- Automakers have spent decades battling for market share.
- But the pandemic has changed shopping habits and these long-standing dynamics.
- Companies like Ford and GM know they don’t have to dominate to make money.
The pandemic might have killed off the auto industry’s age-old, brutal battle for market share.
Before COVID, automakers often viewed market share as key to their success.
GM and Ford have dominated it in the United States: GM held the top spot from 1931 until 2021, when Toyota took the crown. GM, however, reclaimed its title last year, in part by expanding into key market segments like pickup trucks and SUVs, increasing its share of electric vehicles, and more.
COVID-19 has changed things. Automakers have enjoyed success in terms of sales and profits, even in a tough pandemic market, which was rife with new and used vehicle markups and inventory battles. This meant that they didn’t need as many cars to make money.
Now, it seems, automakers are re-evaluating their approach.
“Market share for market share’s sake comes at a cost,” Kristin Dziczek, a policy adviser at the Federal Reserve Bank of Chicago, said at the company’s annual automotive knowledge symposium in Detroit. “A big cost.”
Many companies, including Ford, GM, Stellantis (the parent company of Fiat Chrysler and the French PSA group), and others are not likely to return to their pre-pandemic market share levels, Haig said. Stoddard, Senior Analyst, Forecasting at Wards Intelligence.
Certainly, these companies are beginning to have a healthier level of inventory on their dealer lots than they have in the past two years. But industry executives have said they will not revert to the relatively standard 60-day vehicle supply.
Lower volumes could mean they sell fewer vehicles and possibly have a lower market share.
The drop in market share does not concern GM and Ford
However, longtime industry leaders don’t seem worried about Hyundai and Tesla’s market share growth (to 10.6% and 3.8%, respectively, in 2022, according to Kelley Blue Book). – and that could mean the battle for market share is over.
Automakers like GM and Ford are still profitable, even with declining market share. They held 16.3% and 13.3% of the market respectively in 2022 – with Toyota in the middle at 15.2%. (For context, GM once held half of the US market and Ford peaked at just under 30%).
Because consumers have indicated they will expect – and pay more – for vehicles, even vehicles that don’t necessarily have what they want, these automakers know they don’t have to fight or entice car buyers with markdowns.
“Especially GM and Ford, Stellantis too, they love not having to do those late summer blowouts, bargains and even December year-end stuff,” Stoddard said at the symposium.
As long as Ford and GM remain focused on vehicles that make money, it won’t necessarily be bad for them if they don’t recover – although they should still be careful about vehicles that are profitable for them outside popular pickup trucks and SUVs in the United States, experts say.
As for car buyers, this dynamic could impact those who are accustomed to certain annual sales, incentives and lower-cost vehicles.
“There’s going to be more focus on more of these high-profit type vehicles,” Stoddard said. “The plan is at least, strategically, to stay away from those lower things.”