Subaru says US$25/hour McDonalds wage inflation stops it from manufacturing electric cars in the US

Subaru had an interesting take on bringing its EV manufacturing to US soil in order to comply with the newly minted made-in-America subsidy requirement for electric vehicles that Congress passed together with the aptly named Inflation Reduction Act not long ago.

That same inflation, Subaru argues, has made it pause before splurging on an EV factory expansion in the US, as it brought with it rampant wage growth, too. While nominal wages in the US are stagnant, i.e. barely keeping pace with the general level of the Consumer Price Index, last year the US indeed clocked the biggest year-on-year pay increase on record and salaries as well as hourly wages have been growing ever since.

As per Subaru's CEO Tomomi Nakamura comments when asked about the company's plans to produce electric vehicles in the US:

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. 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.

Despite that Subaru netted twice the Q3 profit year-on-year - about US$350 million - it will still hit a pause on further manufacturing investments in America due to the rising labor costs which would make an EV assembled in Indiana, for instance, prohibitively expensive.

At the moment, Subaru won't lose much in terms of government subsidies by not producing electric cars in the US, as it only has one EV on the market here - the Solterra SUV - which is on top of that a rebadged Toyota bZ4X with some known and loved Subaru AWD and design accoutrements.

Earlier this year, Elon Musk said he is not worried about Tesla's competition, as newcomers to the field like Rivian or Lucid can't replicate Tesla's cost structure with ease and may be heading for bankruptcy if they don't keep expenses in check. Subaru seems wise enough to have realized that and may pass on the US$7,500 new EV subsidy for now if that also means having US-sized production costs, at least until it figures out the best way to transition to the electric car era in the least painful manner.

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