TOKYO, May 22 (Reuters) - Japan's Subaru Co says it is unlikely to increase R&D spending from record levels planned this year, acknowledging that smaller carmakers cannot compete with the budgets and workforces of bigger rivals in developing new technologies.
Global automakers are having to spend more on R&D as they compete fiercely within their industry and with technology companies to come up with self-driving cars, affordable electric vehicles and car-sharing services.
Subaru, the smallest of Japan's major automakers, has earmarked 134 billion yen ($1.2 billion) for R&D in the year to March 2018 to develop electric cars and enhance its suite of automated driving functions. This is up 17 percent from last year and represents 3.9 percent of its projected annual revenue.
Subaru's spend is much less than the 1.05 trillion yen planned by Japan's biggest carmaker Toyota Motor Corp, although the ratio to revenue is roughly the same. Toyota's global sales dwarf Subaru's by roughly 10 times.
CEO Yasuyuki Yoshinaga said Subaru's R&D ratio was "unlikely" to creep up to a ratio of 4 percent, which is the average among Japanese automakers and lower than around 5 percent at U.S. automakers.
"Our R&D division has been increasing headcount, but even at these levels it's likely we won't use up the entire allocation in-house," he told Reuters in an interview.
"We're a small automaker ... we can't do everything."
Yoshinaga said smaller automakers had to focus on specific technologies to remain competitive with larger rivals, which had the budgets to invest in more areas.
Subaru is concentrating on further developing its Eyesight driving functions to enable automatic highway driving by around 2020, although it has no plans to build a driverless car.
While it will also start developing an all-battery electric car this year, it will use technology developed by Toyota in a plug-in hybrid model planned for release in 2018. Subaru has no plans to develop car-sharing vehicles.
Subaru sells around 60 percent of its global production in the United States. It has said it would adjust production at its recently expanded plant in Indiana if its sales are affected by an overall slowdown in the U.S. auto industry.
A slide in U.S. vehicle sales in the last two months solidifies the industry's view that a three-year boom in sales has run its course after peaking last year. So far, Subaru's sales have bucked that trend, boosted by sales of the recent launch of its latest Impreza sedan and hatchback models. ($1 = 111.5400 yen) (Reporting by Naomi Tajitsu; Editing by Susan Fenton)