DALLAS (AP) — If the United Auto Workers union’s strike doesn’t end soon, car buyers will face another round of sticker shock, especially for popular cars that are already in short supply.
The longer the strike goes on, the fewer vehicles will be on dealer lots. Dealers are likely to lose the incentives manufacturers pay to increase sales by lowering prices.
And consumers could make the situation worse by panic buying.
Many analysts believe it will be several weeks before dealer lots start to empty out a bit. Ford, General Motors and Stellantis are stocking up on vehicles ahead of Thursday night’s strike, and the UAW has decided to limit the strike to just three plants, at least for now.
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“Dealers will say, ‘This and that UAW,’ but their lots are full of cars right now,” said Ivan Drury, director of insights at Edmunds, an auto industry intelligence company. says. He estimates that at current inventory levels and the pace of car sales, most car buyers won’t notice any major changes for several months.
Detroit Three vehicles remained in inventory for an average of 52 days before being sold in August, up from 31 days early last year, according to Edmunds data.
The UAW has launched strikes at factories that only produce a small number of vehicles, including Ford Broncos and Rangers, Jeep Wranglers, Chevrolet midsize pickups, and GMC vans. Dealers have plenty of them in stock.
The union said it had “quite productive discussions” with Ford on Saturday, while Stellantis provided details about its latest proposal to the union.
Marc Stewart, Stellantis’ chief operating officer for North America, also said the company has contingency plans in place to limit the impact on consumers, but declined to provide details.
“We really want to encourage our customers not to be afraid,” said Stewart, who encouraged them to take a look at the sale items available at the dealership.
But if the strike doesn’t end soon, some makes and models, including Chevrolet Silverado and Tahoe, GMC Sierra and Ford F-Series pickups, could be in short supply at major dealerships and already in short supply. there is. Car companies have factories in Mexico and can continue producing some models as long as parts are available.
The supply of cars from Detroit’s Big Three depends largely on how long the strike lasts and how quickly it spreads to other plants (Friday said more plants could be added next week). There were also rumors), but there are other factors as well.
Garrett Nelson, an auto analyst at CFRA Research, expects manufacturers to eliminate incentives they pay dealers to promote sales. These incentives allow dealers to lower sticker prices and often target late-selling models.
The biggest wildcard could be consumer sentiment, or panic buying that drives up prices.
“The impact on prices will be almost instantaneous,” Nelson said. “Dealers will say, ‘We don’t know how many additional vehicles we can get.'” There will be some panic effect, potentially stimulating consumers to buy sooner rather than later. ”
There will be a ripple effect as cars from Ford, GM and Fiat Chrysler’s successor Stellantis become harder to obtain. Consumers who need a car are likely to turn to non-union competitors like Toyota, Honda and Tesla, which can charge higher prices.
“You’re going to start to see pricing impact everywhere, not just at the end of the new business,” Drury said. “Used car values, which have fallen slightly from last year’s highs, could start to rise again,” as consumers look for affordable alternatives to new cars.
Consumers who have leased a car and are reaching the end of their contract may be particularly vulnerable. Drury said leasing companies want to return cars while the used car market is hot and may be reluctant to extend leases.
People who are currently buying new, used, or leased cars will also be affected by the interest rate hike. According to Bankrate, the average interest rate on new car loans this week was 7.46% and 8.06% on used cars.
High prices have led to a sharp increase in the number of requests for rides being turned away. The New York Fed said this month that its auto loan rejection rate is now 14.2%, the highest since the bank began tracking the data in 2013 and up from 9.1% six months ago. (Mortgages, credit cards and other loans are also being declined more often, as lenders push back against more people falling behind on their payments. Household debt is rising.)
Car prices were rising long before autoworkers raised the possibility of a strike. Chip shortages, global supply chain disruptions and strong demand pushed up prices.
The average price of a new car has jumped from $39,919 in 2020 to $48,798 this year, according to Kelley Blue Book. Cheap cars have all but disappeared, forcing consumers to take out longer loans to limit their monthly payments. Used car prices soared in 2021 and 2022, but have fallen slightly this year.
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Even if the strike is resolved early, prices are almost certain to rise as automakers’ labor costs rise.
“It’s almost a foregone conclusion that the UAW will be able to successfully raise wages significantly,” said Patrick Anderson, founder of Anderson Economic Group, a market analysis firm. “Some of that is simply due to inflation, some of it is due to automaker profits, and some of that is due to the leverage that the UAW has right now in an economy where inventory is low and there’s still a lot of inventory. It depends on the person who wants to buy a car. ”
The UAW is seeking a 36% wage increase over four years, as well as other demands that would increase spending for companies. Stellantis on Saturday detailed its latest proposal for cumulative pay increases of nearly 21% per hour, roughly in line with proposals from Ford and GM.
Politicians are asking automakers to consider workers who gave up pay and benefits to help their employers during the Great Recession.
“At a time when our nation’s automakers are enjoying solid profits, we need our fellow workers to do the right thing so our industry can come together and be more competitive than ever before,” former President Barack Obama said in a statement Saturday. The time has come to take it.”
UAW President Sean Fein is sensitive to the impression that the union’s profits come out of consumers’ pockets. He noted that prices were rising before the strike and said labor costs accounted for only a small portion of the Big Three’s total costs.
“They could double our wages, not raise car prices, and still make billions of dollars in profits,” he said in an online presentation to union members this week.
That alone is enough for many drivers to consider avoiding parking lots and keeping their current cars for a while. Without a car payment, their bank account is healthier.
“Holding on to your car is not a bad thing,” said Drury, the Edmunds analyst. “It’s a lot more durable than you think.”