The UAW Strike and The Rise of EVs
πππThe ongoing strike in the US by the United Auto Workers and the Detroit 3 - Ford, General Motors and Stellantis highlight the fact that the Auto industry is undergoing a radical change.
The auto industry has been a powerful job generator for decades, forging huge cities with stable paychecks for millions of workers and their families. As EVs take over this will no longer be the case.
Gas powered vehicles have as many as 2000 components in their powertrains while $Tesla Motors(TSLA)$
Electric vehicle powertrains need less employees to build because vehicle battery packs have relatively fewer components and are less complicated to assemble than internal combustion engine powertrains. Electric Vehicles utilise a large number of electronic sensors but require less labour to produce and assemble.
Labour is one of the main expenses that companies use to produce vehicles. If one company has an approach that gives it a clear cost advantage, then the others will try to quickly adopt a similar strategy.
Tesla has had a decade headstart in EVs but the competition is heating up as more EV companies are catching up. The biggest driver is that EVs are just simply more efficient to manufacture apart from the environmental benefits.
Manufacturing EVs require 40% less labour according to Ford CEO, Jim Farley in 2022.
The UAW strike could cost the Big 3 Automakers as much as USD 5 billion within just 10 days. This will exacerbate the structural disadvantage they already face.
Whatever the outcome maybe, Tesla has already won. Tesla is paying their US Autoworkers 25% less pay and they are non unionised. GM, Ford and Stellantis have begun making more EVs but those operations are still rather small. The rest of their operations are still focused on gas powered cars and trucks.
Tesla's workers are not unionised so it will keep making Model 3, Model S, model Y and soon the new Cybertruck. In contrast some of the factories of its US rivals sit idle.
In other news, $NIO Inc.(NIO)$
has just released an Android smartphone on Thursday. The phone will be priced around USD 900 to USD 1000 which will be about USD150 cheaper than a comparable Huawei phone according to CEO William Li. Nio is the 1st premium Chinese EV brand to release its own smartphone. Delivery on the smart phone starts on September 28 with orders starting immediately.
Nio's smartphone will allow users to connect more seamlessly with the car such as when transitioning between the phone and vehicle during online meetings. How cool is that!
Nio's share price is down 11% year todate while Tesla is up 126% year todate.
$Li Auto(LI)$ Share price was up 3% last Friday on signs of an economic rebound in China and 87% year todate.
So was $XPeng Inc.(XPEV)$
which was also up 3% and 61% year todate.
I believe that EVs will continue to grow exponentially in the future. The days of the gas powered vehicles will be numbered.
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This will not be a Cinderella story in the end, demand for the cars gets reduced in the strike, profits go down and it results in a higher price structure.
Tesla pays its workers more than UAW members, cost pressures facing Big 3 rivals as they ramp up EV-production efforts.
The fears of new tech have spread to many areas, such as the Hollywood writers' strike linked to the use of AI.
Who's going to have to pay for it? It's consumers. It will hurt consumers
If your car doesn't work, you're just stuck. It's just mean, don't you think?