Halfway To Zero

The first half of 2007 is behind us, and after some crunching of sales numbers, Automotive News reported today that the market share of the Big Three domestic manufacturers (GM, Ford, and Chrysler) has dipped to 50.2% of the US vehicle market in June, thanks in large part to GM's meltdown. Meanwhile, sales of Japanese branded vehicles in the US rose to 37.5%. Since the Domestics' share was 56.0% in June 2006 and the Japanese brands' share was 32.5% in June 2006, this means that almost one for one, every point of market share that Detroit gave up was snapped up by a Japanese brand. European and Korean brands took up the remaining 0.8 percentage points of market share.

What does this mean? Well, unlike an era a generation or two ago, when GM alone held more than 50% of the US auto market, three US-based companies together are likely to not be able to hold onto that share even together. GM has already said that they will not sit idly by while Ford, Chrysler, and even Toyota outspend them on incentives, so expect possibly a slight bump in July in domestic sales, but the long term writing has been on the wall for a while.

Not only has the US auto market become more fragmented - with more models, more brands, and even more countries of origin than ever before - but the domestic brands falling asleep at the wheel for a decade or two in the 1970s and 1980s certainly has harmed their current situation. For decades, their import competition steadily chugged along, improving their products in terms of comfort and reliability with each generation, convincing one buyer after another to switch brands, Detroit didn't do much about it. Now that this ship has left the harbor, and foreign competition has raised expectations and created a generation or two of satisfied customers, Detroit needs to come up with products and marketing that will convince satisfied import owners - or at least current domestic owners thinking of switching to the import side, that their products are worth buying. To do that, they'll need not only superior products, but substantially superior products. They need to look better (and in some cases, the domestic models actually do look better than their import competition), but also have better reliability, better fuel economy, a nicer interior, and be priced competitively. It's a tough hill to climb, and it pains me to say it, but I don't think we'll see Detroit at 50% market share again, ever.

By the way, the title of this post is not intended to imply that Detroit is on its way to zero market share (although the trend line does move in that direction). At some point, it will level off, but who knows when that will happen? The glass is definitely half empty at this point.