New car demand forecasting: An econometric model

Abstract

Current forecast of car demand using any of the econometric models contains data related to the economics of the data and often neglects the non-economic. Business cycles play an important role in the decision making of the government and also on the forecasting and planning of any industry. In the emerging economy like India where the proportion of the manufacturing is steadily decreasing and the significance of service sector increasing. We need to study the relevance of the manufacturing sector in predicting the future economy and also the factors that are affecting the future. Hence a better forecast of the demand for car which is a representation of manufacturing industry would ascertain the business cycles in the future and the relevance of prediction of future GDP growth and also the industrial planning. With the expectation of the automobile industry’s share in the Indian GDP to increase from 5% to around 10% in 2016, the demand forecast of the car is desirable in studying the business cycles in future and also the impact of the automotive sector in the overall economy of the country. The forecasting would result in the measurable impact of each of the factors in the demand for car in the long run and thus would enable us in determining the bottleneck for economic growth. This would uncover the future of the automotive industry and the sources of the competitive advantage for the future. These factors could also be analyzed by government in setting the policies to remove the bottleneck for growth and pave way for its priorities. Also this industry specific study would help us in clearly identifying the constraints on the economic growth and would give a clear picture.