Why aren’t U.S. automakers more worried?
06.07.2018 - by Joel Levin
Why aren’t U.S. automakers more worried?

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.

29 comments on “Why aren’t U.S. automakers more worried?”
  1. Daniel Williams says:

    Economics on the consumer end is what all comes down to. Look at the price of the average new car, over $35000! That is a pretty hefty payment over a 5 or 6 year period. That more than anything explains why folks are holding on to their current vehicle for 11.6 years. Buy two and you are paying more for your vehicles than your house.

  2. Zrogas says:

    EVs are impractical? In what way? I have been driving a Tesla Model S since 2012. It is much more practical than any 4 door sedan I have ever owned. There is much more storage space with 2 trunks, and a hidden storage area in the rear trunk, There is more inside room with the flat floor. The navigation system with the 17″ screen is very practical for planning trips and avoiding traffic jams. I have more free time as there is very little maintenance, so very little time is wasted getting repairs done on parts that are no longer required in an EV: gas engine, fuel filters, valves, crankshaft, seals, emission controls, filters, fluids like oil, antifreeze, transmission, exhaust pipes, mufflers, catalytic converters, and even brakes, due to regenerative braking, never need to go to a gas station, or worry about the price of gas or oil, leave home with a full charge every day, with a range of 230 miles (Model S) or 260 miles (Model X). The Model 3 has a range of 311 to 370 miles. Tesla also offers free charging with the extensive super charger network on long trips. Why would I ever want to go back to a gas powered car. Please explain the reasons. You must not have ever driven or owned an EV.

  3. Hannibal says:

    The answer is simple. The market (consumer) drives what products will suceed. The automakers know this and will make whatever product is economical to make and desired by the consumer. EVs are not deserable by most consumers because for most people they are impractical.

  4. Richard B. says:

    I’m retired now and ever since I was a teenager I was interested in solar energy but back in the 60’s and 70’s that was a dream because it was so expensive there was no way I could afford anything like that. Well the prices come down enough that last year my wife and I had a 16 kw solar array installed now my electric bill each month is the cost of the rental of the meter (I’m still on the grid). About a month ago we bought ourselves a 2015 Nissan Leaf SV and we love it, It is great for short distances and doesn’t cost us anything to charge the battery. We still have our 2012 Chevy Impala that we keep around for long distant driving the only trouble now is that I have to start it and let it run once a week to keep the battery charged on it, OH WELL! I think things will turn around one of these days and EV’s and solar will overcome. Our current administration is pushing back on renewables which is not helping any.


  5. Nick says:

    This might sound silly. I’m a piston-head child of the fifties who grew up with glasspacks and hollywood mufflers. I can appreciate the testosterone filled air of burning rubber and exhaust fumes. What EV enthusiasts refer to as “quiet and smooth” high torque power delivery, leaves motorheads thinking of their mother’s sewing machine. The really really fast ’93 Mazda RX-7 twin Wankel turbo didn’t sell well at all. Not enough pistons. Just saying! Vroom vroom.

  6. Preston Peterson says:

    Tesla’s are designed and built from the ground up as EV’s. Most Ford, GM and Chrysler all build with ICE parts and then throw in a battery somewhere and an electric motor somewhere. That makes sense to them. Just does not make sense if you are serious about building a true EV.
    Europe, Japan and especially China are designing and building EV’s from the ground up and are gaining valuable experience and practical know how. They will eat our lunch before we even know we have been served.

  7. Douglas Moulton says:

    I have just read the comments available and am appalled that no mention of the drive train simplicity of an EV.. and brakes that last for 150-200,000 miles., because the Electric motors do most of the braking. The age old expression “Keep it simple Stupid”, if put into action, makes virtually anything work better and lasts longer. Using such an approach also has very high economical benefits. It truly is a nobrainer. I had a 2013 Volt and because the warranty ran out (mileage) and I wanted better battery only range, I now have a 2018 model. Both these Volts are the best cars I have owned or driven. The almost non dependence on fossil fuel lightens my conscience knowing I am doing my little part to fight climate change. I love the economics too; I have used about $37. (Cdn Eh!) since February. Finally, it is disheartening that so few people are aware of the perils of climate change. Too many thinking like a certain President of one of the leading global countries ! OK neighbors, lets make this world a better place to live in.

