Forecasting automobile sales

Abstract

Purpose The purpose of this paper is to understand the behavior of the automotive industry which is very critical to avoid major economic disruptions in the economy. To understand this industry, one needs to understand its historical performance in relation to many economic factors that may affect the industry. Design/methodology/approach Data about automobile sales (in dollars and in units) and many economic and demographic variables are collected from a variety of sources. Automobile sales are the dependent variable. However, the variable of automobile sales is divided into foreign and domestic car makers. The data are regressed using Statistical Package for the Social Sciences (SPSS) stepwise regression to obtain highly correlated variables. Findings The results indicate a strong relationship between the economic variables and foreign car sales, but the relationship between the economic variables and domestic car sales is weak. The domestic cars sales relationship to the other economic variables should be explored further to determine possible causes for the weak correlation. One of the possible reasons could be that domestic car makers use many incentives to influence sales, but data on incentives by model by year are not available. The addition of this variable as a factor may improve correlation. Practical implications The results in this study could help the automobile companies better understand their business, and the auto companies could use the results for possible strategic decisions. In addition, legislatures in the impacted states could use the results to prepare for fluctuations in the industry that would result in profound effects on the states in question. Originality/value This type of analysis is not standard, and the use of multiple economic variables correlated with domestic and foreign car sales is unique. The study provides a basis for further research.

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