana, but plans are in place to transition that production to Japan soon. This change raises questions about how Subaru will manage its supply chain and whether it will continue to rely on U.S. facilities for other models.
What’s Next for Subaru’s Production Plans?
As Subaru prepares to move production overseas, it will retool its Indiana plant to manufacture the Forester, another popular model in Canada. However, it remains unclear whether these Indiana-made Foresters will be exported to Canada or if Subaru will depend on its Japanese factories, which already produce the Forester for other markets. This uncertainty highlights the complexities of global supply chains and the challenges faced by automakers navigating shifting trade policies.
Interestingly, Subaru is one of the few legacy automakers without production facilities in Canada. Until now, it has benefited from the United States-Mexico-Canada Agreement (USMCA), which was renegotiated during Donald Trump’s presidency. With the new tariffs undermining this agreement, Subaru is adapting its strategy to remain viable in the Canadian market.
How Are Other Automakers Responding?
Subaru isn’t alone in its efforts to navigate these turbulent waters. Other automakers are also exploring creative solutions to mitigate the impact of tariffs. For instance, Canada is considering loosening regulations to allow more automakers to import vehicles from countries outside the U.S. This could open up new avenues for competition and potentially lower prices for consumers.
In the U.S., the fallout from these tariffs has already led to significant job losses. Volvo, for example, recently laid off hundreds of workers due to the financial strain caused by the tariffs. Similarly, other manufacturers are freezing imports to Canada, reflecting a broader trend of uncertainty in the automotive industry.
What Does This Mean for the Future of the Automotive Industry?
The ongoing trade tensions and tariff disputes are reshaping the automotive landscape in ways that are still unfolding. As companies like Subaru adapt their production strategies, the industry is likely to see a shift in where cars are made and how they are priced. This could lead to a more fragmented market, with automakers increasingly reliant on global supply chains to meet local demands.
The big takeaway? Adapting to change isn’t just about survival; it’s about being smart with your resources. Subaru’s move to shift production to Japan is a clear example of how companies can pivot in response to external pressures. If you’re in the market for a new vehicle, keep an eye on these developments—what happens next could influence your options and pricing in the months to come.