Electric Vehicle Industry: Business Opportunities and Profitability

This report explores the business opportunities associated with the production and marketing of electric cars in the automotive industry. It analyzes the impact of electrification on the market and identifies potential risks for businesses that do not invest in electric cars. The report also discusses the factors influencing the adoption of electric cars and the benefits they offer. The case study focuses on Volvo Cars and its vision for electric vehicle development. Overall, the report highlights the importance of embracing electrification for long-term profitability in the industry.

Electric Vehicle Industry

CONTENTS
INTRODUCTION 3
MAIN BODI 3
a) Identification of new and emerging business opportunities associated with the production
and marketing of electric cars 3
b) Identification and critical assessment of other businesses that may not be able to earn long
term profit due to carrying investment in electric cars 6
CONCLUSION 7
REFERENCES 8

INTRODUCTION
The automotive industry includes all organisations and companies that indulge in the
activities of designing, development, manufacturing, marketing and selling of various type of
motor vehicles. In terms of revenue, this sector considered as the world’s largest economic
contributor. There is a colossal impact ascertained by this sector from the changes in
internal and external business operating factors. Technology played the central role in the
evolvement of motor vehicles within the market where electric cars are in trend and
demanded most by consumers at the global level. All these factors and their influencing
power guides the business operations towards acceptance of new changes so they can
persist within the market with sustainability. Those who failed to adopt have to face long
term negative impact in terms of reduced profitability and earning capacity (Rong and et al.,
2017). The organisation selected for carrying research and further analysis of the concept of
electrification of vehicles is Volvo Cars. It is a large Automotive manufacturing organisation
that provides its business offerings in all over the world. This organisation already has a clear
vision of the development of electric vehicles from the year 2019. The main aim of this
report is about the identification of business opportunities associated with the production
and marketing of electric cars.
The aspects covered in this report include the determination of emerging business
opportunities for entrepreneurs and business executives while producing and marketing
electric cars and assessment of the impact may be or not upon the long-term profitability of
current market players due to adoption of electrification technique of production.
MAIN BODY
a) Identification of new and emerging business opportunities associated with the
production and marketing of electric cars
The automobile industry is large and provides a broad scope to all the players present in the
market to gain a sufficient amount of returns. Many functions fall under the functioning of
this industry includes engine development, bodywork and overall development or
assembling of vehicle. The working in this industry demands flexibility from the
organisations to sustain within the market. Technology played a major role in the
evolvement of this industry along with emerging trends like electrification of cars. Many
other external factors simultaneously have an impact over the functioning demand of
automobile organisations (Liu, Huang and Yang, 2017). These stimulate the operating
behaviour of organisations, directs the adoption of activities that are similar to the current
demands that exist in the market, along with external factors. Now, the technological
element has an impact upon the industry in the form of electrification of cars. This creating
demand among society at the global level about the consumption of same due to associated
with various benefits. This concept also gets the support of government at national and
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international levels. It is clear from the description that a large number of business
opportunities are present for different organisations and new entrepreneurs in the market.
External environment and industry analysis are the two main factors that help to know
about all associated opportunities with business. So, the two models
best to implement in this regard are PESTLE and Porter five forces. Detailed implementation
of both along with various business opportunities for Volvo, including other market players,
is presented below:
PESTLE
PESTLE is the model that help to analyse the factors present in the external business
environment along with their impact over the particular business industry at a global level.
In the current report, these factors analysed to gain understanding about business
opportunities in the automobile industry due to its electrification (Rastogi and Trivedi,
2016).
Political: At the global level, the nature of political towards the production of electric
vehicles is supportive. In this regard, they build numerous linnet policies because of the
associated advantages like saving of non-renewable resource, i.e. petrol and diesel and
reduction of pollution level. It creates the business opportunity for the business
organisations along with Volvo to focus on the production of electric vehicles because
through this medium; they can quickly enter at a global level with governmental support,
i.e. subsidies. The decision of Volvo about the production of only electric vehicles from 2019
was a positive attempt in the direction of attaining immense business opportunities creating
in the market.
Economical: All the automobile organisations, including Volvo, has their production systems
within the nations that are developed or developing. All these nations have a significant
presence of capital for the support of local and international businesses in their expansion.
Electrification is the concept associated with two-way benefits that wanted by all nations to
adopt as one single global platform. It creates the business opportunities for organisations,
including Volvo to expand the business activities and build the production system in the
nation from where they can get the maximum support in the form of human and capital
resource.
Social: The increasing price of petrol and diesel at the global level has a significant impact on
the capacity of middle-class individuals to maintain the vehicles. The central part of the
market based upon lower, middle and upper-middle-class consumers. Electrification in cars
helps them in the saviour of petrol and diesel cost in future years. That creates the business
opportunity in the form of targeting all consumers who have demand of owning a car with
low maintenance cost. Here, electric cars save the money spent on petrol and diesel twice
the final value after the consumption of many years (Achinas et al., 2019).
Technological: The level of technology is high all over the world. Also, the nature of
technologies associated with the electrification of the car is emerging. It creates the
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opportunity for business organisations to create partnerships with other parties that have
technological competence and produce low-cost electric cars—this help to grab whole
market possibilities as a monopolistic competitor.
Legal: This includes the legislations and other legal requirements formulated by different
nations for the safeguarding of their society, environment and individual. The benefits of
