Hurricane Harvey May Have Destroyed Half a Million Cars and Trucks in Texas
When the floodwaters recede, new car sales and used car prices are predicted to skyrocket.
As authorities continue to tally the damage and destruction wrought by Hurricane Harvey, the heartbreaking images coming out of southeast Texas have made one thing clear: the record-shattering floodwaters have destroyed a lot of cars and trucks. How many? Upwards of a half a million vehicles.
With over 50 inches of rain falling in some areas around Houston—America's fourth-largest city, population 2.3 million—huge swaths of land are under feet of water. CNBC talked to Cox Automotive, the company behind Autotrader.com and Kelley Blue Book, to get a sense of the storm's immense impact on the automotive industry.
When Hurricane Sandy swept ashore in New Jersey and New York back in 2012, almost 250,000 cars were destroyed by the storm surge. In a sprawling city like Houston, where the majority of residents own a car, Cox Automotive's chief economist Jonathan Smoke told CNBC that number could range between 300,000 and 500,000 totaled vehicles.
To put that number in perspective, just 325,000 new cars were sold across the Houston area in the past 12 months.
As drivers receive insurance checks and rush out to replace their vehicles, the crush of a year's worth of sales compressed into a short window will deplete the region's used car market. With all that demand and relatively little unaffected inventory, prices are sure to jump dramatically—as are the number of flooded cars being cleaned up and secretly resold by unscrupulous dealers.
"It's going to happen, that's inevitable," a spokesman with the National Insurance Crime Bureau said to CNBC. "Look at all those vehicles floating around. There are people who will try to take advantage of the situation. We didn't see this on a huge scale until Hurricane Katrina. Since then the public awareness of the problem is greater, but with thousands of flooded vehicles it's hard to prevent this from happening."
Meanwhile, Houston's more than 500 new car dealerships will be preparing for a huge wave of customers as the region begins the long recovery process. In the two months after Hurricane Sandy, new car sales alone rose by almost 50 percent. But with the crisis still ongoing, it's hard to gauge how many dealerships were flooded out, and how many brand-new, unsold cars were destroyed.
The Drive spoke with Wyatt Wainwright, the president of the Houston Automobile Dealers Association, who sounded remarkably composed despite having just been evacuated from his own home. Of the 175 franchise dealerships in the association, he knew of at least several that were "totally underwater, just gone." The storm's intensity caught a lot of people off guard, he said, and there wasn't much of a chance to move inventory to higher ground.
Based on their locations, he predicted the majority of their members would make it through the disaster relatively unscathed, but added there was no way to know for sure until the floodwaters begin to recede in the second half of the week. But even if the buildings and cars are dry, the problem transforms into a logistical one. It's almost impossible for employees to make it to work right now.
The National Automobile Dealers Association does have an emergency reserve fund for these kinds of situations—though Harvey's scope and scale are beyond anything they've dealt with before—and Wainwright said other regional groups are pouring money into the coffers to help.
Some of their member dealerships are trying to open as early as today with a skeletal staff, but it's clear it won't be business as usual for a long, long time.
"All we can do right now is live hour by hour, minute by minute. If you try to think beyond that, it's exhausting, it's overwhelming," he said.