Emerging from the shadows of historically low inventory levels in 2022, the automotive industry surged ahead in 2023 with robust new vehicle sales, fueled by pent-up demand and the steady replenishment of supply chains. Yet, amid this resurgence, the sector grappled with challenges, witnessing a slowdown in electric vehicle (EV) development and setbacks in autonomous vehicle (AV) technology.

Amid these industry-wide currents, one story took center stage and captured the collective attention — the United Auto Workers' (UAW) landmark strike against the Detroit 3 automakers. A year ago, not many knew who Shawn Fain was. But six months into his UAW presidency, Fain made a resounding impact. Upon assuming office, he called on his constituents to brace themselves for a war against the automakers.

True to his unwavering commitment, Fain embarked on a mission to secure equitable wages and benefits for UAW workers, setting the stage for intense contract negotiations. This ultimately resulted in a six-week strike against the Detroit 3 automakers.

As we bid farewell to 2023, let's delve into the top auto stories and trends that made waves this year.

Historic UAW Strike

The UAW initiated an unprecedented simultaneous strike against Detroit 3 automakers — General Motors (GM Quick QuoteGM - Free Report) , Ford (F Quick QuoteF - Free Report)  and Stellantis (STLA Quick QuoteSTLA - Free Report) — after the contract expired on Sep 14 at midnight. For the first time in its more than 80-year history, the UAW concurrently called a strike on GM, F and STLA. Central to this dispute was the wide gap between union demands and automaker offers. The UAW called for a 36% increase in hourly wages and a reduced workweek, along with other demands.

After extensive negotiations and a six-week strike, the UAW reached record agreements with Detroit 3 automakers. The new labor agreements until 2028 featured a 25% boost in base wages, including an immediate 11% rise. This cumulative increase will elevate the top wage by 33%, incorporating estimated cost-of-living adjustments, reaching over $42 per hour. Additionally, the agreements will eliminate wage tiers in factories and streamline the progression to earn the top wage from eight years to three years.

Labor negotiations and production interruptions resulted in a substantial financial impact on the Big 3 automakers, amounting to approximately $3.6 billion. GM estimated an EBIT-adjusted loss of $1.1 billion, while Ford anticipated strike-related lost profits of $1.7 billion ($1.6 billion of which pertained to the fourth quarter). STLA's CFO, Paul Jacobson, projected that the strike would impact the company with an approximate pre-tax earnings reduction of around $800 million.

UAW's Power Surge Beyond Detroit

Following the UAW record-setting deals with the Detroit Three automakers, auto giants with production facilities in the United States responded by raising wages for their non-unionized workforce. Companies, including Toyota, Honda, Volkswagen, Hyundai and other nonunion automakers, swiftly implemented substantial salary increases for their manufacturing employees.

The efficacy of these wage hikes in deterring unionization efforts will unfold in 2024 and beyond. Fain, attributing these raises to the "UAW bump," initiated a campaign to organize 13 automakers (BMW, Honda, Hyundai, Lucid, Mazda, Mercedes-Benz, Nissan, Rivian, Subaru, Tesla, Toyota, Volkswagen, and Volvo). This strategic move aims to capitalize on the momentum gained in Detroit, seeking to bolster the union's influence and power, reversing decades of declining membership. If successful, the union would nearly double its representation, as the 13 companies collectively employ around 150,000 U.S. manufacturing workers, compared to the UAW's current membership of approximately 146,000 members at the Detroit 3.

Tesla's NACS Sparks Paradigm Shift in EV Charging

The EV charging landscape underwent a seismic shift, with a major move toward the adoption of Tesla's (TSLA Quick QuoteTSLA - Free Report) North American Charging Standard (NACS) port.It was Ford that got the ball rolling. In May, Ford announced that it would make its charging cords compatible with Tesla's NACS cables, granting Ford EV owners access to Tesla's vast Supercharger network. General Motors followed suit with a similar announcement in June. Subsequently, a wave of major automakers, including Rivian, Toyota, Honda, and others, embraced Tesla's NACS port, signaling a broad industry transition.

In response to the industry-wide evolution, leading charging equipment manufacturers Blink Charging, ChargePoint, EVgo and Wallbox announced plans to offer chargers featuring Tesla's connector, marking a significant turn away from the standard Combined Charging System connector. This shift positions Tesla to potentially generate billions of dollars by opening up access to its Supercharger network.

EV Momentum Slows Down

Despite a rise in EV market share to 7.4% of the U.S. market through the third quarter of 2023, the pace of adoption has not matched initial expectations. A letter from nearly 4,000 dealerships to President Joe Biden emphasized concerns about federal EV mandates. Dealerships are of the view that customer apprehensions about range, reliability and pricing are resulting in lower-than-expected EV sales. Tesla, though still dominant, saw its market share decrease from almost two-thirds to 57.4% despite multiple rounds of price cuts, indicating increased competition.

While significant investments were announced by automakers in EV production last year, 2023 witnessed obstacles in the EV boom, prompting manufacturers to exercise caution and reconsider some of those massive investments. In December, Ford revealed plans to slash production of its Lightning Pro model by 50%, reducing the weekly output at the Rouge Electric Vehicle Center in Dearborn, MI, from 3,200 trucks to 1,600.

