The Competitive Status of the U.S. Auto Industry A Study of the Influences of Technology in Determining International Industrial Competitive Advantage (1982) / Chapter Skim
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8 Technology and Competition in the U.S. Automobile Market
8 Technology and Competition in the U.S. Automobile Market
Pages 122-132
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From page 122... ...
auto industry reflects in part the vigorous competitive challenge of the Japanese, in part a rapid shift in market preferences. We have argued that a recapture of competitive cost and quality performance will require fundamental changes In the way the manufacturing process in the U.S.
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From page 123... ...
Accordingly, our analysis in this chapter will focus on both sales and price effects of a few major technological characteristics in the context of a fairly simple model of consumer demand (at the compact and subcompact end of the market)
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From page 124... ...
Existing evidence on automobile pricing suggests that list prices are determined by product-line policy and standard costs.3 While the markup over standard cost may be influenced by strategic considerations and estimates of consumer valuation, variations in list prices are likely to reflect variations in cost. Inclusion of the list price in an equation explaining transaction prices may therefore provide a control for the supply side.
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From page 125... ...
To begin, we distinguish between performance characteristics and technological attributes, although both are closely related. Thus, miles per gallon measures fuel-efficiency performance, but the size of the engine is a characteristic of the model, and both kinds of variables are included in the analysis.5 In the compact and subcompact markets on which we focus, the key performance characteristics are fuel efficiency, driving range, repair frequency, and package efficiency (efficient use of space)
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From page 126... ...
NOTE: Using the diagrams and specifications in the figure below (taken from Consumer Reports' Annual Auto Issue, April 1980) , the internal volume is obtained by adding the internal volume of the front and rear compartments of the car.
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From page 127... ...
A comparison of 1977 and 1979 data reveals that most characteristics are quite similar in the two years. Because of the introduction of new models and substantial redesign efforts, the average age fell from almost four years to a little over two and one-half.
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From page 128... ...
It may be useful to restate our basic hypothesis in terms of the variables in the analysis. In the price analysis the issue of competitive significance is essentially a question of the size and magnitude of the basic and relative effects.
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From page 129... ...
If, for example, we drop the variables for diesel engine, age, and package efficiency (VOLWT) from the analysis, leaving only front-wheel drive as a measure of technology, we obtain basic and relative effects of front-wheel drive very similar to those reported in Table 8.3.
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From page 130... ...
Moreover, even the performance characteristics valued in 1979 -- range, package efficiency -- had small or negative effects in 1977. While the market placed a high value on fuel efficiency in 1977, the performance and technology characteristics associated with market success in 1979 had little market appeal in 1977.
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From page 131... ...
The data available provide no evidence that technology (as defined TABLE 8.4 Basic and Relative Effects on Sales of Performance and Technology Characteristics, 1977 and 1979a 1977 Characteristics Basic Effect (thousands of vehicles) 1979 Relative Effect (percentage)
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From page 132... ...
4. Although identification of estimated discounts effects depends on the assumption that list prices are based on standard costs and standard markups, the change in the estimated effects between two periods is likely to be more affected by demand considerations since relative costs of characteristics tend to be more stable.
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