Navigating the Perfect Storm: Hurricane Helene, the Longshoreman Strike, and Middle East Tensions
The automotive industry is facing a convergence of disruptive events, from natural disasters to geopolitical instability, that could significantly impact the car market. As dealers, suppliers, and consumers alike contend with the aftermath of Hurricane Helene, the longshoreman strike, and the escalating conflict in the Middle East, it’s important to understand how these challenges might play out.
1. The Impact of Hurricane Helene
Hurricane Helene devastated key areas of the Southeast, including parts of Florida, Georgia, the Carolinas, Tennessee, and Virginia. While hurricanes aren’t new to the car market, this one affected a vast region critical to automotive sales. With insurance claims taking weeks to process, we’ll likely see a steady rise in vehicle demand in these markets over the next 60 days as people receive payouts.
Dealers should be aggressive in sourcing inventory through trade-ins and direct purchases from consumers. However, it’s important to remain cautious at auctions, where prices may be inflated due to the hurricane-driven demand surge. I would caution against paying a premium at auction for used cars. Historically, hurricanes have led to over-inflated auction prices that later deteriorated in value. Additionally, rental car companies—which typically defleet their inventory around this time at auction—are holding onto vehicles for hurricane-affected renters, this tightens the market even further. The reduced supply of rental cars could also have a ripple effect on used car availability for dealers and consumers alike.
Additionally, inexpensive used cars under $8,000, especially those under $5,000, will be in high demand. Many people in rural and lower-income areas who lost their cars during the hurricane won’t have the means to buy new or late-model vehicles. Independent used car dealers may need to prioritize sourcing these lower-priced cars, as their value may hold or even increase during this time. For new car dealers these type of trade ins in these markets may be worth more than usual this time of year when customers are trading them and in the wholesale market.
Lastly, infrastructure damage—particularly in rural areas like Western North Carolina—will further affect transportation and car-buying behavior, leading to long-term impacts in these regions.
2. The Longshoreman Strike: A Supply Chain Disruption
The strike that started at East Coast and Gulf ports will have an immediate impact on the flow of new vehicles, OEM and aftermarket parts, particularly those imported from overseas from China, Korea and Japan. Dealers reliant on imported brands may find it difficult to get new cars and parts used in repairing/reconditioning cars. Parts such as body panels and mechanical components could also be in short supply depending on how long the strike goes on for.
Dealers should stay in constant communication with their suppliers to get ahead of these shortages. For parts wholesalers, there may be an opportunity to buy in bulk now, hedging against longer-term shortages. Whether your dealership is an independent or franchise, having a strategy in place for dealing with these supply chain disruptions will be key.
3. Middle East Escalation: Fuel Prices and Economic Uncertainty
The conflict between Iran and Israel adds another layer of uncertainty. The most immediate concern will be fuel prices. While a small increase in gas prices may not impact consumer behavior too much, if the conflict worsens and oil supplies are disrupted, we could see prices at the pump soar.
Historically, when gas prices have spiked, consumers have quickly shifted away from larger vehicles like trucks and SUVs and moved toward more fuel-efficient options, such as EVs, hybrids, and smaller cars. Dealers should be prepared for this potential shift in consumer preferences, particularly if gas prices rise sharply.
A major war in the Middle East could also trigger broader economic challenges, especially with inflation already high. When people start struggling with essentials like gas and groceries, confidence in making large purchases like cars diminishes. Add to that the longshoreman strike and the election, and we have a perfect storm that could lead to severe inflation and hesitancy in consumer spending.
4. Election Uncertainty
With the U.S. presidential election just six weeks away, many consumers may be hesitant to make large financial commitments. Those who lost their vehicles in the hurricane will still need to buy, but for everyone else, the election uncertainty—especially if it becomes contested—could cause delays in spending. We may not know the results for weeks or even months, and that kind of uncertainty could weigh heavily on the market.
Conclusion: How to Approach the Coming Months
Ultimately, the decisions dealers make over the next few months will come down to risk tolerance. Some may choose a more conservative approach, holding back and waiting to see how things play out. Others may seize opportunities to be aggressive, hedging by acquiring inventory and parts where they can.
Now is the time to consider all these factors and be ready to adapt. Keep an eye on consumer behavior, stay close to your market data, and be prepared to adjust your strategy as things evolve. Whether you choose to stay cautious or go all-in, having a clear plan will be key.
My Ultimate Advice
Given the volatility in the market, I would advise dealers to be conservative with major expenditures for the remainder of the year. Hold off on big investments unless absolutely necessary, and focus on maintaining liquidity and flexibility during this period of uncertainty.
However, dealers should also be ready for potential opportunities. If the used car market suddenly deteriorates and prices drop, don’t be afraid to pull the trigger and buy inventory—provided you’re well-capitalized and can make quick decisions. I’ve seen this play out before, and those who were ready to act benefited greatly from market swings.
Both public and large private companies often can’t move as quickly as smaller, independent dealers. If you’re a smaller or more nimble dealership, ensure you have the authority and ability to act fast when the market presents an opportunity. The same goes for parts—if you see an opportunity to buy in bulk and hedge against shortages, do so now.
Finally, keep in mind that many customers affected by Hurricane Helene have lost everything. These are people who aren’t coming to your dealership because they want to, but because they have to. As dealers, it’s our responsibility to treat these individuals with care and compassion, helping them navigate one of the most challenging times of their lives. Let’s ensure we’re providing the best possible service, not just making a sale.
