Nov. 1, 2012 at 2:52 PM ET
Though the industry clearly took a hit, most automakers largely escaped the devastation of Superstorm Sandy in much better shape than the nation’s Eastern Seaboard.
For some manufacturers, October was, in fact, a terrific month, Volkswagen reporting its best U.S. sales in nearly 40 years, while General Motors had its best October since 2007, before the industry’s collapse. Others, however, felt the pinch, Nissan reporting one of the few year-over-year downturns which the Japanese maker clearly blamed on the natural disaster.
Yet other factors played out in October, including political uncertainty that led some buyers to delay a trip to the showroom. Still other shoppers appear to have been encouraged by improving economic news, however.
“It is absolutely a hurt on us,” said Nissan brand general manager Al Castignetti, referring to Superstorm Sandy and the maker’s modest 3.2 percent decline for October.
Like its competitors, Nissan had been looking at a strong month but saw sales start to slide as residents of the East Coast began hunkering down for the duration. Now the maker has to face the prospect of 65 dealers in New Jersey, New York and Connecticut alone closed due to storm damage or the lack of power. Those showrooms normally account for 40 percent of Nissan’s sales in the Northeast, a region that itself contributes 27 percent of the maker’s overall U.S. volume.
But Nissan is by no means alone. Kurt McNeil, sales chief at GM, suggested, “Probably half of our dealers in the State of New Jersey are still without power,” as he spoke with reporters on Thursday.
While the storm’s impact may actually be felt more acutely in November – especially with authorities warning power to much of the reason could take a week or two to fully restore – there may be a positive side for the industry.
Preliminary estimates are that several 100 thousand vehicles were severely damaged or destroyed and will likely need be replaced. In some cases, whole dealerships, as well as a large taxi fleet in Northern NJ, wound up underwater.
“They will need to be replaced,” said Ricky Beggs, vice president of the Black Book, a service that tracks vehicle pricing and availability. He expects to see particularly strong demand, going forward, for the 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.”
But he also warns that the demand created by the superstorm could push up used car prices that have already been floating at or near record levels most of the year, as well as prices for new vehicles.
While Nissan appears to have gone into negative territory because of Sandy, most makers were solidly in the black, from the modest 0.5 percent gain at Ford Motor Co., to the 22 percent surge reported by Volkswagen, the German maker nearing an October record set almost four decades ago when it was still the nation’s dominant import brand.
Other Japanese makers, notably Toyota and Honda, saw a bit of a slowdown from the torrid pace of recent months – Honda up 8.8 percent, Toyota 16 percent -- but that may be more about finally having satisfied pent-up demand caused by Japan’s own natural disaster, the March 2011 earthquake and tsunami leading to severe inventory shortages for that country’s automakers.
Chrysler, on the other hand, was elated at its 10 percent jump which, company officials boasted, marked their 31st month of year-over year sales gains.
GM’s McNeil was optimistic enough to suggest that even with the brief setback from the storm U.S. sales will likely meet or exceed the maker’s most optimistic forecast, about 14.4 million vehicles for all of 2012. Chrysler, meanwhile, said it expects total volume for the year to reach 14.7 million. Despite the storm’s drenching, preliminary data suggest October’s Seasonally Adjust Annual Sales Rate, or SAAR, could come in around 14.9 million.
And that’s after the storm likely cut overall sales for the month by somewhere between 1 percent and 3 percent, or 20,000 to more than 30,000 units, according to an estimate by forecasting firm LMC Automotive.
“We’ll pick up the losses of recent days,” echoed analyst Joe Phillippi, of AutoTrends Consulting, speaking by cellphone from his New Jersey home which is not expected to regain power for as much as two weeks.
Other factors appear to have come into play last month. GM’s McNeil warned that many fleet buyers are “waiting out this period of political uncertainty before they return to the market.”
On the other hand, he pointed to the latest increase in U.S. housing starts, calling that “an inflection point” that will work in the auto industry’s favor. Normally housing and car sales are closely linked. This time, autos have led the national recovery – without the “tailwind” from housing. So, if that industry is also on the upswing, McNeil concluded, it’s even a better reason why “we’re confident the (auto) industry will have a strong fourth quarter and continue growing next year.”