Yahoo Autos Here's How the East Coast Port Strike Could Affect Car Buyers
45,000 port workers with the International Longshoremen's Association Union officially went on strike Tuesday, October 1, in a move that could cost the United States economy as much as $5 billion a day — a fact that has already stirred up concern among laborers, legislators, and consumers alike. One group that may be particularly hard-hit is the automotive sector, and the strike's potential effects on the car-buying public could come to pass sooner rather than later, according to automakers and industry analysts who spoke to Road & Track.
Around $159 billion in automobiles were imported to the United States in 2022, and the East Coast and Gulf Coast ports of the U.S. are vital avenues for the importation of foreign vehicles — specifically, for European automakers like BMW, Volvo, and Volkswagen.
The impact on automakers and car buyers won't be immediate, but the potential for rippling effects through the start of 2025 is high, according to Barclay's researchers. Cox Automotive analysis shows that high levels of inventories at dealerships should dampen the impact on consumers at first. But Karl Brauer, executive analyst at iSeeCars, says that every car company that sells vehicles in the U.S. will be hurting at some point.
"Every automaker will be impacted by this strike, especially if it goes on for more than a couple weeks," Brauer said in an interview with Road & Track. "Brands with domestic production might appear less vulnerable, but with so many vehicle components arriving from other countries, particularly China, vehicle production will be crippled if the strike lasts for more than a few weeks. And brands importing vehicles along the East Coast, including Audi, BMW, Mercedes-Benz, and Volkswagen, will start to run out of models relatively quickly,"
As contract negotiations between the longshoremen's union and the United States Maritime Alliance employer group stagnated over wages on Monday, the looming threat of a strike quickly became apparent, with JP Morgan analysts estimating that the strike will cost the economy roughly $5 billion a day.
36 marine terminals from New Jersey to South Carolina closed on Monday evening, with over 100,000 containers trapped at ports across the U.S. until the strike is over, according to Rick Cotton, head of Port Authority of New York and New Jersey, who spoke to Automotive News. Dozens of additional ships are expected to arrive at ports over the next few weeks, with no workers or space to offload their goods. Automakers like BMW, Volvo, and Volkswagen's next steps will depend on how long the strike lasts.
"We are aware of the ongoing strike among U.S. East and Gulf Coast ports and are monitoring the situation closely together with our colleagues at the Volvo Car plant in Ridgeville, South Carolina — allowing us to devise and adapt our contingency plans. We are not yet experiencing any noticeable impact on our inbound flows, meaning that deliveries to our plant are continuing without interruptions," a Volvo Cars spokesperson said in an interview with Road & Track.
"We’re monitoring the situation closely and will see how it evolves," a spokesperson for Volkswagen said to Road & Track in an email. A spokesperson for BMW shared similar sentiments, saying that the fledgling status of the strike makes it too early to tell.
Naturally, all automakers are working to minimize the impact this strike could have on their business, but it's not just completed cars the manufacturers have to worry about.
In fact, a potentially more pressing concern is a deficit of parts, both for new manufacturing and repair work. Chris Frey, senior manager of Business Intelligence at Cox Automotive, explained that it'll depend on the manufacturing methodology of individual plants. While some manufacturers maintain a stock of spare parts, others rely on just-in-time delivery, meaning the parts arrive as needed. Automakers with parts stockpiles have a leg up for now, while those who rely on regular delivery may face the consequences earlier.
"For the most part, auto manufacturing is reliant on a massive, carefully coordinated supply chain. When that complex chain is gummed up, the ripple effect can be immediate and painful," Frey said in a statement put out by Cox Automotive.
A side effect of this jammed maritime supply will be additional stress on the West Coast ports and rail infrastructure, as part suppliers and automakers find ways to divert their cargo.
Even so, analysts at Cox Automotive believe that consumers shouldn't worry just yet. With inventory levels now back to to pre-pandemic levels and European brands (the ones that would be most affected by this strike) even having a surplus of stateside inventory, Erin Keating, executive analyst at Cox Automotive, says that dealerships and their customers won't feel too much of any impact — at least, not just yet.
It's not clear just how long this strike will go on. President Joe Biden has publicly declined to use his power granted by the federal Taft-Hartley Act to end the strike, despite outcry from figures like New York Governor Kathy Hochul and U.S. Chamber of Commerce President Suzanne Clark. Meanwhile, the leader of the International Longshoremen's Association, Harold Daggett, has vowed to cripple the industry until his worker's demands are met.
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