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U.S. Auto Market Boosted By Hurricane Replacement Sales

U.S. Auto Market Boosted By Hurricane Replacement Sales

“Do Not Extrapolate”

“In 2018 and 2019, we believe that U.S. auto sales may weaken slightly from their 2017 levels but stay at a relatively healthy 16.8 million-16.9 million”

Hurricane Harvey was a disaster for Houston, but it helped spur U.S. auto sales in September as they zoomed ahead as much as 300,000, spurred on by some victims rushing to replace their vehicles.

“Do Not Extrapolate,” screamed the headline on Morgan Stanley’s report on U.S. car sales in September, which reached an annual rate of 18.6 million.

The argument amongst experts in the U.S. has been over the rate that sales will decline in 2017.

In July Morgan Stanley said U.S. car sales would dive by between 1 million to 4 million annually over the next 3 years, with buyers fearing a credit crunch, falling second hand prices, and worries about early obsolescence. Morgan Stanley then forecast sales of 17.3 million for 2017, falling to 16.4 million in 2018 and dropping to 15 million in 2019 and 2020.

Detroit-based consultancy AlixPartners, then, said sales this year would fall to 16.9 million light vehicles, and dive on down to 15.2 million in 2019.

S&P Global Ratings said in a report published in October that despite a Hurricane Harvey inspired spike, sales this year would now sink to 17.0 million, down from its previous forecast of 17.2 million, a 2.7 per cent fall from 2016.

Weaken slightly
“In 2018 and 2019, we believe that U.S. auto sales may weaken slightly from their 2017 levels but stay at a relatively healthy 16.8 million-16.9 million units annually based on our expectation for steady U.S. GDP growth, housing starts, and gasoline prices,” said S&P Global analyst Nishit Madlani.   

IHS Markit described the reason for September’s spurt like this.

“A perfect mix of hurricane replacement demand, especially in the Houston (area), high incentives, surging fleet sales and available inventory is helped move the pace of light vehicle sales in September to over 18 million for the month. While this strong level of demand isn’t expected to be sustained throughout the fourth quarter, these short-term supports are not likely to drop off in a meaningful way, setting the stage for strong Q4 results,” said IHS Markit’s Christopher Hopson. 


 

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