Hurricane Harvey to disrupt US auto market

The destructive effects of Hurricane Harvey will have a massive impact on the US automotive market for months after the emergency is over.

Hurricane Harvey destroyed many vehicles in the Houston area. Image courtesy of US National Guard.
Hurricane Harvey destroyed many vehicles in the Houston area. Image courtesy of US National Guard.

Last month, Hurricane Harvey hit the Gulf Coast of the US, bringing high winds and record rainfalls to the region.

Houston, the fifth largest city in the US, was particularly hard hit, with large portions of the city left underwater following more than a meter of rainfall.

According to preliminary information, between 500,000 and one million automotive vehicles were destroyed by the flooding, including many personal cars, as well as business fleets and even large trucks.

This wide-scale destruction of automobiles will create a massive spike in demand, as the vast majority of these will need to be replaced in the near future.

Such a spike is also historically precedented, with automobile sales increasing by 49% in the month following Hurricane Sandy in 2012.

While this is a tragedy for the people involved, and indeed for the auto-dealers of the region, it may also prove to be a boon the for the wider US car manufacturing industry.

Prior to the hurricane, the US market suffered from a glut of automobiles, driven by a constant rise in new vehicle sales. This drove a large scale price depreciation of used cars, as the market suffered from increasing oversupply.

By suddenly removing close to a million vehicles from this market, combined with a massive regional spike in demand, this oversupply may temporarily come to an end.

Further driving this, the majority of the vehicles destroyed by Harvey were likely insured, meaning that their owners would be unlikely to be bargain-hunting when it comes to finding their replacements.

Manufacturers too could see benefits from the hurricane’s impacts. Texas is home to several large automaking plants, however, they appear to have escaped with only minor disruptions.

With a spike in demand forthcoming, their owners could stand to make significant profits selling replacement vehicles for those not interested in used vehicles.