Tight inventories and COVID-19 restrictions left Hawaii auto dealers spinning their wheels in the third quarter as sales plunged 15.9% amid a struggling economy.

New vehicle registrations are now forecast to end the year off 20%, with the fewest sales since 2012, according to a report due out today from Hawaii Auto Outlook. Auto sales are expected to rebound 6% in 2021, the report said.

“There are some encouraging signs pointing to a recovery in the new vehicle market, but until the virus is no longer a factor, significant economic headwinds are likely to prevent sales from taking off,” Jeffrey Foltz, editor of Hawaii Auto Outlook, wrote in the quarterly report. “Assuming there is not a major spike in the virus that would lead to the recurrence of widespread business closures, the market should move higher next year.”

Foltz, who produced the report for the Hawaii Automobile Dealers Association, said registrations are predicted to remain below 50,000 units for the first time after seven straight years above that threshold. He is forecasting that 45,750 new vehicles will be registered in the state this year compared with 57,323 last year and 44,837 in 2012, the last time registrations dipped below 50,000. His forecast for this year before the pandemic began was for 56,300 vehicles. He is forecasting 48,500 for 2021. He said 17,050 new vehicle purchases will be postponed this year and in 2021, representing about 33% of sales in an average year.

The City and County of Honolulu’s tiered reopening strategy has been tough on auto dealerships because they can have groups of no more than five persons, sales need to be by appointment, remote transactions are encouraged as much as possible, there can be only 50% occupancy in a room and there can be no test drives with the sales agent in the vehicle.

“Dealers, following the federal, state and county guidelines and restrictions, and by taking extra safety precautions, have continued to provide essential services during these very challenging times,” Foltz wrote. “A key factor restricting growth in the new vehicle market in Hawaii has been tight inventories. … This restrictive factor may soon ease. Motor vehicle manufacturers, in adapting to the crisis, are beginning to turn out more new vehicles.”

Hawaii consumers have favored buying used vehicles over new ones this year because they want to save money, are out of work or fearful of losing their job, or due to sparse vehicle inventories. New vehicle registrations were down 21.2% year to date through September, but used vehicle registrations over that same period declined 16.9% and nearly new vehicles (3 years old or newer) were down 16.5%, according to AutoCount data from Experian.

Foltz said four trends should dictate the course of the new vehicle market over the next year: pent-up demand; strong vehicle affordability due to low interest rates; the speed of the economic recovery; and an increased desire for vehicle ownership due to the pandemic. Some people are buying cars to avoid public transportation and ride-hailing services such as Uber or Lyft, but those purchases tend to be used vehicles.

“While restrictions on retail operations have played a greater role in Hawaii than on the mainland, hopefully, the remaining restrictions on Hawaii retail operations may soon be lifted,” Foltz wrote. “With fewer restrictions, the situation on the mainland has been markedly different than Hawaii’s situation.”

Foltz said despite a 16.4% decline in new vehicle sales nationwide, mainland dealership profits have, for the most part, held steady.

“That situation definitely hasn’t been the case for new car dealerships in Hawaii,” he said. “But while many Hawaii auto dealerships are not making any money, they continue to soldier on in an effort to maintain a state economy that will support the battle against the virus.”

NEW vehicle registrations statewide were 35,006 through September compared with 44,433 in the year-earlier period. The pain was felt in all the island markets as they all suffered declines of more than 20%. Maui was down 25.4%, Kauai was off 21.8%, Hawaii island declined 21.2% and Oahu fell 20.5%.

During the third quarter, statewide new vehicle registrations fell to 12,942 from 15,380 in the year-earlier quarter.

While new vehicle registrations can be representative of auto sales, 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.

Toyota was the bestselling brand in Hawaii through the first three quarters with a 25.3% market share, followed by Honda at 13.3%, Nissan at 7.8%, Ford at 7.6% and Chevrolet at 5.2%.

The market share for the top-selling models in the state through September were Toyota Tacoma, 8.1%; Toyota 4Runner, 4.2%; Toyota RAV4, 3.6%; Toyota Corolla, 3.3%; and Honda CR-V, 2.9%.

Light trucks (which include vans, SUVs and pickups) widened their market share in Hawaii over cars during the three quarters of 2020, with 71.4% of consumers opting for the larger vehicles because of more visibility and additional room for storage. That is up from a 63.3% market share in 2017 and 48.7% in 2012. Only 28.6% of auto buyers purchased cars in the January-September period this year.

Electric and hybrid vehicles continue to gain in popularity. Through September the electric vehicle market share was at 4.6% compared with 2.4% over the same period in 2017. The hybrid vehicle share was 3% through the first nine months versus 2.8% in 2017 over the same period.