Social, Technological and Political Factors For Electric Cars

This week, we learnt about the PESTEL factors.

In the car industry, the introduction of green electric cars is the combination of Social, Technological and Political factors. 

Technological Factor

“Normal” cars, the ones that we’re all familiar with, are extremely harmful to our environment as they pollute the environment and is one of the main contributors to carbon emissions. 

Source: www.epa.gov

Innovation in technology has allowed car manufacturers to develop electric cars. The idea is that eventually, all “normal” cars that run on fossil fuel will be replaced by electric cars, as electric cars are cheaper and more environmentally-friendly. Electric cars produce close to zero exhaust emissions, and this will definitely improve air quality in many urban areas. 

Electric cars first appeared in the 1910s, but they were mainly marketed as “city cars”. However, in 2013, technology has advanced and many electric cars are now “highway capable”

Tesla is credited for producing Tesla Roadster, the first fully electric sports car, followed by Tesla Model S, a fully electric luxury sedan. 

Following which, luxury German car manufacturer BMW also recently launched the i3 and the i8 just last week, the former a city vehicle, and the latter a luxury sports grand tourer plug-in hybrid. 

Apart from BMW, Mercedes, Nissan, Mitsubishi, Ford, Toyota, Honda and Chevrolet and many other car manufacturers also have their own “electric car” range, apart from their “normal car” range. 

Thus, we can see the trend that many car manufacturers are now exploring the options of electric cars. In addition, it would also help car manufacturers to appear more “socially responsible”. 

However, one challenge faced by manufacturers is that there are not enough electrical charging points along highways and cities to encourage consumers to switch to electric vehicles. 

Also, electric cars generally are not able to make long trips without needing to recharge, which may deter consumers from owning an electric car. 

Social Factors

Manufacturer POV

It seems that in this modern world where large corporations are perceived negatively, having a sense of corporate social responsibility (CSR) and producing socially responsible products is a key differentiating factor for firms. 

The lack of CSR can have devastating effects on a company. For eg, in an article by Crossboarder Monitor (1997), it was discussed how Nike’s irresponsible practices made it suffer a huge image damage. It was reported that Nike’s sweatshop scandals caused its sales to fall by 8% in 1999, and its stock also fell by 15%. Thus, it can be proven that a lack of corporate social responsibility can damage a brand and cause a fall in revenue and profits.

Consumer POV

As the Western society grows more affluent, it has led to a trend that sees customers more willing to pay for products that are deemed to be “socially responsible”. This is evident in the automobile industry, where it has led to a trend of an environmentally-friendly approach towards the production of cars, as well as consumption of cars. For eg, in the UK, sales of electric cars have jumped by 25% in Q3.

 (http://www.theguardian.com/environment/2013/nov/11/electric-car-sales-record-high-uk) 

Normal cars have been heavily criticised since they are a major source of pollution to the environment, and also contribute to global warming, acid rain and ozone layer depletion. They are also a major cause for depletion of natural resources, ie. fossil fuel. Thus, there may be a social pressure to switch to using hybrid electric cars to be seen as “socially responsible” and “eco-friendly”. 

Political Factor

Some governments encourage its citizens to buy electric cars by providing buyers some incentives in the form of tax rebates or subsidies. It may also give subsidies or loans to electric car manufacturers. This would encourage car manufacturers to produce more electric cars, as they know that demand for electric cars is likely to increase due to the incentives that the government would offer to buyers of electric cars. 

UK: 25% off the cost of the car, up to maximum of £5,000

China: Subsidies of 60,000 yuan (£6,160) to buyers of electric cars

US: When a consumer purchases a hybrid-electric vehicle, he/she would be eligible for US$3,400 (£2,128) in federal tax credits; US$7,500 in federal tax credits with the purchase of a Tesla electric car

In the US, The Department of Energy also gave a federal loan of US$465 million loan in January 2010 to Tesla, a car manufacturer that only manufactures fully electric cars. The government awarded the loan as part of the Advanced Technology Vehicle program, to encourage the development of fully electric cars.