Motor vehicles, model year 1988

Survey of Current Business, Nov, 1988 by Larry R. Moran

Motor Vehicles, Model Year 1988

Sales of new motor vehicles in the United States increased 1 percent to 15.6 million units in model year 1988, following a 4 1/2-percent decline to 15.4 million units in 1987 (chart 1).(1) The 1988 increase was accounted for by sales of trucks; sales of cars changed little. The quarterly pattern of motor vehicle sales in 1988 was not as volatile as in the preceding several years, partly because manufacturers' sales incentives did not vary as much.

New cars

Car sales were little changed at 10.5 million units in model year 1988 (table 1). Sales had declined 5 1/2 percent in 1987.

Sales of domestic cars were unchanged at 7.3 million units in 1988, following a 9-percent decline. Among domestic size categories, sales of fullsize and luxury cars increased to 1.7 million from 1.6 million, and sales of compact and subcompact cars increased to 3.7 million from 3.6 million. Sales of intermediate-size cars declined to 2.0 million from 2.1 million.

Sales of imported cars were unchanged at 3.2 million units in 1988, following a slight increase. Sales of Japanese cars--at 2.2 million in each year--accounted for roughly two-thirds of all import car sales. Sales of South Korean cars increased to 0.4 million from 0.3 million, and sales of West German cars declined to 0.3 million from 0.4 million. Sales of other imported cars changed little.

The market shares (percent of total domestic and import sales) of domestic size classes and of imports changed little from 1987. The share of domestic intermediate-size cars decreased for the fourth consecutive year, to 19 percent from 20 percent, and the share of imported cars decreased slightly to 30 percent from 30 1/2 percent. The share of domestic compact and subcompact cars increased to 35 percent from 34 percent, and the share of domestic fullsize and luxury cars increased slightly to 16 percent from 15 1/2 percent.

Domestic car production declined to 7.0 million in 1988 from 7.3 million in 1987. Domestic car inventories were 1.5 million at the end of model year 1988, the same as at the end of model year 1987.

New car prices were up considerably less that in model year 1987. The Consumer Price Index (CPI) for new cars increased 2 percent, compared with 4 1/2 percent in 1987. In 1988, new car prices increased only half as much as all consumer prices; in contrast, in 1987, new car prices increased 1 1/2 percentage points more than all consumer prices. The average expenditure per new car also increased less in 1988 (5 percent) than in 1987 (7 percent).(2) For domestic cars, the average expenditure increased to $13,807 in 1988; for imported cars, the average expenditure increased to $14,965.

The quarterly pattern of car sales in model year 1988 generally reflected sales of domestic cars. From a high of 8.0 million units (seasonally adjusted annual rate) in the third quarter of 1987, domestic car sales dropped to 6.6 million in the fourth quarter, increased to 7.6 million in the first quarter of 1988, declined slightly to 7.5 million in the second, and returned to 7.6 million in the third (chart 2). The drop in the fourth quarter of 1987 reflected the ending of attractive sales-incentive programs offered by auto manufacturers in the third quarter. Although manufacturers offered incentive programs in the following three quarters, these programs did not include the deep discounts offered in previous years. Sales of imported cars declined in the first three quarters of the model year and changed little in the final quarter.

New trucks

Truck sales increased 5 percent to a record 5.11 million units in model year 1988. Sales had changed little in 1987.

Sales of light trucks (up to 10,000 pounds gross vehicle weight) increased to 4.77 million from 4.57 million in 1987. Light trucks reached a record 30 1/2 percent share of motor vehicle purchases, up from 29 1/2 percent. (Light trucks include light conventional pickups, compact pickups, sport utility vehicles, and passenger vans; about three-fifths of light trucks purchases are for personal use.) The increase in sales was more than accounted for by light domestic trucks, which jumped to 4.13 million from 3.69 million in 1987; sales of imported trucks, mostly small pickups from Japan, fell to 0.64 million from 0.88 million. The relative strength of light domestic truck sales reflected two factors: (1) A major Japanese manufacturer shifted truck production from Japan to the United States, which raised domestic sales and reduced import sales; and (2) prices of imported trucks increased more than prices of domestic light trucks, partly reflecting depreciation of the dollar against the Japanese yen in the first half of the model year.

Sales of "other" domestic trucks (over 10,000 pounds gross vehicle weight) increased to 0.34 million in 1988 from 0.29 million in 1987. These trucks, nearly all purchased by business, range from medium-duty general delivery trucks to heavy-duty diesel tractor-trailers.

The quarterly pattern of truck sales in model year 1988 generally reflected sales of light domestic trucks. From 4.09 million in the third quarter of 1987, light domestic truck sales declined to 3.82 million in the fourth (chart 3). They rebounded to 4.14 million in the first quarter of 1988, increased slightly to 4.17 million in the second, and increased to 4.36 million in the third. Sales of imported trucks declined in each quarter of model year 1988, and sales of "other" domestic trucks changed little.