Experts say car prices likely to increase as result of UAW strike

For the first time, all three of America’s major automakers, including GM, Ford and Stellantis, are currently facing a strike organized by the United Auto Workers (UAW) union. This work stoppage has raised concerns among consumers and is poised to have significant implications for the automotive industry, as well as car buyers.

“We are not in a position where there’s enough supply for consumers to not feel a lot of pricing pain,” said Pat Ryan, CEO of car-shopping website CoPilot. “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 comes at a pivotal moment for the U.S. car market, which has been recovering from the impacts of the COVID-19 pandemic and supply chain disruptions that led to a global shortage of semiconductor chips—a vital component in modern vehicles. These challenges resulted in a steep increase in the average price of new vehicles, surging to $50,000, up approximately $10,000 from where it had been just five years ago.

Consumers have started to feel some relief. The median price tag for new vehicles declined around $2,000 this summer.

The ongoing UAW strike has sparked questions about whether prices will continue cooling or if consumers will face rising costs once again. Many automotive experts believe that price hikes are on the horizon for both new and used car buyers, but the extent of these increases remains uncertain.

“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, a partner and senior leader within McKinsey’s Global Automotive and Assembly Practice, said. “Prices will likely go up in the used car market.”

“You’re going to get sticker shock in two different ways: the actual sticker price, and the cost of financing that purchase,” said Greg McBride, chief financial analyst for Bankrate, an online service that compares the interest rates of various financial products.

Industry analysts at J.D. Power agree that vehicle costs will likely rise but do not anticipate a return to the extreme pricing pressures seen during the pandemic.

Several popular automotive brands, such as Toyota, BMW, Hyundai, Tesla, and others, are not currently impacted by the strike as their workers are not part of the union. This divergence in labor relations means that some vehicle manufacturers will continue production in the U.S. without disruption.

Cox Automotive officials suggest that the strike’s immediate effect will be limited to specific product lines. However, the strike’s impact could potentially expand if negotiations fail to yield substantive progress in the near future. As of now, the UAW has called for strikes at only three final assembly plants, but the union has expressed willingness to involve workers from other facilities if negotiations remain at an impasse by the end of the week.

“If we don’t see serious progress to noon Friday, Sept. 22, more locals will be called on to stand up and go on strike. We’re going to keep hitting the companies where we need to,” said Shawn Fain, UAW president. “We’re not going to keep waiting around forever while they drag this out … and we’re not messing around.”

With no clear resolution in sight and the likelihood of additional plants experiencing work stoppages increasing, consumers may face gradually escalating costs as this situation continues. Even if the strike is settled quickly, car buyers may still see price increases as labor costs for automakers rise, as well.