Detailed PESTEL Analysis of Automobile Industry | EdrawMax Online (2023)

Detailed PESTEL Analysis of Automobile Industry

Detailed PESTEL Analysis of Automobile Industry | EdrawMax Online (1)

1. Introduction

The PESTEL analysis is a crucial component of management studies. It helps a company to point out the external conditions which may impact the business. There are different external components like politics, economy, society, technology, ecology, and law, which can influence the sales of the automotive industry. The PESTEL analysis of the automobile industry show how those factors can work on the development of this industry. It helps companies to make strategies to resolve the potential harms.

2. Background of Automobile Industry

The automobile industry in the current world is a flourishing industry. Cars are not only a mode of communication, but they are also a part of the lifestyle in many developed countries. Though the increasing gas price, pollution laws, and taxes have some impact on the growth of this industry, technological innovations have opened a door for future customers. The automobile industry is highly profitable, with an EBIT margin of 6% in 2016.

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3. Automobile Industry PESTEL Analysis

The PESTEL analysis of the automobile industry shows how different external factors can affect their business. As the lifestyle of people is changing, the automobile industry is also emerging. PESTEL analysis of the automobile industry shows the problems that they can face in the future. Thus, allowing companies to find out the ways to solve them.

Political Factors:

The politics of a country has a direct effect on the business operating within its periphery. The PESTEL analysis of the automobile industry shows how political issues can impact the automobile industry:

  • In most countries, governments have issued regulations regarding the production of automobile parts to ensure the safety of passengers. If any company fails to fulfill these requirements, their license may get canceled. Moreover, the company needs to spend significant time on test running before launch, which can be costly at times.
  • The administrations are also keen to restrict the ample usage of fossil fuels which create more pollutants. The automobile manufacturer companies need to keep the emissions under a specific range to continue with their business.
  • The automobile industry of a country is also dependent on the government’s decisions on export and import. If a company can import high-quality parts at a comparatively lower rate, it can have a better profit margin.
Economic Factors:

The lifestyle of people is dependent on the economy of a country. Therefore, it can also impact the automobile industry. Here are some economic issues which can affect the automobile business:

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  • The income of people from stable and emerging economic zones are increasing day by day. Therefore their spending capacity is also on the rise. It is the reason the demand for cars is going up.
  • Many countries have imposed taxes on luxury items which have increased their price, and hence a specific section of buyers may not choose to buy one. It may result in decreasing demand for luxury cars in some countries. However, if many companies launch comparatively cheap cars, they may get more buyers.
  • If the price of automobile parts increases, then the cost of the cars will also increase. It can be a reason for the decrease in demand for automobiles.
Social Factors:

The socio-cultural conditions work on the businesses of a land. Social trends gravely impact the production of cars. The PESTEL analysis of the automobile industry can find the sociological conditions, which can toll upon the automobile industry.

  • Cars are not only vehicles but are fashion statements. Hence, the companies need to consider the choice of people while manufacturing new cars. Otherwise, it may go out of fashion and may not get a good sale.
  • Population distribution of a country also impacts the sales of cars. A state with a dense population and large families tends to have a good sale of big cars like SUVs.
  • The culture and tendency of communities also affect the automobile industry. For example, the countries which have well-connected bus services may see less number of people owning cars. There is also a tendency of developed countries to possess one or more cars.
Technological Factors:

Technological condition immensely impacts the sales of automobile companies. Here are some technical issues which can work on the business of the automobile industry :

  • The automobile industry is hugely dependent on innovative technology to ensure the safety of the people. Companies need to upgrade their technologies to make their cars as safe as possible.
  • The companies need to concentrate on the reduction of emissions. They can use modern technologies to keep the emission rate in check.
  • Self-driven cars are already out in the market. Hence in the future, they may get high demands. The company needs to promote these self-driven cars and electric vehicles, which may gain them more customers.
Environmental Factors:

The automobile industry can get deeply impacted by ecological issues. As the concern over pollution is increasing, the condition may toll upon their business. The PESTEL analysis of the automobile industry can identify the environmental issues, which can impact the automobile industry:

