Sample Essay on PESTEL Analysis for Automobile Industry in Europe

PESTEL Analysis for Automobile Industry in Europe

A PESTEL analysis for automobile industry in Europe indicates the major drivers that are used in predicting future scenarios. PESTEL analysis refers to a framework that is used in scanning the external, macro-environment of an organization. PESTEL stands for the Political, Economic, Socio-cultural, Technological, Legal and Environmental factors that can affect an organization.

Comprehensive PESTEL analysis for automobile industry in Europe

The Europe’s automobile industry’s PESTEL analysis is as follows:

Political factors

In Europe, the automobile industry has been a major economic stone. However, proactive governments’ intervention has been seen during economic and financial crisis. Different incentive schemes were introduced early in 2009. These lifted demand, more so for medium and small sized cars. As a result, car manufacturers have been able to get through the economic tough times. However, the incentive schemes expired at the end of 2009 subjecting the car market’s growth prospects to the confidence of the consumer in economic outlook. Generally, the European governments have played a role in influencing the performance of the European automobile industry in different ways. This includes coming up with legislations that touch on the environment, company cars and competition. The governments have also imposed duties and taxes and in some cases, provided subsidies.

Economic factors

The European automobile industry is among the industries that are hardest hit by economic and financial crisis. With the recent economic crisis, business confidence collapsed, some people became unemployed and consumer spending reduced. Tightening credit in banking sectors led to an increase in the rejections of the applications for vehicle financing. This affected the entire automobiles supply chain. Between 2008 and 2009, the industry lost about 20 percent in terms of vehicle production and revenue. Other major economic factors that affect the automobile industry in Europe include excess capacity and pricing pressure. Excess car production increases marketing revenue as well as designing new products. Excess capacity and products proliferation leads to pricing pressure.

Social factors

Among the social factors that affect the automobile industry in Europe include culture and demographics as indicated by the buying pattern and capacity of consumers. In the market that the automobile industry targets, there are changes in fashion and taste, consumers’ buying pattern due to recession, more so in the mature markets, customer predictions as consumers need cars with high fuel efficiency and reduced emission as well as increasing awareness of the harmful emissions from some automobiles combined with increased environmental issues.

Technological factors

Increased consumer awareness has led to technological improvements. Technological improvements have increased efficiency in the manufacturing plants. Today, the automobile industry in Europe is producing vehicles that are energy efficient using modern technologies. The produced vehicles are safer. Technology has also boosted e-commerce or online sale of automobiles. It has also led to production of vehicles that do not cause environmental pollution.

Environmental factors

Increased global warming awareness, greenhouse effects and burnout are some of the environmental factors that affect the European automobile industry. Consumers want hybrid cars, fuel cells cars and more environmental friendly cars. The industry is also affected by the strict application of the EURO norms to curb pollution in the European countries.

Legal factors

The automobile industry in Europe is affected by restrictions and laws that are aimed at curbing pollution. On recognizing that competition from low-cost economies like India and China was increasing, the European Commission launched the CARS 21. This is a 21st century system for regulating the competitive automobile industry. This system influences the performance of the automobile industry in Europe.

Why the PESTEL analysis for automobile industry in Europe is important

PESTEL analysis of the European automobile industry is important considering the brisk changes and intricacy of this industry. It is after conducting this analysis that companies that are thinking of venturing into the European automobile industry will know and understand the political, economic, social, technological, environmental and social issues that their entry strategy should consider and address.



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