Company history

Subaru began not as a carmaker but as one of Japan’s largest aircraft companies. In May 1917 Nakajima Chikuhei, a retired naval reserve lieutenant, set up a private aircraft research lab in Ota, Gunma, on the conviction that the defence of a poor nation should be built around aircraft, and that catching up with the world meant first raising a private aircraft industry. Reorganized as Nakajima Aircraft in 1931, it designed and mass-produced engines and airframes for front-line types — the Army’s Type 97 fighter, the Navy’s Zero. At its 1941–45 peak it held about 28% of the nation’s airframe output and 31% of its engines, splitting the industry with Mitsubishi.

Defeat in August 1945 undid all of it. Under a GHQ order Nakajima was reorganized into Fuji Sangyo and barred outright from making aircraft; the 1950 corporate-reconstruction law then broke Fuji Sangyo into twelve companies, and the country’s largest aircraft maker ceased to exist as a single organization. Five of the twelve reunited in July 1953 to form Fuji Heavy Industries, absorbing one another fully by 1955. The irony that would define Subaru’s identity is here: the occupation policy that stripped the engineers of aircraft is exactly what pushed them into cars.

In May 1958 Fuji Heavy launched the Subaru 360 minicar. Led by the former aircraft designer Momose Shinroku, it married a monocoque body to a rear-engine layout — advanced for its day — and answered a rising national cry for a cheap “people’s car” at a time when the trade press mocked existing sedans as “antiques.” Nicknamed the ladybug, it stayed in production for more than a decade. The plant that mass-produced it was the old Nakajima works at Ota, seized after the war as a US military camp and bought back in 1960 — the aircraft-era production base reused directly for Subaru.

The technical signature that still defines the company was set in these years. The first Subaru 1000 (1966) combined a horizontally-opposed engine with front-wheel drive; the first Leone (1972) put four-wheel drive into a mass-market passenger car ahead of the rest of the world. Boxer engines plus all-wheel drive became the package no rival offered — the distinctive mechanism Subaru would compete on instead of volume. In 1987, crossing keiretsu lines, Fuji Heavy joined Isuzu to build Subaru of Indiana Automotive (running from 1989), planting a factory in North America; the Legacy arrived the same year.

A maturing home market and fierce North American competition tipped Fuji Heavy into one of its largest operating losses since the war in the year ended March 1993. With its main bank (the Industrial Bank of Japan) and its top shareholder (Nissan) both pressing, Nissan dispatched vice-president Kawai Isamu as president in 1996. A production man, Kawai rebuilt from the shop-floor numbers — inventory, quality, cost — and refused to chase scale, refocusing the company on where its strengths lay, a line that would carry into the later North American SUV business. But the one-man turnaround cast a shadow: a 1997 defect cover-up that 日経ビジネス called “a culture that couldn’t speak up under reconstruction-first,” and Kawai’s arrest, by then chairman, in 1998.

Then came an unusual carousel of owners. In October 1999 Nissan, just after tying up with Renault, sold its Fuji Heavy stake, and General Motors took 20%; but GM’s own North American troubles stalled the collaboration, and in October 2005 it sold the entire holding — a tie-up dissolved in six years. In parallel Toyota bought 8.7%, lifting it to 16.5% by 2008 to become the effective top shareholder. Nissan, then GM, then Toyota in the span of twelve years: a capital history with few parallels in the Japanese auto industry. Ironically, the churn proved Subaru’s independence — through every owner, the boxer-and-AWD package stayed an asset no one could move.

On the Toyota footing, Fuji Heavy concentrated on North America and its taste for SUVs — Forester, Outback, Legacy, Impreza. In 2014 it brought out the second generation of EyeSight, a stereo-camera driver-assist system whose automatic braking was early by world standards; the slogan “the car that doesn’t crash” built a distinctive brand around safety and a loyal middle-income following. Through the mid-2010s the strategy paid off: operating profit ran above $2.7B (¥300bn) in each year from the year ended March 2015 through March 2018, while dependence on the North American market climbed past 70%.

In April 2017 the company dropped the postwar name and became SUBARU, unifying the corporate identity with its car brand sixty-four years after Fuji Heavy’s founding; aerospace survives as a single division but only a single-digit share of sales. Dips from COVID and the chip shortage (2019–2021) gave way to recovery as the new Crosstrek and Forester restored the “Subaru business model” of low inventory, low incentives and high residual values — operating profit climbed back to $1.9B (¥268bn) in the year ended March 2023.

The next decade is being built on Toyota’s resources. Subaru is pouring cash into producing battery EVs in-house with Toyota — moving its Gunma plants from mixed lines to dedicated ones and targeting 200,000 units of BEV capacity by 2026 and 400,000 by 2030, with cells from Panasonic Energy, following the Solterra it launched in 2022. The company that held its independence on the boxer engine now leans on its largest shareholder for the powertrain it does not own.