How Hurricane Sandy Could Affect Auto Sales
As the East Coast starts to recover from a hurricane that could end up costing more than Katrina, European automakers, whose ports of entry lay in the storm's path, are still assessing damage. The Port Authority of New York and New Jersey closed all shipping facilities late Sunday night; as of this writing, they remain closed.
A few days' closure could create momentary supply shortfalls for many European automakers. A study released last October for the Port Authority found its ports alone handled more than 738,000 vehicle shipments in 2010. Ports from Boston to Baltimore represent entry points for automakers, from Subaru to Volvo. Most involve European brands, which largely send their vehicles here. Through the first nine months of 2012, about two-thirds of European auto sales were brought to North America, according to Automotive News data.
A few days of port closures could disrupt dealership supply, especially as European automakers keep it tight. Audi, BMW, Mini and Porsche dealerships all began October with fewer than 40 days' supply of cars, according to Automotive News. Mercedes-Benz dealerships had 44 days, but only Volkswagen (91 days) and Volvo (81 days) began the month above the industry's 58-day average.
"We typically ship cars to dealers within days of them arriving at the port," BMW spokesman Tom Plucinsky said. "All our facilities have been closed for the last two days, so it's too early to say what the effects of the storm are on our inventory."
With several days' lead-up to Sandy, early shipments could mitigate supply issues. Steve McDonald, a Chicago-area Mini dealer, said "everything shipped" before the storm, "so there wasn't much sitting at the port."
Audi spokesman John Schilling said the brand ships cars for the northeast into Davisville, R.I. The port closed Monday and reopened Tuesday, and Audi received no reports of vehicle damage.
"Short term, we’ve seen disruptions from power outages and customers postponing deliveries, as might be expected," Schilling said. "Longer term, we are still assessing what, if any, impact that Hurricane Sandy might have caused."
Volvo ships cars into Newark, N.J., as well as Baltimore and Southern California. "We're not sure when normal shipping will resume back into Port Newark as the power is still out," spokeswoman Laura Venezia said.
What about cars damaged at dealerships? The National Automobile Dealers Association told Cars.com that the 12 states affected by Hurricane Sandy are home to 4,750 new-car dealerships. Ford Chief Financial Officer Bob Shanks told Bloomberg TV that as many as 800 Ford dealerships affected by Sandy remain closed, but most were able to shelter their cars.
Update: Image above via Hyundai's Twitter account: @Hyundai "Our hearts go out to #Sandy victims. Our dealers also hit hard by the destruction, such as this fire in NYC. ^jfk"
"The reports that we've gotten, and maybe it's a bit anecdotal at this point, is that there was a lot of advanced warning about the storm coming," Shanks said. "Many of the dealers that had their facilities that were in exposed areas actually, several days ago, started moving inventory away from the risk of the storm."
In the long run, sales could spike back up as people need to replace storm-damaged cars. Pete DeLongchamps, vice president at Group 1 Automotive, which owns 121 dealers in 15 states and the United Kingdom, told Automotive News a "significant spike" came in Gulf Coast auto sales after Hurricane Katrina once shoppers received insurance payments. But he cautioned that every storm can be different.
Katrina and Sandy hit very different cross-sections of America, for one. Census estimates pegged median household income in Louisiana at $40,658 in 2011. In New Jersey, it was $62,338. East Coast drivers have more cash – but in some areas, they may need their cars more.
"If you have a car in this area, it's probably because you have to have a car," IHS analyst Rebecca Lindland told Cars.com. "It's very inconvenient in Manhattan and in the boroughs to have a car. People don’t tend to have a car just for convenience, because it's really inconvenient. They tend to have a car because they have to. So that's going to drive replacement demand."
There's a flip side, though. The storm may prevent potential trade-ins, especially if drivers need to spend the money fixing a damaged roof or flooded basement.
"There's going to be just as many people … who may have been in the market who say, 'I can't replace my car because now I have to pay my insurance deductible,' " Lindland said. "It's not only too soon to tell, [but] we won't really know why somebody didn't buy a car in October or did buy a car in November."