Analysis of the Global Automobile Industry

Introduction

Market analysis of the organisations provides a scope to the multinational corporations to understand the market structure and activities in that particular industry which in turn helps the entrepreneurs to identify the risk and opportunities in the market and strategise their business successfully. In order to conduct market research, PESTEL analysis is one of the effective ways to understand the market condition and identify the external factors that have crucial impacts on the industry. The study explores the PESTEL analysis of the globalised automobile industry which has crucial impacts on the economic growth and social development. The automobile companies are also competing with other with latest innovative products and upgraded technology to satisfy the customers and retain them for long run. As per the figure below, there are multinational corporations operating in the globalised automobile industry which are Toyota, Volkswagen, Ford, Honda, Nissan, Kia, Mercedes, BMW, Hyundai and Chevrolet. These are the famous automobile companies manufacturing high quality cars with latest design and updated technology for creating values for the customers.

Figure 1: Companies operating in the globalised automobile industry with market share

PESTEL analysis of globalised automobile industry

The PESTEL analysis of the automobile industry is helpful for analysing the political forces in the market, economic growth and social development globally, as well as legal rules, technological advancement and environmental sustainability management in this automobile industry.

Political

Political stability is one of the effective factors to support the international business efficiently. The rules of international trade and the intra country relationship among the governments are effective to restructure the business and help the multinational corporations for more international trade. Government promotion of public transport and other alternatives is also effective to increase the sales volume of the public vehicles. Aggressive tax policies on combustion-type automobiles is there in some countries like UK and USA, which is considered as one of the major threats for the customers to buy cars and maintain it efficiently in the market due to high tax rate and maintenance expenses. After the incident of Brexit, there was political instability and uncertain market condition in the globalised automobile industry, however, over the period of time, the market starts stabilising in long run for better trade affairs. Road safety regulations are also imposed by the government across the world which enforces strict safety regulation around the automobile industry (Chandak, Chandak and Dalpati, 2019). For example, limiting the car speed as well as the quality of seat belts are reviewed to maintain passenger safety and thus it can be stated that, the political stability and cooperation of the government across the international borders are effective for the global automobile industry to run the operations activities of the companies successfully. On the other hand, the emission policy, pollution papers as well as the insurance policies are also effective where the government provides clear rules in the global automobile industry.

Economic

As per the economic condition, the economic activities such as GDP, purchasing power parity of the customers as well as the inflation rate are playing crucial role in the automobile industry, where the companies try to review the economic condition and launch the new cars in the market. The economic condition is stable over the years where there is strong GDP contribution of the automobile industry across the world. As per the figure below, GDP growth in the world economy is strong, which helps the companies to strategise their business across the international markets. Moreover, the countries like India, China, Japan, Canada, USA and UK are also growing at a rapid rate with high GDP contribution. The industrialisation as well as increasing purchasing power parity of the individuals over the period of time is the contributing factor in the global automobile industry, where the organisations are able to attract the audiences and influence them to make effective purchase decision (Miglani, 2019). Apart from that, the countries like USA and UK are successful to reduce inflation rate below 2% which is another positive economic condition to run the international business efficiently. Hence, high growth rate in the emerging economies as well as developed countries as well as economic stability across the world are the contributing factors in the automobile industry where the companies can restructure their business efficiently (Chandak, Chandak and Dalpati, 2019).

Figure 2: Global growth countries

Social

As per the social factors, there is high literacy rate across the countries around the globe, where the individuals are trying to literate and give education to the next generation for better living condition. For example, UK has 99.9% literacy rate as USA, which indicates that the individuals are educated and they try to improve their living standard ion long run. Increasing the demand for the electric vehicles and the requirement for self driving vehicles are the major opportunities where the sales volume of the automobile industry as a whole is increasing at an increasing rate (Liu, Zhang and Feng, 2017). The organisations in the global automobile industry can maximise their profitability by attracting more audiences across the markets and increasing their sales volume. On the other hand, there is increasing demand for vehicle-sharing and ride-hailing programs, which is considered to be a threat for the global automobile industry where some percentage of individual prefer to have vehicle sharing facilities which further reduce the sales volume of the automobile companies (Xie, Huang and Gao, 2020).

Figure 3: Vehicle sales

As per the figure above, the sales volume for the automobile products is increasing at a rising rate across the international countries such as North and South America, Greater China, India, Japan and south Asia (Siddiqui and Siddiqui, 2019). The contribution in economic growth is also increasing due to high volume of purchase of the automobile companies.

