For many the appeal of Subaru has been its niche status and AWD image but with its latest project – a jointly developed RWD sports car with Toyota – the carmaker is now faced with losing part of that appeal. The new joint-venture, which was announced earlier this month, will see Subaru and Toyota sell rebadged versions of a jointly developed sports car with Subaru responsible for the engineering work and Toyota the styling.

Careful marketing will be the key to success when the car debuts in late 2011, explained Fuji Heavy Industries (Subaru’s parent) chief Mat Nagato during a recent interview with Automotive News. "A potential question could be cannibalization," Nagato said. " We may lose our longstanding territory, or we may lose the great niche brand image. The potential risk is there. We have to be very smart on marketing strategy."

Subaru sells just 7% of Toyota’s total volume and management is wary of the competition it will face from Toyota once both cars are on the market. Nagato said it is unlikely the companies will divide global markets into Subaru-only and Toyota-only domains, so going head-to-head with industry giant will be an uphill battle all the way. Subaru has one advantage in that the new car will be powered by one if its trademark boxer engines.

Engineers are in the early stages of planning the new sports car with the only details confirmed so far is that it will use a front-mounted Subaru boxer engine and a RWD layout. Volume, pricing, design and engine size are still being decided, Nagato revealed.