The ongoing UAW strike against Detroit car companies may benefit Japanese automakers, particularly Toyota, as domestic car affordability becomes challenging.
UAW’s strike, combined with high interest rates, may push U.S. consumers toward Japanese car brands.
General Motors (GM) is most vulnerable to sales disruption due to the prolonged strike.
The strike’s extended duration might replicate the 2021 dynamics when new car inventory was low, inflating prices.
ABC News reported that the current UAW strike against Detroit-based car manufacturers could inadvertently open doors for Japanese automakers in the U.S. market. High interest rates, combined with the strike, are making domestic new vehicles less affordable for many.
General Motors (GM) emerges as the most susceptible to sales disruptions amidst this strike. Although third-quarter sales results from GM, Ford Motor Co., and Stellantis are imminent, the strike’s limited scope hasn’t significantly affected their sales, as noted by Cox Automotive economists Jonathan Smoke and Charlie Chesbrough.
Renaissance Center, GM’s Detroit Headquarters | Photo: General Motors
However, if the strike broadens and extends into the fall season, the already strained new vehicle supply might dwindle further. This would likely lead to escalating prices in both new and used car markets. Smoke highlighted that Japanese brands, especially Toyota, are poised to benefit from this situation due to their resolved supply issues and ongoing production increase. Additionally, their offerings, which mainly consist of lower-priced sedans and smaller SUVs, contrast with the Detroit pricier pickups and SUVs, making them more attractive in terms of availability and affordability.
The current strike began when UAW President Shawn Fain announced it after labor negotiations collapsed. While initial disruptions were minimal, the union has since expanded its scope, intensifying concerns.
Parts suppliers have been hit hardest, with many laying off workers due to halted operations at facilities on strike. Automakers have also had to lay off thousands linked to the striking facilities.
As the strike persists, its implications could be more visible in brands with tighter supplies, like Chevrolet. However, the high interest rates currently in place might act as a balancing factor. Smoke pointed out that with the average new car loan interest rate surpassing 9.6%, excessive pricing could diminish demand, stabilizing the situation. Smoke concluded with a hopeful note, expressing aspirations for the strike’s resolution this fall.
