The United Auto Workers union is on strike, targeting a select few Detroit 3 car factories.
UAW leadership is threatening to escalate and target more plants if negotiations don't improve.
That could reverse what little vehicle pricing progress that car shoppers saw this summer.
Car buying was supposed to be getting better — but now the auto workers strike at Ford, GM, and Stellantis will be bad for everyone.
After years of a pandemic-driven supply-and-demand car crunch that jacked up new and used vehicle prices and shrunk dealership supply, car buyers had just started to see a little respite. The UAW strike is likely to upend that.
"We are not in a position where there's enough supply for consumers to not feel a lot of pricing pain," Pat Ryan, CEO of car-shopping website CoPilot, said. "We just simply don't have the supply of popular brands and models back to a point where even a short strike could be weathered without impacting pricing.
"The strike will be painful for a lot of folks," he added, "but it will be one that will be felt by car shoppers in a loss of selection and increased prices for the popular models."
What we saw this year
Last year was pretty brutal for car-buying, but by March, Americans were spending, on average, $171 below sticker price on new vehicles (the first time in 20 months that shoppers didn't have to shell out more than a car was listed for).
Then, July saw the smallest increase in average transaction price (ATP) from the year prior in a decade, according to Kelley Blue Book. People paid, on average, $44,827 in August — high, but down substantially from just six months earlier ($48,558 in February).
Incentives also came back to some extent. Buyers have been able to find more than 4% in incentives for some brands, per Kelley Blue Book. Not the discounts they were used to pre-COVID, but welcome news nonetheless as some automakers began to build back a more healthy supply of cars on dealer lots.
The used car market has been trickier to generalize, but even used vehicle listing prices finally dropped slightly in July.
Much of that steady progress is likely to be reversed with the ongoing United Auto Workers strike, even with just three Detroit automaker plants targeted so far (part of a Ford plant in Wayne, Michigan; a GM assembly plant in Wentzville, Missouri; and a Stellantis assembly complex in Toledo, Ohio).
A labor stoppage boosts prices and slashes inventory
The Detroit 3 automakers have more cars in their coffers than many of their peers, with Ford at 77 days' supply, GM brands GMC and Buick at 66 and 94 days, respectively, and Stellantis brands Ram, Dodge, and Chrysler each well over 110 days (with the exception of Cadillac at 46 and Chevrolet at 51, all are generally higher than the industry average at the start of September of 58 days), according to Cox Automotive.
For context, competing brands like Honda, Toyota and Kia had around 30 days.
That should last them in the near term. But with uncertainty about how long the strike will go on — and which plants the UAW might opt to take down next— dealers are likely to hold supply close to their chest. Certainly, any incentives will disappear.
Popular vehicles like the GMC Canyon, Ford Ranger, and Jeep Wrangler already saw availability drop 7.2%, 5.4%, and 2.9%, respectively, over the first weekend of the strike, according to auto shopping site CarGurus.
"It creates a real likelihood that we will see another spike in vehicle inflation, not in what manufacturers charge, but in what dealers charge given the supply and demand dynamics that are out there," Ryan said.
With fewer new cars available, buyers might have to look elsewhere, like Toyota or Honda, Ryan said. But these companies don't necessarily have the capacity to take on more market share (and their suppliers are likely to be negatively impacted by the strike, too) — leaving yet a third less-than-ideal path for buyers in need.
"Pricing may well go up just because of scarcity, and if that happens, then the consumer that potentially was buying a new car would move to the used car market," Russell Hensley, partner in McKinsey's global automotive and assembly practice, said. "Prices will likely go up in the used car market."
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