Isle auto sales may drop 16.3%
During robust times, vehicle registrations neared 65,000 a year
Auto sales in Hawaii are expected to drop 16.3 percent this year as rising fuel prices and market turmoil have caused a shift in consumer demand, according to the most recent data by Hawaii Auto Outlook Inc
The projections show 48,139 registrations for new autos this year, significantly below an industry benchmark of good health.
"The number that is a comfortable level of sales is 60,000," said Dave Rolf, executive director of the Hawaii Automobile Dealers Association, which commissioned the report from Pennslyvania-based Auto Outlook. "If sales are at that level, the economy will grow at least a comfortable 3 percent rate; however if sales are below that number, growth is not going to be as robust."
In 2003, 2004, and 2005 when Hawaii's economy was still growing, new vehicle registrations were 62,712, 65,882 and 64,363 respectively.
"The best hope for a quick turnaround in the current auto sales slump is a rapid restoration of household financial health," said Jeff Foltz, author of the report.
Unfortunately, rising inflation, a softening labor market and declining net worth are likely to inhibit recovery, Foltz said. And an expected slump in tourism is not likely to help matters, he said.
"Given the unprecedented level of uncertainty in the economy and the auto industry, putting an exact number on Hawaii new vehicle sales in 2009 is very difficult," Foltz said. "At this point, it would appear that the market will fall further, but the rate of decline should be smaller than this year. An increase is possible in 2010."
For now, Auto Outlook predicts the big three brands (Chrysler, Ford and GM) will take the largest hit in Hawaii, losing 23.7 percent of market share. Sales of trucks, minivans, and SUVs will also drop 22 percent, with sales of Korean brands falling 19.7 percent; Japanese brands falling 14.1 percent; and European brands falling 11.3 percent.
Mike McKenna, owner of McKenna Hawaii, said Hawaii's auto industry is weathering the worst bottom that he has ever seen in nearly 50 years.
"Business sucks. It's horrible," said McKenna, who has been forced to lay off 25 employees in the last three months and has closed his Kona and Kailua locations in the past year.
"For a customer to buy a car today is the best bargain that he'll ever get in his entire life," McKenna said. "We have to move the inventory. The landlord doesn't wait."
According to Auto Outlook, no Hawaii vehicles will see growth in 2008. Standard car sales are projected to fall 8.8 percent, the least of any category.
"The recent surge in gas prices, combined with a well-founded belief that higher prices are here to stay, have fostered a revolutionary transition in demand away from larger trucks and toward smaller cars," Foltz said.
While many Hawaii car dealers have suffered as a result of this transitioning, Mini Hawaii experienced a 41.1 percent year-to-date increase through July, said Darrel Pestana, the company's new car sales manager.
"As far as the Hawaii market, there is more awareness from folks that are looking for that fuel economy vehicle," Pestana said.
While the MINI cooper, which is manufactured in Oxford, England, is not a hybrid vehicle, customers like the fact that it gets 37 miles to the gallon, he said.