The Future Of The Uk Car Industry Tourism Essay

The purpose of this study is to analyze and discourse the hereafter developments in the UK auto industry by reexamining a figure of drivers that are likely to determine developments in the sector. The survey commences with supplying a brief lineation of the UK auto industry followed by an in depth analysis of the external environment utilizing PEST tool. Eight cardinal drivers that are most important for the future developments of the industry are identified and applied in the impact / uncertainness theoretical account. Future scenarios are developed sing the highest impact and highest uncertainness drivers.

The history of the auto industry in the UK dates back to over one hundred old ages when these “ horseless passenger cars ” were owned merely by the flush and was a symbol of position and wealth. The industry has since experienced periods of important growing and ruin. The UK auto industry, today, has retained its place as the 4th largest auto industry in Europe since 2000, preceded by Germany, France and Italy in top musca volitanss ( Holweg et al. , 2010 ) . The entire vehicle production in the UK was merely under 1.65 million in 2008, puting it at 12th place on the planetary degree ( Holweg et al. , 2010 ) . The UK auto industry accounts for 8.8 % of the European end product of autos and 2.4 % of the planetary end product ( Holweg et al. , 2010 ) . The industry employs 194,000 people in 3,300 concerns accounting for 0.6 % of entire UK employment and represents 0.8 % of the UK economic system in footings of value added ( Holweg et al. , 2010 ) .

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3. PEST Analysis of the UK Car Industry

An external environmental analysis can be conducted utilizing the PEST tool. This helps place the political, economic, societal and technological factors that impact the auto industry presently, based on which future scenarios are developed. Table 1 nowadayss eight drivers from the external environment which is discussed in item later on in this subdivision.

Table 1: Cardinal Drivers of the Car Industry

Political

Economic

Social

Technological

Government disbursement on developing public substructure and advancing other sustainable manners of conveyance

Fuel monetary value, fuel revenue enhancements, pollution revenue enhancement, congestion charges

Population growing. Growth in traveler. Greater demand for conveyance.

Technological promotions facilitate development of low emanation or jump fuel or intercrossed vehicles.

Government support for the auto industry in developing new engineering low emanation vehicles

Consumer disbursement

Energy crisis and turning environmental issues

New engineering enables betterments in conventional vehicles, in footings of design, life, safety and sustainability.

Political

As portion of the scheme to cut down C emanations and congestions, the UK authorities is progressively undertaking steps to better the convenience and attraction of public conveyance. Government investing in railways sums 15 billion lbs for the period 2009 – 2014 ; and in instance of coach services the investing has more than doubled to 2.5 billion lbs a twelvemonth ( DfT, 2009 ) . Other steps taken by the Government to better the attraction of public conveyance include ordinance of menus to do public conveyance more low-cost. In the last 12 old ages at that place has merely been a rise of about 5 per cent in rail and coach menus which is mostly offset by the addition in mean disposable income by more than 20 per cent ( Dft, 2009 ) . Under UK ‘ compulsory bus grant policy, presently 11 million people travel for free and a great many travel at subsidized rates. The impact of the betterments in public conveyance in the UK is apparent from the increasing rider Numberss. In the last 10 old ages, usage of coach services has grown by more than 17 per cent and usage of rail services has grown by 50 per cent ( DfT, 2009 ) . The Government is besides undertaking significant steps in advancing other sustainable manners of conveyance such as cycling. For illustration, a new 5 million lb programme has been started late for bettering rhythm storage installations in up to ten major railroads Stationss ( DfT, 2010a ) . These tendencies in the political environment points towards the possible high competition that the auto industry could confront from public conveyance in the hereafter.