electrification in the car, manipulate the political behaviour where they build linnet policies
related to starting production or entering as an international business organisation. That
creates the business opportunity for large organisations to get the support of the
government in easy, fast and cost-efficient creation of production system on fulfilment with
minimal conditions.
Environmental: The automobile industry harms the global environment through the
emission of CO2. This impact of this gas negative where it becomes the reason for ozone
depletion and climate change all over the world. Electrification of cars comes as a saviour
that creates the business opportunity for organisations that ascertain the support of society
and associations related to environmental safeguard in the promotion and expansion of
electric car production. The benefit of the same also ascertained in the manner of fast
environmental clearance that helps to meet the consumers demand on time in the market
(Gheibi et al., 2018).
Porter Five Forces
That is the model used for industry analysis. It also aids in ascertaining the level of
competition that exists in the industry. It has a positive contribution to the assessment of
the power of different players along building appropriate strategies. It is an application over
the automobile industry is provided below to know the power and business opportunities;
Buyers Power: At present, the number of buyers is low that purchases electric cars. The
upcoming market scope is broad. That depicts the power of organisations will be high while
they start selling electric cars (Wee, 2017).
Supplier Power: The number of suppliers is less that provides services n electric car market.
That depicts the power of a business organisation is low. The benefit is that the supplier has
sufficient amount of resources and power to deliver the materials to different parties. So,
building connection and agreements will be a positive attempt towards manufacturing
electric cars.The threat of new entrants: The power of new entrants within the electric car
segment is shallow because it requires a massive amount of capital and technological
competence. That creates the business opportunity for existing players to focus over their
shifting of production systems.
The threat of substitutes: The number of electric cars within the market is significantly less.
Tesla is the organisation that has major operations in the electric segment. The cars of Tesla
are high in price and not for the middle class. That depicts that the power of substitutes is
low against the existing players of the market as they have large target consumers who are
curious to buy electric cars within their budget.
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Competitive rivalry: The level of competition with electric cars is low. The less number of
players exist like Tesla and Volvo. They are also targeting the premium class. That depicts
the business opportunity for others to target the primary market of cars through the
production of electric one for middle and upper-middle consumers (Prasad and Warrier,
2016).
b) Identification and critical assessment of other businesses that may not be able to earn
long term profit due to carrying investment in electric cars
There are many other automobile organisations in the industry other than Volvo that are
thinking of electrification of their whole business functions. The point about that they will
not be able to gain the long-term profitability from the investment within electric cars is not
correct or viable. As per the demand of electric cars in the market and associated benefits,
the long-term positive impact upon profit is evident. All different organisations are
irrespective of their nature and sizeable to get a significant amount of returns. The aspect
that will hamper the profits at short term level is lack of coordination or support in internal
activities within medium level organisations or those having low operating capabilities than
Volvo (Ou et al., 2018). That can understand from the application of Porter value chain
model over business functioning of both Volvo and other organisations.
Porter value chain
That is used by the organisation to ascertain the connection between all its business
functions. The way in which functions performed, associated cost and profit is determined.
This model has five primary activities named as Inbound Logistics, Operations, Outbound
Logistics, Marketing & Sales and Service. Also, it has four supportive activities that assist in
the performance of primary activities with effectiveness includes Firm infrastructure,
Human resource management, Technology development and Procurement (Porter value
chain, 2020). The application of this model about both Volvo and other organisations
provide below:
Coordination of support activities in the performance of the primary: Volvo is a large
organisation where primary activities attain significant support. About the organisations, the
lack of knowledge, experience and employee’s resistance does not allow in the providence
of adequate support to primary activities. That makes the process of adoption longer and
impacts short-run profits.
Objectives: This is about the development of objectives for mitigating gaps identified
above. Here, plans developed or adopted regarding the improvement of experience and
knowledge.
Implementation: This is about the implementation of the above plans stated as
objectives that work in the direction of improving coordination and final deliverance of
activities.
Review: This is about review so nothing can be left behind that is not perfect and impacts
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the viability of project or product. This step aid in the availability of quality products to end
consumers.
It is clear from the application of above that short-run impact upon profit ascertained due to
poor coordination. That increases the initial cost compared to Volvo. Overall, the long-term
profit has no negative impact. All are going to ascertain positive returns from the market.
Product life cycle
This includes the description about the process or stages from which a product goes through
when it first introduced in market till the time of decline or removal from market. This has
four different stages include introduction, growth, maturity and decline. These are defined
below in relation to fuel based cars;
Introduction: This is the stage when new product will be introduced in market. In case of
fuel based cars they enter in market in every earlier period of time.
Growth: This is the stage of growth in business. The fuel based car business was on hike in
past 10 years.
Maturity: This is the stage when product attains the stage of maturity. Now, the current
period is of maturity for fuel based cars as trend of electric car get started.
Decline: This is the stage when business goes down. Right now, this stage is not arriving due
to high price of electric cars.
Figure 1Product life cycle stages
CONCLUSION
It has concluded from the above report that electrification within the automobile industry is
the best change associated with numerous benefits. That will aid in safeguarding
environment, consumption of non-renewable resources like petrol and diesel and low
maintenance cost. All the external factors, including political, technological, social,
economic, legal and environmental, have a positive impact on the automobile industry and
creates opportunities for business expansions. In the upcoming time, the organisation who

