It is standard business logic than when a market is growing quickly, an ambitious business should devote its efforts to capturing market share. Profits can wait for later. It is much easier to find new customers when they are coming into the market for the first time. It is far harder to do so in a mature or shrinking market when you must convince customers to leave a different product for your offering.
So why are the large automakers spending all of their marketing muscle fighting for shares in the declining market for gasoline cars and content to sit by and watch as Tesla rapidly grows its share of the most dynamic segment of the U.S. auto market? The overall U.S. market for gasoline cars is mature and not expected to grow much, as 2017 auto sales are down 1.8% compared to 2016. Young people take Uber and Lyft instead of buying cars. Existing car buyers are holding onto their cars longer as they become more reliable, with the average age of a U.S. vehicle increasing to 11.6 years.
The market for plug-in cars grew by 27% in 2017 and is expected to increase even faster this year. With its huge bump in estimated production in May, Tesla had an estimated 38% of the plug-in car market or a staggering 73% of the market for pure electric cars for the month. You’d think the large automakers would be a little more worried. They have plenty of good products on the market, but lots more still needs to be done in terms of producing the quantities that people want and marketing them properly. The market is now growing rapidly. If they don’t make more serious efforts to catch up with their start-up rival, many automakers may be wondering in years to come how they lost out on this market.