10.05.2024 Upcoming Corporate Actions

Аватар на автора




Carmaker-Union Troubles Is a Warning for Tesla

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

In the 38th week of the year (ending 23rd of September), the United Auto Workers (UAW) union discussed intensifying its strikes against the “Big Three” – Ford (F), General Motors (GM) and Stellantis (STLA) – by going beyond a single assembly plants for each carmaker to plants that produce more profitable vehicles such as Ford’s F-150, GM’s Chevy Silverado and Stellantis’ (Dodge) Ram on Friday. The initial strike by UAW was unprecedented: the union had never initiated action against all three carmakers simultaneously before.

As of Friday of the 38th week, 38 plants within the “Big Three’s” manufacturing ecosystem in the U.S. had joined the strike initially launched by 13,000 union workers out of its estimated 391,000 active members and more than 580,000 retired members in over 600 local unions.

Websim is the retail division of Intermonte, the primary intermediary of the Italian stock exchange for institutional investors. Leverage Shares often features in its speculative analysis based on macros/fundamentals. However, the information is published in Italian. To provide better information for our non-Italian investors, we bring to you a quick translation of the analysis they present to Italian retail investors. To ensure rapid delivery, text in the charts will not be translated. The views expressed here are of Websim. Leverage Shares in no way endorses these views. If you are unsure about the suitability of an investment, please seek financial advice. View the original at

Barbs about “greedy CEOs” like Tesla (TSLA) CEO Elon Musk, who’d “rather build rocket ships than pay workers,” have also been thrown by UAW’s president Shawn Fain in a television interview.

Overall, the bulk of Electric Vehicle (“EV”) manufacturing – including at Tesla – is carried out by non-unionized workers. Therefore, the argument could be made that this is to EV carmakers’ advantage, specifically Tesla. However, reality is slightly more complicated than that. Both the American worker and middle class have long been under siege for reasons not entirely due to actions of company management.

First: A Consideration of Labour Costs

It’s next to impossible to calculate the “value” of labour on a per-car basis. However, a simple “back of the envelope” method can be employed on balance sheet line items for a rough idea on profits on a “per-car” basis:

  1. Take an automobile company’s annual revenue for a financial year and divide by the number of vehicles sold in that year. This can be considered as the revenue earned per car.

  2. Next, take the reported gross and profit margins and apply on the per-car revenue to arrive at a gross and net profit on a per-car basis.

  3. Subtract the profit from revenue to derive a per-car cost.

Using this, a per-car profit and cost can be calculated for a number of companies. Generally, Toyota trends at around $2,500 in profits per car for a manufacturing cost at about $12,500 in most years while Ford trends around $2,200 (gross) for a cost of around $20,000 per car. This method, however, isn’t a “true” valuation. For instance, Porsche trends around gross profit in the region of $17,000 while the manufacturing cost vary from $33,000 to $133,000, depending on how said costs are intertwined with that of parent Volkswagen. Meanwhile, Ferrari has a trending profit of only $6,000 relative to costs of $195,000. In a 2013 research note, Bernstein Research’s analysts concluded that Volkswagen-owned Bugatti incurs a whopping $6.24 million loss for every $1.5 million Veyron it sells, given the whopping R&D costs of about $1.62 billion relative to low sale volumes. Bugatti responded that the estimates are implausible since they don’t supply financial data while Bernstein’s analysts did mention in the note that these metrics are “obviously very, very approximate” and not to be taken too seriously.

Costs aren’t fixed in that it’s a simple matter of applying labour on components along an assembly line to produce cars that spontaneously appear before buyers. It takes large teams of R&D personnel years of effort to produce the right component mix, years of iterative (and costly) testing of said components to ensure they’re durable and entire teams of experienced accountants and team leaders to keep track of costs of these various efforts to keep plant floors running at a sustainable rate on a bare minimum.

Using the “back of the envelope” method, however, it could be assumed that generally 50-60% of a car’s price is attributable to raw materials and spare parts while 16% could be attributed to R&D. Therefore, about 20-25% of the cost (on average) could be considered labour cost if one were to also exclude the likes of advertising costs, storage, transportation and sales tax as being a concern.

Second: A Consideration of the US Car Market

Overall, new car sales have been in decline in the U.S. for some time now, with the used car market rising in price as a result. This decline becomes even starker in the present day: as of June of this year, monthly passenger car registrations in the U.S. are the lowest in over 63 years. The high water mark was September 1986 when more than 1.25 million cars were registered.

Note: There is a difference between sales and registration. The latter essentially recognizes that a car exists and is fit to operate. Sales volumes typically run higher than registered volumes.

Despite high sales growth rates of Battery Electric Vehicles (BEVs) in recent years, conventional cars presently reign supreme in absolute terms. Across 2021 and 2022, the biggest share of U.S. car sales was held by the “Big Three” plus Toyota.

Preliminary trends for 2023, with August’s data (representing two-thirds of the year) indicate volumes for the current year are trending downwards relative to the past year.

Note: Data is still trickling in. The full extent of car sales figures would only be available near the end of December.

