An unexpected and truly surprising piece of news hit us last week, when Fuji Heavy Industries inked a Memorandum of Understanding (MoU) with the Tan Chong Group to assemble Subaru vehicles in Malaysia. This website was also first up with the confirmed identity of the compact SUV that will kickstart CKD operations here, which is the production version of the Subaru XV concept.

The concept made its world debut in Shanghai earlier this year, and we understand that the production model will be launched in the first quarter of 2012. This means that it will be just half a year from launch when the first locally assembled XVs roll out of Tan Chong’s Segambut plant in KL.

That’s not all. The local assembly of the XV is part of FHI and Motor Image’s big plans for the region. MI doesn’t have much of a presence in Malaysia at present, but all that is set to change with 18 new outlets planned through 2013, nationwide including East Malaysia. A flagship Subaru Hub is also in the works.

It’s too good not to follow up, so we made the short hop to Singapore to dig more from Glenn Tan, Executive Director of Tan Chong International and Group Chief Executive of Motor Image, the Tan Chong arm handling Subaru in the region. Answers to your burning questions are after the jump, including the drivetrain selected for the CKD XV.

So why now, and why the XV? Wouldn’t a mass market car such as the Impreza sedan be better for business? Glenn explains that while the assembly of Subarus in the region has always been in the back of Motor Image’s mind, the timing of various factors led to this car, at this time.

The current Impreza sedan sold in Singapore is in its last legs. It’s due to be replaced by the next gen car and Motor Image is selling whatever they have left. If you remember the Exiga, that MPV has been discontinued by FHI.

Glenn says that while the sedan has long been the big player in the market, they noticed that the current trend sees SUVs picking up, and it’s being spearheaded by crossover types such as the Hyundai Tucson and Honda CR-V, as opposed to what he describes as “traditional” SUVs like the Subaru Forester. Their market research backed up this observation.

He also noted that Subaru isn’t traditionally strong in sedans, but has a knack of making good wagons and crossovers (think Legacy wagon, Outback, old Forester). Moreover, there’s less competition in the segment the XV will play in. A raised Impreza with macho bodywork and the brand’s trademark Symmetrical AWD, “the XV comes very naturally for Subaru”.

It’s hard to argue with this, since the C-segment sedan is packed with Japanese stalwarts (Civic, Corolla, Sylphy) and impressive Korean offerings (upcoming Elantra, Forte). Shorn off weapons like the WRX badge and turbos, the drab Impreza sedan will find it very hard out there. Remember that outside of Singapore and Malaysia, ASEAN is Toyota territory.

Another timing factor concerns resources. The Japanese earthquake and tsunami tragedy earlier this year left Motor Image with no fresh models and stocks to sell in Singapore, a situation compounded by the sky high COE prices that is affecting all mass market brands – can you believe that BMW is the top selling marque in SG, and that Porsche is in the top ten?

This “dry period” gave MI the chance to rearrange its resources and redeploy manpower to focus on the region, a plan that’s been brewing for eight years, according to Glenn. “If there wasn’t a slowdown, we’d be really taxed now,” he admitted, sharing that they had trouble recruiting in Malaysia as “people think Subaru is a small company”. We all laughed, before the straight talking boss added: “Please write that!”

On why they chose Segambut and not Serendah, Glenn explains that the Segambut plant, which has been in operations since 1976, “may not be state of the art, but good to start off things and great for small volumes”.

He also pointed out that although it’s older, the Segambut plant is flexible and has a history of assembling Subarus and other non-Nissan cars such as for Renault (Kangoo). Besides that, Serendah, which churns out the Nissan Grand Livina, Sylphy and Teana models, is at full capacity.

Moving ahead, Glenn says that it’s still very early days, but should the business of assembling Subarus grow, Tan Chong owns additional land adjacent to the current Serendah plant as well as the former AMI plant in Shah Alam, and these could be possible future locations. “Segambut can be a Subaru plant as well, who knows?” he shrugged.

