Industry Trend Analysis - Quick View: Harvey Will Disrupt Seasonal Demand Patterns - OCT 2017

The Latest: Hurricane Harvey, which hit the US Gulf Coast on August 25, has flooded several major cities in Texas, damaging vehicles already in use and forcing dealerships to close, impacting both the existing fleet and new sales. With the storm ongoing, it is not yet possible to gauge the full extent of the damage, and in turn evaluate the impact on sales and whether it is necessary to revise our current forecast for a 2.9% decline in US light vehicle sales in 2017.

Implications: Texas is the second biggest state for vehicle sales in the country accounting for 9% of total sales in 2016. This means that the closure of dealerships (around 350 closures reported at the time of writing), and damage to their inventories will be felt not only by the dealers themselves but will also be reflected in national sales. On a segment level, the majority of Texas sales are light trucks, which would impact the best performing vehicle segment and also have a more negative effect on margins, which are higher for trucks and SUVs. So far, manufacturing plants in Texas have not reported any problems.

What ' s Next: Similar natural events, such as Hurricane Sandy, saw sales reduced in the month of the storm but then recouped in following months as insurance claims made it possible for consumers to replace their vehicles, leading to a spike in sales. This gives us some idea of how the market's seasonal performance might be impacted, even if the annual total remains the same, but with the strength of Harvey being widely considered unprecedented, there is still an element of uncertainty.

Dealer Income Threatened By Harvey
Top Five States By Dealership Sales 2016
Source: NADA

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