“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
Mathematical confirmation: Rewiring financial networks reduces systemic risk
22.06.2017 | International Institute for Applied Systems Analysis (IIASA)
Frugal Innovations: when less is more
19.04.2017 | Fraunhofer-Institut für Arbeitswirtschaft und Organisation IAO
Whether you call it effervescent, fizzy, or sparkling, carbonated water is making a comeback as a beverage. Aside from quenching thirst, researchers at the University of Illinois at Urbana-Champaign have discovered a new use for these "bubbly" concoctions that will have major impact on the manufacturer of the world's thinnest, flattest, and one most useful materials -- graphene.
As graphene's popularity grows as an advanced "wonder" material, the speed and quality at which it can be manufactured will be paramount. With that in mind,...
Physicists at the University of Bonn have managed to create optical hollows and more complex patterns into which the light of a Bose-Einstein condensate flows. The creation of such highly low-loss structures for light is a prerequisite for complex light circuits, such as for quantum information processing for a new generation of computers. The researchers are now presenting their results in the journal Nature Photonics.
Light particles (photons) occur as tiny, indivisible portions. Many thousands of these light portions can be merged to form a single super-photon if they are...
For the first time, scientists have shown that circular RNA is linked to brain function. When a RNA molecule called Cdr1as was deleted from the genome of mice, the animals had problems filtering out unnecessary information – like patients suffering from neuropsychiatric disorders.
While hundreds of circular RNAs (circRNAs) are abundant in mammalian brains, one big question has remained unanswered: What are they actually good for? In the...
An experimental small satellite has successfully collected and delivered data on a key measurement for predicting changes in Earth's climate.
The Radiometer Assessment using Vertically Aligned Nanotubes (RAVAN) CubeSat was launched into low-Earth orbit on Nov. 11, 2016, in order to test new...
A study led by scientists of the Max Planck Institute for the Structure and Dynamics of Matter (MPSD) at the Center for Free-Electron Laser Science in Hamburg presents evidence of the coexistence of superconductivity and “charge-density-waves” in compounds of the poorly-studied family of bismuthates. This observation opens up new perspectives for a deeper understanding of the phenomenon of high-temperature superconductivity, a topic which is at the core of condensed matter research since more than 30 years. The paper by Nicoletti et al has been published in the PNAS.
Since the beginning of the 20th century, superconductivity had been observed in some metals at temperatures only a few degrees above the absolute zero (minus...
16.08.2017 | Event News
04.08.2017 | Event News
26.07.2017 | Event News
18.08.2017 | Life Sciences
18.08.2017 | Physics and Astronomy
18.08.2017 | Materials Sciences