Japan's Subaru Abandons Domestic EV Production... "13 Trillion Won Invested in US Local Manufacturing"

Starting EV Production in the US from 2027
Choosing US Entry to Comply with IRA and ZEV Regulations

Japanese automaker Subaru has decided to produce electric vehicles (EVs) locally in the United States starting in 2027. This marks a strategic shift from its plan announced just three months ago in May to manufacture EVs in Japan and export them to the U.S. Subaru aims to leverage the U.S. Inflation Reduction Act (IRA), which provides subsidies for EVs assembled in North America, to strengthen its competitiveness in the EV sector.

On the 3rd, Nihon Keizai Shimbun (Nikkei) and Asahi Shimbun reported on the announcement made the previous day by Subaru President Atsushi Osaki. According to the announcement, Subaru plans to concentrate its management resources on EVs and will begin local EV production in the U.S. from 2027.

[Image source=Reuters Yonhap News]

Previously, in May, Subaru had announced plans to produce EVs at its Gunma Prefecture plant in Japan starting in 2025 and export them to the U.S. market. However, just three months later, the company significantly revised its strategy to focus on local production in the U.S.

Under the slogan "EV Shift," Subaru revealed plans to invest a total of 1.5 trillion yen (approximately 13.57 trillion KRW) in EV production by 2030, actively developing new EV models. Subaru has set a global sales target of over 1.2 million units by 2030, aiming to increase the EV ratio to 50% of total sales, reaching 600,000 EV units.

Japanese media analyzed that the rapid changes in the EV market were behind Subaru’s decisive move. Nikkei reported, "As the transition to EVs accelerates in the key U.S. market, Subaru appears to have made the decision to produce locally to enhance competitiveness."

This strategy is designed to take advantage of incentives offered under the Biden administration’s IRA while also responding to zero-emission vehicle (ZEV) regulations implemented by various U.S. states. According to the IRA, buyers of EVs produced in North America can receive a tax credit of up to $7,500 (approximately 9.73 million KRW). This gives locally produced EVs a price competitiveness advantage.

The ZEV regulations independently set by each U.S. state also seem to have influenced Subaru’s decision. These regulations focus on increasing the proportion of zero-emission vehicles such as EVs. For example, California mandates that EVs must account for 35% of new car sales by 2026 and 68% by 2030.

Until now, Subaru has been recognized for its strong internal combustion engine technology, making it difficult to leverage advantages in the EV field. However, as ZEV regulations spread across the U.S., the existing production strategy centered on gasoline vehicles will inevitably need to be revised. A senior Subaru official expressed concern to Nikkei, saying, "Punitive taxes on gasoline vehicles may be imposed."

Nevertheless, there is a prevailing positive view that the upcoming local entry into the U.S. market could serve as an opportunity to pioneer new markets. President Osaki told Nikkei, "Although the products are aimed at the U.S. market, EV development will ultimately create new opportunities to enter markets in China and Europe."

This content was produced with the assistance of AI translation services.