Thesis on "Foreign Market Analysis"

Thesis 5 pages (1716 words) Sources: 5 Style: APA

[EXCERPT] . . . .

Hybrid Cars

Foreign market analysis

Foreign market analysis: Hybrid cars in European Union (EU) nations

European cars are famously smaller than American cars, as well as often more fuel- efficient. Because of traditionally higher gas prices and higher taxes on gas consumption, Europeans have tended to eschew the American 'bigger is better' obsession with their personal modes of transport. Car ownership is far lower than it is in America, and fewer European families are two-vehicle homes. However, European consumer enthusiasm for environmentally-friendly hybrid vehicles had lagged behind American sales for such cars. One reason for this may be that because Americans prefer to drive bigger cars. Thus, Americans are also more desperate to drive hybrids -- although the small size of many, albeit not all hybrid vehicles seems to undercut this claim. Another argument is that Americans lack viable public transportation alternatives, with the exception of only a few major metropolitan areas, like Washington DC and New York City. European nations have substantially better public transportation infrastructure. They have shorter distances to travel when commuting and engaging in daily activities, given the smaller geographic span of most European Union (EU) nations.

But perhaps an even more potent reason for the imbalance of hybrids between America and Europe is that of taxation: when not produced in an EU tax-free zone, as has been the case of the most popular hybrid vehicles Toyota Prius and the Honda Civic Hybrid, the foreign manufactures must pay a 40% tax. Thus, these trusted hybrid vehicles' price is simply not competitive in Europe, despite the car's environmentally friendly nature. This is reflected in the following sales figures: Honda hybrid sales in North America account for 78% of sales; but only 12% in Europe. Yet the fact Honda hybrids also account for only 8% in Japan suggests there are other environmental and cultural factors at play that motivate greater demand for hybrids in America, such as Japan's comparative availability of even smaller and more fuel-efficient cars than even North America, and the presence of speedy bullet trains in the small, island nation that make the use of cars less of a necessity (Honda, 2009, Green Car Congress). Alternative, trusted models and public transportation options seem to reduce demand for more expensive hybrids.

Research objective

To explore the current market potential for hybrids in Europe, and to explore what could make the purchase of such vehicles more attractive to a European audience.

Economic environment

Despite apparent resistance to hybrids, the impact of the world economic crisis has been felt in Europe. As individuals are forced to cut back on daily expenses, gas minimization becomes a priority. The green movement has also been more vocal and active in Europe than in America -- green technology is emphasized within the EU's governing body, and Green Party candidates offer viable alterative opposition voices in many EU nations' parliaments. However, European conservation remains entrenched in a diesel fuel mindset: "Diesel is the name of the fuel-efficiency game ... And the German companies are strongest in the diesel and clean diesel space" and German-made cars remain some of the most popular vehicles in Europe (Smart 2009).

German car manufactures lead the resistance to focusing on hybrid technology: "In Europe it makes more sense to optimize the diesel motor in order to save energy," enthused BMW's director of marketing, strategy and operations, stating "the hybrid car is technologically challenging and costly to produce. Besides, the hybrid car doesn't bring any benefits when driven at a constant speed. A four-wheeled drive adds weight to the vehicle, making it consumes more fuel" (Willborn 2009). However, hybrid advocates say this is somewhat belied by the fact that "unlike French or Italian manufacturers, the German car industry has overwhelmingly big models in its range and is the most-polluting industry in Europe," although they do concede that small, diesel cars may make 'more sense' for Europe (Willborn 2009).