I asked if FHI is satisfied with Segambut, and what, if any, upgrades are needed for for this job. Glenn said that FHI is confident of the quality of Tan Chong’s products, and they will, in any case, “make sure the Tan Chong name is not tarnished”, so quality is a priority. There are some new equipment and processes that will be introduced, but fundamentally the whole line is acceptable, which is a reason why they can be so quick off the mark (just about half a year after Q1 2012 world debut).

When asked about plans for more CKD models, Glenn said that the next logical model will be the Forester, but that’s not on their minds for now. “One model is just the start, but we want to do it right, and not bite more than we can chew,” he said.

The planned 5,000 units will be divided for sale equally between Malaysia, Thailand and Indonesia. Glenn says that the reason Singapore isn’t in the plan is because while Indonesia and Thailand have strong acceptance of ASEAN made cars, the sentiment isn’t as strong in Singapore. However, Motor Image will bring in some Malaysian assembled XVs to test the market.

To sell the cars, they need the network, and Motor Image is embarking on a big expansion plan in Malaysia with 18 outlets planned through 2013. This means that by 2014, Malaysia will have 20 Subaru outlets if all goes to plan. Is that overly ambitious since they’re almost like starting from scratch?

“We have aggressive plans, and we’re confident we can do it, because we have the experience in expanding the network in China and Taiwan. We have the backend system and the know how,” Glenn replied, adding that this was gained from “trial and lesson” which he views as “expensive school fees”. It’s paying off though, from a few hundred units, MI is aiming to sell 2,000 Subarus in Taiwan this year, for instance.

I had a chance to check out Motor Image’s S$25 million Subaru Hub in Toa Payoh, Singapore, and came away impressed at the size and scope of operations. The modern six-level building houses a showroom, service centre, delivery and preparation area, few levels of workshops, dyno room, motorsports workshop and a rooftop mini “off road” test area built to demo Subaru’s AWD system. It’s also home to the company’s Downtown car rental services.

And instead of a traditional brochure rack, showrooms visitors can search for info, view videos and see the entire range via touch screen consoles. The comfortable waiting area’s TV shows the current status of a vehicle sent for service.

The building is also home to a Subaru training centre, one of three worldwide. Technicians must pass yearly tests to have a “license to practice”. The orderliness and cleanliness of the workshop and repair areas were exemplary, much like the country it operates in. View the gallery at the end of the story.

The good news is that Malaysia will be getting a Subaru hub of its own. The Petaling Jaya site where the current Malaysian HQ sits on (along the Federal Highway) will be cleared to make way. Glenn says that this flagship centre is currently in the design stage, and will be completed by Q4 next year, perhaps in time for the XV launch.

He adds that it will, like the Toa Payoh hub, have six levels, but without the roof top “jungle”. No worries, we have plenty of natural ones!

As for the car itself, Glenn revealed that the XV will come with a 2.0-litre engine paired to a CVT gearbox. This 2.0L boxer unit is not the current one servicing the Impreza and Legacy sold in Singapore, but from a new engine family with Dual Active Valve Control System (DAVCS). Not sure if our version will stick with the previously announced 148 hp/197 Nm figures though.

The choice of CVT is expected. Instead of upgrading from four-speed automatics to torque converter autos with more ratios, Subaru has decided on the CVT route for non performance models, starting with the current gen Legacy 2.0 that was launched by MI in 2009. Subaru has a new Lineartronic CVT that’s lighter, quieter and more compact, and that unit should be the one used for the XV.

It’s not a Subaru if it doesn’t have AWD, and the CKD XV will count all paw traction as one of its main selling points.

Glenn refuses to give an estimated price, only saying that the XV will be “price competitive with other C-segment SUVs”. The final price will of course be determined by the localisation factor as well as Japanese yen movement. As for equipment levels, forget fancy stuff such as panoramic glass roofs – Subaru will be focusing on “drivability and AWD” as USPs.

Pre-launch of the XV will happen before an October 2012 debut, but in the meantime, the Malaysian market can expect a few new models from Motor Image such as the Outback and Impreza STI A-Line, which is an automatic variant of the hot hatch. It’s exciting times for the Subaru brand in the region – watch this space for updates!

Subaru Hub – Toa Payoh, Singapore
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