“We only make a million cars. I have absolutely no intention to make that two million,” said Subaru Chief Executive Yasuyuki Yoshinaga in an interview Friday.
Mr. Yoshinaga discussed strategy for this year, in which plateauing demand in the core U.S. market is expected to weigh on growth.
Prevailing wisdom in the business holds that survival depends on getting as large as possible. That is supposed to drive down costs and bring the scale needed to fund research into technology such as self-driving and electric cars.
Carlos Ghosn greeted the addition of Mitsubishi Motors Corp. to his Renault-Nissan Alliance by pointing to the alliance’s annual volume of nearly 10 million vehicles, putting it in the top class globally. Sergio Marchionne, the head of Fiat Chrysler Automobiles NV ,has argued for mergers that would create a company that could sell 15 million vehicles a year.
“To me, that’s like suicide,” said Mr. Yoshinaga.
His strategy relies on a loose alliance with giant Toyota Motor Corp. , which owns nearly 17% of Subaru and is working on the next-generation technologies that a smaller company like Subaru is unlikely to invent on its own.
“That’s why we value our partnership with Toyota—so we can survive,” Mr. Yoshinaga said.
Boosting volume forces companies to tackle low-profit markets such as compact cars in India, said Mr. Yoshinaga. Even General Motors Co. has found it difficult to maintain scale by entering so many divergent markets: It said this month it would stop selling cars in India and plans to sell its unprofitable Opel AG unit in Europe to Peugeot .
Toyota is spending more than ¥1 trillion ($9 billion) a year for research and development. It wants to fend off threats from Silicon Valley upstarts such as Google parent Alphabet Inc.’s Waymo and Tesla Inc.
Subaru isn’t even bothering to build a self-driving car, Mr. Yoshinaga said. The company is betting that enough people will always want to drive their own car.
“We can’t afford huge R&D expenses,” Mr. Yoshinaga said. Subaru plans to spend about $1.2 billion on research and development this year.
The U.S. market, which accounts for 60% of Subaru’s sales volume, is facing oversupply and rising inventories.
‘To put it in extreme terms, so long as one person in 100 takes a liking to this kind of car, we can survive.’
—Subaru Chief Executive Yasuyuki Yoshinaga
For the year ending March 2018, Toyota is predicting a second year of declining profit and a decline in operating margin to 6% from 7%. Subaru expects its net income and its enviable (for the car industry) 12% operating margin to stay essentially flat, a relative victory.
It is banking on Americans devoted to the company’s stable of safe, reliable crossover SUVs, a category the company helped pioneer. Subaru dealers have long complained they don’t have enough cars to meet demand.
Recently, inventories and incentives have crept up even at Subaru, but Mr. Yoshinaga believes the car maker can enjoy its relatively privileged position while the giants battle more severe inventory problems.
About 95 million vehicles will be sold globally this year. “To put it in extreme terms, so long as one person in 100 takes a liking to this kind of car, we can survive,” Mr. Yoshinaga said.
Chief Executive Yasuyuki Yoshinaga says the Japanese auto maker is taking a different road in a bid to survive...