Improving fuel economy is route to higher car maker profits - US study
Mon 18 September 2006
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Achieving fuel efficiency improvements in excess of CAFE standards would help US car makers to increase profits concludes a new study from researchers at the University of Michigan.
In all four market-demand situations evaluated by the researchers (defined by fuel price and a consumer discount rate), proactively increasing fuel economy would be the best strategy for all car makers, in that it would result in the highest profit that each company could be assured of earning, no matter what the fuel price of fuel or what actions are taken by competitors.
The results of the study, which surprised the researchers, showed that the Detroit automakers (GM, Ford, and DaimlerChrysler) have more to gain from pursuing an aggressive fuel economy improvement strategy than do the three largest Japan-based car makers (Toyota, Honda, and Nissan). This is because the Detroit automakers face more risk (are more vulnerable) if they pursue a business-as-usual option than the Japan car makers.
The study - led by Walter McManus, Director of the Automotive Analysis Division of Michigan University's Transport Research Institute - says that the Detroit car makers have more opportunities for improvement, since their vehicles currently have lower average fuel economy than the the vehicles supplied by Japanese producers.
Related Links
University of Michigan Report link
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