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  • As emission from the vehicle is a concern for the environmentalists and government. The companies can use their latest technology to manufacture battery-driven or electric cars, which can help in decreasing the rate of emissions.
  • The governments of the countries are more willing to take up environmental policies to decrease the pollution level, and the automobile manufacturer needs to abide by the rules. It may lower the profit margin for automobile manufacturing companies.
  • The research unit of the automobile companies needs to be strict with the testing. They should debut a unit in the market if only it can pass the strict pollution tests.
Legal Factors:

The laws and regulations of the countries can affect the business of the automobile industry. Most of the countries have laws for automobile companies. Here are some legal issues which can work on the business of the automobile industry:

  • Many countries have strict laws to decrease the number of vehicles on the street, which can help them to lower the air pollution level.
  • During the forensic test of an accident, if it is proved that there was any problem with the faulty parts or airbags, the company may have to face legal proceedings.
  • If a vehicle company operates in an international market, the company must take care of the tax laws and environmental laws. If they fail to do so, the company may get banned in the country.

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4. Key Takeaways

As the lifestyle and economic conditions of the countries are changing, the automobile industry has the potential to see rapid growth in the future. However, there are safety and environmental concerns which they need to take care of to sustain stability. The PESTEL analysis of the automobile industry shows that the automobile industry should successfully cushion its potential threats. Only then can they expand their business in both developed and developing countries.

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5. References

  1. Bush, T., 2021. 'PESTLE Analysis of the Automotive Industry', PESTLE Analysis, [online]. Available at: https://pestleanalysis.com/pestle-analysis-of-the-automotive-industry/ (Accessed 26 June 2021).

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  2. Farooq, U., 2021. 'Global Automotive Industry PESTLE Analysis | Marketing Tutor', Marketing Tutor, [online]. Available at: https://www.marketingtutor.net/global-automotive-industry-pestle-analysis/ (Accessed 26 June 2021).

  3. Pratap, A., 2021. 'Automotive Industry PESTEL/PESTLE/PEST Analysis by Cheshnotes', notesmatic ,[online]. Available at: https://notesmatic.com/automotive-industry-pestel/ (Accessed 26 June 2021).

  4. UKEssays.com. 2021. 'SWOT and PESTEL analysis of the automobile industry', notesmatic ,[online]. Available at: https://www.ukessays.com/essays/marketing/swot-and-pestel-analysis-of-the-automobile-industry-marketing-essay.php (Accessed 26 June 2021).

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FAQs

What is Pestel analysis give examples? ›

PESTLE is an acronym that stands for six external factors affecting your business: political, economic, sociological, technological, legal and environmental. Each of these can have a profound effect on your business and varying implications, for example, in terms of: duration of impact - short term or long term.

What are social factors affecting automobile industry? ›

Social factors include population growth, changing trends, demographic shifts, and so on. These directly determine the values people have and their attitude toward vehicles, which in turn affect car sales.

What are the most critical environmental factors impacting upon the automotive sector? ›

It's also true that most of an automobile's environmental impact, perhaps 80 to 90 percent, will be due to fuel consumption and emissions of air pollution and greenhouse gases that climate scientists say are driving global warming.

What economic factors are affecting the automobile industry? ›

In addition to increased fuel prices, there has been an upward trend in interest rates and inflation. The numerical increase of these two factors, without corresponding wage growth, has negatively impacted the automotive market.

How do you write a good PESTLE analysis? ›

Here's how to write a PESTLE analysis:
  1. Start political.
  2. Move on to economic factors.
  3. Examine social influences.
  4. Look at technological factors.
  5. Understand the impacts of the legal system.
  6. Study how environmental changes affect you.

What is a PESTEL analysis PDF? ›

Doing a PESTEL analysis helps you to look at all important factors. that might affect the success or failure of your project. PESTEL is an acronym for the following factors (Political, Economic, Social and cultural, Technological, Environment and Legal)

What are the barriers in the automobile industry? ›

The existence of economies of scale is perhaps the most significant entry barrier in the auto industry. Also customers have existing brand preferences. For such a high-value purchase, the brand often becomes the decisive factor. There are heavy sunk costs associated with exits.

How political factors affect automobile industry? ›

Political factors play an important role and have a direct impact on the profitability of the automotive industry. Governments around the world are favoring low emission vehicles. Moreover, taxes on the luxury vehicles and fuel guzzlers have grown higher.

