Hurricane Harvey has caused massive devastation to Houston and the surrounding area since it made landfall last week, but the used car industry has already experienced some gains as the storm has left hundreds of thousands of cars submerged under water.
Floodwaters cover America’s fourth-largest city, with Harvey already the cause of what will likely amount to over $100 billion of damage. And just one day after President Donald Trump visited Texas, the tropical storm hit land once again on Wednesday. This time it hit southwestern Louisiana, as well the Houston area again.
FEMA, along with countless other groups and individuals, are currently conducting rescue and recovery efforts and seeking to provide food, water, clothing, and housing for those affected by the storm. Almost 200,000 people have already asked FEMA directly for financial assistance.
But the economies of Houston and southwestern Louisiana won’t be halted forever, and one of the first consumer facing industries that could experience a big boost is the used car market.
Roughly half a million vehicles are possibly damaged beyond repair, according to Cox Automotive. Now, car retailers, especially used car dealers, are set to benefit.
"It's supply and demand," chairman of the Houston Automobile Dealers Association, Steven Wolf said on CNBC's "Power Lunch" on Wednesday. "And obviously there's going to be a tremendous demand for vehicles. I think that you're going to see some price pressure on used cars."
Wolf also offered a vote of confidence in auto insurance companies. "The insurance companies are going to step up and do the right thing and get these claims handled quickly.” He noted that companies will "send more people down there to help with the claims."
All of this signals a potential windfall for car dealerships in the area, but also for online car sellers and rental car companies.
Shares of used car giant CarMax (KMX - Free Report) jumped 3.82% on Wednesday, while online car dealer Auto Trader (AUTO - Free Report) climbed 2.49%. The relatively new, online-only used car dealer Carvana Co. (CVNA - Free Report) saw its stock price skyrocket 11.37%. AutoNation (AN - Free Report) , a massive automotive retailer that sells both new and used vehicles mostly in the Sunbelt, shares gained 4.09%.
Rental car industry powers Hertz (HTZ - Free Report) and Avis Budget Group (CAR - Free Report) shares popped by 6.55% and 4.78%, respectively.
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