The Government is besides undertaking steps to promote auto makers to develop low emanation vehicles and alternate fuel vehicles in order to control C emanations. The new EU emanation criterions implemented in April 2009 requires that in 2012, 65 % of each maker ‘ freshly registered vehicles should follow with the limited value curve of 130 g / kilometer set by the statute law. In 2013, this will lift to 75 % and from 2015 onwards, this will be set at 100 % ( DfT, 2010b ) . Recent tendencies besides indicate that the Government is puting in steps to make a favorable environment for the auto industry in developing extremist low emanation and alternate fuel vehicles. For illustration, sing the high monetary value of these new engineerings, the Government is offering inducements of up to 5000 lbs to clients to purchase these new – tech vehicles ( The Green Republic, 2009 ) . In add-on, there are besides programs to supply up to 30 million lbs to a pool of metropoliss for constructing electric vehicle bear downing substructure ( Green Car Congress, 2009 ) . However, the Government is already confronting heavy unfavorable judgment for the support rendered to the auto industry at the disbursal of much needed investings in other sectors ( BBC, 2009 ) . This points to high uncertainness in Government support that will be able to the auto industry in the hereafter.

Economic

Consumer fuel monetary values in the UK is one of the highest in the universe due mostly to the Government ‘ high responsibility and revenue enhancement on gasoline and Diesel. Owing to this high degree of fuel revenue enhancement, UK consumers are among the most vulnerable people in the universe to high fuel monetary values ( Daily Mail, 2010 ) . Fuel revenue enhancement has been increasing steadily over the last 15 old ages. Fuel revenue enhancement was raised by 2 P in December 2008 to countervail the 2.5 % cut in VAT which brought up the entire revenue enhancement for route fuel to 52.35 pence per liter ( ppl ) . A farther addition by 1.84 ppl in April 2009 and 2 ppl in September raised the fuel revenue enhancement to the current degree of 56.19 ppl ( Petrol Prices, 2010 ) . These rates will farther increase by 1 % above rising prices every twelvemonth from April 2010 to 2013 ( Petrol Prices, 2010 ) . In add-on congestion charges besides apply in several countries in the UK ( BBC, 2010 ) . Studies conducted prior to the recession period revealed that there was no grounds demoing that the high degree of fuel revenue enhancement has lead to decrease in the usage of personal autos ( Forster, 2008 ) . On the contrary, UK auto Numberss continued to increase despite the addition in fuel monetary values. However, the rise in fuel monetary values which coincided with the economic recession when disposable incomes had fallen owing to the mortgage crisis and rising prices in public-service corporation monetary values was found to hold resulted in a important diminution in auto usage. This tendency demoing that addition in fuel monetary values do affect auto usage particularly at times when disposable incomes are reduced, points towards a extremely unsure hereafter for the auto industry.

Another economic factor which is a major driver of the auto industry is consumer disbursement. The sharpest diminution in UK consumer disbursement since the station – war period was recorded in the beginning of 2008 when the state was hit by the economic recession. Consumer disbursement fell by 4 % and nominal disbursement declined by 1.5 % ( Business Week, 2008 ) . The auto industry was one among the many industries that faced a crisp autumn in gross revenues during the period. It was merely until the 3rd one-fourth of 2009 that consumer disbursement started demoing marks of betterments ( Guardian, 2009 ) . Figure 1 depicts the corresponding rise in auto gross revenues.

Figure 1: UK Car Gross saless ( 2000 – 2009 )

Social

The population growing rate in the UK in 2009 was 0.65 % . There has been a steady addition in population in the UK. The Office of National Statistics ( 2010 ) predict that the population will lift from the current 61.4 million to 65 million by 2018. The associated consequence will be a immense addition in travel demand ( World Bank, 2010 ) .

Other major drivers of the auto industry are energy and environmental issues. An energy crisis is predicted to take topographic point in the following 30 old ages owing to the increased demand for energy from developing states and at the same clip the universe ‘ energy production is nearing its bounds ( Christitidis et al. , 2003 ) . Shell and BP have announced in recent times that they are unable to replace their militias and an energy crisis is largely likely to happen ( EMCC, 2005 ) . This predicted energy crisis points towards a possible addition in demand for alternate fuel vehicles in the hereafter.

Technological

Alternate fuel engineerings, viz. , intercrossed fuel systems, battery electric power, fuel cell electric power and biodiesel are developing fast and the challenge for auto makers is to research and take full advantage of the chances now ( Car Junky, 2008 ) . The UK authorities is presently puting up to 30 million to back up the auto industry ‘ research and development in low emanation and alternate fuel vehicles. This investing is expected to speed up technological developments in alternate fuel vehicles.

