Record sales, but Subaru drops prices anyway

An emerging pattern for the Australian market in 2009 is for car companies to raise prices and lower expectations. Some companies have finished 2008 ahead on sales, but not without some hard graft along the way.

Subaru is tacking into the wind with the best of them, having achieved another record year for sales in 2008, despite the downturn in the latter half of the year.

Not a company to rest on its laurels, Subaru is also reducing prices of certain variants in the Impreza, Liberty and Outback ranges to consolidate on its sales performance last year.

Prices of the Impreza R sedan and hatch have been reduced by $1500 to a new price of $22,990 for the manual variants. Automatic variants have also been reduced by $1500 -- to $24,990. The company has also applied a discount of $2000 to the Liberty 2.5i sedan and wagon in automatic variants, with the sedan now priced at $32,990 and the wagon now $34,990. Similarly, buyers of the Outback 2.5i with automatic will enjoy a $2000 discount, bringing the price of the car down to $36,990.

Subaru Australia MD Nick Senior offers that the importer's hedging strategy has placed the company in the virtually unique position of lowering prices when most other car companies are raising theirs, in the aftermath of the Aussie dollar losing ground against major currencies around the world -- principally the American dollar, the Euro and the Yen.

"While other brands are increasing prices, we have a window of opportunity because of our hedging strategy," explained Senior.

"Obviously with the dramatic drop in the exchange rate of the Australian dollar versus the Yen, we will inevitably have to review prices in the future, but just now we are passing on our good fortune to our customers."

Hedging reduces the importer's exposure to risk of the currency at the retail end of the market losing value against the currency in the country of manufacture. In this instance, without hedging, Subaru would be forced to raise prices of imported product as the cost of manufacture in Japan escalates with the loss of value for the Australian dollar, relative to the Japanese Yen.

Subaru has a reputation for maintaining strong resale values across its model range, but reducing the new-car pricing can adversely affect resale values. Whether the company's calculated tactic will maintain new-car sales into 2009 without detriment to the long-term resales of cars already sold is a conundrum that Subaru has plainly decided it can ignore.