Subaru’s EV rethink reveals the harsh new reality facing car makers

Subaru has delayed plans for its first independently developed battery-electric vehicle (BEV) as mounting US tariff costs and slowing EV demand force the Japanese car-maker into a major strategic rethink.

Subaru has become the latest global automotive brand to scale back its electric vehicle ambitions, confirming it will delay the launch of its first independently developed EV amid worsening financial pressure and slowing demand in key markets.

The announcement came during Subaru Corporation’s latest Board of Directors meeting in Tokyo, where President and CEO Atsushi Osaki revealed operating profit for the financial year ending March 2026 had collapsed from 405.3 billion yen to just 40.1 billion yen.

Converted to Australian currency, that represents a fall from roughly $A3.6 billion to about $A350 million in just 12 months.

According to Subaru, two major factors drove the decline.

US tariffs on imported vehicles stripped approximately $A2 billion from earnings, while EV-related write-downs and impairments accounted for a further $A510 million.

The deteriorating outlook has now forced Subaru to delay plans for a bespoke EV that was due to be built at a new production facility in Gunma Prefecture, north-west of Tokyo, from 2028.

“In the US, our key market, the pace of BEV adoption has slowed due in part to the easing of environmental policies,” said Subaru President and CEO Atsushi Osaki during the earnings call at the end of the Japanese financial year.

“We want to begin a comprehensive re-evaluation of the entire strategy, including which models to bring to market.

“We will continue developing the core components of BEVs, but we will significantly reduce the resources allocated to this effort.”

Subaru already sells three electric vehicles globally – the Solterra, Uncharted and Trailseeker – all of which were jointly developed with Toyota.

That partnership has allowed Subaru to spread development costs, but creating a standalone EV architecture and manufacturing program would require substantially higher investment at a time when the company is facing increasing pressure in its largest market.

More than 70 per cent of Subaru’s global sales come from the United States, with around half of those vehicles imported from Japan and now subject to a 15 per cent tariff.

Subaru joins a growing list of manufacturers reassessing EV timelines and product plans, alongside Honda Ford, General Motors, Mercedes-Benz, Stellantis, Volvo and Volkswagen.

Many brands have cited weaker-than-expected consumer demand for EVs, alongside stronger ongoing demand for hybrid and internal combustion models.

Osaki declined to confirm a revised launch timeline for Subaru’s delayed in-house EV program.

“We intend to finalise the exact launch timing after carefully monitoring market conditions,” he said.

“It is still too early to say a specific timeline at this point.”

Australian buyers are also contributing to Subaru’s softer outlook.

Local sales fell 3.9 per cent across 2025, while year-to-date figures through April 2026 are tracking almost 20 per cent behind the same period last year. 

The latest-generation Subaru Outback has also attracted criticism from some long-time buyers, particularly over its shift towards a more SUV-like design compared to the wagon-inspired styling of earlier versions. 

Subaru is forecasting a modest recovery in the coming financial year, with global sales expected to rise around five per cent to 940,000 vehicles.

However, with mounting tariff pressures, slowing EV demand and increasing development costs weighing heavily on profitability, the company’s transition to a fully electric future now appears likely to take considerably longer than originally planned.

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