Introduction to Automobile Sector
For the purpose of absorbing the shock of the financial crisis and maintaining a rational chance of circumventing irreversible and disastrous harm to the ecological systems, taking actions has become a necessity. The economy crisis has put the sales of automobiles and especially cars in jeopardy. The automobile sector is one of the major employment providers. Therefore, any sort of disturbance in this sector has the capability of affecting both the social and economic fabric of the European continent (Anderson and Anderson, 2010). This is the reason for which the car sector was made the main focus of the recovery assignment of the European Commission. In addition to this, the increasing apprehension over the mounting carbon emissions has compelled the automobile sector of Europe to develop better and advanced automotives that run on alternate fuels. The industry is even coming up with car sharing infrastructures which will further promote the use of eco or hybrid cars (Bernabo and et.al, 2009). The present report delves into the automobile sector of Europe and identifies the trend analysis of hybrid and eco-friendly cars. The different opportunities and risks that lie ahead of them will be analyzed.
2.1 Trend Analysis
The trend analysis of the hybrid car market of Europe will be carried out in the following paragraphs. This will include PESTEL analysis, Moore’s theory in relation to this sector, qualitative opinions and perspectives of the experts of the industry, systems diagram and scenario development to examine the changes that might take place in the sector over a period of time.
2.1.2 Pestel Analysis
Political Environment – For the past some years, the procedure of looking out for alternate source of energy has not been restricted to just environmental and economic concern. In fact it has grown to become a security concern for the entire continent. The European Commission is placing a strong emphasis on this energy issue and is faced with the mission of lessening the dependency on foreign oil and petroleum from unsteady parts of the world (Corporate sustainability: How stakeholder management is engendering environmental consciousness, 2002). As the prices of the gas are at an all time high, there is a dire need for change. Currently, the dependency on petroleum based automobiles is 94%. Thus, the European Union has set new policies and rules for the car manufacturers. It is instructing them to manufacture pollution free and more energy efficient cars. This will compel the automakers to switch over to the production of eco or hybrid cars. Hence, it can be said that political framework of the entire continent provides good opportunities to this industry (Dennis, Wixom and Roth, 2008).
Economical Environment – The economic factors can be considered as one of the main drivers for the increasing popularity and use of eco cars. As there are not many oil reserves in Europe, the continent has to import it from other nations. This practice takes the money away from people’s disposable incomes (Fuxman, 1999). It results in smaller business investments and lesser expenditure on retail shopping. As a consequence of this, the GDP of all nations will suffer badly. Therefore, due to the high fuel efficiency feature of the hybrid cars, the dependence of European Union’s member states will be reduces and this will enable increased money circulation in the economy (Greenwood and et.al., 2009).
Social Environment – The benefits brought by a hybrid car are more than that of a non-hybrid automotive. This feature is increasingly attracting more and more towards this trend. The social factors encompass concern for health and safety. The masses are becoming progressively conscious about the environment (Hamzaoui and Merunka, 2006). The main drawback of petrol and diesel cars is the amount contributed by them to the air pollution. The impending health problems from the pollution are already raising the eyebrows of people. Therefore, there is greater demand for hybrid cars these days as customers are shifting from conventional cars. However, these cars are costlier and the performance is not as good as the fuel based cars as of now (Jonk, Handschuh and Niewiem, 2008).
Technological Environment – Going by the history of the history of the automotive industry, the cars reflect an evolution. Engines that first started with steam fittings have now evolved into gasoline and electrical. When the gasoline and electrical cars were first introduced they were of inconvenience for the users (Kumar and Yamaoka, 2007). However, gradually with several refinements and advancements, they are now used world over. Novel ideas for innovation in automotives regularly need to be pioneered so that more safer and efficient vehicles are launched. Hence, hybrid cars fit in this context. Considerable amount of fuel will be saved with help of hybrid technology. This will also result in safeguarding the environment. Hence, the future holds good for this segment (Luo and Zhang, 2012).
Legal Environment – Legal regulations are mainly concerned with the protection of the people of the society. There was a case hearing in which it was argued that the electrical motor in hybrid cars is capable of causing accidents (Olson and Thjømøe, 2010). People who are sight impaired are more vulnerable to this as they normally depend on hearing the sound of an approaching car or vehicle. Though all agencies are concerned about the environmental impact of pollution, there is very less concern for the implications of less sound emissions. Therefore, the problems due to hybrid car’s no sound producing electrical motor are not regulated and no protection is given to the public (Ombach, 2012).
Environmental factors – Though low sound emissions are a legal problem but from environmental standpoint it contributes greatly to reducing sound pollution. Its electrical motor produces almost no sound while the fuel operated vehicles generate large amount of noise (). In addition to this, they also consume lesser oil as compared to their fuel based counterparts. Therefore, they do not emit carbon dioxide, carbon monoxide and other hydrocarbons. As per an environmental report, around 19 pounds of CO2 is released every time one gallon of gasoline is used by a car. The most apparent implications of such emissions is global warming. Hence, from this point of view, hybrid cars stand to win (Rieg, 2010).
