We have received many inquiries about what we believe the damage due to Hurricane Ian might have been in Florida and the subsequent impact on replacement demand and wholesale prices. Here’s our thinking at this point:
We believe the likely range of severely damaged vehicles that could need replacement is between 30,000 and 70,000 vehicles. As it is still early days in the aftermath of Ian, we recognize that is indeed a large range, so we will consider the mid-point at 50,000 vehicles.
That vehicle-specific impact – 50,000 vehicles – is a fraction of what Hurricane Harvey produced in 2017 when it hit Houston and southeast Texas. In terms of vehicle damage, Harvey remains unchallenged, as estimates for vehicle loss due to Harvey were in excess of 300,000.
Our significantly lower estimates for Hurricane Ian are based on three key assumptions.
- Hurricane Harvey hit one of the most vehicle-dense markets in America. In 2017, Harris County, which includes the city of Houston and is among the most populated areas in the country, had approximately 2,100 vehicles per square mile. By contrast, the footprint impacted by Hurricane Ian has a quarter of that density.
- Hurricane Ian was a relatively fast-moving storm, and the significant property and vehicle damage was principally the result of wind and storm surge, focused mostly on the west coast of Florida. Hurricane Harvey damage, on the other hand, was caused by historic rainfall – 40-inches plus in some areas – that significantly flooded a much larger vehicle-dense area. Hurricane Harvey essentially sat over the Houston metropolitan area for 48-plus hours.
- The impact of Hurricane Harvey was also more of a surprise, which resulted in fewer evacuations. While the exact trajectory of Hurricane Ian was incorrectly forecast – it hit farther south than anticipated, sparing the larger Tampa area – the size and scope of the storm were well publicized ahead of time and larger evacuation efforts were undertaken.
Considering the need for replacement vehicles, we would expect about two-thirds of that activity to happen in October and November, so we would expect a lift in retail vehicle sales (new and used) in the impacted Florida markets of 33,000 units. For the markets in question, that adds about 70% more retail demand against the current retail sales run rate.
With supply of new vehicles very tight, we also expect about 80% of replacements to come from the used market. In normal situations, about 66% would be in used, but new vehicles continue to be harder to get in the current market. That means the upside sales impact will be largest in used, where retail sales demand in Florida could increase by about 75% for a few months. That increase, however, will not noticeably impact national used-vehicle retail sales.
The aftermath of Hurricane Ian will more likely influence wholesale used-vehicle values in October. We expect to see a modest uptick in the non-seasonally adjusted average price at Manheim in October. Our mid-October Manheim Used Vehicle Value Index will be reported on Tuesday, October 18.
Rental demand should also be strong in Florida through the end of the year, putting more pressure on rental car companies to secure rental units in new and used as well.
Jonathan Smoke is the chief economist at Cox Automotive.