Subaru Is Breeding a New Winner
Subaru, the automotive division of Fuji Heavy Industries , has become the 12th largest auto brand in the U.S after its bumper August sales month. Through August, sales are up 29% and its growth rate is trailing only that of Cadillac and Jaguar. Subaru's success is owed to the popularity of its Foresters, Imprezas, and BRZs which are seeing exploding sales. However, there is one car in the company's stable that is often overlooked but has the potential to be a complete game changer. I am talking about Legacy, Subaru's boring midsize car, which can rock the auto world in the times to come.
A class apart
To say that Legacy is a unique midsize sedan may seem like an exaggeration. The segment is dominated by the likes of the Toyota Camry, whose monthly sales compare with the sales of all Subaru vehicles put together, or the Honda Accord, which keeps breathing down Camry's neck. So what is so special about the Legacy? The answer is that it is the only midsize sedan to run on flat "boxer" engines.
The biggest benefit of boxer engines is that it lowers the car's centre of gravity. This means that Legacy has less chances of an turning over, is more agile and less prone to collision, has reduced tire wear, and generally performs better. The second benefit is that it doesn't need bulky balance enhancing solutions that are required to counter heavy vibrations inherent with conventional engines. This offers significant engineering advantages. Other than Subaru, Porsche is the only other car maker in the world to offer flat engines.
Legacy is the only midsize sedan that offers all wheel drive as a standard feature. This scores a huge point in areas that receive snowfall or where roads are rugged. In other parts of the country this can be taken as an added safety and performance feature. The Legacy is practical and allows complete driving ease. The number of official complaints lodged against it is lesser than even Camry and Accord, which are considered the gold standard in reliability. And, of course it comes with spacious if not stylish interiors and hordes of other standard features.
The trade off
Legacy's biggest plus point has also been its worst bottleneck. On account of its boxer engine and all wheel drive, the mileage that it offers cannot compete with most of its peers. With its 3.6-liter six cylinder motor, Legacy offers only 25 mmiles per gallon on the highway where most competitors with V6 engines offer much more. The V6 Camry offers 30 mpg on the highway while V6 Accord sedan offers an even better 34 mpg.
Mileage is better on Legacy models with the 2.5-liter flat four engine at around 24 mpg in the city and 32 mpg on the highway. But, both the Camry and Accord that run on four-cylinder engines beat this hands down. The 2014 Toyota Camry offers 35 mpg on the highway and 25 mpg in the city and 2014 Accord sedan offers 36 mpg and 27 mpg, respectively.The Legacy lags not just Camry and Accord, but most of the popular midsize sedans on this parameter.
For an average buyer, fuel economy is often the most deciding factor, and this has muted Legacy's demand somewhat. It is true that sales have grown after the post-recession slump in 2009 and the growth rates have been significantly more than the industry leaders, Camry and Accord, clocked, but there is no doubt that Legacy's performance has remained sub-par.
The Legacy is of immense value because it operates in the midsize sedan market where the opportunity is 3.5 million units and the Legacy has approximately 1.35% of that. If Subaru can engineer a Legacy which overcomes its shortcoming regarding fuel efficiency, it can give its competitors a run for their money. The main difficulty in this regard is that if we leave out Porsche on account of its being a niche player, Subaru is the only company that is working with flat engines. So, it has only its own engineering efforts to fall back on, it cannot leverage any breakthroughs made by any other manufacturer.
But, this challenge is also its biggest advantage, because if it does manage to reach its goal there would be no looking back for it. And, the company might be heading that way. Recently, automotive.com has reported that Subaru has been testing its 2015 Legacy with premium competitors, the Audi allroad quattro and the Infiniti G37x. According to this source, the 2015 Legacy will be a completely new car and fuel efficiency is going to be significantly enhanced.
Now, the Legacy sedan has an extremely attractive price - according to Kelley Blue Book, the 2014 Legacy with six-speed manual transmission is available for just over $21,000 and the automatic is available for just over $22,000. Ford Fusion, the only other car to offer all wheel drive, albeit as a premium feature, comes for nothing less than $33,000.
If Subaru can maintain even a decent price differential for its 2015 model, we can have a real winner. While Toyota and Honda are likely to remain segment leaders in the foreseeable future, they are bound to feel the heat from the quirky Legacy - that in itself is no small achievement.
Subaru is harbouring dreams of making it big in the U.S. with the smallest product range. It has less than 10 vehicles with which it is aiming to fulfil its aspirations. So, it is important that each of its vehicles emerge as superstars in their own right. The Legacy sedan definitely has the potential to fit this description. If Subaru can really come out with a more fuel efficient, stylish, and relatively inexpensive model together with its standard boxer engine and all wheel drive features, we can have a car like never seen before.
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The article Subaru Is Breeding a New Winner originally appeared on Fool.com.Gaurav Basu has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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