2.1.3 Theories and Law
The Moore’s Law can be aptly applied in the context of hybrid car industry. The Law which is originally related to the long run trends in the computer hardware history is also applicable for the growth trends of the hybrid cars. According to the Moore’s law the number of transistors contained in a circuit that are representative of the computing power doubles in every two years and the costs remain similar (Seidenfuss, Kathawala and Dinnie, 2010). As such there are no standard interfaces in the automobile industry. The companies do not have an agreed upon standard of making cars. This acts a roadblock to innovation. The controller area networks in automobiles are on the basis of age old standards. However, continuous innovations have been taking place in the automobile segment over all these years (Shelly and Rosenblatt, 2011). There have been constant additions to the chip because of which more advanced versions of cars have been obtained. Earlier there were steam engines, and then gasoline engines were introduced. Later on electronics was also added in the engines. Now there are hybrid cars. This growth trend is increasing with newer technologies coming in every moment. There will be many more innovations in the hybrid car segment as well (Silberglitt and et.al., 2002). Hence, it can be said that hybrid cars are going to experience many ground breaking technologies which will increase their popularity. Currently, the cost of manufacturing a hybrid car is quite high. However, over a period of time, this cost will also come down and these cars will not be more expensive than their fuel based counterparts (Tracking technology innovation trends: Mapping future prosperity of nations, 2002).
The different trends in the hybrid car market are in favor of this technology. Though it will take the car considerable time to gain a huge market share and sales, yet, the trends show that there are several opportunities present in front of segment in the form of social, technological, environmental, political and economic factors.
2.1.5 Qualitative Predictions and Opinions
The experts of the industry state that post the horrors of 2008, the automobile industry is again in a better form and shape. Several radical trends will be driving both automotive development and sales. The integration of newer technologies i.e. from compound materials for body to hybrid engine systems and improved safety mechanisms are perceived to be providing a competitive edge to the automakers (Westbrook, 2001). In addition to this, alliances between components suppliers and manufacturers are being seen as the solution to the altering business model. Currently, the hybrid cars are selling in small volumes, however, it is likely to experience strong growth. Sales in the year 2007 were only 50k but they rose 2000% from the year 2002. One major problem presently in this segment is that there are not many choices as only a limited number of HEVs present. Many segments are not covered by this car. The price is evidently more as compared to the gasoline cars (Wang and Kimble, 2010). The car is priced 20% more than the diesel automotives.
Two scenarios have been developed for the growth trend of the hybrid cars. The first is the Pessimistic scenario. According to this perspective there are no incentives for the hybrid segment in the long run. In addition to this, it also states that the hybrid cars have not covered all the key market segments (Silberglitt and et.al., 2002). These cars are an option for only a particular segment of buyers. Not every car lover considers this option when deciding to purchase a car. Moreover, the diesel hybrid car is extremely expensive for the masses. This does not make it the favorite of customers. They would prefer going for a conventional fuel based car instead of a hybrid in times when the entire world is just recovering from the financial crisis (Shelly and Rosenblatt, 2011).
On the other hand, there is also the optimistic scenario which states that there is great likelihood that this car segment will maintain incentives for the medium term. In addition to this, the experts would also like to presume that these eco cars are piece of the basket of choice for most of the customers. Moreover, it is supposed that majority of the market segments will be covered by the hybrid automotives in five years down the line. Furthermore, a majority of the OEMs are expected to enter this market (Jonk, Handschuh and Niewiem, 2008).
Experts say that the green cars have been generating great interest among users, carmakers and policy makers. However, the market penetration of these cars is still quite low. Moreover, there exist substantial differences in the transmission of alternate fuels and energies plus the technologies among nations. Though the diffusion of green cars is rising slowly, in the coming 7-8 years they are expected to command only a slight share of the automobile market of Europe as compared to the total vehicle sales (Bernabo and et.al., 2009). Moreover, there are some high uncertainties surrounding the development of market for distinct technologies and products. Electric and hybrid cars have attracted huge attention from all segments and hence sales data focus mainly on such technologies. The experts also mention that diesel hybrid cars are more suitable for the European region as compared to the gasoline hybrids (Anderson and Anderson, 2010).
3.1 Justification And Critiques Of Responses Or Opportunity
From the above trend analysis it can be said that there are several opportunities in front of hybrid carmakers. Firstly, as the European commission is instructing the automobile manufacturers to manufacture more energy saving cars, production of hybrid cars is likely to grow. Secondly, the opportunity provided by the economic factors is also bright as this will enable the economy to have its money circulated within only. Thirdly, the technological innovations, as also represented by the Moore’s Law brings to light that, innovations in this segments are likely to happen continuously. However, all such opportunities are marred by the fact that the cost of these vehicles is too much and it is not affordable for the masses. In addition to this, it is also true that, the cars are not in the basket of people’s choices. The consumption of these cars in the entire Europe is just 24% which is very low as compared to the 51% of the United States. Hence, it can be stated that the carmakers will continue to make such hybrid cars which will sooner or later change the shape of the automotive industry.
Therefore, from the above report it can be concluded that innovations in technology are altering the shape of automotive sector. Electric motors are being installed in the engines which do not pollute the air and neither produces sound pollution. This changing phase of the sector and the rising popularity of the hybrid cars is here to stay. Due to the global warming and energy challenges, there is dire need to develop cars and vehicles which can replace the gasoline cars. Hence, the trend of hybrid cars is likely to stay and increase in the next 10 years to come (Bernabo and et.al., 2009).
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