Cars have always been considered an extension of a person’s individuality. Apart from being utility items in the form of personal transport, automobiles have fueled the fascinations of car aficionados for generations. In recent years, however, trends have begun to reverse.
Automobile manufacturers the world over are faced with a sudden slump in demands. This coupled with environmental factors, technological upheavals and complex regulatory frameworks have resulted in the global automotive industry going through tough times.
Is this only a passing phase, or will it have long lasting repercussions? In this global automotive industry PESTLE analysis, we are going to take a look at the different macro-environmental factors that have impacted the automotive industry in recent times, and also consider how emerging economies and technology will affect the industry in the times to come.
Automotive Industry Pestle Analysis
Below are the political factors affecting automotive industry.
One of the most prominent factors affecting the global automotive industry is the looming prospect of a no-deal Brexit. With Britain on the road to cutting lies with the European mainland, automobile manufacturers are confronted with an uncertain market and the risks of higher operating costs. This has resulted in a sharp decline in investment in the European auto-markets.
Apart from the above, complex regulations and environmental legislation have also had a significant impact on the global automotive industry. As a result, new firms are sluggish to enter the automobile market.
However, significant opportunities lie in the emerging economies of Asia and South America, especially India and Brazil. According to a study by these two countries have shown significant rise in car sales in the past year. This growth rate is projected to continue with India expected to grow to the third largest market for automobiles by 2021.
Below are the economic factors affecting automotive industry.
The economic tussles and trade wars between nations have had a significant impact on the global automotive industry. With the US and China on the path to full scale trade wars, demands have fallen in the Chinese markets. As China accounts for the single largest share of global auto sales, a fall in demand from this market echoes across the entire industry.
But there is good news, again from emerging economies such as those from African and South American countries. With income levels rising in developing nations, the population has access to considerable amounts of disposable income which they are able to invest in personal vehicles. This no doubt bodes well for car makers worldwide.
Below are the social factors affecting automotive industry.
Owning a car was, and still is, considered a mark of social standing. In developed nations of Europe and North America families usually have one or more vehicles for individual members. Things are beginning to change, however, with the advent of driver-less vehicles and car-hailing services such as Uber.
With lower costs of travel, zero maintenance woes and related benefits, the trends seem to be shifting away from ownership and towards ride-sharing and renting. As tech-giants make forays into the car industry (think Tesla and Google), global automakers are teaming up to remain relevant in a market where consumer demands are rapidly morphing into novel forms.
Below are the technological factors affecting automotive industry.
Since inception, the global automotive industry has always been driven by technology. As AI and self-driven vehicles become a reality, traditional automakers are increasingly discovering the need to adapt their existing business models and practices to cater to the latest shifts. Tech advancements have also significantly contributed to improving safety measures adopted by automakers.
Below are the legal factors affecting automotive industry.
Car makers regularly have to navigate a maze of regulations that govern the manufacture of automobiles. With new safety regulations and legislation being passed, copyrights and patent laws changing shape as well as legal woes stemming from competition, the automobile industry finds some relief in the developing nations where enabling regulations and tax-cuts are helping automakers to deliver newer models to consumers.
Below are the e factors affecting automotive industry.
The car industry perhaps has one of the largest carbon footprints of all. As most vehicles continue to ply using fossil fuels, environmental degradation continues to be a cause for concern for automakers. With governments imposing stricter rules and tax-norms, the global car industry is making a shift towards electric and hybrid vehicles which is more environment-friendly and appealing to eco-conscious customers.
Cars continue to remain a way of life, though rising costs and tougher norms are considerable obstacles for the global auto market. But as this automotive industry PESTLE analysis delineates, emerging economies and technological advancements offer significant opportunities for automakers to adopt new practices and business models for overcoming the current demand slump and emerge profitable in the near future.