failed or not adopting the concept of electrification has to face negative consequences in
the form of fewer returns and low-level profitability.
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REFERENCES:
Books and Journals
Achinas, S. et al. (2019) ‘A PESTLE Analysis of Biofuels Energy Industry in Europe’,
Sustainability. 11(21). p.5981.
Gheibi, M. et al. (2018) ‘Controlling air pollution in a city: A perspective from SOAR‐
PESTLE analysis’, Integrated environmental assessment and management. 14(4).
pp.480-488.
Liu, C., Huang, W. and Yang, C. (2017) ‘The evolutionary dynamics of China’s electric
vehicle industry–Taxes vs. Subsidies', Computers & Industrial Engineering. 113.
pp.103-122.

Ou, S. et al. (2018) The dual-credit policy: Quantifying the policy impact on plug-in electric
vehicle sales and industry profits in China’, Energy Policy. 121. pp.597-610.
Prasad, A. and Warrier, L. (2016) ‘Mr. Porter and the new world of increasing returns to
scale’, Journal of Management Research. 16(1). pp.3-15.
Rastogi, N.I.T.A.N.K. and Trivedi, M. K. (2016) ‘PESTLE technique–a tool to identify
external risks in construction projects’, International Research Journal of
Engineering and Technology (IRJET). 3(1). pp.384-388.
Rong, K. et al. (2017) ‘Organizing business ecosystems in emerging electric vehicle industry:
Structure, mechanism, and integrated configuration’, Energy Policy. 107. pp.234-247.
Wee, C. H. (2017) ‘Think tank—beyond the five forces model and blue ocean strategy: an
integrative perspective from Sun Zi Bingfa’, Global Business and Organizational
Excellence. 36(2). pp.34-45.
Online
Porter value chain. 2020. [Online]. Available at:
https://www.mindtools.com/pages/article/newSTR_66.htm (Accessed: 17 April 2020)
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