||Superstorm's Impact on Auto Sales is Expected to be Brief
Insurance checks cut in November and December are expected to help automakers and dealers more than make up for the sales that Hurricane Sandy wiped out at the end of October.
Many dealers in New York and New Jersey remained closed through the weekend as cleanup and power-restoration efforts slowly progressed. But when the lights come back, so will customers, analysts and auto executives said.
"What we have learned historically from these tragic events is that obviously sales are postponed, and these sales come back relatively quickly," said Ken Czubay, Ford's head of U.S. sales and marketing. "After insurance comes in, people use those proceeds to buy new vehicles."
Ultimately the storm should have a short-lived impact on the auto industry, which stayed on track elsewhere in the country last month and appears headed toward a strong end to the year.
The government's latest employment report showed some improvement in the economy, and the Conference Board's consumer-confidence index rose last week to the highest level since February 2008. Tuesday's presidential election -- regardless of who won -- also could reduce some of the uncertainty consumers have been feeling.
"Hurricane Sandy may have put a crimp in sales, but consumer confidence and personal income are both climbing," Cody Lusk, president of the American International Automobile Dealers Association, said in a statement. "That's good news for auto dealers and the communities they support."
New-vehicle sales rose 7 percent in October, with Sandy cutting deliveries by 20,000 to 30,000 units, according to most estimates. Hyundai posted a 4 percent drop, its first decline in more than two years, and Nissan North America, which relies heavily on sales in the Northeast, reported a 3 percent drop.
The seasonally adjusted annualized selling rate fell to 14.3 million, from 14.9 million in September, but analysts said the storm, which hit in the always-important last week of the month, accounted for nearly all of the decline.
"While November is likely to get off to a slower start," Ryan Brinkman, an analyst with J.P. Morgan in New York, wrote in a report for clients last week, "we estimate auto sales likely will return to normal by month-end, and may even track stronger medium-term, as consumers return to the showrooms and some consumers look to replace damaged vehicles."
Some automakers responded by creating incentive programs targeted at consumers in Sandy's path.
General Motors, Ford Motor Co. and Chrysler Group will give $500 rebates through Jan. 2 to buyers whose vehicles were damaged. Nissan is offering employee pricing and discounted financing to storm victims.
Toyota buyers in the region can have their payments deferred for 90 days, a deal that could help people who need a new vehicle immediately to shop before their insurance claim is settled.
Edmunds.com said about 17 percent of October sales typically occur on the last three days of the month; Sandy struck Oct. 29, though showroom traffic in the Northeast slowed a few days before that as people in the area either began evacuating or gathered supplies.
Edmunds said the area affected by the storm accounts for about 20 percent of national sales, adding that import and luxury brands took the biggest hit.
Joseph Spak, an analyst with RBC Capital Markets in New York, estimated that the number of vehicles that have to be replaced as a result of Sandy could surpass the roughly 640,000 scrapped after Hurricane Katrina, which devastated the Gulf of Mexico coastline in 2005.
Many consumers who need a new vehicle will focus on the used-vehicle market. But high prices and low availability of desirable used cars -- factors undoubtedly exacerbated by storm damage -- and cheap, widely available financing could make new vehicles more attractive to many, said Jessica Caldwell, a senior analyst with Edmunds.
"For these folks who weren't planning on (car shopping), it's at least going to be an easier time getting a loan than it has been in the past," Caldwell said.
The top priority is getting dealerships back in business. In Denville, N.J., Salerno Duane Infiniti relocated employees to an affiliated Buick-GMC store a few miles away because the Infiniti showroom was still dark as of Friday.
"The biggest issue is there's no electricity," said Jorge Rodriguez, general manager of the Infiniti dealership, which was mostly responding to service requests out of its temporary home. "There's nothing we can do to get our business up and running without power."
Dealers who were able to reopen soon after Sandy swept through were already making sales.
"On Tuesday we had two customers whose cars were totaled by falling trees," said Joel Avery, general manager of Acura of Peabody in Peabody, Mass., about 3 miles inland from the Port of Salem. "We sold them new Acuras."
(Source: Automotive News, 11/05/12)
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