Additionally, GM faced a setback in its EV strategy, announcing a significant nine-month delay in the launch of EV drive production at the Toledo Propulsion Systems plant. Originally scheduled for early 2024, production is now rescheduled for the end of 2024, following GM's October announcement of postponing the production of electric trucks, including the Chevy Silverado RST and GMC Sierra Denali EVs, to late 2025.

Autonomous Hurdles

In 2023, autonomous vehicles encountered significant challenges, exemplified by GM's self-driving unit — Cruise. Following a San Francisco accident where a Cruise car injured a pedestrian, the company's permits to operate autonomous vehicles in California were suspended. This incident forced Cruise to retract its ambitious expansion plans, leading to CEO Kyle Vogt's resignation, the dismissal of nine leaders and a 24% employee layoff. With only nine months of cash left and losses exceeding $8 billion since 2017, Cruise's future appears uncertain, compounded by the reluctance of major investor Honda to inject more funds.

Tesla, a pioneer in autonomous technology, grappled with its issues in 2023. The company initiated the recall of 2 million vehicles, limiting the use of its Autopilot driver-assistance software. (Tesla Recalls 2M Vehicles to Fix Autopilot Features)

These setbacks underscore the elusive nature of the promise of full self-driving autonomy on public roads, pushing the industry further away from achieving this ambitious goal.

Complex Terrain of EV Tax Credits

Apart from price caps, EV tax credits prioritize companies obtaining battery minerals from the United States or its trade allies and producing battery components in North America. Per the U.S. Treasury list in April, specific EV models of GM, F, TSLA and STLA qualified for the $7,500 tax credits in 2023. The credit is divided into two parts, with the first $3,750 related to sourcing of battery minerals, increasing from 40% to 80% by 2027. The other half involves U.S. assembly, escalating from 50% in 2023 to 70% in 2026.

Federal incentives have led automakers to rush to establish compliant supply chains. However, following guidance from the Biden administration restricting the use of China-made battery components, many EVs are now ineligible for the tax credit, impacting car manufacturers' ability to meet these stringent requirements. Many GM, F and TSLA models will be losing EV tax credit eligibility beginning Jan 1, 2024. Tesla's most affordable Model 3 is anticipated to lose its $7,500 tax credit starting Jan 1, as stricter sourcing rules come into effect.

Carvana’s Epic Comeback

This used car e-retailer made it to the top stories of 2022 with a drastic decline of 98% in its share price amid growing concerns about the company going out of business. In 2023, Carvana catapulted back into the spotlight, emerging as the year's auto stock champion. Defying expectations, shares of the company have skyrocketed a whopping 1,058% since the beginning of 2023. In fact, Carvana is the biggest gainer on the Russell 3000 index this year. (CVNA's Epic Comeback Makes it the Top-Performing Auto Stock of 2023)

TSLA Enters the E-Pickup Domain With Cybertruck

Initially scheduled to hit the roads in 2021, the timeline of this futuristic pickup has been pushed back many times. After two years of delays, Tesla announced in July that it built its first Cybertruck at its plant in Austin, TX. The e-pickup will be offered in three different configurations — Single Motor RWD with 250+ miles of range and a startup speed of 0-60 mph in 6.5 seconds, Dual Motor AWD with 300+ miles of range and a startup speed of 0-60 mph in 4.5 seconds, and Tri Motor AWD with 500+ miles of range and a startup speed of 0-60 mph in 2.9 seconds. TSLA delivered its first Cybertrucks to a few customers at an event in Texas on Nov 30. Elon Musk claims that his company will achieve a production rate of 250,000 trucks a year in 2025.

Inventory Surge

Pre-pandemic, the U.S. auto industry typically maintained inventory between 3 million and 4 million vehicles. In spring 2021, inventory sharply dropped to under 1 million due to sales surpassing constrained production from pandemic-related disruptions. It remained low for over a year, starting a gradual recovery in summer 2022. Production gains accelerated in 2023 and inventory levels picked pace.

As of December, new-vehicle inventory reached 2.56 million, up over 900,000 from a year ago. Days' supply increased to 71 from 60 in November, surpassing December 2022 by more than 17 days. According to Cox Automotive, December marked the highest new-vehicle inventory since early spring 2021.

EV SPACs Flame Out

After taking a shortcut to an IPO through SPAC mergers, most EV startupsfaced investigations for misleading projections.  Cash reserves depleted and scaling production became challenging amid limited funding options and economic turbulence.The once-booming EV SPAC frenzy is now witnessing a sobering reality as startups falter in their ambitious milestones, leaving investors disillusioned.

In June 2023, Lordstown Motors filed for bankruptcy protection after failing to resolve a dispute over a promised investment from Foxconn.The company received a delisting notice from Nasdaq in April 2023 as its share price fell below $1 a few months prior and failed to rebound. The delisting warning prompted Foxconn to waver and it threatened Lordstown to withdraw from the agreement unless the stock listing predicament was resolved. In the second week of August, Proterra filed for Chapter 11 bankruptcy. Proterra's aggressive strategy to expand its three business lines simultaneously led to rapid capital burn, creating financial vulnerabilities that proved difficult to overcome.