How Elon Musk could win the UAW strike

The United Auto Workers strike is likely to have at least one winner: Elon Musk. And that spells trouble for President Joe Biden's efforts to shape the auto industry's future.

The UAW’s work stoppage offers yet another massive headache for the Big Three automakers just as they’re gearing up to challenge Musk’s Tesla in the growing market for electric vehicles. A generous settlement with the UAW could compound Detroit’s problems, industry analysts say, by widening the gap in labor costs between the U.S. auto giants and Tesla’s non-union factories.

Either way, Tesla’s continued dominance on electric cars would undermine Biden’s hopes of basing the next generation of cars and trucks on unionized labor — in just the latest collision between the White House’s visions and those of the mercurial billionaire.

Musk has already won a number of early skirmishes with the administration, including by getting several other big automakers to adopt Tesla’s charging technology as a de-facto industry standard.

“Tesla’s competitive advantage over the Detroit Three is going to widen,” said Garrett Nelson, vice president of equity research at CFRA Research, an investment advisory firm. Ford, General Motors and Stellantis already pay their workers more than Tesla, he said, and that gap in labor costs is sure to grow even under the concessions the automakers have already offered.

Neither the UAW, Tesla nor the White House responded to requests for comment.

Relations between Tesla and Biden’s White House — frosty at first, before warming in the past year — will be put to the test again after UAW workers walked off the job at three GM, Ford and Stellantis plants on Friday. Biden is already under pressure from the union over the impacts of his electric vehicle push on their jobs, and it won’t help if a non-union competitor reaps the gains from the strike.

For much of Biden’s presidency, the pro-labor White House was reluctant to even acknowledge that Musk’s vocally anti-union company is leading the nation’s move to electric vehicles (Tesla accounted for 60 percent of new electric vehicle sales in the U.S. in the second quarter of this year, according to Cox Automotive.)

In 2021, the administration invited executives from Ford, GM and Stellantis to the White House lawn for a major EV summit, while snubbing Tesla and Musk. When asked if Tesla’s non-union status was the reason it wasn’t invited, then-White House press secretary Jen Psaki responded, “Well, these are the three largest employers of the United Auto Workers, so I’ll let you draw your own conclusions.”

In January 2022, Biden met at the White House with GM chief executive Mary Barra and Ford CEO Jim Farley — but not anyone from Tesla — to discuss the administration’s hopes for a big climate bill, prompting Musk to label the president a “damp [sock] puppet in human form.” Later that year CNBC reported that the White House had privately indicated it wouldn’t invite Musk to future meetings with corporate leaders.

In response, Musk alleged at the time that Biden “has pointedly ignored Tesla at every turn and falsely stated to the public that GM leads the electric car industry.”

But that has changed in the past year as Biden has pushed to make electric vehicles account for half of new car and truck sales by the end of the decade, a goal that makes Tesla’s hegemony in the EV market difficult to ignore. That has led to an increasing number of entreaties to Musk and Tesla.

In January, two of the president’s top advisers, John Podesta and Mitch Landrieu, hosted Musk at the White House to discuss implementation of the administration’s tens of billions of dollars in electric vehicle incentives. Weeks later, the White House announced it had brokered a deal for Tesla to open some of its charging stations to the public in exchange for access to federal dollars.

And this summer, the White House threw its support behind an effort to establish Tesla’s charging technology as an industry standard. It came after Tesla’s EV rivals — led by Ford and GM — decided to adopt Tesla’s North American Charging Standard, just months after the Biden administration had mandated a rival charging standard for its federally funded chargers.

Various versions of three Tesla’s Model 3, Model Y and Model X vehicles also qualify for the full $7,500 consumer tax credit that the Treasury Department is offering under last year’s Inflation Reduction Act, at least for customers who earn less than the law’s income caps.

A lengthy strike could make it hard for Ford, GM and Stellantis to do two things they need to do to lure new customers — roll out new electric vehicle models and lower their prices.

That’s especially true if the Detroit-based auto giants end up making big concessions on wages and benefits, some of the companies argued this week.

Ford said in a statement Thursday evening that the union’s demands would more than double the company’s UAW-related labor costs, “which are already significantly higher than the labor costs of Tesla, Toyota and other foreign-owned automakers in the United States that utilize non-union-represented labor.”

Internally, Ford estimates that its labor costs are already 25 percent higher than Tesla’s, when accounting for wages and benefits. Under the UAW proposal, that gap would grow to 67 percent, according to people at Ford who were granted anonymity to discuss internal projections.

That could crimp the company’s ability to compete as Tesla has aggressively lowered its prices this year.

Tyson Jominy, vice president of data and analytics at J.D. Power, said Tesla is already “operating on a different plane” when it comes to pricing of its electric vehicles.

“That is leading to some very significant market share gains for Tesla, with or without the strike,” Jominy said.

Jominy projects that with a six-week strike — the length of the last strike against GM in 2019 — the Big Three automakers would lose 200,000 sales to their competitors and be forced to raise prices by 2 to 5 percent, at least in the short term. Even if electric models are likely to be somewhat insulated from those effects because of abundant inventory, the strike could also slow the rollout of new models.

GM started taking orders for its Chevrolet Blazer EV in early September, and its Equinox EV and Silverado EV are set to launch later this fall. Ford plans to roll out its electric Explorer next summer.

“There’s a lot of product coming,” Jominy said.

Ford and GM did not respond to a request for comment on this story. Stellantis declined to comment.

But a loss for the Big Three is not necessarily a win for the union. Tesla is notoriously anti-union and has clashed with UAW in the past.

A federal appeals court ruled in March that Musk had illegally intimated Tesla workers organizing with the UAW at its factory in Fremont, Calif., with a 2018 tweet that threatened to take away their stock options. Musk has appealed the ruling.

In February, the carmaker fired 18 software workers in Buffalo, N.Y., less than 24 hours after they declared their intention to unionize, drawing a complaint to the National Labor Relations Board.

In a post Thursday on his social media network X, formerly known as Twitter, Musk wrote that factories for Tesla and his space company SpaceX “have a great vibe” that encourages “playing music and having fun.”

“We pay more than the UAW [by the way], but performance expectations are also higher,” Musk wrote. “Quite a few of our factory techs who work on the line have become millionaires over the years from company stock grants.”

UAW President Shawn Fain brushed off concerns about Tesla’s competitive advantage in a CNBC interview on Wednesday.

“Competition is code word for race to the bottom, and I’m not concerned about Elon Musk building more rocket ships so he can fly in outer space and stuff,” Fain said. “Our concern is working-class people need their share of economic justice in this world.”

Musk, meanwhile, "has been pretty vocal about not being pro-union,” said Mona Dajani, a partner at the law firm Shearman and Sterling who has worked with clients involved in industries such as clean energy, mobility and energy technology. “His view is that the workers that he has, they’re not unionized, but they get stock options, and those stock options are the highest in the auto industry.”

"He feels that the UAW is old, and it’s archaic — he feels that he is paying his workers even more,” said Dajani, who was not speaking on behalf of Tesla or her firm.

Tanya Snyder and Olivia Olander contributed to this report. 

CORRECTION: A previous version of this story incorrectly described Mona Dajani's occupation. She is a partner at the law firm Shearman and Sterling.