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Houston Area Auto Dealers Reeling in Wake of Hurricane Harvey

Storms and flooding will provide short-term economic boost.

by on Aug.31, 2017

AutoNation CEO Mike Jackson said 17 company dealerships are shut down due to Harvey and he's unsure when they'll reopen. Photo credit: CNBC.

Houston is the fourth-largest city in the U.S. and one of the largest markets for new vehicles so when it’s shut down by a massive hurricane and record rainfall it’s a big deal for the car business.

Fiat Chrysler, General Motors and Hyundai are already offering modest discounts on new vehicles purchased as replacements for cars, trucks and utility vehicles wrecked by the storm or floods.

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The discounts range from $500 to $750 but it’s not clear that that dealers around Houston are ready to handle the post-hurricane traffic just yet.

Dean Crutchfield, executive vice president and chief information of CDK Global, said his company is helping Houston auto dealers get back online. But he still doesn’t have a complete count of the number of Houston-area automotive retailers that suffered some sort of disruption.

(Hurricane Harvey hammers auto industry, motorists across the U.S. For the story, Click Here.)

More than 100 dealer groups with 350 stores have reached out to CDK, which provides data services to automobile dealers around the country, he said. “If they have access to internet we can help them get back online,” he said.

But dealers still face a variety other challenges even if the dealerships aren’t actually in flooded areas, ranging blocked roads that prevent traffic from reaching dealership to employees unable to come to work because of the havoc created by the storm, Crutchfield said.

Experts believe Harvey will have destroyed twice as many vehicles as Superstorm Sandy.

As of now, there still isn’t an accurate count of the amount of inventory lost to the storms, he said.

AutoNation’s Chief Executive Mike Jackson told CNBC on Tuesday that 17 of the company’s dealerships were closed in the wake of Hurricane Harvey and that he did not know when they would reopen.

(Click Here for details on how to avoid buying a flood-damaged car.)

However, there is also a potential upside for the dealers who do get up and running. Demand for new vehicles is expected to jump in the aftermath of the storm. The rebuilding effort that follows hurricane usually provides a one-time economic stimulus to the local economy that can last for months.

In addition, the storm literally struck deep into the heart Texas as impact was felt in 150 counties in across East Texas that contain about 46% of the state’s population.

The good news is that car sales are often postponed during a storm but never wiped out completely. Unlike in the case of a canceled airline flight where the revenue is lost, car sales are recoverable.

Overall, the Houston metropolitan area, with a population of 6.5 million, contains nearly five times the number of people as the New Orleans metropolitan area and Houston has more than five times as many jobs as New Orleans, which amplifies the magnitude of Hurricane Harvey’s economic impact.

(To see how automakers are moving to help hard-hit Houston, Click Here.)

By one estimate, Houston’s local gross domestic product topped $503 billion in 2016.

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