Floods, falling trees, and the disruption of what’s normally a hot end-of-the-month period for car dealerships will all affect auto sales going forward. So will new Sandy-related incentives from car manufacturers.
Ford, GM, and Toyota have all announced new programs to help Hurricane Sandy victims (and simultaneously boost sales), according to InsideLine. Ford and GM are offering $500 discounts, while Toyota has launched an initiative in which customers can get payment extensions and lease-deferred payments on their vehicles. The three automakers are following in the footsteps of Nissan, which on November 1 started offering employee pricing and discounted financing to Sandy victims.
As it turns out, Nissan appears to be especially in need of some help selling cars. The automaker sold 79,685 new vehicles last month, down 3.2% compared to October of last year. Some of the decline is being attributed to the Superstorm that walloped the Northeast, reports the Tennessean:
Nissan Division vice president Al Castignetti said October “ended on a down note” due to disruptions caused by Hurricane Sandy. Nissan has more than 225 dealers in the Northeast, its strongest performing region.
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All major automakers have felt the impact of Sandy. Thousands of East Coast car dealerships had to shut down for days during the key end-of-the-month sales period, and many remain shut. Many dealers are also in the process of assessing storm damage to showrooms and vehicles on low-lying lots. According to the Detroit Free Press, 25% of Volkswagen of America dealerships say they were affected by Hurricane Sandy.
Even so, for the month as a whole many automakers posted decent sales figures, all things considered. Compared to October 2011, sales were up 22.4% for Volkswagen, 15.8% for Toyota, 10% for Chrysler, 8.8% for Honda, and 4.7% for GM. Sales of Nissan’s flagship brand decreased by 6%, while its Infiniti brand boasted an impressive increase of 27.6%.
“Sandy hit the Northeast region, which typically accounts for 25 to 30 percent of all auto sales in the United States, during the last few selling days of the month when sales are typically the strongest,” said Kelley Blue Book analyst Alec Gutierrez, via press release. “Dealers in the Northeast worked tirelessly to get their new-vehicle inventory to higher ground in the days preceding the storm, limiting sales and hopefully preventing flood damage from the bulk of their inventory. While the storm kept October sales somewhat depressed, the month will close approximately 7 to 8 percent above October 2011.”
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Auto executives tell the Los Angeles Times that car sales should be above average in the aftermath of Sandy:
Ken Czubay, Ford’s sales chief, said any sales lost to the storm will be quickly recaptured. “Typically, after the insurance companies come in, people use that money to buy new vehicles,” he said. This could lead to stronger sales this month and next.
Ricky Beggs, vice president of auto pricing researcher Black Book, explained to NBC News that the increase in demand is likely to be met with an increase in car prices, new and used alike:
“We may be seeing anything from $200 to $600 depending on how much the need is,” he says, adding that there could be especially strong demand for pickups and full-size vans used by contractors and repair crews – not only to replace vehicles damaged by the storm but “because there’ll be demand for services to repair the damages from the storm, so someone who might have had one truck may now need two.”
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Similarly, Dr. Ray Zhou, director of analysis at Edmunds.com, offered his prediction for higher used-car prices in the near future:
“Used vehicle prices will increase $700 to $1,000 in the impacted area short term due to the damages done to dealer inventories and supply chains (trade-ins and local auctions). But this increase should be short term and price should not be dramatically higher for two reasons: (1) dealers can get needed supply from far away (non-affected area) fairly quickly nowadays, and (2) insurance companies are going to pay more for the damaged/destroyed vehicle than a dealer would on a trade. Additionally, some of the new incentives for new vehicles in the impacted region may attract some of the used buyers to the new market.”
All of this suggests a high likelihood that tons of cars will trade hands quickly and furiously during the end-of-year period, and on through early 2013. The situation also increases the possibility of an unsuspecting used-car buyer getting stuck with a car that’s suffered severe water damage—check out Edmunds’ tips to avoid that happening to you.
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Not everyone, however, is confident that the year will end on a high note for auto dealerships. “November sales will likely be reduced by the storm as consumers remain more focused on the recovery than buying a new car,” noted Kelley Blue Book’s Gutierrez. “It is too early to tell if sales will continue to be impacted in the next month. December is typically one of the strongest months of the year as dealers and manufacturers pull out all of the stops to liquidate any remaining previous model-year inventory. If dealerships are not fully up and running by that time, sales will be significantly impacted.”