Hurricane Harvey Car Damage Could Near $5 Billion

Experts have provided estimates of the cost of Hurricane Harvey for everything from commercial real estate to lost gross domestic product to increases in construction spending. New research shows that the losses of car values may reach $4.9 billion, a record for any single disaster. However, there is a silver lining to the trouble.

Kelley Blue Book posted its estimate:

As the full impact of Hurricane Harvey comes into focus, the Cox Automotive team has estimated that between 300,000 and 500,000 vehicles in the Houston market alone were severely damaged or destroyed. The impact in terms of vehicle value is estimated to fall between $2.7 billion and $4.9 billion. By measure of vehicle damage, Hurricane Harvey is likely the worst natural disaster in our country’s history.

[nativounit]

These losses may drive up the prices of used cars as the normal supply of vehicles is crippled by a lack of inventory from the southeast Texas and Louisiana markets. Used car prices nationwide are already high. As time passes and the water subsides, tens of thousands of people in the affected areas will need new cars. In a matter of weeks, there should be a surge of activity at new car dealers. Some estimates of this activity suggest it will be substantial enough to measurably help the increase, or erode the decrease, of new car sales for the entire country. It would be a temporary help to manufacturers who have struggled with declining U.S. sales for most of 2017.

One limit to the benefit to car companies is how quickly they can move inventory into the areas badly beaten up by Hurricane Harvey. Presumably, this inventory would need to draw from other areas of the country. This might help manufacturers with unsold inventory, which is measured by months. This has been a problem for several companies, including GM. Manufacturers like Subaru, which make cars that are in great demand and therefore have only modest inventory available, may not benefit at all.

While it is hard to peg the winners and losers among manufacturers in the aftermath of the storm, the industry is about to get an unexpected boost.

[wallst_email_signup]