Subaru is recalibrating its electrification plans as looming U.S. tariffs, projected to cost the automaker $2.5 billion this fiscal year, disrupt its financial outlook and production strategy, according to CEO Atsushi Osaki during a May 14, 2025, news conference. With global trade uncertainties and shifting U.S. regulations, the Japanese automaker is reassessing investment timelines and production priorities while maintaining its long-term commitment to electrified vehicles.

Tariffs Force Strategic Pivot

Subaru, which imports about half of its U.S.-market vehicles from Japan, faces significant financial pressure from proposed tariffs under the Trump administration.

“We are re-evaluating our plans, including the timing of investments, in light of not only today’s rapidly changing environment but also medium- to long-term external business factors surrounding our company,” Osaki said in a statement reported by Actualités automobiles.

The company withheld its full fiscal year forecast ending March 31, 2026, citing trade and regulatory unpredictability. To mitigate tariff impacts, Subaru aims to boost U.S. production at its Indiana plant, which produced 345,000 vehicles last year but could scale to 500,000, though suppliers are currently equipped for about 370,000, per Senior Managing Executive Officer Tomoaki Emori.

Electrification Plans Under Review

Subaru’s electrification roadmap, targeting fully electrified vehicles by the early 2030s, is now in flux. The company recently unveiled the 2026 Trailseeker, a battery-electric crossover, and introduced a hybrid Forester for the U.S. market. However, Osaki noted that plans for a dedicated EV plant may shift to include mixed production with gasoline or hybrid vehicles.

“We are currently making various preparations for a BEV-dedicated plant, but I feel that we may have to review what type of vehicles to produce at that plant, depending on the situation,” he said.

Proposed U.S. policy changes, including Republican efforts to eliminate EV tax credits and relax fuel economy rules, further complicate Subaru’s strategy, as Emori emphasized the challenge of balancing hybrids, plug-in hybrids, and full EVs.

Financial and Sales Challenges

Subaru’s fiscal year ending March 31, 2025, saw a 13% drop in operating profit to $2.7 billion, driven by rising U.S. incentives and a 4.1% global sales decline to 936,000 vehicles. North American deliveries fell 4.1% to 732,000, though Canada hit a record 70,000. Looking ahead, Subaru projects a further 4% sales drop to 900,000 vehicles this fiscal year, partly due to production halts at its Yajima plant in Japan, which is being retooled for next-generation EVs.

Osaki set a conservative operating profit goal of at least $667.7 million, stating, “Even if the impact of U.S. tariff policy continues throughout the fiscal year, we will implement various measures and are aiming for operating profit at the ¥100 billion level as an initial target.”

Industry and Consumer Implications

Subaru’s pivot reflects broader challenges for import-reliant automakers navigating trade barriers and regulatory shifts. Increased U.S. production could stabilize costs but requires significant supplier coordination. For EV enthusiasts, delays in Subaru’s electrification timeline may slow the rollout of new battery-electric models like the Trailseeker, though its hybrid offerings provide interim options. As Subaru balances profitability and innovation, its ability to adapt production and maintain affordability will shape its competitiveness in the evolving EV market.

Photos courtesy of Subaru