Auto strike heralds price hike
Despite facility limit, walkout likely to have ripple effect
DALLAS — Car shoppers are heading for a new round of sticker shock if the strike by the United Auto Workers doesn’t end soon, particularly for popular vehicles that are already in short supply.
The number of vehicles on dealer lots will shrink the longer the walkout goes on. Dealers are likely to lose incentives that the manufacturers pay them to boost sales by cutting prices.
And consumers might make things worse with panic-buying.
Many analysts think it will take several weeks before dealer lots start to look a bit empty. Ford, General Motors and Stellantis built up inventories of vehicles ahead of Thursday night’s strike, and the UAW decided to limit the walkout to just three plants — at least for now.
“Guys at the dealerships are going to tell you, ‘The UAW this and that,’ but their lots are full of cars now,” says Ivan Drury, the director of insights at Edmunds, a provider of information about the auto industry. He estimates that at current inventory levels and the pace of vehicle sales, most car shoppers shouldn’t notice much change for a couple of months.
Vehicles from the Detroit Three sat in inventory an average 52 days before being sold in August, up from 31 days at the start of last year, according to Edmunds data.
The UAW began striking at factories that make only a few vehicles — Ford Broncos and Rangers, Jeep Wranglers, Chevrolet mid-size pickups and GMC vans. Dealers have good inventories of those.
If the strike isn’t ended soon, however, there could be shortages of some makes and models —big sellers or vehicles that are already in short supply, such as Chevrolet Silverado and Tahoe, GMC Sierra and Ford F-Series pickups. The car companies have plants in Mexico that could keep producing some models — as long as they have a supply of parts.
While the supply of cars from Detroit’s Big Three will largely depend on how long the strike lasts and how quickly it spreads to other plants — there were rumors Friday that additional factories could be added next week — there are other factors.
Garrett Nelson, an auto analyst for CFRA Research, expects manufacturers to eliminate incentives they pay to dealers to boost sales. Those incentives let dealers reduce their sticker prices, and they’re often targeted at slower-selling models.
The biggest wild card could be consumer psychology — panic-buying that would drive up prices.
“The impact on prices would be almost instantaneous,” Nelson says. “Dealers will say, ‘Look, we’re not sure how many additional vehicles we’re going to be getting.’ There could be somewhat of a panic effect that could stimulate consumers to make that purchase sooner rather than later.”
As cars from Ford, GM and Stellantis, the successor to Fiat Chrysler, become harder to find, there will be a ripple effect. Consumers who need a vehicle would likely turn to nonunion competitors like Toyota, Honda and Tesla, who would be able to charge them more.
“You’ll start to see that pricing gets affected everywhere — and not just on the new end of the business,” Drury says. “Used-car values, which have been seeing a bit of a decline from last year’s highs, could start going back up” as consumers look for an affordable alternative to new vehicles.
Consumers who lease their vehicle and are coming to the end of the term could be especially vulnerable. Drury says leasing companies want their cars back while the used-car market is hot, and might be unwilling to extend the lease.
Anyone shopping for a new, used or leased car right now will also be hit by higher interest rates. The average rate for a new-car loan this week stood at 7.46%, and for a used car, it was 8.06%, according to Bankrate.