There are losers in the U.S. auto industry strike, but there are also winners. While the three automakers Ford, General Motors and Stellantis and their related upstream and downstream suppliers are facing difficulties, other auto companies may be quietly making money. According to Oliver Lee, portfolio manager at Eastspring Investments Singapore Ltd., Japanese car companies could benefit from any prolonged strikes in the United States that lead to supply disruptions.
In addition to Japanese car companies, South Korean and German car manufacturers are also making a fortune. However, given that Japanese cars have been deeply involved in the U.S. market for many years and the depreciation of the yen has brought strong export advantages, their benefits from the UAW strike are even more obvious.
Lee said Japanese cars look quite competitive, especially with the current weak yen. He added that while wages for Japanese workers were also rising, wage pressures in the United States were likely to be greater.
Since the beginning of this year, the yen has depreciated by 12%. In the past three years, Japan has depreciated by nearly 30%. The costs for Japanese exporters have become relatively cheap.
The depreciation of the yen has been the main driving force for Japanese auto stocks this year. In dollar terms, Japan's Topix transportation equipment index is up 36% this year, South Korea's auto stocks are up 16%, and similar European indexes are up 15%.
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The UAW strike comes at a perfect time for the Japanese automaker, which holds one-third of the U.S. market share. It just makes up for the industry disadvantages caused by its slow transition to electric vehicles and the fading advantage of the yen's depreciation.
Analysts at Nomura Securities said that based on GM's strike situation in 2019, the ongoing strike may last about 40 days. This will result in a reduction of approximately 300,000 to 500,000 units in the production of the three major companies.
Nomura analysts also noted that in addition to short-term disruptions, U.S. wage costs appear set to surge, bolstering the competitive advantage of non-U.S. automakers. The average salary of the Big Three is expected to increase by 26% over the next four years, and U.S. autoworker wages will increase much faster than elsewhere.
Cox Automotive Chief Economist Jonathan Smoke and Senior Economist Charlie Chesbrough said on Tuesday that the impact of the UAW's targeted strikes has so far been very limited, and the Detroit automaker's sales have not experienced a major hit.
But they worry that if the strike expands or continues into the fall, the already tight supply of new cars will shrink further.
Smoke also predicts that Japanese brands are most likely to benefit from this, especially Toyota, which is increasing vehicle production. Moreover, the prices and models of Japanese cars are more economical and practical, making it easier to attract consumers than American cars.