As analysts seek to assess auto damages in Florida after Hurricane Irma made landfall over the weekend, damage from Hurricane Harvey is coming into focus.
The latest report from Morgan Stanley predicts Ally Financial and Santander Consumer USA could see earnings declines of 12% to 18%, given their high concentration of vehicle loans in the Houston area.
However, some of that earnings decline is already baked in given that both banks reported down months — in the range of 5% to 10% — before the hurricane even hit.
Furthermore, auto sales are expected to surge in Houston — which is considered the seventh largest market by population in the U.S. and has a vehicle ownership rate of 94.4% — as consumers start to rebuild, according Jonathan Smoke, chief economist at Cox Automotive.
“Sales of new and used vehicles typically fall during the month of a hurricane in impacted areas but then spike in months following,” he previously told Auto Finance News. “New York saw a 49% increase in new vehicle sales in November, the month following Sandy, which came ashore on Oct. 29, 2012. That sales spike lasted two months.”
Early estimates of Irma’s total economic destruction before it made landfall pinned the cost at $100 billion, AccuWeather President Joel Myers said in a statement on Sunday. It’s still unclear how much of that damage will be auto related.
“We estimated that Hurricane Harvey is to be the costliest weather disaster in U.S. history, at $190 billion, or 1 full percentage point of the GDP,” Myers said. “Together, AccuWeather predicts these two disasters amount to 1.5 of a percentage point of the GDP, which will about equal and therefore counter the natural growth of the economy for the period of mid-August through the end of the fourth quarter.”
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