Prolonged UAW Strike Could Drive Up Car Insurance Rates Even Further

In a year during which American drivers have already faced significant insurance rate hikes, the United Auto Workers (UAW) strike against General Motors, Ford Motor Company, and Stellantis (formerly Chrysler), could affect manufacturer supply chains and lead to even higher car insurance rates.

Rates have already climbed up to 34% in some states this year. 

“Higher parts prices will mean it’s costlier to make and repair cars,” says Allie Feakins, senior vice president of insurance at Insurify. “This will drive up the severity of insurers’ losses, and lead insurance companies to raise rates.”

On Friday, Sept. 22, UAW announced that while it had made headway in talks with Ford, it would expand the strike to 38 General Motors and Stellantis facilities. A prolonged strike and additional plant shutdowns could have a more significant impact on consumers, says Feakins. UAW president Shawn Fain had earlier said that if the Big Three didn’t make “serious progress” on negotiations by noon on the 22nd, the union would expand the strike.

The UAW strike could further increase car insurance rates

Car insurance rates increased 17% in the first six months of 2023, according to Insurify’s most recent car insurance report. And consumers are feeling the financial strain. 

Insurify’s data suggests drivers are cutting coverage to save on car insurance. The number of drivers searching for full-coverage policies, which are more expensive than liability-only insurance but provide more protection, decreased by 51% in 2023 compared to 2022.

Several factors contributed to the spike in insurance rates, including damage from climate catastrophes, increased accidents after COVID-19 lockdown mandates lifted, and the rising cost of car maintenance and repair driven by supply chain issues. Drivers could see ripple effects from the UAW strike the next time they renew their premiums.

“The impact may be more focused on the brands produced at the striking plants,” Feakins says. “Consumers may see price increases on these specific brand makes and models as opposed to the coverage-level price increases we’ve been seeing [on all car insurance] the past few years.” 

The first three plants that went on strike manufacture the following vehicles:

Feakins stressed the strike’s impact on insurance rates wouldn’t be immediately apparent and may have a minimal effect depending on the length of the walkout. During the 2019 UAW strike, 48,000 General Motors workers walked out of 55 plants for 40 days. A synchronized strike at all Big Three manufacturers is unprecedented, so the effect on insurance could be, too.

How the UAW strike affects new car costs, inventory 

Car buyers have weathered a tumultuous few years as COVID-19-related supply chain issues slowed production and left manufacturers with insufficient inventory. New car prices averaged $48,451 in August 2023 but were tempered by growing inventory. Prices were up just $42 year over year, according to Kelley Blue Book, compared to 10.8% the year prior. The plateau may be short-lived if the strike continues.

If the UAW escalates to a walkout of all members employed by the Big Three, manufacturers would suffer losses of $989 million within 10 days, according to the Anderson Economic Group. Current new vehicle inventories are estimated to sell out in around 55 days, so even a short strike could affect consumers. The UAW picked plants that make vehicles with lower profit margins for the first three strike locations — a move designed to spur negotiations without backing the Big Three into a corner. Car buyers in the market for affordable vehicles may see the most significant price increases, depending on how long the walkout lasts at the 38 facilities that joined the strike on Friday.

Fain pushed back on the idea that UAW wages are driving the 33% increase in new vehicle prices since 2018, citing a meager 6% pay raise for auto workers over the last four years. Instead, Fain points the finger at car manufacturers for “fleecing” consumers.

Manufacturing shutdowns may impact used car prices

As the UAW strike continues, new car inventory levels will decline. Lower vehicle production levels can trickle down to used car buyers over time. 

Manufacturing halts during COVID-19 still affect car buyers. New vehicle inventory plummeted from 3.8 million in the spring of 2020 to 820,000 by the fall of 2021. Inventory shortages and rising costs sent buyers to the used market. But used vehicle inventory is near its lowest level in 10 years, according to Cox Automotive. 

As a result, the average price of a used vehicle spiked 35% from $19,872 pre-pandemic to $26,696 in 2023. Used vehicle mileage is also up 9% from 65,000 to 71,000 miles. 

Labor shortages and supply chain disruptions also push up the cost of repairs, which used cars are more likely to need. The US Consumer Price Index for motor vehicle maintenance and repair has increased to 391.4, up 11.97% year over year.

Consumers shouldn’t expect the strike’s impact to be as dramatic as pandemic shutdowns. Used car buyers are more likely to feel the effects if the UAW strike expands to more plants or if the strike outlasts the Big Three’s inventories.

Why UAW workers are striking 

The UAW’s core demands range from big wage increases and medical benefits for retirees, to increased pensions and substantially higher wages. 

The Big Three made more than $21 billion in North American profits in the first half of 2023, and CEO salaries have increased 40% over the past four years, Fain said in his video. UAW workers are demanding a 36% wage increase, down from 40% to match CEO pay spikes, and have already rejected a proposed 21% raise from Stellantis.

The average hourly wage for motor vehicle production employees was approximately $28 in August 2023, according to the Bureau of Labor Statistics. Wages would average $38 an hour if manufacturers meet the UAW’s demand.

For comparison, the CEOs of the Big Three each took home between $20 million and $30 million last year.