Subaru Can’t Afford to Make EVs in US, Citing Fast Food Wages

If you’re planning to sell electric vehicles in North America, chances are you’re trying to work out how to build EVs here, too. The Inflation Reduction Act has made it a worthwhile investment for automakers. Not Subaru, though — Subaru remains unconvinced, for the moment.

We know this from comments made by CEO Tomomi Nakamura during the company’s latest quarterly earnings report, which occurred on Wednesday. During the call, Nakamura lamented the surging inflation that’s pushing wages upwards in parts of the country, which have apparently made running a second U.S plant financially infeasible. Subaru already operates one such facility in Lafayette, Indiana, where the Impreza, Legacy, Outback and Ascent are made.

However, things took an odd turn when Nakamura compared the wages his company pays hourly plant workers with those of another local Indiana business. Courtesy of Automotive News:

“In Indiana, part-time workers at McDonald’s earn $20 to $25 per hour, which is in competition with what temporary workers make at our plant,” Nakamura said. “If we were to build a new plant, it would be very difficult to hire new people for that. Labor costs are rising now. It is quite challenging for us to secure workers for our Indiana plant, including those of suppliers.”

I have never conducted business in the Hoosier state, so it’s quite possible Nakamura knows something I don’t. But when I read the quote above, the $20-to-$25 estimate struck me as a tad high. There are five McDonald’s franchises in the Lafayette area, as far as I could tell via Google Maps. At the time of writing, the restaurant chain’s job site lists a range of staff and managerial positions open between them. The ones that do mention hourly rates all list between $12- and $15-per-hour, “plus cash incentives.” Meanwhile, Subaru’s plant around the corner appears to be paying $17-per-hour at the entry-level end for a “Laborer,” about $19 for a “Production Associate,” and the rates go up from there.

In other words, it doesn’t seem like the Golden Arches are poaching a great many would-be Ascent assembly line workers. But even if they were, there are plenty of reasons for Subaru to pay people a livable wage to build EVs in the U.S. Of course, there are the boring reasons nobody likes to talk about, but it’s also just a prudent business move for Subaru.

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Sure, the company can count on its classic conservatism to get it through the next few years. It’s worked wonders thus far. By March — the end of its current financial year — the brand estimates its operating profit will cross $2 billion. In its second quarter alone, Subaru sold three percent more cars in the U.S. than over the same period in 2021. It was the only region outside Japan where sales volume increased.

That’s not going to last forever, though. Electrified models will consume ever-larger slices of the pie as the decade marches on. In the long run, certain cities and states will phase out internal-combustion car sales. Subaru expects to have a plant in Japan churning out electric cars by 2027, so it can obviously see the writing on the wall.

Lest Subaru fall behind and have to offer EVs without the discounts many of its competitors will enjoy, it might want to psych itself into investing on this side of the Pacific too, before it’s too late. Even Toyota and Honda, criticized for being laggards in their own right, have seemingly come to understand as much. If that means outspending the McDonald’s on the other side of Route 52, so be it.