ABSTRACT
The two important facts relating to costs of production in the motor industry have been brought out. The first is that in the short run the vehicle manufacturer's fixed costs are a relatively small proportion of his total costs—certainly less than 20 per cent—unless his plant is working at very low levels of output. The second is that in the long run the cost of manufacturing vehicles falls steeply as the scale on which they are produced grows larger. The number of models depends on the pattern of demand and the number of major firms, and not, by and large, on the wickedness or stupidity of the car manufacturers. As compared with the motor industries of other countries, the British industry shows up fairly well on its performance since the war. Competition takes place in quality rather than in price.
