Harvey to drive vehicle sales: 500,000 may need to be replaced
DETROIT — Tropical Storm Harvey is likely to briefly depress already-slowing U.S. auto sales, but will eventually boost demand as damaged cars are replaced, analysts said on Tuesday.
The catastrophic flooding in Houston, the fourth-largest U.S. city, could mean 2 percent fewer vehicles will be sold in August than previously expected, according to Edmunds.com.
"In subsequent months we'll likely see a slight localized bump in sales as the recovery takes hold and people are able to buy replacement vehicles," said Jessica Caldwell, executive director of industry analysis at Edmunds, in a statement.
It was not clear how many vehicles have been damaged by the storm — an estimate from Cox Automotive, parent of Kelly Blue Book and Autotrader, places the damage count as high as 500,000 vehicles.
Automakers were due to report August sales on Friday.
Before the storm, industry consultants JD Power and LMC had forecast sales for the month at a seasonally adjusted annualized rate of 16.6 million units, down nearly 3.5 percent from August 2016.
Auto loan applications in the Houston market have dropped roughly 80 percent since the storm came ashore on Friday, according to Cox Automotive's Dealertrack.
Cox Automotive said it had lowered its U.S. auto industry August sales forecast to a seasonally adjusted annualized rate of 16.3 million units from 16.6 million units.
After Superstorm Sandy caused widespread flooding in the New York metropolitan area in 2012, "we saw all of those lost sales made up in the subsequent few months and then some because of replacements for vehicles destroyed and damaged," Cox Automotive analyst Michelle Krebs said.
A sales rebound will depend on how quickly car owners file claims and the speed with which insurers process them, said Christopher Hopson, senior analyst at industry consultant IHS Markit.
"If the reaction is swift, we could start to see a pickup in sales as soon as late September or October," he said.
Hopson said insurers' swift response after Sandy in October 2012 fueled an almost immediate sales uptick.
Auto sales in New York in November 2012 rose 49 percent versus the previous year, according to Cox Automotive.
The Houston metropolitan market is the seventh largest in the United States, and ranks third in sales of large pickup trucks, which generate significant profits for the Detroit Three automakers, Krebs said.
General Motors, Ford and Fiat Chrysler Automobiles NV went into August with hefty inventories of unsold pickups, and a post-storm sales bump could help clear out those trucks at higher prices.Production at plants like Toyota Motor Corp's San Antonio, Texas, truck factory and a large GM-operated SUV plant in Arlington, Texas, have been unaffected, the companies said.
However, Volkswagen AG said on Tuesday that shipments of vehicles to the Port of Houston have been delayed because the facility is closed.
Auto dealerships around Houston have been flooded or had operations disrupted, industry officials said.
Mike Jackson, chief executive of AutoNation Inc, the largest U.S. auto retail chain, said on CNBC that 17 dealerships were closed following Harvey and that he did not know when they would reopen.
Reporting by Nick Carey and Joseph White
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