Auto dealers expect sales to level off in 2018

Hurricane Harvey brought revved-up figures that were welcome as the oil bust lingered

Houston-area auto dealers expect new-vehicle sales to plateau in 2018 after a brief surge by customers replacing cars and trucks damaged in Hurricane Harvey, a spending spree that boosted year-end totals.

Total sales are expected to reach 306,000 vehicles next year, according to the TexAuto Facts Report, published by Sugar Land-based InfoNation. This year, dealers are expected to sell 324,000 vehicles, including about 30,000 Harvey replacements.

The forecast isn’t substantially more than the 2016 total, which plunged by nearly a quarter to roughly 300,000 vehicles in the wake of the energy bust. Crude oil topped $60 a barrel on Friday for the first time since 2015, but InfoNation owner Steve McDowell doesn’t anticipate a near-term uptick in vehicle sales even as the economy steadily recovers.

“I don’t see anything that’s going to change a whole lot in the next year,” he said.

Despite the tepid forecast, area dealers expressed optimism that a few months of above-average business would give way to at least a modest boost at the start of next year. InfoNation estimated that the storm destroyed about 300,000 cars and trucks worth $2.4 billion, and many dealers saw a substantial increase in sales after Harvey.

In September, as drivers rushed to resume their obligations and commutes, retail newvehicle sales in the area soared 61 percent from August and 15 percent year over year. Steven Wolf, president of the Houston Automobile Dealers Association and owner of three local dealerships, said he sold about 350 vehicles in September, twice his monthly average.

The momentum has carried

into December, Wolf said, helped in part by strong incentives and finance options. Manufacturers, faced with sluggish sales nationwide, are working to move this year’s models off the lots by offering steep year-end deals.

“This last week has been really good,” he said.

Harvey-related sales could spill into next year. Area dealers had sold 26,600 replacement vehicles at the end of last month, and InfoNation estimated that they could sell as many as 75,000 replacement vehicles by the end of January.

Many dealers agree, however, that the Harvey rush is mostly over. Rick Maroney, president of the Houston Independent Automobile Dealers Association, said the boost has tapered after providing a welcome break from the lingering effects of the oil bust.

“I don’t really know what would’ve happened this yearend if we hadn’t had the flood,” he said.

He is waiting to see whether auto insurance providers will raise premiums for Houstonarea drivers in the wake of the storm, a move he expects would put additional pressure on sales in the area. Some carriers have already raised rates, he said, and his commercial insurance has also become more expensive.

“That’s not very promising,” he said. “It’s going to have a big impact on people’s decision to buy cars.”

The 2018 forecast, however, spells good news for truck and SUV dealers. Those vehicles claimed a 69.2 percent market share last month, a record and a trend that is expected to continue.

“That means people are buying vehicles that are a little pricier than a passenger car,” McDowell said.

Virgil Skinner, owner of Fort Bend Kia and former chairman of the dealers association, said the utility of trucks and SUVs has driven a shift in demand nationwide.

In Houston, he said, low gasoline prices and the need to navigate hazards like floodwaters has compounded that interest.

Already, he said, manufacturers have responded to the shift by introducing a greater assortment of crossovers and large SUVs. He hopes the annual Houston Auto Show, which will take place at NRG Center on Jan. 24-28 next year, will generate interest in the newest models.

“That should give us a boost,” he said.