Wednesday, October 27, 2010

Vehicle Sales 1976-2010: Introduction

This post is part of the special series Vehicle Sales 1976-2010.

Every month Calculated Risk posts the graph of monthly light-vehicle sales. The sales are usually presented as the seasonally adjusted annual rate (SAAR) reported by the BEA. The reason for the adjustment is a strong seasonality in sales which make it difficult to see underlying trends in the short-term. These numbers are suitable for comparison from month to month or even year-over-year, but I found them unsuitable for looking at longer-term trends. To remedy this, I decided to find some different ways of looking at the data to try to get a better look at long term trends in light vehicle sales and hopefully gain some insight as to plausible future outcomes.

Introduction
To begin, let's consider some of the factors that affect light-vehicle sales:
  • The number of drivers and potential drivers
  • The level of vehicle-ownership
  • The lifespan of a a vehicle
The first factor is not dependent on the current economic cycle, although it is affected by larger demographic trends which may or may not be the result of past economic cycles. Because sixteen is the age at which most teenagers can drive in this country, potential drivers will be defined as residents aged sixteen or older for the purposes of this post. To find the estimated number of residents aged 16 and older, I used the estimates published by the Census Bureau. The number of drivers is the number of licensed drivers reported by the FHWA.

Vehicle-ownership is harder to define. The Federal Highway Administration publishes a series of statistics every two years that includes the number of registered vehicles and the number of licensed drivers. The series is slightly out of date right now, but I believe it should be updated in 2011. The series is limited in various ways; for example, numbers are rounded to the millions and vehicles registered are not broken down into separate categories by use (a motorcycle, a garbage truck, a school bus and my mom's Matrix are all counted as a motor vehicle). Additionally, a vehicle does not necessarily belong to a licensed owner, or even an individual, and not every licensed individual drives. Despite this, I believe that the numbers will be useful in identifying long-term trends, even if they lack precision.

It is hard to determine the current lifespan of an automobile. We can find an approximation by looking at the mean age of automobiles, which gives us an idea of the lifespan of past models, but this isn't very reliable. New models may have longer or shorter life than past models, and things like wage levels affect the potential lifespan of vehicles--if labor is expensive, fixing and maintaining older automobiles becomes less economically attractive. Additionally, economic conditions affect how often people look for new cars.

I will hopefully have time in the future to extract more precise figures from archived reports, but the task is time-consuming and I am skeptical about it's added value (e.g. buses and motorcycles only accounted for 0.41% of the total fleet in 2008). Many the series were split-up recently and many of the numbers are only available from PDF reports from which the data must be re-entered into a spreadsheet to be usable.

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