The enormousness of the car market, despite conventional car sales being in decline, can be demonstrated in the breakdown of sales by manufacturer in December 2022’s data:

Tesla’s sales across all of 2022 were lower than the collective sales by General Motors, Toyota, Ford and Stellantis in December alone. However, Tesla also showed the highest increase in Year-on-Year (YoY) terms across all the manufacturers. This could be construed as a consequence of an “over-catered” customer base in the higher ends of the income spectrum essentially driving BEV sales. Across the lower ends of the income spectrum, however, is a rising affordability issue that has been apparent for a long time now.

The Root of Conflict

In a report published earlier this year, think-tank American Compass estimates that its Cost of Thriving Index (essentially, an index that quantifies the affordability of “middle-class” amenities such as housing and healthcare) for an average family of four has been increasing in long-term trends since 1985.

The report is summarized thus:

“While the typical man working full-time in 1985 could support a family on 40 weeks of income and then still have income from roughly 20% of the year left to cover other expenses and save, a comparable man working full-time in 2022 would work the whole year and still come up ten weeks short.”

The most affected are those in prime working age, namely in the 25-34 age range, who need well over an average of 70 weeks of work to be able to afford a year’s (54 weeks) of middle class amenities:

Various estimates indicate national healthcare costs continuing to balloon well past this current decade, interest payments on government bond issuances becoming a substantive drain on government revenues from taxation et al, increasing burdens on government contribution to benefits as a result of this, and the ominous implications on the creation of conditions for “thriving” among America’s youth entering the workforce. In essence, the American middle class is under enormous pressure. By no means can blame be laid squarely on any one side of the current political divide: as the data indicates, little of consequence has been done to address these issues in the past four decades wherein both sides of the political divide held sway over the highest seats of power for extended periods of time.

It’s increasingly harder to enter the middle class or stay in the middle class. This has grim consequences on long-term consumption trends of American goods by Americans. Rising costs could be considered to be the root cause behind both a decline in overall new car sales as well as rising clamour among the workers’ unions for higher wages and benefits.

Advantage: EV Makers?

Ford estimates that the average hourly labour costs, including benefits, among the “Big Three” amounts to around $65 per worker, compared to about $55 for foreign non-union automakers in the U.S. like Toyota and Nissan. However, to control costs, it brought about a tiered system has since been in place that effectively pays younger/newer workers less than older workers, along with a cap of workers’ wages at around $32 an hour. UAW demands that this be done away with. The union further demands from the “Big Three” a mid-30% wage increase over the lifespan of the new contract, down from the initial demand for a 40% pay hike, but still far from what auto manufacturers have offered, at 20% at most. Ford has stated that UAW’s demands would double its labour costs, which are already significantly higher than that of carmakers that utilize workers unrepresented by unions.

It has been estimated that Tesla’s labour costs, borne from non-unionized labour, are at around $45-$50 per worker per hour. Both Ford and Volkswagen have estimated that 30% less labour is required to build a BEV, given they don’t require complex parts needed to build engines and transmissions. The “Big Three” have committed to investing over $100 billion in EV manufacturing over the next few years via joint ownership of plants with companies such as South Korea-based LG Energy Solution and Samsung predominantly located in a growing “Battery Belt,” centred on Georgia, Kentucky, and Tennessee. Most of these developments are in states with “right to work” laws that curtail collective bargaining.

However, UAW seeks to extend union-driven benefits to workers in EV plants, with Tesla already being a long-sought target. A California plant worker allegedly fired by the company for union organizing has been ordered to be reinstated by federal authorities, which is currently under appeal. The authorities also made it clear that there can be no withholding of stock grants to any unionized workers.

In Germany, Tesla’s Berlin plant also employs workers who are represented by a management-dominated Works Council (Betriebsrat) instead of the likes of a union such as IG Metall. As early as 2017, it was reported that Tesla’s German workers are paid 20-35% below that of unionized workers in other car companies. Earlier this year, IG Metall has called for an investigation over complaints that workers were made to work longer hours and are being forced to sign non-disclosure agreements, thus making them fearful of retribution if they were to discuss working conditions.

In Conclusion

Former Ford CEO Mark Fields already warns that UAW’s demands not related to wages – such as the reinstatement of pensions and healthcare for retirees among others – could simply make it more rational for U.S. carmakers to move production to foreign shores such as Mexico. Tesla and BMW both are working on building plants in Mexico, along with a host of EV-relevant Chinese companies.

Much of the current bickering between worker and management is severely limited to what the former can squeeze from the latter and how little can the latter get away with conceding to the former. What neither union nor management acknowledges is why the conflict exists: rapidly (perhaps even exponentially) rising costs of living, over which neither have substantive control. Decades of laxities in government planning have led to this with, as per current trends, at least a decade more of long-term rising costs expected. Given that, it’s inevitable that this conflict would recur in very short order.

