SII RETAIL AUTO: AT ~1M, HARVEY MAY HAVE WRECKED MORE VEHICLES THAN ANY NATURAL DISASTER IN US HISTORY!
The Harvey region represents about 30% to 40% of Texas sales, which account for up to 9% of U.S. sales, according to Barclays.
The storm may have ruined up to one million vehicles along the Texas Gulf Coast, according to automotive data firm Black Book. In the Houston area, about one in seven cars may have been destroyed, according to analysts from Evercore ISI, an investment banking advisory and research firm.
Michael and Pansy Granberry took two feet of water into their home in the suburb of Friendswood. But losing three cars felt almost as painful as the damage to their home that will require extensive repairs.The couple suspects all three vehicles suffered electrical damage that will be too expensive to fix.
"The Lexus is gone, the Cadillac, my favorite, I just bought at the end of February, won't do nothing — it's just blown," Michael Granberry says. "We've already talked to the insurance company, and they said they will be out soon to take care of it." In the meantime, they were scrambling to find a rental, which are in high demand, to get around.
Harvey destroyed about 300,000 to 500,000 vehicles owned by individuals, Cox Automotive chief economist Jonathan Smoke estimates. Insurance is expected to cover a large portion of those losses.
Smoke's projections were based on Houston-area storm damage and vehicle ownership, compared with scrappage rates and insurance claims following Superstorm Sandy in the New York region in 2012 and Hurricane Katrina in the New Orleans area in 2005.
Vehicle ownership rates are higher in Houston than in New Orleans during Katrina and New York during Sandy.
Houston has 1.8 vehicles per household compared with 1.6 in New Orleans and 1.3 in New York during the earlier catastrophes.
Sandy is believed to have destroyed about 250,000 vehicles, while Katrina ruined about 200,000, according to Cox Automotive.
Other research estimates Katrina's destruction at closer to half a million cars and trucks, but those figures include vehicles that may have been wrecked by storms that occurred in the region later, including Hurricane Rita and Hurricane Wilma.
"It makes sense that the total vehicles damaged will be more severe than we saw in either of those cases," Smoke says, adding that 300,000 is "a fairly conservative estimate" and that 500,000 is "clearly plausible."
Another 366,000 new vehicles stored on dealership lots were probably "affected," with about 150,000 to 200,000 of those cars and trucks located in the hardest-hit areas, Jessica Caldwell, an analyst for car-buying website Edmunds, estimates.
Black Book says more than 500 dealerships in the Houston area were affected. That included all 17 stores owned by AutoNation, the largest dealership network in the U.S., which reopened its locations Thursday.
Black Book estimates the number of vehicles that must be replaced at 500,000 to one million.
For victims of the disaster, auto insurance checks won't take long to start arriving. Auto sales in the region will likely start accelerating by late September or early October, says Chris Hopson, an auto analyst with IHS Markit, a research firm.
But in the short term, U.S. auto sales will take a hit. Automakers likely sold tens of thousands fewer vehicles than expected because of the storm, according to several estimates. The Harvey region represents about 30% to 40% of Texas sales, which account for up to 9% of U.S. sales, according to Barclays.
"We have a whole week in August where we're not going to see sales in the Houston area," Hopson says.
But the disaster will likely boost auto sales in the fall, with a particular increase in pickup trucks and SUVs because Houston is one of the nation's biggest buyers of large vehicles.