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Stock Analyst Update

Detroit Three Positioned for Harvey Bounce

August auto sales improved versus July.

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Automakers reported U.S. August auto sales that looked slightly better than July despite Hurricane Harvey’s impact at the end of August in Houston. Total sales declined year over year by 1.8%, better than July’s decline of 6.9%, but we calculate a 5.5% decline when adjusting for one extra selling day in August 2017 versus August 2016. The seasonally adjusted annualized selling rate came in at 16.13 million compared with 16.97 million in August 2016. Exact losses from Harvey are not known yet, but we have seen estimates between 200,000 and 1 million vehicles. We see supply shocks having temporary impacts on demand. After a couple months for residents to assess damage and in some cases receive an insurance check, we think the industry will see a surge in sales.

We see the Detroit Three especially well positioned for a Harvey bounce because Texas is by far the largest state for full-size pick-up truck sales often at around 15% of the segment. The Detroit Three last year had about 94% of the full-size pick-up market and 84% of the full-size SUV market. According to the National Automobile Dealers Association, Texas constituted 8.9% of new vehicle registrations. We’ve seen Houston’s mix being between 20%-40% of the state’s sales, so it is possible damaged vehicles in Houston equate to about a full year of sales for the area, if not more.

Ford’s (F) total August deliveries fell by 2.1% year over year while retail fell 2.7% and fleet declined by only 0.2%. Fleet mix increased 40 basis points to 21.8%, but the rental component fell by 230 basis points to just 2.1% of August sales compared with 12.2% for the full year to date. Trucks continue be the main bright spot for Ford’s volume and pricing, with those models up 9.3% including a 15% gain for F-Series. F-Series pricing rose by $3,400 year over year to $45,600 thanks to Super Duty pricing up $5,500 to over $55,000. 

 General Motors' (GM) total sales rose 7.5% year over year while retail channel deliveries grew 4.2%. Chevrolet, which constituted 68% of GM’s retail sales, rose 11.4% in total and 5.9% for retail and had its best retail August sales since 2004. Crossovers continue to thrive with the recently released all-new Equinox’s retail volume up 67% and the larger Traverse’s total volume up 35% while the subcompact Trax rose 17%. The GMC Acadia grew 56% and the Terrain was up 54%. Acadia’s August retail sales were an August record, and GMC’s overall prices year to date reached a record $43,400 due to record Denali penetration.

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David Whiston does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.