Tesla could benefit from UAW strike on supply now, costs later

Tesla Inc. could benefit from an extended UAW strike against the Detroit automakers since the Texas-based EV brand has ample production capacity to further bolster its dominant market share in the event of vehicle shortages from General Motors, Ford Motor Co. and Stellantis, analysts said Friday.

"We speculate that a prolonged strike would benefit Tesla most due to its production capabilities and opportunity to build on its leading market share position," said Baird Equity Research.

Tesla has about 60 percent of the EV market, according to analysts, and is drawing the lion's share of consumers switching from gasoline vehicles. In the U.S., Tesla operates assembly plants in California and Texas.

Nearly 13,000 hourly workers at three large assembly plants went on strike early Friday against Ford, GM and Chrysler parent Stellantis. The targeted walkout affects gasoline vehicles including one plug-in hybrid, the Jeep Wrangler 4xe.

Future strike actions by the UAW could affect other plants, including some making EVs, if the auto workers union decides to step up pressure on the automakers as negotiations drag on, analysts said. GM and Ford late Friday issued layoffs for several hundred additional employees at facilities related to the struck plants.

Tesla could also benefit once a UAW settlement is reached since it will increase labor costs for the Detroit automakers, extending Tesla's cost advantages and pricing power, the analysts said.

"We view the Detroit Three as losers in what is more likely to become a prolonged standoff as the two sides become more entrenched," said Garrett Nelson, vice president of equity research at CFRA.

One danger for Tesla from an extended strike — and for other non-union EV automakers such as Rivian and Lucid — could come from the financial collapse of suppliers due to a sharp drop in sales.

Dan Ives, managing director of equity research at Wedbush and a Tesla bull, believes Tesla is isolated from disruptions caused by the strike, including among suppliers.

"This is a game of high stakes poker and Musk and Tesla are the winners," said Ives, referring to Tesla CEO Elon Musk, a longtime critic of the UAW.

Ives said that even when the union and the automakers reach an agreement, the deal will add thousands of dollars to vehicle prices for the legacy Detroit automakers, making Tesla vehicles more attractive.

"If the strike lasts longer than three to four weeks, it will be moderately detrimental to GM and Ford's EV strategy in 2024," Ives said. "While the Detroit stalwarts battle with the UAW, there's a bottle of champagne that's being iced at Tesla headquarters."

Ives also saw Rivian as a potentially beneficiary, since its R1T pickup competes with the Ford F-150 Lightning. As of Friday afternoon, the Ford plant making the EV pickup was not on strike.

Some analysts warned, however, that an extended work stoppage at UAW plants could trickle through the supply chain, forcing parts makers to shut down their own plants. That potentially could affect non-union automakers, including Tesla.

"If the strike goes on for too long, we think auto suppliers could have to cut production and furlough workers at their plants, creating a ripple effect across the entire industry," Nelson said. "Importantly, the suppliers' balance sheets are not as strong as the original equipment manufacturers."