What are top 5 most common automobile problems? ›

Let's take a look at some of the more common issues and see if these are likely to be a quick fix or a costly repair.
  • A Warning Light Shows. ...
  • The Engine is Sputtering. ...
  • The Steering Wheel is Shaking. ...
  • The Brake Pads are Worn. ...
  • The Brakes are Squeaking/Grinding. ...
  • The Tyres are Flat. ...
  • The Tyres are Wearing Unevenly.

What are the factors affecting vehicle performance? ›

Factors such as terrain, temperature, weather, trip length and environment, driving behavior and load all affect the performance of a vehicle over time.

What are the biggest contribution of automobiles in to the industry? ›

Autos create jobs, jobs, jobs.

Building 60 million vehicles requires the employment of about 9 million people directly in making the vehicles and the parts that go into them. This is over 5 percent of the world's total manufacturing employment.

What are three impacts of the automobile? ›

The automobile gave people more personal freedom and access to jobs and services. It led to development of better roads and transportation. Industries and new jobs developed to supply the demand for automobile parts and fuel.

What are some factors that affect the efficiency of automobile engine? ›

These include the chemical energy loss in emissions, heat losses from the engine and through the exhaust gas, and gas pumping and friction losses in the engine. Accordingly, the overall brake thermal efficiency of the engine is a product of the combustion, thermodynamic, gas exchange, and mechanical efficiency.

What kind of market is the automobile industry? ›

The auto industry is highly competitive in terms of return on investments and it is considered as an oligopoly market.
...
Market Environment And Structure Of Auto Mobile Industry Marketing Essay.
✅ Paper Type: Free Essay✅ Subject: Marketing
✅ Wordcount: 2377 words✅ Published: 1st Jan 2015
1 Jan 2015

Which PESTLE factor is most important? ›

There is no single most important factor in the PESTEL framework. Depending on the subject to be analyzed, different factors may be supportive or detrimental. There is something that is most important in strategy formulation - knowing your company, knowing your competition, and knowing your customer.

What questions should I ask in a PESTLE analysis? ›

Sections of a PESTEL analysis template
  • Who are our stakeholders?
  • When is our country's next local, state, or national election? How could this change government or regional policy?
  • Could any pending legislation or taxation changes affect our business, either positively or negatively?
7 Aug 2019

What is Pestel analysis diagram? ›

Key Takeaways. A PESTEL Analysis evaluates the macro-environment facing a business that affects its current and future state. It illustrates the political, economic, social, technological, environmental, and legal factors that impact the company from outside.

How do you do a PESTLE analysis step by step? ›

How to do a PESTLE analysis
  1. Identify the scope of the research. ...
  2. Decide how the information will be collected and by whom. ...
  3. Identify appropriate sources of information. ...
  4. Gather the information – you can use the template below.
  5. Analyse the findings.
6 Dec 2021

What is PESTLE analysis PPT? ›

PEST PowerPoint template is a presentation design that you can use to present PESTEL analysis in PowerPoint. It stands for Political, Economic, Social and Technological analysis that describes the framework of macro-environmental factors. These factors are used for environmental scanning in strategic management.

Why PESTEL analysis is important PDF? ›

A PESTEL analysis is a framework or tool used to analyse and monitor the external environment factors which have an impact on an organisation. The result of which is used to identify threats and weaknesses, strengths and opportunities which can be considered or used in a SWOT analysis.

What trends are impacting the automotive industry? ›

Trends Shaping The Auto Industry In 2023
  • Increased Production Of Electric Cars With Digital Technology. ...
  • A Rise In Digital Automobile Sales. ...
  • Increased Sales Of Pre-Owned Vehicles. ...
  • More Connected Cars. ...
  • More Innovative Online Marketing Strategies. ...
  • The Emergence Of Fuel Cell Electric Vehicles. ...
  • Shared Mobility.
1 Oct 2022

What are the effects of automobile in environment? ›

Toxic substances such as carbon dioxide and carbon monoxide are emitted when fuels such as gasoline and diesel oil are burned in automobiles. These substances cause a variety of environmental problems such as air pollution and global warming, which is why people say that cars are bad for the environment.

What is the future of automobile industry? ›

Opportunities in the automotive industry seem nearly endless. However, two key trends are set to further push the automotive industry forward in the long run: electrification and connectivity. These trends are mainly driven by policy changes and technology.

What are the 4 major components of an automobile? ›

(i) A steel frame, which is a major part. body and other accessories, which are not involved in the movement of the vehicle. (iii) Other major components include engine, transmission system, front and rear axle, steering system, suspension system, wheels, tyres and brakes.

