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mustang84

Thinking about market share percentages

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These days, all the talk is about how Detroit is losing X amount of market share each year to imports. Well, I did a little thinking about it tonight and have written up this nice little example to show it in a different light of thinking: For simplicity's sake, I'll only deal with 4 companies and small numbers In 1900, there are two companies, GM and Ford. Each company sells 1 car in that year, meaning that they each hold 50% market share. Then in 1950, a newcomer, Mercedes, comes to the US market. While GM and Ford have each sold 10 cars, Mercedes sells 2 cars that year. Calculating that out with 22 cars total for that year, GM's market share is 45%, Ford's market share is 45%, and Mercedes' market share is 9%. In 1975, GM sells 40 cars, Ford sells 35 cars, and Mercedes sells 15 cars. Another newcomer, Toyota, sells 10 cars. With 100 cars sold that year, the market share in 1975: GM is 40%, Ford is 35%, Mercedes is 15%, and Toyota is 10%. In 2000, GM sells 50 cars, Ford sells 40 cars, Mercedes buys out another car company and sells a total of 30 cars, and Toyota, who has experienced massive growth, sells 35 cars. The total car sales for that year is 155. GM's market share is 32%, Ford's market share is 25%, Mercedes' market share is 19%, and Toyota's market share is 22%. In conclusion, each company sold more cars per year, but every year since 1900 GM and Ford lost market share, while Toyota and Mercedes gained market share. GM and Ford will never have the market share they had back in the 1950s for one simple reason; more car companies exist today. So the next time some news article moans on about GM's lost market share, just remember that GM has been losing market share since the very beginning. The massive losses in market share over the last few years for GM and Ford are bad, but the market share loss over the last 50 years or so is just a natural balancing act due to more competition. Even if GM and Ford turn their losses around and start selling more cars, they will never get market share back up to those historic levels because too much competition exists today.
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You are completely correct, mustang84, and I've thought nearly the exact same thing myself for some time. This is my #1 problem with "market share". It's a relative & comparison term as opposed to a true indicator of health & performance. What's ferrari's marketshare vs. their profit? The entire focus on marketshare is totally overwrought and needs to be dumped like last year's kia. 2-week sales totals are now being used :rolleyes:, wait until we get weekly or daily marketshare reports. Can the satellite radio 24-HR Automotive Marketshare Report be far behind?
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That is a good point, as I think GM has sold pretty much the same amount of cars per year for a long time now. I guess the reason that market share is important now is because almost all companies are established and there aren't any newcomers anymore (at least none that are making a splash) and if GM is losing share then that means buyers are going somewhere else.
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It would be interesting to know GM's total vehicle production (or sales) for the past 20 or so years. Still, it's not hard to see that GM has fallen. GM used to have a lock on the best-selling vehicles. A decade ago, Ford had five of the top 10 vehicles. How could Ford and GM let such a mediocre car like the Toyota Camry be the best selling car in the U.S.? I guess I'll answer my own question by saying that the Camry is a very good value, it's a safe (meaning does not require much thought) buy, and many competitors can't even match the low bar that the Camry has set.
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marketshare is really only important to investors. Why the media has embraced the concept with a deathgrip, I don't know. Yes I do: because they're primarily lazy, thoughtless hacks.
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Mustang, you are right on the money, except for one thing: in the 1950s, there were just as many players as now: Studebaker, Packard, Hudson, Nash, and others were all around. Most of them were gone by the early 1960s. It was the 1960s that were GM's hayday. When one model line of Chevrolet could sell more than a million units (1965).
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