Hurricane Harvey to Leave Thousands Needing Replacement Rentals

While market watchers agree that Hurricane Harvey's impact stretches beyond Houston-area automotive business, estimates on exactly how many vehicles will need to be replaced vary between half a million and million vehicles, including as many as 18,500 fleet vehicles.

Earlier this week, Cox Automotive Chief Economist Jonathan Smoke estimated that the storm, which made landfall along the southeast coastline of Texas on Aug. 25, took out a half a million vehicles. Smoke told Automotive Fleet, commercial, government, and rental fleet losses could be between 11,000 and 18,500.

On Thursday, Black Book analysts said that number could be as a high as a million.

"Black Book expects the impact of the hurricane to have far-reaching effects, not only on Houston-Area automotive businesses, such as dealerships and wholesale auctions, but also throughout the South and Midwest," the company said on Thursday, noting that early reports put the number of dealership impacted in the Greater Houston area at more than 500 stores. "Somewhere between 500,000 and a million vehicles will have to be replaced in the area. We believe there is enough new inventory in the U.S. to supply the consumers' needs and the timing may actually be good with new-car stores looking to deplete the 2017 models at model-year changeover."

Black Book estimates that the rental industry will be affected first with the supply challenge, as thousands of residents will need to find immediate replacement of personal transportation. This entails not only a large quantity but the right mix of vehicles. Work trucks and service vehicles will be in extremely high demand immediately.

Forecasts remain fluid, however, with Harvey coming ashore near the Texas-Louisiana border on Wednesday after swinging out into the Gulf of Mexico. AccuWeather called the storm "the costliest and worst natural disaster in American history," and estimated its impact on the nation's gross domestic product to be $190 billion. The GDP currently stands at $19 trillion.

With Texas being the auto industry's second largest market behind California — the state accounting for 14% of U.S. truck sales — Black Book said the market should be strong for both new and used vehicles, especially pickup trucks and SUVs, in the coming month as residents in the affected areas begin replacing damaged vehicles.

The new-vehicle seasonally adjusted annual rate (SAAR), which has been on the decline this year, should also see a lift.

"Online buying will be a significant ingredient in the dealers' ability to source vehicles since they don't have a local option," Black Book said. "The inventory will come from many other parts of the U.S., with cars and trucks being transported to the effected regions."

Cox Automotive revised its August forecast of 16.6 million SAAR to 16.3 million, noting that between 20,000 and 40,000 new-vehicle sales could be delayed in Texas based on Harvey's impact so far. September is likely to register a mild boost in sales as a result.

"The process will likely last months, pushing higher sales in the region in Q4," read a statement from Cox Automotive's Smoke. "We are looking at impact to full-year SAAR; initial estimates indicate a potential net improvement on full-year sales once replacement sales pick up in earnest."

"Given what we know so far and recognizing that the effects of the flooding are still ongoing, Houston looks bad. Considering Katrina damage and Sandy damage, and comparing vehicles in operation in Houston, and taking into account vehicle dependency and what the damage in Houston looks like from the reporting, we estimated the range to between 300,000 and 500,000," Smoke said. "If Houston indeed lost 300,000 vehicles, it's sobering to note that the entire Houston DMA has seen 325,000 new-vehicle sales in the last 12 months."

Editor's note: Paul Clinton, AutomotiveFleet.com web editor, and Amy Hercher, senior editor of Auto Rental News, contributed to this story.