The impact of technological promotions is besides seen in conventional fuel autos in relation to inventions in design, safety and sustainability. Taking into history the ageing population, progressively developments are being made in driver aid systems which are really helpful for older people in easing their continued drive ( AAR, 2009 ) . Safety and sustainability have become the marketing subjects of most auto makers. These tendencies in the technological environment point towards a hereafter where new engineering vehicles will rule the market over conventional systems.

4. Impact / Uncertainty Model

As can be seen from the PEST analysis, a cardinal end product of external environment analysis is strategic uncertainness. Two tools used for germinating these uncertainnesss to schemes are the impact uncertainness theoretical account and scenario planning. The impact uncertainness theoretical account fundamentally involves measuring the comparative importance of strategic uncertainnesss in footings of the extent to which it will impact bing concerns ( McLoughlin and Aaker, 2010 ) .

Figure 2: UK Car Industry Impact / Uncertainty Model

Factor Key

Factor

A

Government disbursement on development of public conveyance.

Bacillus

Government support to auto makers to ease development of alternate fuel vehicles.

C

Fuel Price

Calciferol

Consumer Spending

Tocopherol

Population growing

F

Energy crisis and environmental issues.

Gram

Alternate fuel vehicles engineering.

Hydrogen

Conventional fuel vehicles engineering.

Bacillus

Calciferol

C

F

Degree

of

Impact

A

Gram

Hydrogen

Tocopherol

Degree of Uncertainty

As noted in the PEST analysis, authorities support is important for the development and publicity of intercrossed and alternate fuel vehicles. Support is required in the signifier of investings in R & A ; D, revenue enhancement inducements and other promotional runs to acquire greater figure of people to buy the new engineering vehicles, and in constructing the substructure to ease the usage of intercrossed and alternate fuel vehicles. Widespread ownership of these new engineering vehicles can non be achieved in the absence of authorities support. Although the Government is presently rendering high support to the auto industry for advancing developments in low emanation vehicles, the hereafter is extremely unsure sing the likely alterations in economic conditions which would necessitate the Government to cut back disbursement. Another high uncertainness driver is fuel monetary values. As was seen from the PEST analysis, high fuel monetary values coupled with autumn in disposable income could ensue in a diminution in auto usage and new auto gross revenues.

5. Scenario Planing

Given the uncertainness and capriciousness of the hereafter, scenario planning is a strategic planning technique which prepares an organisation to confront future challenges with sensible assurance. The scenario planning procedure purposes at set uping a position about the possible state of affairss that industries may hold to cover with in the hereafter ( Armstrong, 2006 ) . This strategic tool helps top direction in reevaluating their current schemes and investing determinations in the visible radiation of future scenarios. Scenario planning is based on the premise that the hereafter is non a simple extrapolation of the past and hence can non be known with certainty. The scenario plans for the auto industry are prepared based on the drive forces identified in the external environment.

Figure 3: UK Car Industry Scenarios

High authorities support

Low authorities support

Low fuel monetary values

High fuel monetary values

Safe and sustainable conveyance

Old is gold

Smokeless passenger cars

Worst instance

Safe and sustainable conveyance – This is the best instance scenario. Public conveyance systems have improved but personal autos still remain the preferable manner of conveyance. The consistent high authorities support for R & A ; D in the auto industry every bit good as in publicity of low emanation vehicles has greatly facilitated the development of intercrossed and alternate fuel vehicles. However the low fuel monetary values make the market for conventional fuel powered vehicles still dominant. The attraction of conventional fuel powered vehicles is farther enhanced with technological developments driving alterations in design, safety and sustainability of these vehicles, which appeal to all population groups. The economic system is thriving and personal wealth has increased across the state which has created a market state of affairs where people are acute on upgrading to new engineering and there is a greater demand for the purchase of new autos.

