Subaru is the latest brand to announce that it will reduce its investment in electric vehicles (EV) and instead focus on expanding its hybrid development, citing falling demand for electric vehicles.
On a recent earnings conference call, as reported by Atsushi Osaki, president of financial institution Nikkei Asia, said his company would reconsider The 1.5 trillion yen (~14.86 billion Australian dollars) It had committed to investing in future electrification – even though it had already made investments 300 billion yen (~2.98 billion Australian dollars).
“With the increasing demand for hybrid vehicles and the re-evaluation of internal combustion engines, it is appropriate to postpone the timing of investing in full-scale mass production of electric vehicles,” Osaki-san said.
Subaru’s investment had enabled plans to offer eight electric vehicles worldwide by 2028. The original plan to offer four Toyota-based electric vehicles by the end of 2026 will continue to be implemented, but the launch of future models – including those to be developed by Subaru itself – will likely be postponed.
Importantly, Osaki-san outlined that the original invested amount would not be reduced but would be redistributed as a growth investment. Exact details of this reassignment have yet to be announced.
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In addition to declining demand for electric vehicles, Subaru has also been forced to change course due to changes in government incentives, particularly in the United States, where the company generates more than 70 percent of its global sales.
On September 30, 2025, the Trump administration ended incentives of up to $7,500 for the purchase of electric vehicles, a move that has also affected the plans of other Japanese manufacturers.
Toyota, for example, announced in early November that it would postpone plans to build an electric vehicle factory in Japan’s Fukuoka Prefecture in 2028 Nikkei Asia.
This was the second time construction of the plant was postponed, as a claimed decline in demand for electric vehicles forced Toyota to postpone construction in March this year. Nissan also abandoned plans for an electric vehicle battery factory in Fukuoka in May due to profitability concerns and financial difficulties.
At Subaru, the above-mentioned shifts in demand for electric vehicles led to the announcement that it would equip one of its largest Japanese plants to produce gasoline, hybrid and electric vehicles on the same production line in order to be able to respond flexibly to market demand.
“We will expand our product range to meet different needs,” Osaki-san said, noting that new future models will offer hybrid or internal combustion engines rather than being pure electric vehicles.
Subaru has previously stated its commitment to internal combustion engines for as long as possible. It is part of a three-way agreement with Toyota and Mazda to advance the development of lower-emission engines based on hybridization and the use of synthetic fuels, and recent concepts such as the Performance-B STI suggest demand for internal combustion engines.
Additionally, Subaru’s latest hybrid models utilize Toyota technology. The new Forester Hybrid uses this technology to improve the capability and performance of the electric portion of its powertrain, while a similar setup has also been fitted to the updated Crosstrek Hybrid overseas.
The previous generation of Subaru’s mild-hybrid-like technology is still available in Japan in the Impreza station wagon and Rex light SUV. As for electric vehicles, Subaru’s only current model is the Solterra, but by the end of 2026 it will be joined by the Trailseeker, the Uncharted and another as-yet-unknown model shared with Toyota.
Subaru is just one of many brands that have scaled back their electric vehicle ambitions, even though the company has been relatively slow to move to electric.
Earlier this year, Japanese manufacturer Honda cut its electric vehicle development budget by 30 percent, while Volkswagen briefly paused electric vehicle production to offset slower-than-expected sales growth.
The trend has also continued towards the upper end of the market. Porsche has has revised its electric vehicle plans to include more combustion models, and Volvo has abandoned its plan to be all-electric by 2030, as has rival brand Genesis.
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