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The Honolulu Advertiser

Posted on: Saturday, November 6, 2004

After record high sales, auto market may cool

By Dan Nakaso
Advertiser Staff Writer

New car sales in Hawai'i are expected to reach an all-time high this year, then fall 3.4 percent in 2005, pushed down by high gas prices and "uncomfortably high" consumer debt, according to an independent automotive research firm.

Tom Corvo bought this new BMW X5 SUV in June. He plans to buy another new car for his wife next year, playing out the scenario predicted by Hawai'i dealers that next year won't be a downer for sales.

Eugene Tanner • The Honolulu Advertiser

The forecast by the Hawaii Auto Outlook represented sobering news yesterday for an otherwise jubilant Hawai'i automotive industry expected to sell a record 66,318 new cars this year.

If the forecast by the Hawaii Auto Outlook comes true, Hawai'i's auto dealers would still sell 64,032 new cars next year. The last record sales year was set in 2003, when 62,712 new cars were sold.

Several auto dealers and the Hawaii Automobile Dealers Association yesterday doubted that the expected drop in 2005 sales will be as bleak as forecast.

"Everybody's anticipating that the juggernaut pace of the last few years will taper or slow a bit," said Dave Rolf, executive director of the Hawai'i Auto Dealers Association. "But that would be the first time in the last five years that business would have turned south, if in fact the estimates are correct. ... We feel that anything above 60,000 vehicles is a good year and we anticipate we will still be above that number. That will still be a very strong year for Hawai'i auto sales."

The Hawaii Auto Outlook, an independent market research company, believes that sales will drop next year partly because so many customers have bought new cars in the last few years.

New Car Registrations

2003: 62,712 — 17.6 percent growth from previous year.

2004: 66,318 (estimated) — 5.8 percent growth.

2005: 64,032 (estimated) — 3.4 percent decline.

Source: Hawaii Auto Outlook

"...Very strong sales over the past several years is likely to lead to a mild, cyclical decline," according to the forecast.

But dealers such as Mike McKenna would be surprised to see a 3.4 percent drop.

"I don't see how those numbers will hold true," said McKenna of McKenna Motors Windward Ford and McKenna Motors Windward Volkswagen/Mazda. "We had a hell of a day (Thursday). We sold a lot of units."

Curtis Lee, general manager of Servco's automotive operations, said the outlook's prediction doesn't make sense in Hawai'i's thriving tourism market, surging home sales and expanding construction industry.

"Based upon what we hear from the bank economists, the Hawai'i economy is expected to be strong for the next couple of years," Lee said. "To predict that sales are going to go down in the face of strong economic news, I would tend to believe the numbers would remain the same or go up a small amount because the economy is still very strong."

Servco sells Toyota, Lexus, Suzuki and Chevrolet models. Lexus — in particular — had a 20 percent increase in sales in October, better than any month so far this year.

If there is any change next year, Lee said, high gas prices will probably shift sales toward more fuel-efficient and hybrid vehicles.

"But I think next year will continue to be pretty steady," Lee said.

Tom Corvo, a wholesale mortgage lender at Colorado Federal Savings Bank, bought a new BMW X5 sports utility vehicle for $47,000 in June. According to the Hawaii Auto Outlook, Corvo would be an unlikely candidate to buy a new car next year.

But his wife, Tracy Wright-Corvo, needs a bigger car than her 2003 BMW Z4, two-seat roadster to lug around equipment for her thriving portrait photography business.

So Corvo probably will be looking to buy his wife a bigger BMW next year.

"My business has been good and we forecast the mortgage business to continue to be good," Corvo said. "So I might get her a car next year."

Calvin Shimamoto, a major appliance sales associate at Sears Ala Moana, bought his BMW 530i in April for nearly $50,000.

He's already thinking of trading it in next year.

Shimamoto's last BMW, a 1994 525i, lasted him 10 years. But Shimamoto is already dreaming of the 2005 BMW 5-series.

"I like the looks and some of the new features," Shimamoto said. "I've been known to upgrade after two or three years."

Asked if he might buy another new car next year, Shimamoto said, "It's possible. In fact, it's very possible."

Reach Dan Nakaso at dnakaso@honoluluadvertiser.com or at 525-8085.