“Non-Price Determinants of Automotive Demand: Restyling Matters Most,” a study by three economists in the VCU School of Business, analyzed secular market share changes in the automobile and light truck submarkets.
Their research revealed that new product, as measured by restyling, represents the dominant determinant of demand in the auto industry. Other factors, such as price, advertising, rebranding, warranty curtailments, new safety appliances and even changes in vehicle reliability, had minimal impact on demand.
“A 10 percent reduction in relative price would yield only one-tenth the market share impact of a restyling,” said Oleg Korenok, assistant professor of economics at VCU and lead author of the study. “And one would have to double one’s relative advertising expenditure to match the impact of a restyling.”
Domestic automotive producers saw their market share fall from 72.9 percent in 1996 to 47.4 percent in 2008. Over the 1995-2006 model years, Japanese manufacturers restyled on average ever third year, while U.S. manufacturers restyled every four years.
Korenok and his co-authors, George Hoffer, professor of economics at VCU, and Edward Millner, professor and chair of the Department of Economics at VCU, argue that “this difference in styling (frequency) better explains the 25.5 percent market share loss for domestic manufacturers over this period than more often cited factors such as reliability differentials as cited by Consumer Reports.”
“Japanese and Korean makes and to a lesser extent European brands have been much more aggressive in restyling and much more aggressive in introducing new products than the U.S. brands,” said Hoffer, who has researched the auto industry for more than 40 years. “Interestingly, the current Detroit Three (General Motors, Ford and Chrysler) used more frequent restylings 50 years ago as a weapon to drive the post-war independent American manufacturers such as Hudson, Kaiser and Packard from the market.”
The study authors say that increased fragmentation of the domestic automobile market and management misallocation of styling resources explain the failure of U.S. manufacturers to restyle more frequently. They said that the Detroit Three’s best hope of regaining market share is to increase the level of restyling activity, especially for high-volume lines. Domestic manufacturers also should be reluctant to jettison established vehicle line names because rebranding has an adverse market share impact.
“Non-Price Determinants of Automotive Demand” has been published on the Journal of Business Research web site -- http://tinyurl.com/ojk5jh -- and will be published in a forthcoming issue.
About VCU and the VCU Medical Center: Virginia Commonwealth University is the largest university in Virginia with national and international rankings in sponsored research. Located on two downtown campuses in Richmond, VCU enrolls 32,000 students in 205 certificate and degree programs in the arts, sciences and humanities. Sixty-five of the programs are unique in Virginia, many of them crossing the disciplines of VCU’s 15 schools and one college. MCV Hospitals and the health sciences schools of Virginia Commonwealth University compose the VCU Medical Center, one of the nation’s leading academic medical centers. For more, see www.vcu.edu.
About the VCU School of Business: Located in Richmond, one of the nation’s best places for business and careers (Forbes, 2008), the VCU School of Business offers a tradition of forward-thinking academic excellence and connection with businesses in our region and around the globe.
Tom Gresham | Newswise Science News
Frugal Innovations: when less is more
19.04.2017 | Fraunhofer-Institut für Arbeitswirtschaft und Organisation IAO
Europe's microtechnology industry is attuned to growth
10.03.2017 | IVAM Fachverband für Mikrotechnik
More and more automobile companies are focusing on body parts made of carbon fiber reinforced plastics (CFRP). However, manufacturing and repair costs must be further reduced in order to make CFRP more economical in use. Together with the Volkswagen AG and five other partners in the project HolQueSt 3D, the Laser Zentrum Hannover e.V. (LZH) has developed laser processes for the automatic trimming, drilling and repair of three-dimensional components.
Automated manufacturing processes are the basis for ultimately establishing the series production of CFRP components. In the project HolQueSt 3D, the LZH has...
Reflecting the structure of composites found in nature and the ancient world, researchers at the University of Illinois at Urbana-Champaign have synthesized thin carbon nanotube (CNT) textiles that exhibit both high electrical conductivity and a level of toughness that is about fifty times higher than copper films, currently used in electronics.
"The structural robustness of thin metal films has significant importance for the reliable operation of smart skin and flexible electronics including...
The nearby, giant radio galaxy M87 hosts a supermassive black hole (BH) and is well-known for its bright jet dominating the spectrum over ten orders of magnitude in frequency. Due to its proximity, jet prominence, and the large black hole mass, M87 is the best laboratory for investigating the formation, acceleration, and collimation of relativistic jets. A research team led by Silke Britzen from the Max Planck Institute for Radio Astronomy in Bonn, Germany, has found strong indication for turbulent processes connecting the accretion disk and the jet of that galaxy providing insights into the longstanding problem of the origin of astrophysical jets.
Supermassive black holes form some of the most enigmatic phenomena in astrophysics. Their enormous energy output is supposed to be generated by the...
The probability to find a certain number of photons inside a laser pulse usually corresponds to a classical distribution of independent events, the so-called...
Microprocessors based on atomically thin materials hold the promise of the evolution of traditional processors as well as new applications in the field of flexible electronics. Now, a TU Wien research team led by Thomas Müller has made a breakthrough in this field as part of an ongoing research project.
Two-dimensional materials, or 2D materials for short, are extremely versatile, although – or often more precisely because – they are made up of just one or a...
28.04.2017 | Event News
20.04.2017 | Event News
18.04.2017 | Event News
28.04.2017 | Medical Engineering
28.04.2017 | Earth Sciences
28.04.2017 | Life Sciences