Post-Harvey Houston faces a car crunch

 06 Sep 2017 - 18:35

Post-Harvey Houston faces a car crunch
A forklift moves a car damaged by Hurricane Harvey at a local staging area run by Insurance Auto Auctions Inc, which has launched a major operation to process damaged cars for its insurance company customer base in Houston, Texas, U.S. on September 5, 2017. Reuters/Nick Carey


New York:  As Houston residents contend with flooded homes and lost belongings in the upheaval left in the wake of Hurricane Harvey, many face another urgent priority: getting a new car.

Having a vehicle is a necessity in the sprawling Texas metropolis with few public transportation options.

But as many as a half million cars were washed away or irreparably deluged after the storm dumped a year's worth of water on the city in a matter of days.

Local auto dealerships that survived the storm are reporting brisk business as Harvey's victims seek an essential tool for traversing a city that was built for the automobile and features two massive highway loops that surround the downtown.

"There is a high demand going on now," said Ezequiel Zepeda, a salesman at Houston Direct Auto, a used car company.

Zepeda these days is juggling a torrent of incoming calls and a perpetually full voice mail from residents as well as from workers with non-governmental groups and rescue organizations such as the Red Cross.

"I had a couple come in earlier and both of them bought a vehicle, which doesn't happen often," he told AFP. "I have customers even before I get to work."

Prices of cars have held steady for those already in Zepeda's lot prior to Harvey because many became wet, but did not suffer damage. But Zepeda has boosted prices on many vehicles acquired after the storm due to spiking demand.

More car casualties than Katrina

Major hurricanes like Harvey usually result in numerous car losses, but the toll is expected to be even bigger than other catastrophic storms in recent years.

Appraisal firm Black Book estimates about 500,000 cars will need to be replaced due to Harvey, double the more than the 250,000 hit by Hurricane Sandy in the New York region in 2012, and the 200,000 pummeled by Hurricane Katrina in the Gulf coast in 2005, according to Cox Automotive.

That could give Detroit a boost at a time when the American car industry is feeling the effects of a cooling North American auto boom. But analysts do not expect to see the impact immediately in car industry financials.

"When it does occur, (it) is likely to be greater than was the case with Sandy, because more vehicles are estimated to have been damaged this time around," said Ryan Brinkman, an auto industry analyst at JPMorgan Chase.

Around 150,000 people already have notified insurers of losses, but far more filings are expected, according to the Insurance Council of Texas.

"It might take weeks for victims to be compensated because of the inability to reach or even locate some vehicles," said Mark Hanna, a spokesman for the Insurance Council of Texas, who estimates the total economic impact at $2 billion.

Typical insurance policies allow holders to purchase a small car if their vehicle is damaged in a storm, or receive reimbursement for a rental, Hanna said.

Rental car giant Avis has waived late and extension fees in the hurricane-ravaged area.

"We are moving vehicles into the affected areas as quickly as possible to increase inventory to meet our customers' needs," said Katie McCall, a spokeswoman at Avis Budget Group.

Ford is offering $1,000 rebates for the purchase of new cars.

Some will go without

Unsurprisingly, car purchases are easiest for those buyers who don't need to line up financing, or await an insurance payout.

"If there's a cash deal, I show them the vehicle, they sign the contract and 45 minutes later they walk out the door with the vehicle," said Zepeda.

But some Houstonians will no doubt go carless as they await insurance payouts while putting any available cash into vital home repairs.

"There will be thousands that will be unable to replace their cars immediately," said Andrea French, executive director of TAG Houston, a non-governmental organization that advocates for more public transit solutions.

That could boost the odds that more consumers opt to go into the "black market" of used cars that are not insured, which already accounts for about 15 percent of the Texas market, she said.