Semiconductor shortage may stall state auto sales

The global semiconductor chip shortage is expected to bring Hawaii auto sales to a screeching halt in 2022 after they accelerated this year from a pandemic- induced slowdown.

New-vehicle registrations jumped 32.9% to 46,529 through the first three quarters to exceed 2020’s full-year total and are projected to finish the year up 22% to 56,200, according to a report due out today from Hawaii Auto Outlook. There were 35,006 registrations as of Sept. 30 a year earlier.

That’s quite an improvement from 2020 when statewide auto sales tumbled 19.6% to 46,064 and below auto dealers’ coveted 50,000 registration threshold.

But the momentum is expected to slow in 2022 with sales forecast to inch up just 1.1% to 56,800 under the baseline scenario of the report, which is produced for the Hawaii Automobile Dealers Association.

“The chip shortage and other supply-related bottlenecks have turned the auto industry upside down,” Jeff­rey Foltz, editor of Hawaii Auto Outlook, wrote in the report. “For most of the past 50 years, here’s how it worked: key economic factors would dictate the level of demand in the marketplace, and the manufacturers would produce more than enough vehicles to accommodate demand. Most of the time, supply exceeded demand.”

But he said that hasn’t been the case for the second half of this year, and that the slowdown likely will last well into 2022.

“Demand is significantly higher than supply and sales levels will be determined based on how many vehicles can be produced,” he said. “Pinpointing production volume is a complex puzzle impacted by several interrelated pieces: the chip shortage, COVID- induced labor cutbacks, tight supplies of other key components, and transportation logistics. Even if it was possible to accurately predict production, it’s not feasible to directly link this to state new vehicle sales.”

As a result, Foltz produced three scenarios that cover the remainder of this year as well as next year. Besides his baseline forecasts, his upside projection is for annual registrations to rise 24% this year and 5.3% next year. Foltz’s downside forecast is for annual registrations to increase 20.1% this year and fall 7.2% next year.

But he said there is a silver lining to the recent slowdown in sales.

“Key pillars of demand for new vehicles are bullish,” Foltz said. “Affordability is strong, and consumers have an intense need and desire to purchase new vehicles. The supply-related issues will pull sales well below anticipated levels, but most of these purchases will occur in the future. When supply issues abate, pent-up demand will give a boost to the market for an extended period.”

The state’s four markets posted big increases this year through September as registrations soared 58.2% on Maui, 42.9% on Kauai, 41.5% on Hawaii island and 27.1% on Oahu.

New-vehicle registrations can be representative of auto sales, but the two don’t always align because a buyer can purchase a vehicle one month and register it in another month. The data is based on county Department of Motor Vehicles registrations.

Light trucks (which include vans, SUVs and pickups) maintained its large lead over cars with a 75.1% market share through the first nine months of 2021 versus 24.9% for cars. More consumers are opting for the larger vehicles because of more visibility and additional room for storage, although once-stable gas prices have been rising and were the second-highest in the nation in Hawaii at $4.35 a gallon for regular fuel as of Thursday, according to AAA. Only California was higher at $4.65 a gallon.

Toyota was the bestselling brand in Hawaii through the first three quarters of 2021 with a 25.3% market share, followed by Honda at 14.0%, Nissan at 7.6%, Ford at 6.2% and Tesla at 5.3%. Tesla’s 1.6% gain in market share over the first nine months of the year was the best of any of the brands.

The market share for the top-selling models in the first nine months were To­yota Tacoma, 7.5%; Toyota 4Runner, 4.4%; Toyota RAV4, 3.8%; and the Toyota Corolla and Honda CR-V, 3.3%, both at 3.2%.

As the state transitions away from fossil fuels, the market share of electric vehicles in Hawaii has risen 4.7 share points during the past four years. Through the first three quarters of 2020, electric vehicles encompassed 7.1% of the market compared with 2.4% at the same time in 2017. Hybrid vehicles represented 5.3% of the market share versus 2.8% four years ago, and plug-in hybrids’ market share was 1.5%, compared with 1.0% in same time frame in 2017.