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All About Pestel Analysis of the Automobile Industry!!

Pestel Analysis of the Automobile Industry

Before diving into the topic of pestle analysis in the automobile industry, we need to understand what pestle means and why we are talking about this. How is it related to the Automobile industry? Why should everyone be aware of this? If you are looking for the answers to the above questions then you are at the right place. In this blog, we are going to discuss and try to understand the concept of pestle analysis. The automobile industry or automotive industry is one of the world’s largest industries by revenue. 

PEST analysis stands for the environmental influences on a business. It is useful to identify the external environment factors in which a business operates. Pest analysis refers to political, economic, social, technological, environmental, and legal issues that could affect the strategic development of a business. 

Before applying any kind of marketing strategy, it is necessary to apply situational analysis, and Pestel is a part of it. Industries that successfully monitor and analyze the changes in the environment can make plans and strategies in advance or gain a competitive image. Depending on the organization, the Pestel can be reduced to PEST or some areas like ethics can also be added.

PESTEL Factors of the Automobile Industry

The PEST tool is very useful to analyze or to understand the reduction and growth of a certain market including the potential of the business. 

    • Political Factor – This refers to entire laws, rules, regulations, and security assessments, that can be applied to the entire industry. These rules and laws are brought up in the matter of environmental issues, therefore, the automobile manufacturers had to take certain precautions. All newly manufactured cars should stick to the EU (Euro Standards) vehicle emission standard. The government makes rules by keeping in mind that no industry should have any negative impact on the environment. Rules for example – once the UK government imposed a high tax charge on the automobile which produces high CO2 emissions. 
    • Economic Factor – These are associated with the exchange rates, interest rates, worldwide economic rates, raw material costs, employment, or unemployment rates. These are the factors that impact economic decisions thus impacting an organization and its profitability. The automobile industry is one of the most demanding industries in terms of infrastructural development. High rate of car produced leading to high rise in new demands and revenue marketing.
    • Social Factor – These factors are less related to the automobile industry as they include changes in the social environment and identify emerging trends. It involves changes in demographics, lifestyle changes, cultural trends, education levels, changes in buying patterns, customer standard of living, etc. The customer always looks for the label of the automobile. There are so many different kinds of people, and so does their taste and demands, thus, some customers buy bigger or spacious cars to suit their big family and some go for sporty, stylish cars in which they feel more comfortable.
    • Technological Factor – The technological factor is related to development changes or any innovation that affects the market or industry. Technology in the automobile industry is changing in many different ways. In many countries, developers are focusing on and creating vehicles that emit less air pollution. They are aiming to reduce the life casualties caused by transportation accidents. For example autonomous driving cars, robotized monitoring, etc. 
    • Environmental Factor – This element has become important with the rise of Corporate Sustainability Responsibility. Factors include climate, recycling procedures, waste sustainability, etc. The factors like the surrounding environment and the impact of ecological aspects are kept in mind during the manufacturing of vehicles.
    • Legal Factor – Organizations or industries should be aware of any change in legislation and regulations within the territories they are working in. Factors include health and safety, consumer law, employment legislation, etc. These refer to all the laws that are directly related to a business or company. 

Why should you do a PESTEL Analysis?

It is an essential strategy analysis tool that considers external factors or the environment in which they operate. This is particularly important for big firms or organizations that can become more inward-looking. The PESTEL tool can provide you with a positive perspective by making out the threats and opportunities in advance hence giving firm time to react. It is particularly useful when synchronized with Porter’s 5 Forces analysis which is also an important tool for understanding the forces that shape the competition within the industry. 

Conclusion

Pestel analysis is more often criticized by people based on analysis that has been done poorly. This analysis should be done after every six months as the surroundings are changing very rapidly.  Hire professionals or nominate people who can keep an eye on the pestle factors. The number of steps that are adopted while doing analysis are brainstorming, consulting, researching, evaluating, and repeating the process until it has been narrowed down to insightful points in every step. 

What is PESTEL analysis and why is it relevant to the automobile industry?

PESTEL analysis assesses the political, economic, social, technological, environmental, and legal factors that impact a business or industry. In the automobile sector, understanding these factors is crucial for strategic planning and decision-making.

How do political factors influence the automobile industry?

Political factors encompass laws, regulations, and security assessments. For instance, government regulations on vehicle emissions standards (like EU standards) and taxation policies can significantly impact automobile manufacturers.

What economic factors affect the automobile industry?

Economic factors include exchange rates, interest rates, raw material costs, and employment rates. These factors influence consumer purchasing power and demand for automobiles, ultimately affecting industry profitability.

What social factors are relevant to the automobile industry?

Social factors involve changes in demographics, lifestyle trends, cultural preferences, and buying patterns. Understanding these factors helps automakers tailor their products to meet consumer preferences and market demands.

How can businesses ensure effective PESTEL analysis?

Effective PESTEL analysis involves steps such as brainstorming, consulting stakeholders, thorough research, evaluation, and iteration. Hiring professionals or designating individuals to oversee the analysis process can enhance its accuracy and usefulness.

Posted on May 18, 2021 by NAH