  8. Scott says:

    Car sales may be down but truck and SUV sales are up as more people move away from traditional cars. This is a win for auto mfg as they make more profit on trucks and SUVs than they do for cars which is another reason they are unlikely to jump heavily into EVs since they currently lose money on each one sold.

  9. Todd Ritter says:

    Infrastructure, infrastructure, infrastructure
    We need more ports to charge and more incentives to do so. Outreach and education at the car dealer levels with more EV advertising.

  10. Todd R. Lockwood says:

    When the CEOs of the major auto manufacturers are driving EVs on a daily basis, that’s when the emphasis will change.

  11. Allen says:

    I have a Hybrid that gets 45 mpg, Honda, 600 – 650 miles on a tank of gas. I also have the PHEV that gets 46 miles on a charge and I have only used one tank of gas for 5 months. There are much better options than 32mpg. There are cheaper EV’s that can at least do 100+ miles but the question is where are the necessary chargers to help get from A to B. Chevy Bolt cost $42000 with a range of around 230 miles, There are more EV’s coming on market in the next 2+ yrs that are worth our time but most, not all people are lovers of ICE, can’t give them up.

  12. Lauren says:

    Remember the brilliant spoof Ford made of the Cadillac ELR ad back in 2014? Yeah, the one featuring the amazing Pashon Murray and the C-MAX Plug-in hybrid. For a brief moment, it seemed as if Ford understood their EV niche.

    What happened? That was the last ad for a plug-in electric vehicle I remember seeing from Ford.

    Maybe PlugInAmerica could sponsor a contest for the most imaginative owner-produced ads promoting EVs? If the manufacturers don’t have the gumption to advertise their EV’s, maybe we should do it ourselves?

    1. Noah Barnes says:

      Hi Lauren, We recently sent out a survey of TV commercials for EVs, asking EV supporters to rate them. You can still access this at https://www.surveymonkey.com/r/G9GCR8V. Thanks!

  13. Tom Hendren says:

    For long trips, fill up time and range are considerations. I drive a 2013 VOLT 9 gallon tank that can drive 300 miles on gas BUT we constantly take trips with our 2008 Nissan Altima because on it’s 20 gallon tank and 30 mpg it goes 500 to 600 miles on a tank on the highway. (only 350 around town at 21 mpg)
    Around town, the Volt is best with 40 miles of electric but it only carries two adults and two kids. It has awesome room with the seats folded down, however.
    The new Chrysler Pacifica Hybrid is the one to consider buying now. With 500 mile range using gas at 32 mpg and 33 mile range electric, this is unheard of in ‘mini’vans. This is the nicest minivan I have seen. The price should come down somewhat, though. No minivan can come close to it on fuel savings. Besides, with brakes lasting 150K and other hybrid benefits, it could be the family vehicle of choice.

  14. Jan Wagner, AutoMatters & More says:

    Why is it that Tesla can make long distance EV drives relatively painless yet no one else can? The answer is because they combined high mileage range vehicles with a dedicated and rapidly expanding Supercharger network. No one else is doing that, but to increase sales of electric vehicles they must. Until then, it is sad that there are so few non-Tesla, public charging stations. For proof of that, try to find an available charger at Disneyland or SeaWorld San Diego. If you do not have enough range to make it there and home again without charging, you will be S.O.L.
    As a plug-in hybrid driver (2012 Prius Plus-in Hybrid, with a pathetic 8 miles of all-electric range, but 50-55 real-world MPG), I would happily buy a new Tesla if and when they introduce their affordable Model Y SUV. I had a deposit on a Tesla Model 3 but cancelled that car when I saw its small trunk opening. That car should have had a hatchback.
    Failing a Tesla Model Y, I will eventually buy a plug-in hybrid small SUV, as soon as one comes along that has all-electric range similar to that of Chevy’s Volt. Come on GM — make a small, plug-in SUV with the Volt’s high mileage powertrain.

  15. Mike E says:

    My two cents worth is that they are still making too much money off of the old business model to go through the capital investments to switch over to an EV based business model. FCA is a good example of this. They are “profitable” but their range of cars and the technology they use is way behind. Short term profits and short term thinking . . .

