My opinion: not everyone modifies there cars with the intention of squeezing more power out of it. Of course it's nice to have power, but where exactly is the average person going to be able to exploit it.
I think most mods, are aimed at the car enthusiast who wants something slightly different and unique, to change the appearance, aesthetics, design or feel of a car.
The car manufacturers build and design cars that will sell to large audiences, with good profits, within certain criteria.
As a modern day car modifier, i know my car is now slower than when i first bought it, but i also know, that to my eye, it looks better than standard versions of my car. It's a compromise that some have to make.
:)