Subaru can’t afford to build EVs in North America because McDonald’s pays too well

If you’re thinking of selling EVs in North America, chances are you’re also trying to find a way to build EVs here. The Inflation Reduction Act has made it a profitable investment for automakers. Not Subaruthough – Subaru remains skeptical, for now.

We know this from CEO Tomomi Nakamura’s comments during the company’s latest quarterly earnings report, which took place on Wednesday. During the call, Nakamura lamented soaring inflation that is pushing wages up in some parts of the country, which apparently made it financially impossible to operate a second plant in the United States. Subaru already operates one such facility in Lafayette, Indiana, where the Impreza, Legacy, Countryside and Ascent are made.

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

“In Indiana, part-time workers at McDonald’s earn between $20 and $25 an hour, which competes with what temporary workers earn at our plant,” Nakamura said. “If we were to build a new factory, it would be very difficult to hire new people for it. Labor costs are increasing now. It is quite difficult for us to find workers for our Indiana plant, including those from suppliers.

I’ve never done business in Hoosier State, so it’s entirely possible that Nakamura knows something that I don’t. But when I read the quote above, the $20-$25 estimate struck me as a a little high. There are five McDonald’s franchises in the Lafayette area as far as I know through Google Maps. At the time of writing, the restaurant chain construction site lists a range of open staff and management positions between them. Those who mention hourly rates all list between $12 and $15 per hour, “plus cash incentives”. Meanwhile, The Subaru factory around the corner seems to pay $17 an hour at the entry level for a “worker”, about $19 for a “production associate”, and rates go up from there.

In other words, it doesn’t look like the Golden Arches are poaching a lot of potential assembly line workers from Ascent. But even if they were, Subaru has plenty of reasons to pay people a living wage to build electric vehicles in the United States. Of course there are the boring reasons no one likes to talk aboutbut it’s also a prudent business decision for Subaru.

Of course, the company can count on its classic conservatism to get through the next few years. It has done wonders so far. In March — the end of its current fiscal year — the brand estimates its operating profit will exceed $2 billion. In its second quarter alone, Subaru sold 3% more cars in the United States than in the same period in 2021. It was the only region outside of Japan where sales volume increased.

It won’t last forever, however. Electrified models will eat bigger and bigger slices of the pie as the decade progresses. In the long term, some cities and states will phase out sales of internal combustion cars. Subaru expects to have a factory in Japan producing electric cars by 2027so he 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 invest on this side of the Pacific too, before it’s too late. Same Toyota and Honda, criticized for being laggards in their own right, have apparently come to understand this. If that means spending more than the McDonald’s across Highway 52, so be it.