Hurricane Harvey May Have Totaled 500,000 Cars, Auto Sales to Rebound

The U.S. market was already facing a plateau in car sales, and Hurricane Harvey only brought us new problems. Dealers lost precious inventory in the Houston area, and insurance companies are expecting to receive as many as 500,000 claims for flood-damaged cars. But when the insurance money begins flowing, auto sales are expected to get a nice boost, says IHS Markit.

Automakers are expected to have lost between 10,000 and 25,000 sales between August 25-31, according to a report from IHS Markit. This sales disruption may also extend into September. But in around 60 to 90 days, sales should start to rebound. By the beginning of the fourth quarter, the industry should see a kick-up.

There have been around 184,000 new vehicle registrations in Houston this year, accounting for a 2.2-percent share in total light-vehicle registrations in the U.S. As the third largest pickup market in the country this year, Houston could also provide a boost to automakers that sell these high-margin vehicles. Full-size pickups make up 20 percent of sales in the Houston region. U.S. domestic automakers also make up a whopping 50 percent market share in the Houston area, compared with an average of 44 percent across the nation.

Nationwide, General Motors reported a 7.5 percent increase in sales for August. FCA declined 11 percent, while Ford dropped off 2.1 percent.

Harvey is a catastrophe of immense scale, and has so far caused billions of dollars in property damage and claimed more than 40 lives. Though nothing can replace a lost loved one, one silver lining is that Harvey had limited effects on vehicle production in the local Houston area, so replacement vehicles are close at hand. The two auto companies that manufacture there, General Motors and Toyota, did not lose production capability. Automakers may face pressure on inventory, but likely just in the short term. “In many cases, automakers can reallocate volume to the Houston area rather than have it pile up in other markets that are well stocked,” IHS Markit production analyst Joe Langley noted.

As of Thursday, insurance agencies had already received about 100,000 claims from those affected by Hurricane Harvey, reports The New York Times. Drivers who have comprehensive auto policies should be covered by flood damage. If a car is declared a total loss, payouts will include a car’s replacement value minus depreciation costs.

Unfortunately, experts predict that many of these flooded cars will make their way back on the market. CarFax said 271,000 flooded cars remained in operation last year, and this number is expected to increase thanks to Harvey. To avoid buying a flooded car, buyers should check the car’s VIN through CarFax, Experian’s Auto Check, or the National Insurance Crime Bureau’s VinCheck to get a thorough history on the model, as Forbes points out. It’s also important to check the interior and engine for water damage. Rust, water stains, dried mud, poor wiring, a musty smell, and recently shampooed carpet could all point to flood damage.

Source: IHS Markit, The New York Times, Forbes

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