November 16, 2015 / 5:03 PM / 2 years ago

Subaru may lower China sales target, hopes to dodge price war

TOKYO, Nov 17 (Reuters) - Japanese Subaru vehicle maker Fuji Heavy Industries said it may cut its mid-term sales goals for China, seeking to avoid the worst of cut-throat competition as an economic slowdown hits the world's largest auto market.

Last year Fuji Heavy set a target of selling 120,000 cars annually in China by 2020. But it is set to sell only 46,500 in the year through March, a 13.5 percent decline from last year.

"In the mid-term China is a very important market for us, but in the near term we're not interested in the selling frenzy that's happening there at the moment," Fuji Heavy CEO Yasuyuki Yoshinaga told Reuters in an interview.

"We'll focus on sales in China when things calm down."

China, where Fuji Heavy currently has no local production facilities, accounts for just 5 percent of its global sales. The automaker is now focused on making sure it can keep up with strong U.S. demand for its Subaru Outback and Forester SUV models, which are popular among younger drivers.

The United States accounts for 61 percent of the automaker's global sales. The company aims to boost U.S. sales 9.5 percent in the year ending in March to log a fourth straight year of record vehicle sales globally.

To meet U.S. demand, the company has sped up plans to nearly double production at its plant in Indiana next year, alleviating some of the pressure on its production lines at home.

In July, Reuters reported Fuji Heavy was employing asylum seekers and other cheap foreign labourers in Japan to keep up with demand.

Yoshinaga said Subaru had since surveyed its suppliers in Japan to ensure working conditions at their factories met the company's social responsibility guidelines.

He said it was not in the firm's interest to "be associated with shady practices", while adding that there was little it could do to monitor supplier practices.

"Changing suppliers isn't easy, as some of them are producing very specialised parts for us," he said. "The best we can do is to make sure they are complying with our standards, and that workers speak up if something untoward is happening." (Reporting by Naomi Tajitsu; Additional reporting by Maki Shiraki; Editing by Edwina Gibbs)

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