The Future Outlook Of The Auto Industry | October 2023

How Dealerships Are Feeling The Impact Of The UAW Strike

At the onset of the strike, overall inventory levels were slightly higher than what we’ve seen in recent years. This translated into a less immediate impact on domestic dealerships with respect to their new vehicle inventories.

Even before the strike began, foreign automakers were gaining ground in the United States, notably led by the success of South Korean brands like Hyundai and Kia.

The UAW Push For Unionization

The UAW, equipped with a well-funded “strike fund,” has been pushing for its demands, largely tied to electric vehicle (EV) initiatives. Many of these EVs are not produced in the U.S., and the integration of AI into manufacturing plants is set to reduce the need for labor.

Consequently, the UAW is advocating for the unionization of domestic EV plants, particularly battery facilities.

The strike’s duration will likely affect domestic new vehicle inventories and could potentially impact pricing for both new and used vehicles.

Navigating Rising Interest Rates

Additionally, we foresee layoffs and plant furloughs among automotive suppliers, and this could disrupt supply chains once the strike concludes. However, the current environment of rising interest rates is expected to temper the extent of pricing pressure on inventories.

In other developments, we’ve noticed a significant tightening of credit in both direct and indirect (consumer lending) channels by many financial institutions. Some institutions are even exiting auto lending altogether, such as BMO Harris.

Furthermore, the Federal Reserve appears to be approaching the end of its rate hike cycle as it grapples with inflation. These elevated interest rates have influenced buy-sell transactions in the dealership sector, although many dealerships maintain healthy balance sheets from recent years, ensuring a steady level of buy-sell activities, though not at record levels or multiples.

Brady Ware Is Your Source For Updates

Overall, the auto industry has had a decent year, although it’s not at the record volumes of the past few years. We’ll continue to monitor these trends and provide updates in the coming months.

What Does This Mean For Your Dealership?

So you’re up to date on dealership news. But what now? Brady Ware consultants help you bridge the gap between learning about data and actually applying it to your future strategy.