Many East Coast dealers expect a sales surge
A quarter-million cars will be replaced -- but when?
Many East Coast dealers affected by Hurricane Sandy expect sales and service business to increase significantly as soon as this week.
The Federal Emergency Management Agency "is already on the ground declaring vehicles totaled and cutting checks; the insurance carriers are cutting checks," said Jim Appleton, president of the New Jersey Coalition of Automotive Retailers in Trenton. "The day after the storm, I heard from dealers who had customers in their showrooms saying, 'I can't wait. I need a car now because a tree fell on my car.'"
But others warn: Not so fast.
An industry analyst at Urban Science who studies how car sales are affected after natural disasters says it typically takes a month after a disaster before pent-up demand leads to big sales spikes.
Still, many dealers in the affected region say they will be operational by Monday, Nov. 12, and urge manufacturers to be ready to deliver new vehicles because displaced residents are eager to replace totaled cars.
"We need to make sure the manufacturers are looking at this region and directing or redirecting products to this area," Appleton said.
Some of the major manufacturers will have to scrap about 15,000 new vehicles destroyed by the storm, according to the National Automobile Dealers Association. NADA estimates as many as 250,000 vehicles already in operation will have to be replaced -- about a third as many as were replaced after Hurricane Katrina.
Penske Automotive Group Inc., the No. 2 U.S. auto retailer, had 36 of its East Coast stores affected by Sandy, including the loss of about 1,000 new and used vehicles. It lost three to four days of business as a result, but the group has been working directly with manufacturers "to ensure we get replacement inventory at some point and those OEM's are working very hard to get us replacement product as soon as possible," Penske spokesman Tony Pordon wrote in an e-mail.
Pordon said Penske will move some vehicles from its stores in surrounding markets to supplement the lost inventory in the affected stores.
Sandy, which struck the East Coast Oct. 29, particularly devastated parts of New York and New Jersey and left hundreds of dealerships without electricity and thousands of vehicles damaged or destroyed. Then a Nor'easter hit the region last Wednesday, dumping about 9 inches of snow on portions of north Ocean County and Monmouth County in New Jersey, Appleton said. Those counties are southwest of New York City. At least a dozen dealerships there were again without power, Appleton said, as of last Thursday.
Stressed to the max
About 3,500 new vehicles are sold each day in New York City, on Long Island and in northern New Jersey, said Mitch Phillips, Urban Science's global practice director of network solutions in Detroit.
The exact number of dealerships affected by the storm is unclear, but Appleton says at least 515 dealerships in the state of New Jersey were affected to some extent -- from minor power outages all the way to serious property damage and destroyed inventory.
Based on sales history following other natural disasters, Phillips said, sales in the region will decline over the next month then likely hit historically high levels for about three months before leveling off and returning to normal levels over the following 18 months.
Business can't return soon enough for Lincoln and Suzuki dealer Peter Spina.
Spina has received 50 to 60 phone calls a day since Oct. 30 from customers asking whether he's open and can service their damaged vehicles or provide loaner cars. Spina, who owns Lincoln of Wayne in Wayne, N.J., has had to turn them away because his store remained closed without power until last Friday.
"The customers are very cordial, but if it's an emergency they're going to go somewhere else," Spina says. "I'm stressed out to the max. I get three hours sleep each night."
Spina suffered no damage to his store or inventory, but each day he remained closed cost him about $60,000 in lost business and expenses, he says.
"That's a lot of money," Spina says.
Last Thursday evening, Spina found a commercial power generator to rent for $1,200 a day, plus about $1,000 a day in fuel.
That allowed him to open his business last Friday for the first time in 11 days. But the generator was being used only to power the most important aspects of the business such as lights, service lifts, phones and computers. There was still no heat.
"I hope we're up soon. It's been a long time," Spina says.
Gaining an advantage
Spina and many other dealers believe they will recoup their losses on pent-up demand.
DCH Auto Group reopened nine of its stores on the East Coast on Nov. 2. Showroom traffic trickled in, but DCH leaders expect that to improve this week.
"There are a lot of people whose vehicles were destroyed by floods," said Roy Bavaro, DCH's director of corporate marketing in South Amboy, N.J. "We're working closely with the manufacturers, and we're developing some financing programs."
DCH is advertising a zero-down-and-no-payments-until-2013 sales initiative on Nissan, Honda and Toyota vehicles, Bavaro said. During the 30-day sales lag, Urban Science's Phillips says, manufacturers can replenish stock, and dealers can study consumers' buying habits to know what they want.
For example, after Hurricane Katrina, consumers shifted their preferences from sedans to pickup trucks for a short period, Phillips said.
"I'm not saying that's going to happen," he said. "But those who pay attention and stock their inventory the way consumers like, watch for changes in taste and are flexible enough to get the desired product in the market, they will gain the advantage."
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