Japanese carmaker's lack of success in China brings profit elsewhere

Fuji Heavy Industries Ltd. president Yasuyuki Yoshinaga has become a market darling for something he failed to do: build a factory in China.

The maker of Subaru cars, the only major Japanese auto brand without a plant in the world's largest vehicle market, has jumped 81 percent in Tokyo trading this year for the biggest gain on the Nikkei 225 stock average.

Fuji Heavy's smaller presence in China has helped shield it from a consumer backlash triggered by a territorial dispute between Asia's two largest economies as its sales in the United States and Japan have surged.

"Selling cars in China is difficult now," Yoshinaga said at the unveiling of the new Forester SUV last week in Tokyo. "Luckily, we can cover the loss there by producing more cars for Japan and the U.S., since we don't have a plant in China."

Fuji Heavy's Subaru of America Inc. unit is based in Cherry Hill and it operates an auto-assembly plant that employs 3,500 in Indiana.

While its Japanese peers idled factories in China last month as deliveries slumped, Fuji Heavy was able to ship more cars to the United States and Japan, where waiting times have stretched to six months for its $25,495 BRZ sports car and two months for the $17,895 Impreza hatchback. The demand helped the Tokyo-based carmaker boost its full-year profit forecast by 40 percent even as Honda and Nissan cut theirs by a fifth.

Last year, Yoshinaga said he thought that his perseverance was being tested after he failed to get approval for his company's proposed joint venture with Chery Automobile Co. Chinese authorities had balked because Toyota Motor Corp., which already has two joint ventures in China, is Fuji Heavy's largest shareholder, with a 16.5 percent stake.

China didn't share Yoshinaga's view that Fuji Heavy is independently managed from Toyota. A third partnership in the country for Toyota would have exceeded regulatory limits, according to three people familiar with the situation.

Manufacturing locally is crucial because import taxes of 25 percent make cars built abroad uncompetitive. China is Subaru's third-largest market, after the United States and Japan, but its growth in the country has slowed. The company sold 57,198 Subaru cars in China last year, vs. 57,138 in 2010 and 35,348 in 2009. Nissan Motor Co., which has a joint venture with Dongfeng Motor Corp., delivered 1.25 million vehicles in the country last year.

The China rejection was "disastrous for Subaru and we had a very negative view at the time," said Masatoshi Nishimoto, an analyst with IHS Automotive in Tokyo. "Their misfortune turned into a stroke of good luck after the anti-Japan protests. But in the long term, Subaru can't do without China."