Old is gilded – With fuel monetary values staying invariably low and authorities rendering really small or no support for the development and publicity of low emanation vehicles, the growing of new engineering alternate fuel vehicles market has become dead. The monetary value derived functions in utilizing conventional gasoline / Diesel tally autos and alternate fuel autos is non big plenty to draw clients off from a known engineering and follow a new one. There is a low incursion of fuel efficient and alternate fuel vehicles in the market. Furthermore the low available resources have discouraged auto makers from prosecuting research and development in greener vehicles. Travel at the lowest monetary value remains the primary concern of bulk of consumers. Public conveyance is good developed nevertheless the lower fuel monetary values makes auto conveyance still the preferable manner of conveyance for bulk of the consumers. There is an addition in auto ownership ; nevertheless, the monetary value sensitive consumers prefer used autos over new 1s. With more of older and less efficient autos being used, C emanations from vehicles will lift significantly.

Smokeless carriages – This is the hereafter scenario where new engineering low emanation vehicles dominate the auto industry and has overtaken the conventional fuel priced vehicles sector which is seeing a diminution owing to the high fuel monetary values and congestion charges which make them really expensive to utilize. High Government support has greatly facilitated developments in intercrossed and alternate fuel vehicles. Public conveyance is besides good developed and an integrating of different manners of conveyance can be seen.

Worst instance – This is the worst instance scenario where the market for conventional fuel autos declines significantly and the market for alternate fuel vehicles has non grown either. The high fuel monetary values and congestion charges result in a crisp diminution in the demand and usage of conventional fuel priced autos. Very small support from the Government in the development of intercrossed or alternate fuel vehicles has greatly inhibited developments in this sector. Furthermore the monetary value sensitive consumers are non willing to pay a higher monetary value to buy low emanation vehicles nor are there sufficient developments in route substructure to back up the usage of alternate fuel vehicles. The established public conveyance attracts more people towards it. Besides advancements in information substructure cut down the demand to go, all of which later lead to a bead in demand, purchase and usage of rider autos.

6. Analysis of Impact on Land Rover

Impact on:

Scenario 1

Scenario 2

Scenario 3

Scenario 4

Selling scheme

The selling scheme of the house should concentrate more on advancing new engineering vehicles. Safety and sustainability should be the selling subjects for the conventional fuel vehicles.

In order to last and win amidst the vastly high competition, an aggressive selling scheme focused on adding value for the monetary value sensitive client is required.

The selling scheme should be good balanced between conventional and alternate fuel vehicles.

The selling scheme should take at advancing added value of autos.

Market portion

The market portion for conventional fuel vehicles will stay dominant while the market portion of intercrossed and alternate fuel vehicles will increase.

The market portion of conventional fuel vehicles will be dominant while alternate fuel vehicles will stay a niche section.

The market portion of conventional fuel vehicles will be offset by the alternate fuel vehicles section.

Public conveyance will keep a major portion of the conveyance market while that of private auto conveyance will worsen.

7. Recommendation

Hand in manus with the growing in UK population will be the significant addition in rider Numberss. Based on past tendencies, the demand for autos is predicted to increase. High Government support is likely to ease the auto industry in developing intercrossed and alternate fuel vehicles. Rising fuel monetary values coupled with the Government ‘ enterprises to advance the purchase of low emanation vehicles would give rise to a new dominant sector in the auto industry. However, contrary economic and political state of affairss could put this bright hereafter off path. In an surrogate scenario, high fuel monetary values combined with low authorities support for developments in alternate fuel vehicles or its substructure could drastically impact the auto industry.

In the visible radiation of the four possible future scenarios of the auto industry, it would be most appropriate for auto makers to set about an ADAPT scheme. As was highlighted in this survey, the hereafter of the auto industry will be mostly driven by cardinal factors such as lifting fuel monetary values, energy crisis and environmental issues, all indicating towards a hereafter market environment which is sensitive of monetary value, energy ingestion and environmental issues. In such a context the most ideal scheme for any auto maker today would be to do a move now itself and accommodate its concern in such a mode as to capture the chances when the market alterations. Car makers who wait for the alterations to happen to take any measure are bound to lose out on competition and external environmental force per unit areas.