Relationship of Automobile Characteristics to List Prices and Profit Margins -- A Preliminary Analysis

PDFTech ReportDOT-TSC-NHTSA-78-30DOT-TSC-1311Automobile industryAutomobilesMotor vehicle industryFuel consumptionManufacturingPricesProfitsRegression analysisRegulationsStandardsSizeWeightUnited StatesUnited States. National Highway Traffic Safety AdministrationCassella, M. A.Rabe, F. T.John A. Volpe National Transportation Systems Center, (U.S.)United States. National Highway Traffic Safety AdministrationNTL-HIGHWAY/ROAD TRANSPORTATION-HIGHWAY/ROAD TRANSPORTATIONNTL-ECONOMICS AND FINANCE-ECONOMICS AND FINANCENTL-LAWS AND REGULATIONS-LAWS AND REGULATIONSNTL-LAWS AND REGULATIONS-U.S. Code of Federal RegulationsVolpe National Transportation Systems Center, Technical Reference CenterThe report describes research on potential impacts of fuel economy regulations on the U.S. automobile industry. The study focused on the possible effects of auto "down-sizing" on manufacture profit margins. Historical price data were used to estimate variable profit margins. Estimated margins were strongly correlated with vehicle inertia weight and the price of the average options packages and, to a lesser extent, were negatively correlated with production volume. Regression analyses were also performed to relate list prices to vehicle characteristics believed to represent valuable attributes to consumers. The results, although ambiguous, suggest that vehicle roominess, fuel economy, and power-to-weight ratio are positive influences on prices. However, the extent and quality of the data employed in the analyses were too limited to support firm general conclusions. Further study is required to anticipate the long term effects of the fuel economy regulations on price