Tropical Storm Harvey is likely to briefly depress already slowing U.S. auto sales, but could eventually help 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% fewer vehicles will be sold in August than previously expected, Jessica Caldwell, executive director of industry analysis for Edmunds.com, said in a statement.
“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,” Caldwell said.
Automakers were due to report August sales on Friday.
Before the storm, industry consultants J.D. Power and LMC had forecast sales for the month at a seasonally adjusted annualized rate of 16.6 million units, down nearly 3.5% from August 2016.
Auto loan applications in the Houston market have dropped roughly 80% since the storm came ashore on Friday, according to Cox Automotive’s Dealertrack service.
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.
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 Co, Ford Motor Co 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.
It was not clear how many vehicles have been damaged by the storm.
Production at plants like Toyota Motor’s San Antonio, Texas, truck factory and a large SUV plant GM operates in Arlington, Texas, so far 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 by Harvey, industry officials said.
Mike Jackson, chief executive of AutoNation Inc, the largest U.S. auto retail chain, said on CNBC on Tuesday that 17 dealerships were closed following Harvey and that he did not know when they would reopen.
