Subaru Says A Hamburger Franchise Will Keep It From Building New EVs In The U.S.

Will Subaru ever build a new all-electric all-wheel-drive model like the Solterra in the U.S.? The Japanese automaker says soaring U.S. labor costs will keep them from investing in a new all-electric vehicle plant in the U.S. It's because they are now competing against a McDonald's hamburger franchise on wages outside its assembly plant in Lafayette, Indiana.

Automotive News (by subscription) gets the information directly from Subaru Corporation CEO Tomomi Nakamura, who spoke at Subaru's quarterly earnings announcement this week.

Nakamura says soaring American labor costs are one reason his company is not considering any new investments to build electric vehicles in the U.S. anytime soon. Subaru produces the 2023 Outback, Ascent, Impreza, and Legacy at Subaru of Indiana Automotive in Lafayette.

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

The new 2023 Subaru Solterra EV is manufactured on a shared production line at Toyota's Motomachi plant near its headquarters. But Subaru has plans to build more electric vehicles but not in partnership with Toyota.

Subaru announced earlier this year they will begin making electric vehicles in mixed production with internal combustion vehicles at its Yajima plant in Japan by 2025. Subaru will start offering hybridized powertrains sourced from Toyota by 2025 and will build battery-electric cars itself in a new factory in Japan in the latter half of the decade.

In 2027, Subaru will build a dedicated EV factory on the site of its Oizumi plant in Japan and produce its own all-electric and hybrid vehicles. But it will rely on its current lineup of Forester, Outback, Crosstrek, Ascent, and other combustion-powered models and the Solterra until then.

Nakamura said Subaru would stick with its plans to assemble new electric vehicles at its new dedicated plant in Japan and not build a new electric model in Indiana.

At the earnings briefing, Nakamura said Subaru is studying how it can qualify for EV tax credits in the U.S. But he noted Subaru could only consider building an EV plant in Indiana if wages come down.

"It is tough for us to respond now. There are several requirements," Nakamura said of the Inflation Reduction Act (IRA), which passed in August. "We find it difficult to figure out how the IRA will help us bring benefits to our customers."

The recently-passed IRA act requires new electric vehicles and their battery packs to be made in North America to qualify.

Subaru will bring new electric all-wheel-drive vehicles to its U.S. customers in the last half of this decade, but because they compete against McDonald's for wages, they will be made in Japan and not at its U.S. plant in Lafayette, Indiana.

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Denis Flierl has invested over 30 years in the automotive industry in a consulting role working with every major car brand. He is an accredited member of the Rocky Mountain Automotive Press. Check out Subaru Report, where he covers all of the Japanese automaker's models. More stories can be found on the Torque News Subaru page. Follow Denis on Facebook, Twitter, and Instagram.

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