Published October 31, 2012
Auto sales in the Northeast are sure to take a hit in the immediate aftermath of superstorm Sandy, but many dealers will do just fine in the long run.
The National Automobile Dealers Association (NADA) says it’s too early to determine the full extent of the damage suffered by stores in the region due to communications outages, but it’s clear that hundreds of outlets were affected by the storm to some degree.
Most dealers have a contingency plan to protect their stock in the event of a major weather event, which usually involve moving vehicles inside or to a safer off-site location where they can ride it out. In the aftermath of previous storms, some have gone as far as to relocate their entire businesses to higher ground to avoid flooding.
NADA Chief Economist Paul Taylor says hurricane Irene was a big wake up call for many dealers in 2011, and as a result they are better prepared than they were before then. Nevertheless, lingering power outages can keep even undamaged stores out of business for days.
And which days they are can be very important. TrueCar.com chief analyst Jesse Toporak points out that Sandy struck at precisely the worst time, as the last few days of each month are usually the best for sales. Some dealers do as much as 15 percent of their business on just the last day of each month as the look to clear out inventory with special offers. The Northeast is responsible for more than 20 percent of sales nationwide.
But even though those sales were lost for now, Toporak says that dealers in areas hit by major storms typically see better than average business in the weeks that follow, as customers look to replace and repair their damaged vehicles as soon as possible, often paid for through insurance claims. As a bonus, given the high level of demand, dealers can usually cut back on the incentives the cars would’ve been sold with under normal circumstances.
Taylor says automakers are quick to increase supplies to affected regions when necessary, and even heavily damaged dealerships will go to heroic lengths to reopen for business, squeezing their operations into whatever functional space still remains on their property. Any damaged inventory is covered by the dealer's own insurance policy.
Still, in extreme cases, where a longer than expected cleanup leads to an extended regional economic downturn, automobile dealers face the same difficulties as any other business. In these instances, NADA has an emergency relief fund to help employees who find themselves out of work as a result of these disasters, and has assisted more than 7,700 people in the industry over the past 20 years.
It will likely be several weeks before anyone knows how many will need help this time around.