The United Auto Workers are on strike against Ford, GM and Stellantis. I believe this is the first time there has been a strike against the big three at the same time. What I don’t intend to talk about is whether the demands are reasonable but I do want to talk about how it effects electric vehicles.
First, over 50% of the EVs sold in the US come from Tesla which is non-union. Further, there are only two EV makers who make profits on their cars: Tesla and BYD. At this point BYD has decided to not sell in the US market. I think it is safe to assume that at least initially the strike will benefit Tesla.
Possibly the main reason Tesla makes a profit on its EVs is manufacturing efficiency. Yes, volume production is needed but Tesla also has a much more efficient production process than any other car manufacturer. And, the amount of labor that goes into an EV is far less than for an ICE car. Why? Because the drivetrain of an EV has far less parts than that of an internal combustion car.
The big three has been dragging their feet on the transition to EVs. Most claim low demand but less than exciting EVs is part of the problem and the other is price. Let’s look more into price.
- The big three have been using Lithium ternary batteries. While they have a slightly higher energy density than Lithium Iron Phosphate (LFP) batteries, LFP is catching up. LFP batteries are cheaper and safer. Ford is transitioning to LFP but needs North American production to qualify for tax incentives.
- Tesla’s use of gigacastings in the Model 3 and Model Y significantly decrease the parts count which will, of course, reduce labor to assemble cars.
- Tesla sells cars directly to customers thus avoiding dealer markup. While dealers used to offer manufacturer-approved service centers, EVs require much less service making the cost of a dealer network unnecessarily.
- Tesla is more integrated than any of the big three. That is, they produce more of the components of their cars and continue to move in the direction of more integration.
- Tesla’s production lines are more automated than those of other auto makers.
- Manufacturing volume means lower materials costs. Tesla has this volume (because they sell so many EVs and because they primarily only have two models to sell). Even in those two models there are many common parts.
It seems like the union demands are going to “encourage” the big three to get more serious about EVs. Less labor to produce a vehicle becomes more important when the price of labor goes up.
