The road to higher Hawaii auto sales in the near future appears rocky, but a new report on the local industry says there are two key positives that might stem a decline.

Hawaii Auto Outlook says in a report due out today that pent-up demand continues to grow, and vehicle prices are poised to move lower when supply chain issues improve.

That would be welcome news to state auto dealers, who saw the number of new-vehicle registrations tumble 14% to 46,529 through the first three quarters of this year, including a drop of 21.7% during the July-September period.

For the year, registrations are now forecast to reach just 53,000, a drop of 8.4% from 57,851 in 2021, because lost production due to the microchip shortage during the year was significantly higher than expected at the beginning of 2022, said Hawaii Auto Outlook Editor Jeff­rey Foltz, who produces the report for the Hawaii Automobile Dealers Association. The year-end forecast is also down from the 55,500 registrations predicted just three months ago in Hawaii Auto Outlook’s second- quarter report.

“There is cause for concern regarding the prospects for the Hawaii new vehicle market,” Foltz wrote. “Supply chain issues continue to limit inventories, inflation is surging, interest rates are moving higher, economic growth has turned negative, and consumer sentiment is weak. It’s a formidable list.”

Foltz, though, says increasing pent-up demand and an improvement in supply chain issues likely will prevent deterioration in current sales rates and should provide a boost when supply issues abate and the economic picture brightens. The report estimates that 24,785 vehicle purchases in the state will have been postponed between 2020 and 2023, representing approximately 43% of sales in an average year.

He added that vehicle prices, which have increased sharply due to supply constraints, can move lower.

“If demand weakens sufficiently, dealers can curtail the practice of selling vehicles at or above list price,” Foltz said. “In addition, manufacturers could easily dial up incentives, which have all but disappeared during the past year. And finally, production can be shifted away from higher margin, fully equipped vehicles to less expensive, lower-content models.”

Foltz said the bottom line is that “these vehicle purchases have not vanished, they are being ‘stored up.’ It’s the proverbial gas in the tank for when fundamentals improve.”

He said the market is almost certain to improve in the fourth quarter of this year due primarily to weak results in the year-earlier period when inventory shortages were acute. Foltz is projecting that new-vehicle registrations will rise 5.3% to 55,800 in 2023.

Through the first nine months of this year, registrations fell 16.3% on Oahu, 12.4% on Maui, 8.7% on Kauai and 5.8% on Hawaii island.

Light trucks, which include vans, SUVs and pickups, remained the vehicles of choice with a year-to-date market share of 78.1% compared with 21.9% for cars.

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. The data is based on county DMV registrations.

Toyota was the bestselling brand in Hawaii during the first three quarters of the year with a 29.3% market share, followed by Honda at 8.9%, Ford at 7.5%, Nissan at 8.3% and Subaru at 5.9%.

The market share for the top-selling models through September were To­yota Tacoma, 8.2%; Toyota 4Runner, 6.3%; Toyota RAV4, 4.0%; Toyota Corolla, 3.2%; and Nissan Frontier and Tesla Model Y, both at 2.3%.

The state continued making progress in electric and hybrid vehicle sales. Hybrid sales rose 8.1% during the first nine months of the year. Electric vehicles increased 7.4% and plug-in hybrids rose 1.9%. Nationally, Hawaii ranks sixth for combined electric and plug-in hybrid vehicle market share at 9.3% behind California (19.1%), Washington (11.6%), Oregon (11.3%), Nevada (10%) and Colorado (9.6%).