An Econometric Analysis of the Determinants of Passenger Vehicle Sales in Germany

The automobile market is one of the most significant sectors of the German economy both in terms of value added and number of employees. This paper focuses on the determinants of automobile demand in Germany from 2008 to 2016. We apply multiple linear regression in order to estimate new passenger vehicle sales, using monthly data on price, product parameters, quality ratings, macroeconomic variables as well as government incentives as explanatory variables. For each car segment, a separate model is built, with the purpose of uncovering similarities and differences between distinct segments. Our results indicate that quality is significant for all groups, while consumers' attitudes towards vehicle prices vary from segment to segment. Purchasers of large-sized cars are sensitive to the fuel efficiency of vehicles, whereas drivers of small-sized vehicles pay less attention to fuel consumption. Most of the consumers in Germany are not considering vehicle emissions in their purchasing behavior. The results of this study can help automobile manufacturers to make strategic decisions and help policymakers to understand the automobile market better