Flooding Impacts Auto Market

Automotive recyclers and salvage yards may be deluged by vehicles damaged by the hurricanes that have hit southern states in recent months.

Massive flooding in Houston and surrounding areas hit by Hurricane Harvey caused widespread damage to vehicles.

Cox Automotive estimates that 300,000 to 500,000 cars were damaged, according to a Steel Market Update report on hurricanes’ effects on auto scrap markets. Some vehicles will be repaired while others will be salvaged.

Both repaired and scrapped vehicles impact the salvage yard market. Typically when a vehicle is repaired, recycled parts will be used when a brand new part is not needed. The percentage of recycled parts used increases as vehicles age. For instance, a 4-6-year-old car being repaired uses 59% non-OE parts, including recycled ones.

Cox Automotive estimates that 20 percent of the damaged vehicles will be repaired and that the others will be replaced. This means that around 20 percent of the vehicles will require some recycled parts and that 80 percent of vehicles will be up for auction for salvage yards, which could remove all useable useful parts.

The automotive industry as a whole is expected to take a hit due to the massive number of damaged vehicles that were either at dealerships or warehouses. This means that the people who have damaged cars now also have a tough time getting a new car because the local car dealerships are often impacted the same. The effect will be particularly acute given that Texas is the nation’s second-largest market.

However, it is projected that the industry will end up with positive growth due to the massive number of vehicles that will need to be purchased or repaired. Texans account for 9 percent of the vehicles sold retail in the U.S, according to a Detroit News article on how the auto industry feels Harvey’s impact. They also account for 14 percent of full-size pickup sales.

One Houston-based dealership experienced 700 calls over a few days from people who needed to bring their damaged vehicles in for repair. The automotive industry will likely see a similar boom that happened after Hurricane Sandy hit the Northeast. Car sales spiked 49 percent in the month after Sandy. That surge lasted two months.

Repairs and replacements could continue to drive the industry in fast-growing Houston, which is one of the nation’s largest home-building markets.