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Auto sales up on a bumpy road to recovery

Vehicle sales across the state rise 1.4 percent -- the first uptick since 2005 -- but dealers still face a steep climb

By Erika Engle

LAST UPDATED: 3:49 a.m. HST, Jul 22, 2010

Hawaii auto sales were up 1.4 percent in the first half of the year compared with the same period last year, and if the trend holds, 2010 will be the first year of growth since 2005.

The Hawaii Auto Outlook said new vehicle registrations totaled 16,562. The report, released yesterday, predicted auto sales will reach 34,362 by the end of the year, up 2.1 percent from last year.

While the news might sound encouraging, the 9.8 percent first-half gain in sales nationwide has left Hawaii sputtering in the mainland's exhaust.

Local dealers also are facing a steep climb back to where they were just five years ago. In 2005, sales were double -- 70,268 -- the projected number for this year.

"I think we're on the way up," said multidealership owner Nick Cutter. "We're in a slow growth period from what I can see in the retail side of the business. It's just going to be a matter of time."

Two factors will accelerate auto sales: more jobs and the return of servicemen and women, Cutter said.

"We need to create employment, as the rest of the nation does," he said. "A big part of our business is overseas in Iraq and Afghanistan. We need that military business."

Hawaii Auto Outlook researcher Jeff Foltz observes that Hawaii's auto sales market is being controlled by two contradictory factors: pent-up demand, which "practically guarantees that new vehicle sales will head higher," and reluctant consumers who have elevated household debt. Drivers considering whether to get a new car have "concerns about job security, weak credit availability, the prospects of higher taxes and uncertain financial markets," Foltz said.

Consumer reluctance will cause the pace of recovery to be "painfully slow," Foltz reported.

A year ago the Hawaii Auto Outlook predicted that 2009 would be the bottom for auto sales statewide. In January the report projected a 2010 bump in sales of 9.7 percent, which now appears to be overly optimistic. The Hawaii Automobile Dealers Association, which sponsors the Auto Outlook, is projecting 3 percent growth this year, said Dave Rolf, HADA executive director.

Rolf said the growth in auto sales is an indication that Hawaii's economy is recovering from the slowdown of recent years.

"Two-thirds of any economy is consumer sales," Rolf said, noting that vehicle sales provide "a really good idea as to how the economy is doing."

Oahu was the only island with a year-on-year increase, at 3.9 percent, in the first half. Other islands were in negative territory with the Big Island leading the way, recording a 9.6 percent decline in registrations, Kauai down 8.5 percent and Maui down 0.6 percent, according to the report prepared by Pennsylvania-based Auto Outlook Inc.

The top-selling brands in Hawaii are Toyota/Scion with market share of 28.3 percent, Honda at 14.2, Nissan at 11.6 and Ford with 7 percent. Lexus and Chevrolet are tied for fifth place with 3.7 percent of the market.

Rolf refers to the 1990s as the "lost decade," when registrations dropped almost steadily from 57,456 in 1989 to 40,673 in 1998. With the exception of a slight dip in 2001, sales rose from 1999 through the 2005 record, and have plummeted each year since.

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