The DRI Motor Vehicle prospects model: an example of econometrics and simulation

Abstract

This paper outlines DRI's Motor Vehicles prospect model and presents the results of some sample simulations. The model demonstrates how econometric and simulation techniques can be fruitfully applied at the micro economic level.The model is designed to assess the effects of changes in motor vehicle technology on all facets of the industry. The user first configures the vehicles to be produced over the forecast horizon. Simulation of the model then yields yearly bills of materials, production and investment costs, fuel economy and other fleet characteristics over a forecast horizon. The demand sector of the model forecasts new vehicle sales by market segment as a function of economic and demographic behavior. Final fleet characteristics are thus a function of both the supply and demand for motor vehicles.The model is currently being used by business and government. It is a natural tool for use in making fuel economy estimates and evaluation of motor fuel related energy policy issues. For materials suppliers it is a valuable aid for both long and short term planning. In the automotive after-market it can depict the current and future demand for individual replacement parts with a high degree of accuracy.