Deutsche Bank estimated a full strike could cost each affected automaker about $400 million to $500 million per week if all production was lost. Anderson Economic Group predicts a full 10-day strike could result in a total economic loss of more than $5 billion. While costs increase and conflicts arise, more and more vehicle production (both conventional and EV) will shift to foreign countries. This conflict will become the epitome of a “death spiral”: fewer jobs, more conflicts, even fewer jobs, even more conflicts. It’s all too evident that macroeconomic conditions are the root cause of such a spiral. But little by way of the byzantine corridors of power in Washington seems to address it.

In the midst of this upheaval, professional investors interested in making short-term market plays can consider TSL3 for a 3X daily-rebalanced exposure on the stock’s trajectory while TS3S does the same on the downside.

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

Share this:

Related Products:

Related Products:

Related Articles

Q2 is poised for European stocks’ turnaround and rising interest in energy stocks
Q2 is poised for European stocks’ turnaround and rising interest in energy stocks
Q2 is poised for European stocks’ turnaround and rising interest in energy stocks

Required Information

Welcome to Leverage Shares

Terms and Conditions


If you are not classified as an institutional investor, you will be categorised as a private/retail investor. At this time, we cannot send communications directly to private/retail investors. You are welcome to view the contents of this website.

If you are an ‘Institutional investor’, you affirm either that you are a Per Se Professional Client, or that you wish to be treated as an Eligible Counterparty Client, both as defined under the Markets in Financial Instruments Directive, or an equivalent in a jurisdiction outside the European Economic Area.

Risk Warnings

The value of an investment in ETPs may go down as well as up and past performance is not a reliable indicator of future performance. Trading in ETPs may not be suitable for all types of investor as they carry a high degree of risk. You may lose all of your initial investment. Only speculate with money you can afford to lose. Changes in exchange rates may also cause your investment to go up or down in value. Tax laws may be subject to change. Please ensure that you fully understand the risks involved. If in any doubt, please seek independent financial advice. Investors should refer to the section entitled “Risk Factors” in the relevant prospectus for further details of these and other risks associated with an investment in the securities offered by the Issuer.

This website is provided for your general information only and does not constitute investment advice or an offer to sell or the solicitation of an offer to buy any investment.

Nothing on this website is advice on the merits of any product or investment, nothing constitutes investment, legal, tax or any other advice nor is it to be relied on in making an investment decision. Prospective investors should obtain independent investment advice and inform themselves as to applicable legal requirements, exchange control regulations and taxes in their jurisdiction.

This website complies with the regulatory requirements of the United Kingdom. There may be laws in your country of nationality or residence or in the country from which you access this website which restrict the extent to which the website may be made available to you.

United States Visitors

The information provided on this site is not directed to any United States person or any person in the United States, any state thereof, or any of its territories or possessions.

Persons accessing this website in the European Economic Area

Access to this site is restricted to Non-U.S. Persons outside the United States within the meaning of Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”). Each person accessing this site, by so doing, acknowledges that: (1) it is not a U.S. person (within the meaning of Regulation S under the Securities Act) and is located outside the U.S. (within the meaning of Regulation S under the Securities Act); and (2) any securities described herein (A) have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction and (B) may not be offered, sold, pledged or otherwise transferred except to persons outside the U.S. in accordance with Regulation S under the Securities Act pursuant to the terms of such securities. None of the funds on this website are registered under the United States Investment Advisers Act of 1940, as amended (the “Advisers Act”).

Exclusion of Liability

Certain documents made available on the website have been prepared and issued by persons other than Leverage Shares Management Company. This includes any Prospectus document. Leverage Shares Management Company is not responsible in any way for the content of any such document. Except in those cases, the information on the website has been given in good faith and every effort has been made to ensure its accuracy. Nevertheless, Leverage Shares Management Company shall not be responsible for loss occasioned as a result of reliance placed on any part of the website and it makes no guarantee as to the accuracy of any information or content on the website. The description of any ETP Security referred to in this website is a general one. The terms and conditions applicable to investors will be set out in the Prospectus, available on the website and should be read prior to making any investment.

Leverage Investment

Leverage Shares exchange-traded products (ETPs) provide leveraged exposure and are only suitable for experienced investors with knowledge of the risks and potential benefits of leveraged investment strategies.


Leverage Shares Management Company may collect data about your computer, including, where available, your IP address, operating system and browser type, for system administration and other similar purposes (click here for more information). These are statistical data about users’ browsing actions and patterns, and they do not identify any individual user of the website. This is achieved by the use of cookies. A cookie is a small file of letters and numbers that is put on your computer if you agree to accept it. By clicking ‘I agree’ below, you are consenting to the use of cookies as described here. These cookies allow you to be distinguished from other users of the website, which helps Leverage Shares Company provide you with a better experience when you browse the website and also allows the website to be improved from time to time. Please note that you can adjust your browser settings to delete or block cookies, but you may not be able to access parts of our website without them.

This website is maintained by Leverage Shares Management Company, which is a limited liability company and is incorporated in Ireland with registered offices at 2 Grand Canal Square, Grand Canal Harbour, Dublin 2. 

By clicking you agree to the Terms and Conditions displayed.