Subaru turns up the heat in the Sunbelt

DETROIT — A decade ago, toward the beginning of Subaru of America's remarkable streak of sales records, the automaker identified one region that would be critical to the brand's success.

The Sunbelt.

Unlike the Northeast and Northwest's sometimes harsh climates and challenging terrains, which were natural selling points for Subaru's all-wheel-drive models, the Sunbelt was not an area where large numbers of consumers were drawn to the brand.

Subaru set out to change its Sunbelt fortunes by playing the long game. Today, it's bigger and stronger with a broader product range and targeted marketing, and it is winning a big chunk of business in the region.

The Sunbelt, defined by the automaker as 13 states as well as Southern California, accounted for just roughly 15.4 percent of the brand's retail sales in 2010, according to Subaru.

Despite the Sunbelt including two of the country's most populous states, Texas and Florida, as well as the most populous county in the nation, Los Angeles County, Subaru was missing out, even though it already had a majority of its retailers in place in the region.

"At that point in time, there wasn't a brand more geographically skewed, in terms of its sales and where we sold cars and where we didn't sell cars, than Subaru," said Jeff Walters, Subaru of America's senior vice president of sales. "That certainly just came from decades of building a reputation thanks to our four-wheel drive and awd, with its capability in bad weather and in snow. But starting a decade ago, if we were to really grow, be viable and become a success, we knew that we would have to get a lot of that incremental growth out of the South."

So Subaru began to put its plan in motion.

"We did have a plan that encompassed everything that we thought we would need to do better," Walters told Automotive News. "It had different components. For most of the last decade, we've been pretty tight on inventory. We had to make sure that we were getting those retailers sufficient cars to grow and the right cars for their market. We had to help them with their advertising, because our brand awareness certainly is a bit lower down there. We worked with the retailers to get them incremental advertising so they could work on their Tier 3 plans."

Subaru also rolled out a complimentary maintenance program called Maintain the Love, which covers two years of scheduled maintenance. Almost all Sunbelt markets are eligible for it, Walters said.

"We wanted to make sure that we would be doing everything we could to get that customer back and serviced at that store with complimentary maintenance," he said. "If you could generate that service loyalty, hopefully that would go a long way to keeping the purchase loyalty."

The plan was also aided by Subaru's product evolution. Around 2010, the Forester and Outback crossovers, anchors of the automaker's U.S. lineup, were fresh off redesigns that saw the nameplates grow in size and gain sharper looks.

Plus, Subaru's new marketing, centered on love, was in its infancy, having launched in 2008.

If there was a moment for Subaru to grow in the Sunbelt, this was it.

In 2011, the Sunbelt accounted for 15.6 percent of Subaru's new retail sales. In 2012, that figure grew to 17.5 percent. By 2014, it reached 20.4 percent.

Subaru's plan was working.

By 2016, the figure had grown to 23 percent. In 2019, Subaru reached a milestone: over one-quarter of its retail sales in the U.S., 25.5 percent, were from the Sunbelt.

"The components that make up that program haven't changed much over the decade," Walters said. "Right when we put it in, it's just something that worked and we're going to keep working it."

Through August, the Sunbelt share stands at 26.8 percent. Of Subaru's 634 retailers in the U.S., 165 are in the Sunbelt, Walters said.

Subaru's dealership count has largely remained about the same in the Sunbelt, as well as nationwide — around 625 to 630 — compared with a decade ago. The handful of times Subaru has filled an open point, it was likely in the Sunbelt, Walters said.

What has changed is the number of Sunbelt retailers in Subaru's top 25 for new-vehicle sales volume.

A decade ago, just one Sunbelt Subaru retailer made the cut.

Today, there are nine Sunbelt retailers in the top 25, including the No. 1 store, Subaru of Glendale, north of Los Angeles, Walters said.

"With terms of really driving the volume, you're really looking at Southern California, Texas, Florida," Walters said.

Austin Subaru in Texas, No. 4 on the automaker's top 25 list, is a vivid example of the brand's Sunbelt success since opening in 1996.

Owner Genny Hardeman Hill said up until around 15 years ago, the store sold 20 to 30 new Subarus per month. Sales began to grow about a decade ago and today, Austin Subaru sells around 250 new Subarus per month.

"I don't think that we ever saw it growing this much and this quickly," she said. "We built a new facility in 2017 and thought it was going to be plenty big with lots of space. We're already out of space, figuring out how to put new sales offices in and building new levels of parking garages for inventory."

Don Nelms, owner of Adventure Subaru in Fayetteville, Ark., and a longtime dealer, having started with Honda in 1973, acquired his Subaru franchise in 1999.

"We were selling about 110 to 120 cars initially and last year we sold 2,200 new Subarus," Nelms said. "Being a Honda dealer down through the years, you were somewhat used to growth, expansion and newer and bigger facilities. But I think this one eclipsed anything imaginable during that period of time. In about a five-year period, we went from selling about 500 cars to 2,000 cars. It was extremely rapid."

As Subaru has grown its Sunbelt business, its U.S. sales have ballooned.

In 2010, Subaru's total sales were 263,820 in what was year two of its 11-year-long streak of U.S. sales records and year three of its 12-year-long streak of sales increases.

Both streaks will end in 2020 as a result of the COVID-19 pandemic's impact on sales. Walters said Subaru's sales forecast for 2020 is around 585,000, down from the original goal of 725,000 vehicles.

The product portfolio has expanded. Subaru added the Crosstrek subcompact crossover and BRZ coupe in 2012. Half of BRZ sales are in the Sunbelt, Walters said.

In 2018, Subaru returned to the three-row crossover segment with the Ascent. Nearly one-third of Ascent sales come from the Sunbelt, Walters said.

"It's a market that tremendously demands trucks and SUVs," Daylyn Turner, vice president at JK Subaru, said of Nederland, Texas, where his store is. "For a long time, Subaru was not known for having a big SUV. Now we have the Ascent. That's been a big hit in this market for us."

A redesigned Forester launched in 2018, a redesigned Outback followed in 2019 and a freshened Crosstrek joined this year.

Subaru's growth in the Sunbelt has also equated to a high level of conquesting, given that the brand didn't have a large owner base there, Walters said. But it's also an opportunity.

"We have so many more people, as a percent, that are new to the Subaru family," Walters said. "Now we're going to have to work especially hard to keep them in the Subaru family."

After a decade of incremental growth in the Sunbelt, Subaru is not done.

"We would like to get it up to 30 percent of our business," Walters said.