What was a weakness of the automobile industry? ›

Weaknesses. Weak demand for private ownership of cars powered by the internal combustion engine: This is caused in part by the cost of insurance and fuel, as well as by a decline in commuting.

What are the three major sections of the automobile? ›

Components, Parts of Automobile.
  • The Chassis.
  • The Engine.
  • The Transmission System.
  • The Body.

How does technology affect the car industry? ›

Increased Manufacturing of Electric Cars

Automakers integrate modern car technology into their vehicles. Also, tech companies such as Tesla and Google are working on self-driving and electric automobiles. Therefore, it is clear that automobiles produced in 2022 will be full of technology addressing digital touchpoints.

What is the political factor affecting the industry? ›

Political factors that affect businesses include taxation, employment laws, and political stability.

What are the different types of automobile troubles? ›

10 Common Car Problems and How to Prevent Them
  • Faulty Starter.
  • Dead Battery.
  • Damaged Alternator.
  • Worn Spark Plugs.
  • Flat or Worn Tires.
  • Problematic Brakes.
  • Radiator Leaks.
  • Fuel Leaks.
8 Jul 2022

Which automobile is the most reliable? ›

Here are the 7 most reliable car brands at the moment:
  • Lexus. This brand stays at the top, year after year. ...
  • Toyota. Many Toyota models are among the most popular cars worldwide because they are affordable, dependable, and easy to maintain.
  • Mazda. ...
  • Kia. ...
  • Honda. ...
  • Buick. ...
  • Hyundai.
14 Jun 2022

What is the most important maintenance on a car? ›

The 8 Most Important Car Maintenance Services Teen Drivers and First-Time Drivers Need To Know
  • Check & Replace Your Wiper Blades. ...
  • Change Your Oil Regularly. ...
  • Rotate Your Tires & Check Air Pressure. ...
  • Check Your Battery's Charge. ...
  • Replace Worn-Down Brake Pads. ...
  • Replace Your Air Filter. ...
  • Check Hoses & Belts. ...
  • Replace Old Spark Plugs.
23 Jun 2014

Which type of analysis is required for the performance testing of the vehicle? ›

Real-time Data Analysis.

What are 5 strategies that can increase efficiency in a car? ›

5 Ways To Improve Fuel Efficiency
  • STOP DRIVING WITH A LEAD FOOT. The best method for improving fuel efficiency is to watch your speed and avoid aggressive driving. ...
  • SCHEDULE REGULAR MAINTENANCE FOR YOUR VEHICLE. ...
  • AVOID LONG PERIODS OF IDLING. ...
  • MAINTAIN YOUR TIRE PRESSURE. ...
  • LIGHTEN YOUR LOAD.
19 Nov 2020

What is the purpose of automobile industry? ›

The automobile industry, one of the world's major manufacturing industries, encompasses all companies and activities involved in the production of these vehicles and special-purpose vehicles such as fire engines, hearses, and ambulances.

What is the current position of automobile industry? ›

Currently India's auto industry is worth of more than US$100 billion and contributes 8% of the country's total export and accounts for 2.3% of India's GDP.

Which industries benefited from the automobile? ›

The boom in the automotive industry stimulated growth in other industries related to car manufacture or use. The steel, glass, rubber, asphalt, wood, gasoline, insurance, and road-construction industries all benefited."

How did automobiles affect the economy? ›

The growth of the automobile industry caused an economic revolution across the United States. Dozens of spin-off industries blossomed. Of course the demand for vulcanized rubber skyrocketed. Road construction created thousands of new jobs, as state and local governments began funding highway design.

How does automotive affect the economy? ›

Auto manufacturing drives $1.1 trillion into the economy each year through the sales and servicing of autos and flows through the economy, from revenue to parts suppliers to paychecks for assembly plant workers, from income for auto-related small business to revenue for government.

