Subaru’s Australian importer promises decisive action amid sagging sales, eroding profits

Independent vehicle distributor Inchcape says Subaru is eroding its profit margins in Australia, and it plans to shake things up.

In addition to Subaru, the UK-headquartered auto distributor also handles Chinese commercial vehicle brand Foton in Australia, though it announced in July 2026 it was dropping Peugeot and subsequently announced in October 2026 that it had mutually agreed with Deepal parent Changan to relinquish responsibility for the Chinese brand here.

The distributor is still managing both Peugeot and Deepal in the meantime, with the French brand yet to land a new distributor and the Chinese brand transitioning to a factory-backed operation.

While he didn’t provide specific profitability figures for Subaru, citing this as being commercially sensitive, Inchcape group CFO Adrian Lewis confirmed in a third-quarter earnings call that Peugeot and Deepal’s Australian distribution deals were among 15 “immaterial, dilutive” contracts globally that Inchcape announced this year it was exiting.

But it wasn’t just Peugeot and Deepal that were affecting Inchcape’s financial performance in Australia.

“Our performance has been impacted by a deterioration in the competitiveness of our key OEM partner's brand,” said Mr Lewis, referring to Subaru.

“This has exacerbated our underperformance and led to margin pressure in our Australian business.

“We are taking further decisive action to address this alongside existing restructuring activity, including a comprehensive review of product range and positioning in collaboration with our OEM partner.

“This is an important part of being a good distributor, helping our OEMs understand what it is going to take to win in a market such as Australia. While we are confident that our actions will improve our business in Australia over time, this process will take time, and we expect the current challenges in Australia to continue to impact our performance in that market.”

Inchcape is projecting a lower Group operating margin for 2026 of around 5.5 per cent, citing underperformance in Australia. It reported an adjusted operating margin of 6.2 per cent for 2025.

Mr Lewis cited the rapidly evolving new-car market here, which has seen electric vehicle (EV) penetration rise from eight per cent at the start of the year to around 24 per cent today on the back of high fuel prices.

Subaru sales from January to the end of September this year were down 29.3 per cent on the same period last year, with every existing model bar the mid-size Solterra electric SUV posting double-digit declines.

However, Subaru has also been in the midst of a significant lineup expansion, adding new EVs. Earlier this year, it also introduced a new generation of one of its best-selling models, the Outback. This followed last year’s introduction of a new Forester with a more competitive hybrid powertrain.

Members of the Inchcape executive team plan to visit Japan again this year to meet with Subaru.

“We have kicked off a very senior level-led conversation around how we set that brand up in Australia to address the market as it has shifted and set it up as a business that is acceptable to both parties,” said Mr Lewis.

“That will take time because it will undoubtedly involve deep changes to how the products are set up, how they are configured, what powertrains we bring into the market, and how we position those products.”

The UK-headquartered distributor took over distribution of Subaru in 1992, with Subaru Australia majority-owned by Inchcape albeit with Subaru Corporation holding an eight per cent share.

Mr Lewis said Inchcape is “working on a demand-led process” with Subaru to buy the right amount of stock, and acknowledged there will always be peaks and troughs in demand.

But Inchcape says Australia is no longer one of its top three markets, and no longer draws in the same revenue as before. While it says it’s still profitable, it’s gone from being an “accretive business to the group” to a “dilutive” one – ie: one that was helping to grow the business to one that is lowering Inchcape’s operating profit margin.

“Unequivocally, [Inchcape Australia’s] current position as a dilutive business to the group at scale continues to be a position we need to improve because it is not acceptable for it to continue at that level, and that's the work we are currently engaged in with our key brand partner to make sure that business gets back to something that is at least in line with the group over time,” said Mr Lewis.

He said that in the medium term the Australian market will continue to be a “very attractive” business for the company, along with Hong Kong and Singapore where new-car markets have also seen significant changes, but added: “I don’t think they’ll get back to the scale that they were several years ago, particularly when you think about the participation of Chinese brands in certain markets in those areas.”

He also said that there “is unlikely to be a sharp bounce back in the near term”.

While EV demand has risen sharply in Australia, it’s not as though Subaru Australia hasn’t introduced models locally to cater to this.

It launched the small Uncharted and large Trailseeker electric SUVs earlier this year, flanking the mid-size Solterra which received price cuts across its range in May 2026.

Small, medium and large SUVs are among the largest segments by volume in Australia.

While Inchcape cited its other brands as affecting its financial performance, Mr Lewis boasted of the success of Foton.

“Our business with Foton is doing very well, and we’re seeing demand grow, and we’re able to grow that business in a very positive way,” he said.

Foton only recorded the first deliveries of its new-generation Tunland ute late in 2025, which will make 2026 its first full year on sale.

The brand is sitting at 1165 deliveries year-to-date, above fellow newcomer JAC (629). But the Tunland’s 1085 deliveries fall short of rival utes from other Chinese brands, such as the LDV T60 (2418) and MG U9 (1237).

Deepal has gotten off to a slow start under Inchcape, and this year it has delivered just 924 vehicles to the end of September. That’s less than similarly new brands in Australia offering similar models, such as Leapmotor (1168) and surging Geely (23,632).

Inchcape distributes vehicles across more than 40 markets worldwide, and says its various contract exits – including the dropping of Deepal and Peugeot – have allowed it to free up working capital, as it no longer has obligations to purchase inventory from those companies.

The distributor has handled a number of automotive brands in Australia over the years, including Audi, Jaguar, Proton, Seat and Volkswagen. More recently, it dropped the Citroen brand in 2024.

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