“Replacement Demand” from Hurricane Harvey Overhyped, Carmageddon Returns to US

Thursday, December 14, 2017
By Paul Martin

by Wolf Richter
Dec 13, 2017

ouston-area auto sales rise, but not nearly enough.

The total damage Hurricane Harvey inflicted on parts of Texas, particularly the vast Houston area, may never be fully known. In terms of vehicles, the estimates were all over the place. But one thing is known: Before the flood waters had even begun to recede, the entire industry, was salivating over that huge “replacement demand.”

This would come just in the nick of time, as total new vehicle sales in the US had already fallen by about 300,000 units for the year through July, despite record incentives, historically low interest rates, and muscular all-encompassing marketing. The industry’s elements on Wall Street propagated the idea that post-Harvey “replacement demand” would boost auto sales in 2017, turn the year around, and possibly create another record year, with more booming sales in 2018.

The estimates I have come across at the time ranged from 300,000 vehicles at the low end to over 600,000 vehicles that would need to be replaced. Much of this replacement demand would occur over the remaining months in 2017 and early 2018. These sales would be so big that they would boost US sales overall to new highs.

But now the first real numbers are emerging. Turns out even the low-end estimates of replacement demand were too high, and all that salivation over the projected sales boom based on the larger estimates was wasted. Harvey-based sales increases of new vehicles are real, but they won’t be able to pull out 2017 unit sales.

The Rest…HERE

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