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Home>UPDATE: Harvey and Irma won't bail out the auto makers

UPDATE: Harvey and Irma won't bail out the auto makers

UPDATE: Harvey and Irma won't bail out the auto makers


By Andrew Duguay

Sales will rise to replace flooded vehicles, but the bump will be temporary

Hurricanes Harvey and Irma could represent a short-term boon for the auto industry, but any upswing would be short-lived. Most economic indicators point to anemic growth in the long term. Believing that the hurricanes will serve as an economic injection is near-sighted and ignores the economic implications years in the making.

Industry experts are offering a variety of predictions, from full industry-wide slowdown (http://www.businessinsider.com/us-auto-sales-ford-gm-fiat-chrysler-august-2017-9)to positioning the auto industry as an economic "winner" of the storms (http://nymag.com/daily/intelligencer/2017/09/how-harvey-and-irma-will-impact-our-economy.html)due to the cars that will need to be replaced. Experts are even predicting a full-on bounce back for the auto industry (https://www.cnbc.com/2017/08/29/autonation-ceo-expects-snapback-in-car-sales-after-harvey-because-thats-the-american-way.html)in the next six months, balancing a year that is on pace for to experience its first year of declining sales since 2009.

As much as industry leaders want to believe that the need to replace more than 1 million cars from the storms will lead to a bounce back for the industry, the reality is that all of the U.S. auto industry is facing hard times ahead.

The greater challenge for auto makers is not to get caught up in the speculation or any false positives that may be delivered based on cars that will be replaced in the short term. These sales will only serve as a band-aid for an industry that has relied on two many small bandages to fix a much larger wound.

Auto sales in the United States experienced record growth (http://www.businessinsider.com/us-auto-sales-december-2016-2017-1)numbers from 2009-2016. As a result, the industry has now reached the point where opportunities for new customers and new growth have been exhausted; tactics like increasing auto loan length and extending credit to riskier buyers have led to increased rates of delinquency.

As a result, the auto industry has experienced a steady decline since the beginning of this year, and there is reason to believe that sales will continue to drop in 2018.

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