Technological

Technological factors are also effective for the automobile manufacturing industry as production and manufacturing activities are highly dependent on the latest technology and creative design. The Increasing implementation of self-driving vehicle technology as well as Rising fuel efficiency in automobiles is effective technique to enhance the activities in the market (Ali, Kaur and Jaramillo, 2018). The latest technology in the cars including gearless driving, automated other facilities inside the cars and latest design are effective features to attract the audiences and retain them for long run. The industry is highly efficient to utilise latest IT infrastructure and materials to produce the final output (Li and Li, 2020). The figure below reveals that the share of electric vehicles in the market across the globe which is increasing in different segment such as light commercial vehicle, buses, passenger vehicles and heavy commercial vehicles.

Figure 4: EV share of annual vehicle sales

The customers focus shifts towards high fuel efficient and high mileage vehicles. On the other hand, Toyota focuses on introducing driverless car in the coming years which would be latest technological innovation of the global automobile industry (Khalifah, 2020). For example, Hyundai and Ford invest in low emission and environment friendly vehicles which are also great technological innovation in the automobile industry.

Legal

Legal rules and legislation are mandatory to be managed by the automobile manufacturers to manage their business efficiently. The regulations of the safety measures in automobile industry is strict as well as strict regulation on emission and expanding environmental regulations are there to protect the accidents and environmental sustainability. The automobile industry is hereby efficient to design the sustainable products, delivering efficient services as well as follow the strict rules for running their business sustainably (Kumar and Kaur, 2016).

Environmental

Environmental factors are also effective for running the automobile industry safely. In this regard due to high globalization, the emission of greenhouse gas is increasing over the years and it is high time for the automobile industry to tale active actions to design the cars with low emission or zero emission technique (Furuta, Sato and Otsuka, 2019). This is latest technology, where the companies like Mercedes, Hyundai and Toyota focus on increasing the zero emission electric cars which are sustainable for maintaining the environmental sustainability. The figure below explores that the global plug in electric light vehicle sales in increasing over the years and ion the last years it was 2.21 million across the globe.

Figure 5: Global plug in electric light vehicle sales in million units

Hence, environmental legislative structure and the initiatives of the automobile manufacturer across the globe are effective to launch more zero emission electric vehicles for the betterment of the social communities.

Conclusion

The above mentioned factors have crucial impacts on the automobile industry across the globe and the industry is growing at a rapid rate and it has contributed in the global growth and social development. The technological advancement and environmental sustainable solution of the automobile industry are effective to make the industry sustainable and create values for all the stakeholders engaged with the industry. The government stability and legal structure are also effective to reshape the industry and make the global automobile industry successful.

Reference List

Furuta, M., Sato, T. and Otsuka, K., 2019. Determinants of Success in the Automobile Industry in India: An Analysis of Foreign and Local Enterprise Data for 2000-2008.

Kumar, N. and Kaur, K., 2016. Firm size and profitability in Indian automobile industry: An analysis. Pacific Business Review International, 8(7), pp.69-78.

Khalifah, N.A., 2020. Are foreign multinationals more efficient? A stochastic production frontier analysis of Malaysia’s automobile industry. International Journal of Management Studies, 15, pp.91-113.

Liu, X., Zhang, S. and Feng, X., 2017, January. Comparative Analysis of International Competitiveness of Chinese-American Automobile Industry. In 2016 2nd International Conference on Economics, Management Engineering and Education Technology (ICEMEET 2016). Atlantis Press.

Miglani, S., 2019. The Growth of the Indian Automobile Industry: Analysis of the Roles of Government Policy and Other Enabling Factors. In Innovation, Economic Development, and Intellectual Property in India and China (pp. 439-463). Springer, Singapore.

Chandak, A., Chandak, S. and Dalpati, A., 2019. The Analysis of Impact of Critical Dimensions on Performance in Context of Supply Chain: Evidence from Indian Automobile Industry. Proceedings of Recent Advances in Interdisciplinary Trends in Engineering & Applications (RAITEA).

Xie, X., Huang, H. and Gao, F., 2020. An Empirical Analysis of the Influence Factors on the Automobile Intra-industry Trade in Guangzhou. MS&E, 768(5), p.052109.

Ali, S.S., Kaur, R. and Jaramillo, A.B., 2018. An assessment of green supply chain framework in Indian automobile industry using interpretive structural modelling and its validation using MICMAC analysis. International Journal of Services and Operations Management, 30(3), pp.318-356.

Li, J. and Li, D., 2020. How decent is work in the automobile industry in Shanghai? What does it mean for Chinese vocational education and training? An analysis of shop floor jobs in the Shanghai automobile industry. In Comparative Vocational Education Research (pp. 221-239). Springer VS, Wiesbaden.

Siddiqui, A.M. and Siddiqui, D.A., 2019. Relationship between Custom Duties and Profitability of Automobile Industry: A Cross Country Analysis. Available at SSRN 3400726.

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