Electric vehicle (EV) maker Tesla (NASDAQ:TSLA) is hiking the wages of 11,000 factory workers in Germany by 4% effective this month, the Wall Street Journal reported. The announcement was made by Tesla executives during CEO Elon Musk’s visit last week. The move comes at a time when the company is facing increasing pressure from the prominent IG Metall union in Germany to agree to a collective bargaining agreement governing wages like other automakers in the country.
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Tesla Avoids Union Troubles
Aside from the immediate hike, Tesla will also pay a bonus of €1,500 to offset the impact of high inflation. Further, the company plans to raise annual wages by an additional €2,500 for employees in production. Through these steps, Musk is trying to avoid IG Metall’s aggressive push for unionization. The German union had previously alleged that Tesla’s pay lagged industry standards by about 20%.
Tesla, whose CEO Musk is known for his anti-union stance, is currently facing a strike in Sweden due to its refusal to consider a collective labor agreement. The Sweden union, IF Metall, said that it wants workers at Tesla to have the “same decent and safe working conditions” as workers at other auto companies in Sweden.
In general, workers in the U.S., Canada, and Europe have been demanding higher wages and better facilities, given the soaring inflation. Recently, the United Auto Workers (UAW) union reached tentative deals with Ford (NYSE:F), General Motors (NYSE:GM), and Stellantis (NYSE:STLA), ending intense strikes that significantly impacted the operations of the Detroit car makers.
While Musk contends that Tesla pays higher compensation than rivals, there are concerns that unionization of Tesla workers in the U.S. and Europe would lead to high labor costs and put further pressure on margins at a time when they are already declining due to the company’s aggressive price cuts.
What is the Target Price for Tesla Stock?
With 14 Buys, 14 Holds, and five Sells, Tesla scores Wall Street’s Moderate Buy consensus rating. The average price target of $252.61 implies about 15% upside potential. Tesla shares have rallied 79% year-to-date despite an 11% pullback over the past month due to concerns about the company’s declining margins amid intense competition and macro pressures.
