Pestle analysis of Volkswagen. Volkswagen Group or Volkswagen AG is an automotive German multinational corporation. Its headquarter is in Wolfsburg, Germany. Motorcycles, Fleet Management, Financial Services, Commercial Vehicles, Engines, Insurance, Banking, Passenger Vehicles, Turbomachinery, Leasing, and Propulsion Components are some are prominent products and services of Volkswagen.
Germany Labor Fronts established the vehicle manufacturing brand on May 28, 1937. The Beetle was its first model and millions of people bought it worldwide. The automotive company kept on expanding in the 1950s and 1960s. It launches models like Golf, Polo, and Passat in the 1970s.
Volkswagen kept on expanding its product portfolio by purchasing other brands like Porsche, Ducati, and MAN in 2012, Scania in 2008, Bugatti, Bentley, and Lamborghini in 1998, Skoda in 1994, and SEAT in 1986.
According to an estimate, 671,205 people are working for the automobile company. The brand has a global network spread over approximately 160 countries. It has more than 124 vehicle production plants in America, Asia, and Africa.
Today, we’ll discuss the pestle analysis of Volkswagen. It’s going to analyze the macro-environmental factors impacting the world’s leading automotive company. For internal factors, check out the swot analysis of Volkswagen. Here’s the pestle analysis of Volkswagen as follows;
Political factors affecting Volkswagen
Brexit Deal & Taxes
The UK is a major market in Europe and Volkswagen is a German brand. It means imports and exports taxes after the exit of Britain from the EU. However, the Brexit deal ensures free trade between the UK and Europe. But the clerical and documentation cost would increase the price of the vehicles.
Street to Zero Policy
The UK’s government plans to finish all the petrol and diesel vehicles from its roads by the end of 2040. The goal is to discourage petroleum vehicles and reduce the carbon emission rate so that the automotive companies would manufacture vehicles accordingly. Since Volkswagen already launched electric vehicles and continues to increase the number of vehicles in the market.
EU & the EU
The political tension between the European Union and the US government is not new. Whenever the EU introduces some new policies, the US government returns the favor by increasing the export tax rate. It impacts the sale and profitability of Volkswagen.
Economical factors impacting Volkswagen
Revenue & Income
According to a financial estimate, Volkswagen’s annual revenue was 248.570 billion US dollars in 2020, and it has reduced by 11.09%. Out of which, the net profitability of the company was 4.668 billion dollars, and it has decreased by 68.95%.
Pandemic of Covid-19
The pandemic of covid-19, lockdown, and shutdown of business, travel bans, and the period of complete has had a negative impact on the sale, revenue, and net income of Volkswagen. That’s why the brand’s profitability dropped to a great extent.
Impact of Brexit
The Brexit deal has been having a random impact on various businesses. Volkswagen is among those automotive companies that are facing capital issues. It’s because many British people have stopped the purchase of European products. It has led to a decline in the sale of the company’s automobiles.
Social factors affecting Volkswagen
It’s no doubt the world’s population is fastly moving into the middle class and their purchasing power has improved significantly. But they don’t prefer to spend their money on buying a car. Instead, they prefer to ride a bicycle, walk, and use the subways. Such options are healthy and contribute less pollution to the environment. However, the health-conscious trends of the millennials and Generation Z are reducing the company’s sales.
As we know that Volkswagen sells vehicles under various brand names. However, customers perceive some of the vehicles with high esteem and prefer Buggati, Porsche, Audi, and Lamborghini. They perceive some of the vehicles as cheap and unappealing like Skoda and SEAT. Overall the company is facing tough competition with other luxury brands like BMW and Tesla.
People are getting smart and that’s why they’re adopting the shared economic pattern. As a result, the ride-sharing trend is increasing among young people. Therefore, Volkswagen should keep in the growing trends and launch the product/service accordingly by satisfying their needs.
Technological factors affecting Volkswagen
Volkswagen has launched electric vehicles through continuous research and development. It shows an automotive company’s commitment to technology and innovation. However, the brand plans to increase the total number of electric vehicles in the market from 2025 to onward.
Autonomous Driving technology
Volkswagen is also working on the development of self-driving vehicles and autonomous technology. The automobile brand is going to launch it in the mid of 2021. In fact, the company has formed an alliance with Ford, Amazon, and Microsoft in the development of technology. It’s because the company knows the value and importance of the latest technology.
Innovation is the key to the success of many businesses because it provides a competitive edge. Volkswagen has also been focusing on the same thing and that is to improve the efficiency of its vehicles. However, the automotive companies are working on radar innovation, mapping cameras, territory sensors, and man-made brainpower. Such innovations would be revolutionary in the automotive industry.
Legal factors impacting Volkswagen
Legal factors like security, business operations, and labor laws could impact Volkswagen. Since the company operates its business in approximately 160 countries. The laws and regulations vary from country to country. Therefore, the automotive company should follow the regulations of different governments before introducing its products there.
Volkswagen intentionally tricked the carbon emission test of diesel engine vehicles. The company manufactured vehicles by using specific software that was used to decrease the emission rate for a short time from 2009 to 2015. The court found the automotive company guilty of cheating the emission test. The brand ended up paying 30 billion Euros of penalty.
Environmental factors affecting Volkswagen
Clean Energy Technology
The main objective behind the production of hybrid cars, hydrogen fuel batteries, and electric cars is to build a technology that is environmentally sustainable in the long term. It would help the company to satisfy the needs of environmentally conscious customers and increase the sale. It’s good both for the company and the environment.
Conclusion: Volkswagen Pestle Analysis
After a careful study of the pestle analysis of Volkswagen, we’ve concluded that Volkswagen is indeed the world’s leading automotive manufacturing brand. The lawsuits, environmental regulations, pandemic, changing trends, and economic recession are the main challenges. Volkswagen should address these issues by changing its strategies accordingly.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.