Richmond, Virginia – A failure to introduce new products at the same rate as foreign manufacturers explains the dwindling market share of U.S. auto companies, according to a new study by Virginia Commonwealth University (VCU). The study will be published in the Journal of Business Research.

The study, Non-Price Determinants of Automotive Demand: Restyling Matters Most, analyzed secular market share changes in the automobile and light truck submarkets. The research revealed that new product, as measured by restyling, represents the dominant determinant of demand in the auto industry. Other factors had minimal impact on demand, including price, advertising, rebranding, warranty curtailments, new safety appliances, and even changes in vehicle reliability.

“A 10 per cent reduction in relative price would yield only one-tenth the market share impact of a restyling,” said Oleg Korenok, lead author of the study. “And one would have to double one’s relative advertising expenditure to match the impact of a restyling.”

Market share for domestic auto producers fell from 72.9 per cent in 1996, to 47.4 per cent in 2008. Over the 1995 to 2006 model years, Japanese manufacturers on average restyled every third year, while U.S. manufacturers restyled every four years. “This difference in styling (frequency) better explains the 25.5 per cent market share loss for domestic manufacturers over this period than more-often cited factors such as reliability differentials as cited by Consumer Reports,” Korenok said.

The study said that Japanese and Korean automakers, and European brands to a lesser extent, have been much more aggressive in restyling and in introducing new products than the U.S. brands. Interestingly, General Motors, Ford and Chrysler used more frequent restylings 50 years ago to drive out smaller American rivals such as Hudson, Kaiser and Packard. The U.S. automakers’ best hope of regaining market share is to increase the level of restyling activity, especially for high-volume lines, and not to jettison established vehicle line names, because rebranding has an adverse market share impact.

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