Trade environment

One way to reduce important taxes is to manufacture the car in the EU nation in which the hybrid car will be sold. Currently, Toyota is doing this with its newest hybrid marketed for English drivers. Its new hybrid Auris hatchback is to be manufactured in Derbyshire, England, and is generating positive press because this will improve the sagging economy in the region, as well as bring greener options for UK drivers. Toyota is evidently spotting a potential trend in the UK: "it will be the first time the firm has produced a hybrid vehicle in Europe and is seen as an attempt to popularize Toyota's line of clean-energy cars outside the traditional Japanese and U.S. markets. Toyota makes most of its hybrid models in Japan but some are made in China and the U.S. Toyota sold 429,740 hybrid vehicles last year, including 285,675 Prius cars, the world's bestselling hybrid. More than 37,000 non-hybrid Auris cars -- built in the UK and Turkey -- have been sold in Europe since the model's introduction in spring 2007" (McCurry 2009). Increasing popularity for Toyota as a company and increasing popularity of hybrid vehicles, combined with positive press, could all stimulate the purchase of more Auris in the UK market, and pave the way for its introduction into other EU nations.

Commercially, hybrid vehicles are on the rise in the EU. For a long time, even for companies that had 'gone hybrid' in their delivery of products and services in their nation of origin, Europe posed a challenge. Coca-Cola, for example, only recently switched to hybrid delivery vehicles in Europe. The European branch of that company stated: "In Europe, we have lagged behind the U.S. In hybrid technology development with the majority of hybrid manufacturers being U.S.-based and having intellectual property exclusivity on their technology" (Kanter 2009). However, the presence of hybrids in Europe is expanding: A year or two ago "99% of global hybrid sales were from U.S., Canada, Japan, UK and France," but "today, the hybrid market has spread to nearly 50 countries…[there is] dramatic growth in the Netherlands, Greece, and Israel" (Hybrid, 2009, Hybrid Cars). Joint ventures between foreign and EU firms have expanded supply and generated greater demand.

The social and cultural environments

Evidentially seeing a trend, and striving to reinforce an existing trend in the United Kingdom, Toyota will pilot its revolutionary plug-in car in Great Britain. Even for 'green' consumers, the debate continues to rage in Europe over questions about disposing of the batteries used in hybrid vehicles, although these cars do boast lower fuel consumption, less noise and emissions pollution, and frequently drivers of hybrids are given tax breaks for driving the vehicles. But the added expense of finding a place to service hybrids and getting the cars repaired properly incurs more frustration and often expense for drivers. Still, Toyota is working hard to foster cultural receptivity of hybrids: "Toyota plans to lease 150 plug-in electric hybrid vehicles to fleet customers in Europe this year…the cars can be driven for short distances on just electric power before a Prius-like full gasoline/electric hybrid system takes over" (Toyota leases, 2009, NW autos). Leasing is a low-commitment option that may wean European consumers away from their fondness for diesel -- and public transport. And the cars' greater use of electricity means that they are both small and far more fuel-efficient than even American-style hybrids. Their plug-in vehicles' shorter running power may be just what smaller, less-car dependant European drivers require.

The political, legal, and regulatory environments

To achieve its objective of creating a greener delivery system, and partially to improve its distressed marketing image as an American cola manufacturer of sugary, artificial drinks, Coke partnered with a well-respected company within the EU: "Coke's partner in Europe is Iveco, a truck maker belonging to the Italian Fiat Group. Iveco already makes some hybrid vehicles, including city buses, and a medium-distance truck called the Eurocargo" and has also manufactured vehicles for FedEx and other European-based companies (Kanter 2009). Circumventing the added taxes on imported cars from manufacturing centers outside the EU is vital for foreign manufactures wishing to establish inroads in the European personal vehicle market as well, and partnering with UK and European businesses is likely to be the path of the future hybrid market into the EU.

Additional regulatory measures may ensure that Europe may not be able to 'afford' to resist hybrids for much longer, due to more stringent emissions standards: "Reuters reported that Europe is gearing up for the arrival en masse of electric cars in the coming years, but they won't be the only solution -- hybrid vehicles will also be a weapon in the fight to meet tough emissions reduction targets" (2009, Auto Channel). The focus has been on reducing emissions for municipal and state transportation vehicles at present. Hybrids that are more dependant upon electricity, and even hybrid diesel models are likely to be the 'compromise' models of the future, and manufactures such as Toyota, or even American and other foreign manufactures that can establish a base within EU nations are likely to… READ MORE

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