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.
Katrina Experience
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
Why am I suddenly reminded of the Broken Window Fallacy?
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No idea…
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where do you put a half million junked cars?
how long will it take adjusters to get to the cars? We don’t think it’s a total…
Warren Buffett didn’t get super rich by being a soft touch
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gas stations in NJ seem to be doing an ad hoc fundraiser for houston, price spikes and disparities are interesting
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50,000 losses!lol that’s usual buffet spin it postive diatribe,300,000 1 million in vehicles and that’s probably way low,houston to beaumont,corpus christie alone is a few hundred thousand,no one evacuated,everyone stayed
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Local estimate in Houston are one in seven cars flooded. That’s close to a million.
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Those in the market for a used car should proceed with caution. No doubt some of the 325,000 to 500,000 Houston water-damaged cars will end up in other states with magically clean titles. It can take months or years for the water damage to become mechanically apparent. Pay a trusted mechanic to thoroughly inspect the car prior to purchase.
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Remove runners in car or a door panel to be sure. They will not clean the car in these areas. They will even dry and shampoo carpets. True evidence will be in the hidden areas.
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Tips for cursory inspections:
https://www.ericpetersautos.com/2017/09/02/avoid-harry-hooptie/
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Scrapped aĺlowances being offered in Europe to remove old diesel.
VW, GM, Hyundai etc.
Real reason is expected flagging sales IMHO.
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In the UK the schemes (offered by manufacturers) typically allow c.£2,000 for scrapped diesels, suggesting the vehicles eligible are unlikely to be owned by those looking to pay c.£20,000 or much more for a new replacement or even lease same. No doubt a sales revival is a hoped for outcome but the actual schemes may be more about getting good public relations as well as general advertising.
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The title makes me laugh with the word “unexpected” since the worst kept secret is the rising number of days of car supply on dealer lots!
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The stated figure of 16 million is bogus. Remember that a “sale” occurs when the car leaves the factory, not when a future customer signs on the dotted line. So 16 million cars left the factory to languish on dealer lots for 9 months.
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After such a long run we shouldn’t be surprised. The market is saturated and this has been a long time coming.
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From previous MISH posts, dealer inventory is high nationally. Those with inventory will try to sell to dealers in Houston, and not replace that inventory. I doubt a ramp up in production is prudent at this time.
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2018 Implosion followed by QE4, followed by deflationary depression. Buh-bye!
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WHO PAYS for 500,000 new cars?
The old flooded cars will still have car payments.
Are all these people going to walk (or get a bailout) on these laons and then buy a new car?
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15% of TX car owners don’t have car insurance, another 25% don’t have comprehensive so owners will be eating the losses on 1/3 of these 500K flooded cars. Then there are owners who have taken cash out car loans.
The owners need to find their cars and has an insurance adjuster come and do his thing and then wait for payment.
I think Houston busses will be very crowded for quite a while
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Every car in Houston was under water before the flood.
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+1
Shades of Hurricane Sandy. There was a running joke here on the East Coast prior to Sandy landfall. If you needed to get rid of your car (or payment) – and had insurance – just drive it and park it in path of storm. Voila. No more worries.
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“Texas drivers are not required to have comprehensive auto insurance — the type that covers flood and other types of damage. People holding only the legally required insurance — liability coverage for damage done to other people’s cars — will not have valid claims, Mr. Stillwell said.” https://www.nytimes.com/2017/08/31/business/car-insurance-storm.html?mcubz=0
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Funny, guys. A lot of people here pay cash in Houston for cars or we don’t buy until we can. We keep them insured too, those same cars for years and years. But thanks for lumping us with the unfortunates who aren’t able to do that.
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Do you have enough coverage to replace the car you’ve owned for years with a new replacement? Have you checked prices lately? If it’s been a few years since you’ve gone car shopping I’ll bet you’re in for a shock.
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Fortunately, I do. Thanks for asking. I’m very aware. I paid off my home years early too when I realized my eighteen year old was being solicited by all the credit card companies. The signs for what was coming were there for those who bothered to look.
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No doubt that there will be loses not covered by insurance. As to the number of vehicles lost due to storm damage, whether by flooding or other means (trees or parts there of falling on vehicles), there will be a flood of vehicles on the used car market. The usual process is for the insurance companies to set up locations where those vehicles deemed salvaged will be cleaned up and sold to various consignees. The titles of such vehicles will usually bear the words “salvaged vehicle”.
Then there will be those vehicles that are not deemed salvageable and will be assigned to scrap yards for recovery of parts and metals. For those individuals not covered by insurance, salvage or scrap will be their problem. Usually we are talking about much older vehicles that tend to be worth less than five thousand dollars or less. Those vehicles where the loan balances are paid off may also fall into this category. Individuals will eat these loses and I doubt that unless tax regulations permit credit for such loses, it will hurt a good many people.
Finally, those vehicles with high payoff loans against low payout value will present a problem for the owners of such loans, both those who owe and those who are owed. No matter how one looks at the problems, there are no winners. Those who are insured will end up with less than they thought and those who payout the insurance will end up with more loses than they thought.
So what about that auto inventory that has remained unsold for the moment. Some of that was damaged during the flooding and the automakers can’t expect the dealers to bear the brunt of those loses. As for clearing that inventory, remember that most of the vehicles that remain unsold are those that have low demand. The best selling models go first and the rest are warehoused. Many buyers will not be able to replace their high end models because their homes are also damaged. So we cannot count that every one who lost a vehicle will immediately replace it. There will be small business job loses since not every small business will be able, financially, to reopen.
For the auto makers, much of their optimism will be false and many of their projections of increase manufacture inventory will not come to fruition. I would not rush out to buy GM or Ford stock. As for all the rebuilding (rumor has it that the illegals with building skills are rushing the Texas borders anticipating a rapid rebuilding of Houston), that will proceed more slowly. Some of the housing will need to be demolished and the rest in need of various repairs. I suspect that those buildings with slab foundations may be the worst hit. Perimeter pour, assuming the depth of the foundation is not too shallow (under 24 inches) will tend to suffer less damage. What matters is the walls and the extent of water damage. In most cases, sheet rock and insulation will need to be removed to the ceiling level and framing inspected and dried out. Floor coverings will need to be ripped up, most appliances replaced, and electrical wiring exposed for inspection. Essentially, one is renovating the house, not remodeling it, a very big difference and much more expensive.
So while Warren Buffet may be optimistic, I would rather he be assigned to a construction gang and given a hammer and a crowbar. Let him experience first hand what real work is like and see the suffering that never touches him. He can partner with Munger ripping our sheet rock and insulation. They both might become a little more sage about life.
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O/T
Pushing to create an EU constituency
http://www.express.co.uk/news/politics/848559/European-Union-Guy-Verhofstadt-Brexit-France-transnational-vote-European-Parliament
i.e. “EU” taking on nationality status.
No statues… no books… no historical documents? Not sure exactly what this person wrote alongside the photo, but it seems the photo itself was what he was sanctioned for.
http://gatesofvienna.net/2017/08/michael-sturzenberger-six-months-in-prison-for-posting-a-photo-of-hitler-and-the-mufti-on-facebook/
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First people must understand that people who buy the big trucks and SUVs for the most part are over extended. The marketing of the big cars is unbelievable. Why, the profits are higher. Small or compact cars are actually selling and all those cars in the flood area have to be replaced, unless you can live with mold. The gloom and doom and finally maybe the big SUVs, Ford F450s and Silverados will meet their doom. They are too big for highways and cause accidents.
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Reblogged this on World4Justice : NOW! Lobby Forum..
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