Car buyers are no longer contending with the chip shortages that led to a scarcity of new cars during the pandemic and sent used-car prices soaring, but anyone looking to purchase a car these days is still in for a bumpy ride.
Nearly 13,000 U.S. auto workers went on strike early Friday after the Big Three domestic carmakers — Ford Motor Co.
General Motors Co.
and Stellantis N.V.
the maker of brands such Chrysler, Dodge, Jeep and Ram Trucks — and the United Auto Workers failed to reach an agreement before their national contract expired just before midnight on Thursday.
“This is our generation’s defining moment,” UAW president Shawn Fain said.
“‘This is our generation’s defining moment.’”
Prices of new and used cars could eventually creep higher, experts say, and the wait for certain new cars could get longer.
Car dealers reported a 0.4% increase in sales from July to August and a 4% annual increase in August, according to retail-sales data released Thursday. Overall, retail sales rose 0.6% in August from July, topping expectations of a 0.1% increase.
Electric-car maker Tesla
which has a nonunionized workforce, could see an opening for more market clout in the long run, experts add.
The last UAW strike, in 2019, lasted 40 days.
Even with pandemic supply-chain snags in the rearview mirror, this is still a tough time for car buyers. Inflation has gnawed at consumers’ budgets and rising interest rates have made car loans more expensive. The cost of cars is still high, and bargains are hard to find.
Americans paid an average of $48,334 for a new car in July, down 0.7% from the previous month, according to Kelley Blue Book. That’s essentially flat year over year — but consumers whose wages may not be keeping up with inflation and whose savings are dwindling could balk at taking on more debt.
Could new-car prices increase?
If the strike runs until the end of the month, average prices could increase by around 2% on new vehicles across the board, said Tyson Jominy, vice president of data and analytics at J.D. Power.
There is a “real risk” that prices could climb if fewer cars are available for sale, Jominy said. But there are more cars on dealer lots today than there were a year ago.
It’s been nearly two and a half years since the car industry had as many unsold cars as it does now, according to Cox Automotive. The 2 million unsold cars in inventory in September represents a 68% increase over the same point last year, Michelle Krebs, an executive analyst at Cox Automotive, wrote in a blog post.
If no new cars became available for sale, dealers would have inventory to cover an average of 58 days of sales at the current pace, Krebs said. A 60-day supply is the historical amount, she wrote, and most of the Big Three brands have days of supply above the 58-day average.
What about Tesla?
Most people shopping for domestic cars — with the exception of those considering a Ford Mustang Mach–E — might not opt to pay for a Tesla instead, said Jessica Caldwell, head of insights at Edmunds, a site that helps consumers research and shop for cars.
The price of a new Tesla Model 3 is $40,240 before a federal EV tax credit and excluding taxes and fees. The Mach-E has a suggested retail price of $42,995.
For that reason, Erik Gordon, a professor of business at the University of Michigan, isn’t expecting any immediate post-strike jump in Tesla sales.
“The long-term benefit is that there is nothing a company likes to see more than its competitors’ costs go up,” said Gordon, who teaches strategy and entrepreneurship and has watched Tesla CEO Elon Musk’s business moves for years. That includes recent price cuts for various Tesla models.
“Tesla doesn’t face the difficult job of transitioning from internal-combustion engines to electric vehicles. The Big Three do,” Gordon said. “It’s good news for Tesla if the UAW makes it harder for the Big Three to make the transition by reducing the companies’ flexibility.”
So what does that mean for car shoppers? People might give Tesla a more serious look if the carmaker is able to turn lower labor and production costs into lower prices, Gordon said.
The average list price on a new non-Tesla EV was $68,383, according to Cox Automotive. People buying Teslas in July spent an average of $54,660, lower than the roughly $62,000 average they spent in January, Cox Automotive said.
But if the union talks are putting labor relations front of mind for consumers, that might be a strike against Tesla for some buyers. Two years ago, the National Labor Relations Board ordered Tesla to reinstate a worker who was trying to form a union, and told Musk to delete an anti-union tweet.
Will used-car prices go up?
If new-car prices increase, it’s likely many people will shop for used cars — which could pump up those prices as well, said Karl Brauer, an executive analyst at iSeeCars.com. That would reverse the gradual price drop that has followed the spike that occurred when chip shortages made new cars scarce, he noted.
With a strike, “we’ll basically get a taste of the COVID new-car product restrictions, but not the same level,” Brauer said.
Caldwell thinks prices of used cars could shift higher, especially for cars that are less than three years old. But there’s a limit, she said.
The average transaction price on used cars last year hit $31,095 in April, she said. In August, it was $28,719, according to Edmunds’ data. “I don’t think they would go beyond the peak of last year,” she said.
What about wait times?
As inventories have grown, the wait for certain cars to become available has shortened, Caldwell said. Even a strike likely will not bog down availability — as long as a shopper isn’t wedded to certain colors, trims and configurations, she noted.
But buyers who aren’t willing to be flexible may be sidelined. And they are out there.
There are customers who will simply wait for their ride instead of pushing up prices on other vehicles, Jominy said. Pickup-truck drivers commonly stick with the brand they already have, he noted.
“If there are no [Ford] F-Series or [Chevrolet] Silverados to buy, owners are not going to defect to other brands or other segments. They will wait until their truck is ready,” he said.
UAW, Ford and GM did not respond to requests for comment.
A Stellantis spokesperson declined to comment on potential impacts on price and availability.
The ongoing talks with the UAW have been “constructive and collaborative,” Stellantis said in a statement. “In our view, a strike does not benefit anyone — our customers, our dealers, the community and, most importantly, our employees.”
The Dow Jones Industrial Average
and Nasdaq Composite
all closed lower on Friday.