Hurricane Harvey Reverses Car Sales Forecast, Delays First Year-over-Year Increase in 2017
Though August new car sales were projected to increase year-over-year for the first time in 2017, analysts say the devastation caused by Hurricane Harvey will delay that.
With 20,000 to 40,000 new vehicle sales delayed in Texas, an updated August projection show a 0.5% decrease in year-over-year sales.
The revised forecast predicts a seasonally adjusted annual rate (SAAR) — a metric that removes seasonal variations in purchases and allows sales to be compared more accurately across months — of 16.3 rather than the 16.6 that was initially reported.
Dealer.com websites, which power over 60% of all auto dealer sites, saw shopping research drop off by almost 40%, according to Jonatan Smoke, chief economist at Cox Automotive.
The dependency on cars in the affected areas makes the impact particularly severe. Houston is the 7th most populated market in the United States and has a car ownership rate of 94.4%, higher than the national average of 91%, according to Smoke.
“Given what we know so far and recognizing that the effects of the flooding are still going on, Houston looks bad,” Smoke wrote in a note about the revised estimates. He said the number of vehicles lost in the storm could be between 300,000 and 500,000.
To put that number in perspective, consider this: The entire Houston market, comprised of 20 counties that were all affected by Harvey, has seen 325,000 new vehicles sold in the last 12 months.
The loss of so many homes and vehicles means costs from Harvey may surpass the record $160 billion in damage caused by Hurricane Katrina in 2005.
It’s likely the area see a boost in car demand next month to replace those vehicles. In the month after Hurricane Sandy, the New York market saw a 49% increase in new vehicles sales, according to Smoke.