Issues in the 1983 Auto-Sales Outlook

Since the late 1970s, the U.S. auto market has suffered a severe decline. Total auto sales (domestic and foreign) have fallen from the highs of over 11 million units in 1977 and 1978 to an anemic average of 8.5 million units since 1980. The sales performance of U.S. autos has become one of the business horror stories of the 1980s, as imports consistently have captured a greater share of the shrinking new-car market. Accompanying the sales dive of U.S. autos is a corresponding dip in the capacity utilization rate of U.S. motor vehicle industries; this measure fellfrom 99 percent in 1977 to approximately 60 percent in 1982. Total employment in these industries declined nearly 27 percent over the same period. With an industry so decimated, it has been difficult for market analysts to predict the level of auto sales in 1983. After examining the sources of new-car demand, we still question whether the recent weakness in the auto industry is temporary or whether it represents a long-run downward adjustment that could continue indefinitely.