  16. Mr. Shelley Dahlgren, PhD says:

    Mr. SDD. The traditional auto makers are hanging on making big trucks as long as they can. My 2011 Leaf went 18 months and only needed a tire rotation. I love the car, but it does not go far enough. The Chevy Bolt is close, but is too expensive and has too many gee gaw extras. The Tesla Model 3 is slow on delivery, and is not made by a car company, but a tech company. Nissan is advertising the 2018 Leaf as a computer, not a car. When a small, simple and inexpensive EV with 240 mile range is available, the earth will change and the car companies know it. The car will be charged at home or work at night, or during lunch or overnight on the road. But the charging infrastructure currently being built does not fit this profile. There needs to be a lot of charging stations at places people will stop for lunch or overnight; now we have useless single stations all over the territory. Mr. SDD

  17. Tim Helble says:

    I just got a Chevy Bolt and it seems to be a great EV – it’s developing quite a loyal following. I think GM is positioning itself reasonably well for the future, although I wish they started a few years earlier.

  18. John Zimmerman says:

    I’m sure they are very interested in what is happening with the EV market. In 2010 we had maybe 6 production models available and half or better were startups. Today there are over 40 models available, so the industry is definity paying attention. Little wonder Europeans are more inclined to buy, gasoline has been over $5/gallon there for a long time. It is all market driven. The bigger question is why aren’t more of the public concerned enough about environmental impacts to want to get off gas. Still a lot of impediments, apartment and many townhouse dwellers can’t charge at home which makes it almost impossible to own. It isn’t going to help once the fuel market begins to feel the impact of EV’s and we start seeing gasoline cost drop dramatically.

  19. Stephen Russell says:

    Estd automakers are “stuck” in the past, thus token EV growth until fossil fuels dry up or other then they produce EVs
    Seen No Incentives to buy EVs from other makers.

  20. Derrick Landers says:

    The “old guard” dilemma is very real here! We are so far behind other nations in this regard that it’s not even funny anymore…we’re a great country, but we’re losing the innovation battle on this one.

  21. Rob A. Storm says:

    Not sure whey you said only an S/X, Model 3s have 310 miles of range, with fast superchargers in route…

  22. Scott says:

    The biggest obstacle to faster EV adoption and investment by manufacturers is lack of adequate infrastructure. While California is moving quickly to add more other states have little to no infrastructure and are many years away from having enough to meet demand if we reach 25% of market. Manyufacturers will not invest in infrastructure unless they see it as a means to increase profits.

  23. Brock Nanson says:

    True disruption is almost always poorly-predicted by industry insider, pundits and experts. Make no mistake, EV’s and shortly, Autonomous EV’s, will shake the industry. Perhaps their paralysis is similar to that of meaningful climate change action. The ‘boiling a frog’ analogy comes to mind…

  24. Gary Thompson says:

    Right now, most two+ car households would be much better off having 1 ICE car and the rest EVs. And as affordable long distance EVs gain traction, infrastructure improves, and critical mass of 25% adoption happens that last ICE car will transition as well, and relatively quickly. GM could have been the leader in this field with the EV1, instead they chose short-term profits and will now struggle to keep up with the more nimbler automakers.

  25. Ramon A. Cardona says:

    I disagree, most are worried but have little options. People still need and want ICE vehicles because the evolved technology and infrastructure are in place. Just did an 800 miles trip on a hybrid, 32 mpg, and needed 23 gallons of gasoline, at $2.75 a gallon. Not that expensive. The vehicle is 10 years old with 104,000 miles. The only EV able to do this trip is a Tesla S/X new/used starting at about $56,000. The technology and costs that make an EV a practical machine are a long way ahead. Thanks

  26. Jim Stack says:

    They are like many people. They resist change. If they have made money for 50 years they won’t change until they have too. They make a lot of service and repairs. The won’t change.

  27. Andy Silber says:

    The answer is clearly explained in “The Innovator’s Dilemma” https://en.wikipedia.org/wiki/The_Innovator%27s_Dilemma

    They’re making too much money selling gas cars to properly manage the new technology. Time and time again, companies chose profits now over profits tomorrow. The counter examples are rare (e.g., Apple hurting their iPod business with the iPhone). More typical is that new companies (like Tesla) devour the old guard. Sometimes existing players develop great new technologies, but can’t make it work in the marketplace (e.g., Kodak was an early innovator in digital photography, but failed to leverage their head start)

  28. Charles Hall says:

    Maybe it’s because the EV technology is so different from ICE technology? It’s like asking why potato chip manufacturers don’t make beer. That’s the best I can come up with. They seem to be committing business suicide by ignoring EV’s.

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