《SHARE OF U.S. AUTOMAKERSlowast;》.pdfVIP

INTERNATIONAL ECONOMIC REVIEW Vol. 48, No. 4, November 2007 VEHICLE CHOICE BEHAVIOR AND THE DECLINING MARKET SHARE OF U.S. AUTOMAKERS? BY KENNETH E. TRAIN AND CLIFFORD WINSTON1 University of California, Berkeley, U.S.A.; Brookings Institution, U.S.A. We develop a consumer-level model of vehicle choice to shed light on the ero- sion of the U.S. automobile manufacturers’ market share during the past decade. We examine the in?uence of vehicle attributes, brand loyalty, product line char- acteristics, and dealerships. We ?nd that nearly all of the loss in market share for U.S. manufacturers can be explained by changes in basic vehicle attributes, namely: price, size, power, operating cost, transmission type, reliability, and body type. U.S. manufacturers have improved their vehicles’ attributes but not as much as Japanese and European manufacturers have improved the attributes of their vehicles. 1. INTRODUCTION Until the energy shocks of the 1970s opened the U.S. market to foreign automak- ers by spurring consumer interest in small fuel-ef?cient cars, General Motors, Ford, and Chrysler sold nearly 9 out of every 10 new vehicles on the American road. After gaining a toehold in the U.S. market, Japanese automakers, in particular, have taken signi?cant share from what was once justi?ably called the Big Three Table 1 . Today, about 40% of the nation’s new cars and 70% of its light trucks are sold by U.S. producers.2 And new competitive pressures portend additional losses in share, especially in the light truck market—a traditional stronghold for U.S. ?rms partly because of a 25% tariff on light trucks built outside of North America and the historical absence of European automakers from this market. Japanese automakers are building light trucks in the United States to avoid the tar- iff and introducing new minivans, SUVs, and pickups, and European automakers are starting to offer SUVs. The domestic industry’s loss in market share is not attributable to the pr