Fallout from Tropical Storm Harvey is poised to put a dent in August car sales in the U.S., as hundreds of dealers across southeast Texas were forced to close stores and rush to mitigate damage to vehicles parked on their lots.
As many as 350 dealerships throughout the region have closed because of flooding, power outages or other damage from the storm, which hit landfall as a Category 4 hurricane, said Bill Wolters, president of the Texas Automobile Dealers Association. Mr. Wolters, whose group represents about 1,300 dealerships statewide, said he has received several emails from local car retailers that show vehicles partially or completely submerged from flooding the hurricane wrought.
A spokesman for AutoNation Inc., the nation’s largest dealership group, said the company’s 18 Houston-area stores were closed Monday.
Carroll Smith, owner of Monument Chevrolet in Pasadena, Texas, a Houston suburb, closed his dealership Friday just before the storm hit. His employees rushed to move about 200 cars to higher ground on a construction site adjacent to the store.
“I didn’t have any idea it would be this bad,” said Mr. Smith. His store is largely inaccessible from flooded roads and he expects to keep it closed through the weekend, he said.
The area in southeast Texas affected by the storm and resulting flooding accounted for about 5% of U.S. auto sales last year, Citigroup analyst Itay Michaeli estimated in a research note. He and other analysts predicted the seasonally adjusted annual rate of sales in August could slip by 100,000 or more vehicles because of sales lost in the wake of the storm. That would, many analysts said, push the much-watched barometer well below 16.5 million, potentially marking the slowest U.S. sales pace in more than three years.
U.S. car sales have already been showing weakness throughout the year, with analysts predicting sales to plateau at around 17 million annually for the foreseeable future after two consecutive years of record results. Sales have fallen for seven straight months following an unusually strong seven-year run, as potential buyers turn more fickle despite more-generous incentives slapped on vehicles. Those discounts, which dent auto makers’ profits, have recently spread to high-margin pickup trucks and sport-utility vehicles that have garnered strong demand amid low gas prices.
Auto makers are expected to collectively post their first monthly sales increase of 2017 when they report August sales on Friday. But the increase, pegged at around 1 or 2% compared with August 2016, will benefit from an extra selling day this go-round, according to analysts. In addition, on an adjusted basis, the rate of retails sales — those to individual buyers that are a higher-margin business than deliveries to fleet customers such as rental-car companies — is expected to hit its lowest level this year, according to J.D. Power.
The storm’s impact could be magnified because it will hamper car shopping in the final week of the month, when dealers and manufacturers often enhance discounts in a final push to hit monthly sales targets. Discounts have been rising nationally for more than a year. The average incentive is expected to hit an August record of $3,805 per vehicle, J.D. Power estimates, up 4% from a year earlier.
Write to Mike Colias at Mike.Colias@wsj.com and Adrienne Roberts at Adrienne.Roberts@wsj.com