How will you increase the efficiency of an automobile? ›

Increasing Energy Efficiency in Your Cars and Trucks
  1. Keep Engines Tuned. ...
  2. Choose Proper Octane of Fuel. ...
  3. Monitor Tire Inflation. ...
  4. Change Motor Oil. ...
  5. Replace Air Filters. ...
  6. Plan Your Trips. ...
  7. Observe Speed Limits. ...
  8. Modify Driving Habits.
14 Jun 2010

What is the most significant factor in automobile fuel consumption? ›

Factors that affect fuel efficiency
  • Driving behaviour: Rapid acceleration, speeding, driving at inconsistent speeds and even extended idling can increase your fuel consumption. ...
  • Weather: The colder it is, the worse your fuel consumption will be. ...
  • Weight: It's a fact that lighter cars use less fuel.
4 Sept 2018

Which engine has highest efficiency? ›

The Stirling engine has the highest theoretical efficiency of any thermal engine but it has a low output power to weight ratio, therefore Stirling engines of practical size tend to be large.

Who is the market leader in automobile industry? ›

Maruti Suzuki

Is automobile An example of monopoly? ›

The automobile industry is an oligopoly market as it has only a few well-known firms producing automobiles. Since there are only a few firms, each firm must produce a large amount of output before it can achieve low average costs.

What are the sectors in automobile industry? ›

What Companies Are In The Automotive Sector?
  • Original Equipment Manufacturers.
  • Electronic Car Component Manufacturers.
  • Dealerships and Rental Agencies.

What are examples of political factors? ›

Political factors include government policies, leadership, and change; foreign trade policies; internal political issues and trends; tax policy; regulation and de-regulation trends.

How PESTLE analysis is beneficial for organizations explain in detail with examples? ›

A PESTLE analysis is often used as a broad fact-finding activity. It helps an organization establish the external factors that could impact decisions made inside the organization. By understanding the impact these external factors can have on an organization, it becomes handy for organizations to plan better.

What are examples of environmental factors in a PESTLE? ›

Climate change. Weather. Pollution. Availability of non-renewable goods.
...
And consequently,
  • Availability of certain renewable goods.
  • Existence of certain biological species.
  • Workplace efficiency.
  • Environment-related laws.

What is PESTEL analysis used for? ›

What is PESTLE? A PESTLE analysis is a tool used to gain a macro picture of an industry environment. PESTLE stands for Political, Economic, Social, Technological, Legal and Environmental factors. It allows a company to form an impression of the factors that might impact a new business or industry.

What is legal factor in pestle analysis? ›

Legal factors include - health and safety, equal opportunities, advertising standards, consumer rights and laws, product labelling and product safety.

What are the economic factors affecting business environment? ›

Economic environment
  • Employment/unemployment.
  • Income.
  • Inflation.
  • Interest rates.
  • Tax rates.
  • Currency exchange rate.
  • Saving rates.
  • Consumer confidence levels.

What are economic factors in pestle? ›

Economic factors include inflation rate, interest rates, foreign exchange rates, economic growth patterns etc. It also accounts for the FDI (foreign direct investment) depending on certain specific industries who're undergoing this analysis. Example Index Terms – Ownership Changes, Bankruptcy, Company Relocations.

How does PESTLE analysis help in better business decision making? ›

The purpose of the PESTLE analysis is to identify external factors that could impact an Organization's ability to meet its goals and objectives – whatever they may be. These external factors fit two key criteria: Factors of Concern – outside the direct control of an Organization.

How does PESTLE factors affect the success business? ›

PESTLE helps you to analyse external factors which can affect your business. The six factors are: political, economic, social, technological, legal or environmental. With a clear overview of these factors you can better understand the position and potential of your business in the market.

What are the three most important environmental factors? ›

The list of issues surrounding our environment go on, but there are three major ones that affect the majority of them overall: global warming and climate change; water pollution and ocean acidification; and loss of biodiversity.

What are the 7 environmental factors? ›

Environmental factors include temperature, food, pollutants, population density, sound, light, and parasites.

What are the 10 environmental factors? ›

10: Environmental Factors
  • Osmolarity.
  • pH.
  • Temperature.
  • Oxygen Concentration.
  • Pressure.
  • Radiation. Key Words. Essential Questions/Objectives. Exploratory Questions (OPTIONAL)
3 Jan 2021

What are the 6 elements of PESTLE? ›

In particular, PESTEL reflects the names of the six segments of the general environment: (1) political, (2) economic, (3) social, (4) technological, (5) environmental, and (6) legal.

Are Pestel important to every organization? ›

PESTEL analysis is one important tool that executives can rely on to organize factors within the general environment and to identify how these factors influence industries and the firms within them.

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