While the full scope of the destruction wrought by Hurricane Harvey has yet to be tallied, it’s clear that a lot of cars and trucks will be headed to the scrap yard.
In fact, Harvey could set a record for car destruction, according to a CNBC report. Up to 500,000 vehicles could be destroyed, the news network reported, citing data from research firm Cox Automotive. That would be double the amount of cars destroyed by Hurricane Sandy.
After Sandy hit New York and New Jersey in 2012, an estimated 250,000 cars and trucks were scrapped. That included many vehicles stuck at ports waiting to be delivered to dealerships. But while the New York metropolitan area has more residents, Houston as a higher number of vehicles per household, according to CNBC. That means more vehicles were likely in Harvey’s path than Sandy’s.
According to Zero Hedge, Katrina damaged between 500, 000 and 600,000 vehicles. Harvey has caused most of its damage in an area five times as populous as New Orleans and could take out much more vehicles than the 2003 storm. U.S. Automotive industry pricing and market insight source Black Book estimated between 500,000 to a million replacement vehicles will be needed, spanning the Cox Automotive and Zero Hedge figures.
As residents and business search for replacement vehicles, rental companies will be called on to meet the immediate needs, especially for work and service vehicles, according to Black Book. More than 500 dealerships in the greater Houston area alone were impacted by Harvey. Dealerships searching for inventory will make heavy use of online buying resource to track down and arrange transportation for both new and used vehicles.
Updated 9-28-2017 – Sales are getting back to normal and interest in commercial and work vehicles are up dramatically in the wake of Irma and Harvey, as relief workers and first responders continue to race to save lives — and ultimately rebuild from the devastation. According to Jumpstart Automotive Media, the automotive market has reached pre-storm levels in Houston, where buyer interest in midsize pickup trucks increased 26 percent three weeks after Harvey compared to three weeks before the hurricane hit.
In Florida’s Naples to Fort Myers region, the hardest hit by Hurricane Irma, sales recovery has been slower than in Houston so far because Irma hit more recently, but again the interest in mid-sized pickup trucks increased by 21 percent compared to three weeks prior to the storm. Interest in full size and heavy-duty pickups increased in both regions, but at lesser levels than midsize pickups.
Harvey hit at a time when many manufacturers begin to ship 2018 models. This timing may help as dealerships around the country look for ways to offload leftover 2017 inventory.
The sheer size of the Texas market also plays a part in Harvey’s automotive impact. Trailing only California, Texas is the second largest market for vehicle sales in the U.S., according to Black Book. Texas is synonymous with trucks and the Lone Star state accounts for 14 percent of truck sales in America.
The flooding will keep auto insurers busy with claims, while car dealers are expecting a boom in business. Used car values are already close to a record high, according to CNBC. Manheim Auto Auctions, which specializes in used car sales, expects prices to continue climbing over the next couple of weeks, due to restricted supplies.
Meanwhile, the National Insurance Crime Bureau told CNBC that it expects some of the flooded cars to be reconditioned and sold — without buyers realizing it. Selling flood-damaged cars is not illegal, as long as the damage is disclosed on the car’s title. After Hurricane Katrina, thousands of flooded cars with titles that did not denote the damage were sold to unsuspecting buyers.
Buying a flood-damaged car — even a rebuilt one — is a risky proposition. Even if everything visible looks okay, a car that has been submerged in water can hide other faults. Water can damage almost any critical part on a car. It can also collect in hidden areas of the bodywork or structure and cause rust.
Harvey, once a Category 4 hurricane, was downgraded to a tropical depression Wednesday night as it moved away from Texas toward Louisiana and Mississippi, according to The New York Times. Tens of thousands of people in Texas remain in shelters and there have been at least 38 deaths so far, local officials said.
Update: Added information from Zero Hedge and Black Book about Hurricane Katrina and specific impacts on the auto industry.
Original article 9-1-2017 by Stephen Edelstein and Bruce Brown, updated 9-28-2017 by Bruce Brown with information about post-hurricane truck sales and interest-levels in areas devastated by Hurricanes Harvey and Irma.
