IDEAS home Printed from https://ideas.repec.org/a/pal/buseco/v42y2007i1p53-60.html
   My bibliography  Save this article

The Link Between Gasoline Prices and Vehicle Sales

Author

Listed:
  • Walter McManus

Abstract

This paper examines the link between fuel prices and sales of cars and trucks. U.S. automakers have long denied that such a link exists. One source of this false belief is an obsession with the crude count of units sold, equating Hummers with Minis. Another source is the conventional “wisdom” that Americans are unwilling to pay for fuel economy. The paper presents theoretical reasons and market evidence that refute Detroit's conventional wisdom. American manufacturers' reaction to rising fuel prices over the last few years revealed the shortcomings of the U.S. automakers' recent product and powertrain strategies. The effect of rising fuel prices has, in effect, been offset by reducing prices of vehicles in inverse proportion to fuel economy. Thus, unit sales of large SUVs could be maintained, but their revenue (and profit) fell because vehicle prices were cut, directly or indirectly. The paper concludes with a few practical guidelines that business economists should use to prevent their companies from experiencing the recent massive losses experienced by the U.S. automobile industry.Business Economics (2007) 42, 53–60; doi:10.2145/20070106

Suggested Citation

  • Walter McManus, 2007. "The Link Between Gasoline Prices and Vehicle Sales," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 42(1), pages 53-60, January.
    • Handle: RePEc:pal:buseco:v:42:y:2007:i:1:p:53-60
    as

    Download full text from publisher

    File URL: http://www.palgrave-journals.com/be/journal/v42/n1/pdf/be20076a.pdf
    File Function: Link to full text PDF
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: http://www.palgrave-journals.com/be/journal/v42/n1/full/be20076a.html
    File Function: Link to full text HTML
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sa-ngasoongsong, Akkarapol & Bukkapatnam, Satish T.S. & Kim, Jaebeom & Iyer, Parameshwaran S. & Suresh, R.P., 2012. "Multi-step sales forecasting in automotive industry based on structural relationship identification," International Journal of Production Economics, Elsevier, vol. 140(2), pages 875-887.
    2. Konstantakis, Konstantinos N. & Milioti, Christina & Michaelides, Panayotis G., 2017. "Modeling the dynamic response of automobile sales in troubled times: A real-time Vector Autoregressive analysis with causality testing for Greece," Transport Policy, Elsevier, vol. 59(C), pages 75-81.
    3. Tsvetan Tsvetanov & Kathleen Segerson, 2011. "Re-Evaluating the Role of Energy Efficiency Standards: A Time-Consistent Behavioral Economics Approach," Working Papers 07, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    4. MATSUMOTO Shigeru & OMATA Yukiko, 2015. "Consumer Valuations of Energy Efficiency Investments: The case of Vietnam's air conditioner market," Discussion papers 15063, Research Institute of Economy, Trade and Industry (RIETI).
    5. Greene, David & Hossain, Anushah & Hofmann, Julia & Helfand, Gloria & Beach, Robert, 2018. "Consumer willingness to pay for vehicle attributes: What do we Know?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 118(C), pages 258-279.
    6. Frankel, David M., 2015. "Insuring Customers of a Unionized Firm Against Loss of Network Benefits," Staff General Research Papers Archive 38580, Iowa State University, Department of Economics.
    7. Chen, Anning, 2011. "Reliable GPS Integer Ambiguity Resolution," University of California Transportation Center, Working Papers qt9gs0t2f9, University of California Transportation Center.
    8. Eric Kateta Tshiakambila & Joseph Chisasa, 2017. "Food Inflation and Passenger Vehicle Purchases in South Africa: Cointegration, Short Run Dynamics and Causality," Journal of Economics and Behavioral Studies, AMH International, vol. 9(5), pages 122-134.
    9. Martin, Elliot William, 2009. "New Vehicle Choices, Fuel Economy and Vehicle Incentives: An Analysis of Hybrid Tax Credits and Gasoline Tax," University of California Transportation Center, Working Papers qt6sz198c2, University of California Transportation Center.
    10. Tsvetanov, Tsvetan & Segerson, Kathleen, 2013. "Re-evaluating the role of energy efficiency standards: A behavioral economics approach," Journal of Environmental Economics and Management, Elsevier, vol. 66(2), pages 347-363.
    11. Baur, Dirk G. & Todorova, Neda, 2018. "Automobile manufacturers, electric vehicles and the price of oil," Energy Economics, Elsevier, vol. 74(C), pages 252-262.
    12. McManus, Walter, 2007. "Economic analysis of feebates to reduce greenhouse gas emissions from light vehicles for California," MPRA Paper 3461, University Library of Munich, Germany.
    13. Martin, Elliott William, 2009. "New Vehicle Choice, Fuel Economy and Vehicle Incentives: An Analysis of Hybrid Tax Credits and the Gasoline Tax," University of California Transportation Center, Working Papers qt5gd206wv, University of California Transportation Center.
    14. Cumhur Erdem & Saban Nazlioglu, 2013. "Determinants of new vehicle registrations in EU countries: a panel cointegration analysis," Transportation Planning and Technology, Taylor & Francis Journals, vol. 36(3), pages 287-298, April.
    15. Frankel, David M., 2014. "Optimal Insurance for Small Stakeholders," Staff General Research Papers Archive 37551, Iowa State University, Department of Economics.
    16. Kleinbaum, Rob & McManus, Walter, 2009. "Fixing Detroit: how far, how fast, how fuel-efficient," MPRA Paper 19607, University Library of Munich, Germany.
    17. Daziano, Ricardo A., 2015. "Inference on mode preferences, vehicle purchases, and the energy paradox using a Bayesian structural choice model," Transportation Research Part B: Methodological, Elsevier, vol. 76(C), pages 1-26.
    18. Shigeru Matsumoto, 2018. "Consumer valuation of energy-saving features of residential air conditioners with hedonic and choice models," Empirical Economics, Springer, vol. 55(4), pages 1779-1806, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:buseco:v:42:y:2007:i:1:p:53-60. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.