The Japanese automotive landscape continues to throw up surprises, and Subaru is no exception. After reporting its second-quarter financial results, the company announced a radical change of course that sheds light on the hesitant adoption of all-electric vehicles (EVs) in some key markets. Of the originally planned 1.5 trillion yen (approximately $9.7 billion) investment in electrification, a significant portion will be redirected back to developing new hybrid models and, mind you, traditional internal combustion engines (ICEs).
Subaru President Atsushi Osaka shed light on this strategic rethink. He explained that the growing demand for hybrids, combined with the need to reassess the potential of internal combustion engines, makes it wise to postpone large-scale spending on pure EVs. According to him, market reality shows that customers are still wary of fully electric cars. In contrast, hybrid systems offer the much-desired flexibility and peace of mind in everyday use, which generates a continuous growth in demand.
To date, Subaru has already invested about 300 billion yen in electric mobility. The fate of the remaining 1.2 trillion yen is currently being reviewed. Part of these funds will be used not only to "refresh" the hybrid and internal combustion engine lineup, but also to create entirely new types of vehicles that management believes will better respond to the pulse of consumer expectations. It’s a pragmatic move aimed at stabilizing revenue in a dynamic but not yet fully mature EV environment.
It’s important to emphasize that this adjustment does not represent a complete abandonment of the electric era. Subaru confirmed that plans to launch four electric SUVs developed in close collaboration with Toyota remain in place.
Production of these joint models is scheduled for late 2026. The company is therefore simply opting for a more moderate pace of electrification, seeking to avoid financial pitfalls on the path to zero emissions. This approach is already bearing fruit in the domestic market, where the updated Forester – combining Subaru’s boxer engine with Toyota’s hybrid technology – has enjoyed considerable success.
The new course also has a strong financial rationale. The report reveals that the company suffered a significant loss of 154.4 billion yen caused by new import tariffs in the United States. In response, Subaru announced that it would cut costs by 200 billion yen by 2030. The move is vital to stabilizing its investment balance and minimizing risks. Subaru joins compatriots Toyota and Honda, which are also postponing some of their most ambitious EV projects, reflecting a general cautiousness among Japanese automakers.
Despite the market caution in Japan, global trends are showing the opposite dynamic. Analysts suggest that global EV sales continue to grow, with October 2025 seeing an 8% increase year-on-year. However, analysts warn that as Japanese brands delay their investments, they risk falling behind aggressive competitors from Europe and especially China. The move may be a short-term response to financial pressures, but in the long term it could weaken the Japanese auto industry’s position in the global EV race.