The 1920s saw the improvement of roads and the linking up of Auckland and the Bay of Plenty with Government railways. As a result, by 1929 the bulk of passenger traffic declined until it became uneconomic for the Company to continue passenger services. The Northern Steam Ship Company was forced to withdraw passenger steamers such as NGAPUHI, MATANGI, CLANSMAN, RARAWA, WAKATERE, NGATIAWA, AUPOURI and APANUI.

All that was left was the cargo service, but the situation worsened with the Depression of the 1930s. Everyone was cutting back, fewer goods were being purchased and production dropped, so the Company's ships had fewer cargoes to carry. By 1931, the Northern Company had eighteen ships laid up and had terminated ten services. Despite the situation the Company still managed to maintain the fleet. In 1934 CLANSMAN II and WAIOTAHI II were purchased. By 1937 the effects of the Depression had lessened and the Company bought a motor-ship RANGINUI. The next year the coaster KAPITI was purchased. By now, the Northern Steam Ship Company was beginning to replace the passenger steamers with motor-vessels.

When the War broke out, the Northern Steam Ship Company played a role in the war effort. The Company's last two passenger ships, HAUITI and KAWAU, were requested by the Navy to serve as examination ships. The RONAKI and TUHOE were sold to the United States Army. The rest of the Company's fleet played a role in providing transport, carrying concrete, heavy machinery and steel for the defence installations.

After World War II the Northern Steam Ship Company decided to change the scope of its operations from the provincial trade routes to inter-island services. As a result the Company found it necessary to employ larger vessels for the longer and inter-island runs. Also changes were made to the Company's operations to make them more streamlined and efficient.