Economists actually thought car sales would be flat in August. The Econoday consensus was 16.7 million units at a seasonally adjusted annualized rate. Instead, sales plunged to 16.1 million units.
Unit vehicle sales faded noticeably in August, to a 16.1 million annualized rate from 16.7 million in July. This is the lowest rate since February 2014. Sales of domestic-made vehicles fell to 12.7 million from 13.2 million with imports at 3.5 million from 3.6 million. Sales of both cars and light trucks showed declines. These results point to a sharp August reversal from what were unusually strong vehicle sales in the retail sales report for July.
Hurricane Boost Coming?
Bloomberg reports Nissan Leads Sales Plunge in Mixed Results for U.S. Carmakers
In addition to seeing replacement demand from the heavily vehicle-dependent city of Houston, manufacturers led by Ford Motor Co., General Motors Co. and Fiat Chrysler Automobiles NV are expected to sell more pickups, both to support reconstruction efforts and meet demand from a market that already loves trucks. The shares of the three largest U.S. automakers rallied Friday even as the industrywide sales pace missed estimates.
“We think we will see sales in the area increase pretty quickly and we’re confident that will boost the entire market,” Michelle Krebs, an analyst for Autotrader, said by phone. “It’s a big truck and SUV market already, so we expect sales of those vehicles will be strong.”
To meet replacement demand in Texas, carmakers may have to crank up assembly lines just as they did after Hurricane Sandy hit the New York metro area in 2012, and after Hurricane Katrina battered New Orleans in 2005. Boosting production would be welcome change for a U.S. auto industry that’s been laying off workers at passenger-car plants as demand contracts following a record seven-year growth spurt.
Fiat Chrysler led gains Friday with its stock surging 4.8 percent in New York trading. Shares of Ford and GM rose 2.9 percent and 2.2 percent, respectively.
There is “every indication” that Ford will need to boost production in the wake of Hurricane Harvey, Mark LaNeve, Ford’s vice president of U.S. sales and marketing, said on a conference call Friday. He said the period following Katrina is the best proxy the company has for what may happen next.
“The month or two immediately following were weak, as people were recovering and we were trying to get the dealers back on their feet and backfill inventory,” LaNeve said. “But then we saw a very dramatic snap-back in maybe the 60- to 100-day window following it where consumers and companies were replacing their vehicle needs.”
Vehicle sales rose 49 percent in the New York region the month after Sandy, said Jonathan Smoke, chief economist at Cox, the parent company of car-shopping researchers Kelley Blue Book and Autotrader.
The 300,000 to 500,000 cars and trucks that Houston may have lost likely exceeded the 325,000 new vehicles sold in the region during the last 12 months, he said. By comparison, the New York area lost about 250,000 autos related to its 2012 storm.
As many as 130,000 new autos that were on dealer lots in the Houston area may be scrapped as a result of flooding damage, Matthew Stover, an auto analyst for Susquehanna Financial Group, said in a report Wednesday. The losses may actually turn out to be a silver lining, alleviating concerns about bloated car and truck supply that surged earlier this year to the highest level since 2004.
“Harvey may have solved the industry’s inventory problem,” Joe Spak, an auto analyst for RBC Capital Markets, wrote in note to clients Wednesday.
Buffet has 500,000 Cars Insured in Houston
Despite the upbeat auto assessment, Harvey will be a drag on GDP.
Mike “Mish” Shedlock