TOKYO -- Subaru Corp. on Monday reported its lowest quarterly profit in over five years, as North American sales declined and U.S. incentives rose.
Operating profit at the smallest of Japan's major automakers fell 52 percent in April-June from a year earlier to 57.6 billion yen ($517.38 million).
North American sales, which comprise about 70 percent of Subaru's total, fell 13 percent to 166,000 vehicles in the quarter, pushing overall global sales 12 percent lower to 237,900 vehicles.
U.S. sales of the compact Forester crossover fell during the period, as customers held back from buying until a revamped model is launched in the coming months.
Subaru has also been increasing buying incentives in the U.S., including for the Forester and midsize Outback crossover, as it tries to expand U.S. market in the face of competition with much bigger rivals. That raised marketing costs in the first quarter. U.S. retail sales rose 7.8 percent during the period, according to the Automotive News Data Center.
Tariff concerns
Subaru has been increasing vehicle production at its U.S. plant to address a jump in demand for its cars over the past few years, but it still imports roughly half of the cars it sells in the country from Japan.
As a result, a rise in auto import tariffs in the United States -- as advocated by the U.S. President Donald Trump -- could have a significant impact on Subaru as it would raise the cost of selling vehicles in the market.
The Trump administration has imposed tariffs on steel and aluminum. Those tariffs were having limited impact on materials costs at Subaru, which locally procures the majority of such materials for its U.S.-made vehicles, CFO Toshiaki Okada said at an earnings briefing.
He declined to comment on any possible impact of U.S. tariffs on autos and auto parts.
Subaru maintained its forecast for full-year profit to slide 21 percent to 300 billion yen in the year through March, due to the impact of a strong domestic currency and higher U.S. marketing expenses.
At home, Subaru in April said employees had manipulated mileage readings on vehicles for the Japanese market, adding to domestic compliance failings it revealed a year earlier. In the wake of the tampering scandal, the company in June named Tomomi Nakamura as its new CEO, replacing Yasuyuki Yoshinaga, who had been the chief executive since 2012.
Hans Greimel contributed to this report.