Based On Discrete Choice Models Of Consumer Demand Analysis Family Car Market In China

Originally, the automobile industry in our state used to be an emerging industry withhigh tariff barriers. Many factors restricted the development of the automobileindustry that the whole industry was over-protected, dispersedly-invested andirrationally-structured as well as lack of domestic R&D capabilities and perfect policyof consumption. Entering the21st century, the automobile industry in China got intoan unprecedented stage of rapid development after China was formally accessed to theWTO. On the one hand, China’s automobile production and sales in the past decadekept an average annual growth of25%, and broken the historical record in2010tobecome the world’s largest automobile production and sales country; Self-innovationhas yielded fruitful results at the same time, and the whole industry structure has beenfurther optimized; Besides, the “Auto Industry Restructuring and Revitalization Plan”promulgated by the State Council in2009helped the whole industry tide steadily overthe global financial crisis triggered by the subprime crisis in U.S. in2008; While theglobal warming and other environmental issues have been put on the agenda all overthe world, the development of energy-saving and new energy vehicles also has initialachievements. On the other hand, the gross domestic product in the past decademaintained with a steady two-digit growth, and in2011, there were25provinceswhose GDP per capita exceeded$4,000. The increasing level of residents’ disposableincome stimulates the rapid development of the private car market. Although themarket of several mega-cities in our country tends to be saturated, the potentialpurchasing power of those cities in small and medium-size will continue to promotethe development of the whole private car market.Due to the relatively mature development and fully transparent market information,theoretical approaches and empirical researches on the automobile industry abroad isquite well-off where the most popular methods include the aggregate model based onmacro-level and the disaggregate model based on micro-level. Along with all-rounddevelopment of the domestic automobile industry, there have also been increasingstudies, most of which, however, are focused on the analysis of car ownership thataim to make policy analysis and long-term forecast limitedly based on macro-level,and there exists few studies on a particular market based on micro-level. It is in this context that this paper explores the private car market in China through theperspective on product heterogeneity based on micro-level in order to analyze thefactors affecting the consumers’ car choice behavior and to estimate the own andcross-price elasticities among varieties brands of car models between different levels.This paper finally obtained several following conclusions:(a) factors such as price,weight, size, officially-measured fuel consumption, maximum horsepower andhorsepower per weight play a significant effect on the consumers’ car choice behavior;(b) factors such as top speed, displacement, doors and seats number, maximum powerand maximum torque, etc. play an insignificant effect on the consumers’ car choicebehavior;(c) cars in domestic private car market are popularly divided into mini,small, compact, medium, large and luxury according to the size of wheelbase. Theempirical results given in this paper show that this classification plays a significantrole in consumers’ choices, and the potential market share of each class are also quiteimportant to the econometrical model;(d)compared to logit model, the outcome giventhrough nested-logit model is more reasonable to reflect the real situation of the wholemarket;(e) the own and cross-price elasticities among varieties brands of car modelsbetween different levels calculated via the nested logit model indicates that thesubstitution among those individual models belonged the same level are exactlydifferent to those belonged different levels, and the degree of substitution among allmodels are generally tends much more to zero as difference of their classes getfurther.