Experts have agreed that the devastating wildfires have been relentless in sweeping through the nation’s second-largest car market this week, likely resulting in thousands of vehicles being totaled. This will have significant repercussions for both Detroit automakers and car buyers, as the surge in demand to replace destroyed cars is expected to drive prices higher, particularly in the tight inventory of the used car market. Jonathan Banks, general manager of vehicle valuations at J.D. Power, highlighted the potential impact on prices at a national level based on the severity of vehicle losses, drawing parallels to the aftermath of Hurricane Sandy in 2012.
The exact number of vehicles lost in the fires is still unknown, but images show the charred remains of many vehicles. The destruction has been extensive, with over 12,300 structures, including vehicles, being ravaged since the fires began on Jan. 1. The total economic damage is estimated to be in the range of $250 billion to $275 billion. Kevin Roberts from CarGurus pointed out that approximately 25,000 new and used vehicles listed in ZIP codes affected by evacuation orders or warnings in Los Angeles County could be impacted, representing a significant portion of California’s listings, especially in higher-priced vehicle regions.
The impact of the fires is expected to affect vehicle sales in Los Angeles, with a potential decline of 5,000 to 13,000 new vehicle sales for January. However, the Detroit automakers may see an increase in overall sales as some individuals who lost their vehicles opt for new ones. Despite the tragic human element of the situation, there could be a slight upside for the Detroit Three in the aftermath of the fires.
In times like these, we see an increase in car buyers due to people replacing lost vehicles, according to Jominy. However, this surge tends to stabilize after a couple of months. Bob Smith, the executive director of the Greater Los Angeles New Car Dealers Association, mentioned to the Free Press that most franchise car dealerships in Los Angeles are operational, but many dealership employees have lost their homes. The association plans to collaborate with the National Auto Dealers Association, which has a relief fund to support those affected individuals. While there are numerous stories of people impacted by the fires, it is challenging to determine the exact number of cars lost. Smith estimates that there could be between 2,500 to 5,000 vehicles needing replacement. The used car market is predicted to see a rise in demand for replacement vehicles, as most individuals won’t receive insurance payouts immediately after the fires. Despite high prices in the used car market, they are still lower compared to new vehicles. Experts anticipate a shortage in the supply of newer model used cars due to a decrease in lease returns, leading to increased demand and prices. The tight supply has caused an increase in average monthly payments for used cars, prompting buyers to possibly consider vehicles from other states. On the new vehicle side, the outlook is positive, with expectations of a boost in sales for those replacing their destroyed cars with new ones.
Product availability remains strong for new cars, with approximately 3 million vehicles in inventory during the fourth quarter, nearly double the amount from two years ago. Mark Schirmer, from Cox Automotive, mentioned that December saw robust sales, reducing the nation’s new car inventory to 2.88 million vehicles by mid-January. While some vehicles were impacted by the recent fires, the overall supply of replacement vehicles isn’t expected to be overwhelmed.
Automakers like Ford, GM, Honda, and Stellantis are stepping in to assist residents affected by the wildfires. Ford is offering employee pricing and deferred payments, along with significant grants to support relief efforts. GM has activated complimentary OnStar Crisis Assist Services for impacted customers, emphasizing the safety of their employees as a top priority. Honda has increased its donation to relief funds, while Stellantis is providing employee pricing and financial assistance to affected customers.
Efforts are ongoing to support those in need, with automakers playing a crucial role in assisting communities affected by the wildfires in the Los Angeles region.
In the midst of the raging wildfires in Los Angeles, Boeckmann, a compassionate leader, gathered his team for a crucial staff meeting. Their mission? To sift through their extensive customer database, identifying those residing in the affected areas. Their objective was not to push car sales, but rather to extend a helping hand. “If they need a car, I’m happy to give them a car to use for a while,” Boeckmann expressed, emphasizing the spirit of giving over taking.
As the smoke begins to dissipate, both in reality and metaphorically, Smith from the Greater Los Angeles New Car Dealers Association foresees a restoration of mobility for the survivors. The auto industry, with its roots in Detroit and a significant presence in LA, stands ready to provide the necessary means for those in need. “Detroit is the car capital, but LA makes a claim for that title, too, because of how widespread and populated it is. The people who don’t leave will need cars,” Smith affirmed, highlighting the vital role vehicles will play in the rebuilding process.
Amidst the devastation, a glimmer of hope emerges in the form of a well-stocked inventory of new vehicles waiting to meet the demands of the community. Smith anticipates that those determined to rebuild will find a way to secure the transportation they require. In this challenging time, the automotive industry stands as a beacon of support, ready to assist in the recovery efforts.
Contributions to this article came from the skilled pens of Eric D. Lawrence and Jackie Charniga, shedding light on the collaborative efforts within the community during this crisis. Jamie L. LaReau, a seasoned automotive writer focusing on Ford Motor Co., shares insights and updates from the frontlines of the industry. For further engagement with the latest automotive news and developments, readers are encouraged to follow Jamie on Twitter @jlareauan and sign up for the autos newsletter.
In the aftermath of the LA wildfires, a ripple effect is anticipated in the used vehicle market, potentially leading to increased prices in Detroit and beyond. As communities come together to support one another in times of adversity, the automotive industry stands poised to play a pivotal role in rebuilding lives and restoring hope.
This narrative encapsulates the resilience and compassion exhibited by individuals and industries during times of crisis, underscoring the power of unity and empathy in the face of challenges. As the echoes of the wildfires slowly fade, a new chapter of recovery and renewal begins, with the automotive sector at the forefront of driving positive change and restoration.
