Volkswagen, a German automobile brand, is one of the most renowned automobile brands in the world. The group is also associated with certain other major vehicle brands such as Audi, Buggati, Skoda, Ducati (motorbike), etc. which act as its subordinate brands. Over time the Volkswagen group has taken on many ventures, some successful, others not as much; and this is also their modus operandi in the current market.
The successes and failures of this multinational automobile giant is based on a number of political, economic, social, technological, legal, and environmental factors. In this Pestle Analysis of Volkswagen, we will present a thorough analysis of all these factors and how they affect the Volkswagen group in current times and in the near future.
Political Factors Affecting Volkswagen
Although the company is based in Germany, one of its primary markets lies in the Unites States. The USA is planning to place certain major tariffs on goods imported to it from the EU, and in the coming years this tariff may be placed on automobiles as well. The UK, another huge market for Volkswagen’s automobiles has decided to separate from the EU. This is also a political factor that will affect their sales since certain tariffs may be placed on goods that are imported from the EU to the UK.
Economic Factors Affecting Volkswagen
Volkswagen’s primary target market is the social upper class that prefers to drive luxury and semi luxury vehicles. Since the consumer spending scale is currently on a rise, this helps Volkswagen expand their customer base beyond the upper classes and into the middle classes as well. What is traditionally known as a ‘poor market’ is currently being considered as a potential market by Volkswagen as well. Another factor tied into this economic perspective is opening of up of markets in the less developed and developing countries.
Sociocultural Factors Affecting Volkswagen
While Volkswagen is a well-known name in the automobile industry, when it comes to luxury vehicles brands such as BMW or Ferrari seem to have the upper hand. This is primarily because of Volkswagen’s business model which was to branch out and create multiple luxury vehicle brands. As a result, the primary brand Volkswagen is no longer directly associated with premium automobile classes. However, at the same time Volkswagen is not recognized as a cheap automobile brand either. There seems to be need for certain rebranding of their business persona especially in the eyes of the younger automobile users. Apart from this, the other sociocultural factors that might have a strong effect on the brand are the growing popularity of ride-sharing applications such as Uber.
Technological Factors Affecting Volkswagen
The world is moving towards automation in every sector and automobile is not far behind either. Self-driving vehicles are already being put to use and scientists claim that the future of the automobile industry will be driven by automation. This can potentially act as a major market deterrent for any luxury vehicle brand including Volkswagen. However, this is not a process that is fully compliant yet and it might take at least a decade before self-driving vehicles pose a serious enough threat to the automobile industry.
Legal Factors Affecting Volkswagen
Since 2015 Volkswagen has been on the stand for allegedly manufacturing engines that failed the emission test. The primary allegation was that these engines produced fewer emissions when tested but upon regular use they projected more emissions than allowed by the United States Environmental Protection Agency. Although the brand was able to justify themselves by citing technical faults, this major legal scandal proved to be a deterrent for their brand image. The brand can possibly step out of this negative light by being more thoughtful towards environmental factors.
Environmental Factors Affecting Volkswagen
Global climate concern is currently one of the most potent sociopolitical issues that all manufacturers have to deal with. The traditional engine used by automobiles is being rethought and replaced by technology that is better for the environment. This is a factor that the Volkswagen group will have to implicate within their vehicles in order to stay relevant to the current market. Green vehicles are becoming increasingly popular and introduction of such models will definitely help the brand enter into the next era of automobile technology.
This PESTLE analysis of Volkswagen provides a deeper insight into the market and the business persona of the Volkswagen group. There are more such factors that affect the group’s sales and innovative framework. Being an automobile giant in multiple countries, it is expected that the group will accommodate all these factors within their business decisions in the near future.
Image by Gabriele Lässer