PESTLE Analysis of the Automotive Industry

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Automobiles have been around for more than 150 years, but it’s only within recent years that we’ve noticed the scary Environmental ramifications of the automotive industry. You’ve got to wonder: will the market for motor vehicles survive with all this tension?

In this PESTLE analysis, we’ll look at the Political, Economic, Sociocultural, Technological, Legal, and Environmental factors affecting the automotive industry, in the hopes of gaining some insight into the future of this space!


Here are the Political factors affecting the automotive industry:

Safety Regulations

Driving motor vehicles can be extremely dangerous. Although we like to think of airplanes as being unsafe, the truth is that you’re significantly more likely to have a car or motorcycle accident than to be involved in a plane crash. As a result of this, governments across the world enforce strict safety regulations around the automotive industry. Not only do these regulations govern the manufacturing of motor vehicles — providing specific build requirements, such as seatbelts, to ensure passenger safety — but they also affect those behind the wheel. This makes it more difficult to launch a new business in the automotive space, helping existing brands to maintain their place in the market.

Emissions Policies

Aside from controlling the safety aspect of the automotive industry, politicians also take great interest in the environmental consequences of motor vehicles. Almost all cars, motorcycles, and buses are powered by fossil fuels such as petroleum and diesel, which produce a number of environmental pollutants when burnt. A major concern with motor vehicles is that of carbon emissions, i.e. the amount of carbon dioxide produced by driving a vehicle. As such, governments also have a great interest in the emissions statistics of new and existing vehicles. This, along with other environmental concerns, is yet another regulatory hoop for automotive manufacturers to jump through.


Here are the Economic factors affecting the automotive industry:

Growing Disposable Incomes

As a general trend, individuals around the world are earning more and more money every year. This means they have more money to spend on luxury items such as electronics and, of course, automobiles! It comes as no surprise, then, that demand for motor vehicles is slowly but surely growing. This is especially true in developing regions — such as some African states — where recent economic developments have only now made it possible for poorer households to afford their own car. Ultimately, this growing demand for motor vehicles means that more cars will be sold, and the automotive industry will become even more profitable for its participants.


Here are the Sociocultural factors affecting the automotive industry:

Popularity of Driving

There’s no doubt that, from a Sociocultural perspective, the popularity of driving is growing. It’s becoming commonplace for families around the world to own one or more motor vehicles; in fact, owning one or more motor vehicles is already the norm in developed countries such as the United States, Canada, and much of the European Union. Part of this is a cultural phenomenon: it’s not like many of us can’t get away with bicycles and buses, but instead we choose to drive motor vehicles simply because that’s what is expected of us.


Here are the Technological factors affecting the automotive industry:

Self-Driving Cars

Without a doubt, the biggest Technological shift impacting the automotive industry is the advance of self-driving technology. With some automotive brands such as Tesla already offering nearly completely autonomous motor vehicles, there is a huge change to the way we commute on the horizon. This isn’t necessarily a good or bad thing for the automotive industry, but it may mean that manufacturers of conventional cars have to change their business strategy to stay relevant.

Improved Safety

Aside from the advent of self-driving cars, another big Technological advancement in the automotive industry is, generally speaking, the safety of motor vehicles. It was only in the 1980s that wearing seat belts became a requirement; similarly, it took lower-end automotive brands until the early 2000s to begin rolling out airbags across their models. Not only are standards improving across the industry, but so is the underlying technology. Most recently, automotive manufacturers have begun introducing emergency brake assist systems to their vehicles, vastly reducing the likelihood of front end collisions.


Here are the Legal factors affecting the automotive industry:

Copyright Issues

Interestingly, the issue of copyright also affects the automotive industry. Certain features of a car — from its branding to even its shape — can be protected by copyright, trademark, or patent laws. It’s uncommon to hear about legal showdowns in the automotive space, but they do happen. In recent decades, a rising issue has been that of Chinese automobile manufacturers blatantly stealing the designs of Western counterparts. For example, Chinese brand Geely has created some oddly similar copies of the Rolls Royce Phantom, resulting in some conflict. It’s unclear what net effect this copying has on the industry, but it’s definitely present.


Here are the Environmental factors affecting the automotive industry:

Carbon Emissions

As touched upon earlier, carbon dioxide is one of the most serious Environmental pollutants generated by the automotive industry. It plays a large role in global climate change, by means of the greenhouse effect. Over the last few years, the issue of carbon emissions has gained global attention. We continue to drive motor vehicles on a daily basis, but it’s unclear whether governments will be forced to take greater action to stop global warming — and that might involve a complete ban on production or usage of motor vehicles, or at least a switch towards electric vehicles.

Final Thoughts

The motor vehicle has become a part of everyday life for many of us. Not only can we afford to buy and fuel our cars more than ever before, but we’re also implicitly expected to use automobiles. However, the Environmental consequences of driving are serious, and it looks like we might have to think about making the switch to electric vehicles to save our planet.

Image by Jay George