Wednesday, May 23, 2018
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New car sales slip following Harvey, but Wrangler sales rise

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    Jeeps at the Yark Chrysler Dodge Jeep dealership. New car sales slipped in August for both Fiat Chrysler Automobiles and Ford Motor Co., but General Motors Co. posted a better-than-expected increase.

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    The Toledo-built Wrangler was an exception to the rule at Fiat Chrysler, with sales rising 10 percent to 16,808.

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As many as 500,000 cars have been destroyed in the Houston area by the massive flooding that followed Hurricane Harvey, something that’s likely to create headaches for the insurance industry but should give a boost to automakers as the area begins to rebuild.

“We expect the recovery in vehicle sales to be quick,” said Jonathan Smoke, chief economist at Cox Automotive. “People need transportation to get their lives back in order.”

Right now, though, the industry is itself still sorting through the damage.

The storm, which made landfall Aug. 25, put many Gulf Coast dealers out of commission, helping to sink what had been expected to be a strong month for car sales. Most analysts believed August would come in slightly ahead of last year’s pace — the first month this year in which that would be the case.

It wasn’t to be.

Fiat Chrysler Automobiles said Friday its August sales were down 11 percent, with the Jeep brand posting a 15 percent decline. The Toledo-built Wrangler was one of FCA’s bright spots, though, with sales up 10 percent to 16,808.

Ford Motor Co. and Honda both reported sales slipped more than 2 percent. Nissan, Kia, Hyundai, and Mazda also reported lower year-over-year sales.

There were a few outliers. General Motors Co. reported a stronger-than-expected 7.5 percent increase on a spate of sales to commercial fleets. And Toyota sales jumped 6.8 percent, led by an exceptionally strong month for the Toyota RAV4.

Overall, U.S. new car sales were down about 2 percent compared to last year, according to figures compiled by Autodata Corp.

Experts put the number of purchases delayed or lost because of Hurricane Harvey in the range of 20,000 to 40,000. But even so, there appeared to be other factors at hand.

“Even if you take some of the effects of Harvey, it looks like the sales in August came in soft,” said Jessica Caldwell, an analyst with “Usually you see really aggressive model year end advertising and deals out there. We didn’t really see as much this year.”

Ms. Caldwell noted new car inventories remain high, with a number of 2017 model year vehicle still sitting in dealer stock.

“You just can’t go into 2018 with half the 2017s remaining on dealer lots,” she said. “I think some of the replacement demand in Texas and parts of Louisiana is going to alleviate some inventory issues but probably not 100 percent.”

Still, as those affected by the hurricane begin to put their lives back together, they’re going to need to buy a lot of new vehicles. Mr. Smoke said more vehicles were lost to Harvey than in any other single weather event, dwarfing both Hurricane Katrina and Hurricane Sandy.

It’s somewhat difficult to predict how many people who need to replace the vehicles will buy new and how many will buy used cars, though Mr. Smoke said new cars will likely make up somewhere in the range of 30 percent to 40 percent percent of those lost. The rest will be used, or in the case of older vehicles without comprehensive insurance, not replaced at all.

That’s likely to strengthen used car prices and to get the new car sales pace back on track after a weak June and July. 

“The fundamentals for demand remain strong,” Mr. Smoke said. “The economy has low unemployment and continues to see positive and strong job growth.”

Kelley Blue Book on Friday said it has revised its full-year sales forecast back to approximately 17.1 million vehicles. That had been KBB’s forecast earlier in the year, though the company sliced the prediction to 16.9 million vehicles prior to the storm. 

Last year, automakers sold a record 17.55 million new cars and trucks.

Contact Tyrel Linkhorn at tlinkhorn@theblade.com419-724-6134 or on Twitter @BladeAutoWriter.

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