Carmakers can expect sales surge after Irma, Harvey
Damage dealt by catastrophic hurricanes in Texas and Florida, striking nearly back-to-back, has automakers and dealers accounting for losses even as they prepare to get people back on the road down south.
High winds from Hurricane Irma — which dissipated in the southeast on Wednesday following days of destruction in Florida — didn’t cause as much damage as Hurricane Harvey’s flooding inflicted last month in Texas, according to initial analysis from Cox Automotive. Yet, the estimated 200,000 to 400,000 vehicles damaged by Irma, coupled with the 320,000 to 580,000 vehicles destroyed by Harvey, mean September promises to be a busy month for the automakers.
General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV said hundreds of their dealerships in Florida are still assessing damages, and recovery efforts in Texas are moving quickly. But the automakers want to get dealerships up and running again as quickly as possible.
The reason: Analysts are predicting another influx of vehicle sales in Florida akin to what happened in the Houston area as those caught in the storms start to recover. And that could be a boon to industry sales that have shown unmistakable signs of softening each month so far this year.
“We know one of the first things people do is replace their transportation,” said Michelle Krebs, analyst with Autotrader. “We immediately after Harvey saw an increase in car shopping and sales.”
The trend is likely to be replicated in Florida. Ted Smith, president of the Florida Automobile Dealers Association, said the damage to dealerships from Hurricane Irma is minimal compared to what their counterparts in Houston experienced after Harvey.
“I don’t think we are anywhere near where Houston experienced, which is good news for us,” he said. “We dodged a bullet. It went up the center of the state and it did not do nearly as much damage as was anticipated.”
Smith, based Tallahassee, Florida, added that he is not aware of any significant damage to dealerships in Florida during the storm. He is waiting for updates from south Florida and the Keys, where power and phones are still down.
“There has been some minor damage and walls have fallen down at dealerships, but there has not been tremendous damage to inventory or property,” he said. “In the Jacksonville area, they got hammered with rain, wind and surge, but those dealers experienced more damage at their homes than they did at their dealerships.”
Florida dealerships benefited from having a lot of experience in weathering big storms. Smith said that Irma could put a damper on auto sales in Florida — at least in the short term: “This was a storm of inconvenience. It’s going to impact auto sales for a couple of weeks if the stores can’t even open.”
Harvey damage tanked U.S. vehicle sales in August, but Irma landed earlier in the month, giving automakers more time to recoup losses. Krebs expects recovery sales from Irma to supplement Harvey recovery sales, which spilled over into September.
Harvey also tore through the country’s second-largest automotive market, where profit-rich trucks and SUVs are king. With less flooding, more time before the storm for evacuation and preparation, and the fact that a glut of rental vehicles in Orlando could bail out other Florida cities in need of those vehicles, Irma’s unlikely to cause automakers too much of a headache.
The two hurricanes could bring an uptick in sales through the fourth quarter as automakers close out a year that brought plateauing sales numbers at best, Krebs said. But the most significant effect will come through the used car market.
Automakers can ramp up production to account for new models lost to the storm, but the supply of good used vehicles is limited. Though automakers have a glut of used vehicles sitting on lots, those who lost trucks and SUVs to the storms are unlikely to find such vehicles on the used car market.
People have been turning in cars as they opt for bigger trucks and SUVs. That means used car lots around the country are currently stuffed with sedans at a time when Americans prefer the utility vehicles.
“The used car mix could be challenging,” said Krebs. “And the fact that there will be a lot of demand for used cars will keep prices high.” That’s good for automakers, but potentially challenging for consumers in need of a vehicle, though Krebs downplayed fears that those prices will approach record highs.
Meanwhile, automakers are giving dollars and discounts to assist in the Irma recovery. The Ford Motor Co. Fund is matching employee and dealer contributions to the American Red Cross up to $150,000 to aid Irma disaster relief. The company is also deploying the “family” customer-assistance bundle it rolled out in Texas. It includes “no-haggle” pricing at the same level enjoyed by Ford employees and family members, no payments required until 2018 and a simplified online application process.
That’s in addition to the $3.5 million in total Ford estimates it provided in help following Harvey. Ford is also giving Florida and Texas first responders a $1,000 discount toward the purchase of any Ford or Lincoln vehicle. The company says the more than 500 dealerships affected by Harvey are open for business.
GM said it gave $1 million to the American Red Cross for disaster relief. Employees there have made $110,000 in personal contributions as well. The company also committed $1 million to Habitat for Humanity’s rebuilding efforts.
“We cannot communicate enough just how much those affected by Hurricane Irma, along with those still recovering from Harvey, remain in our thoughts and prayers,” Mark LaNeve, Ford’s vice president of U.S. marketing, sales and service, said in a statement. “The Ford family of employees, dealers and customers is dedicated to putting our heart into everything we do. As we did with Harvey, Ford is committed to taking action where we can to make the process of rebuilding as simple as possible.”
Detroit News staff writer Keith Laing contributed.