PEST will be adopted to analyze the macro environment of Volvo in China.
Political factor is concerned in the first place. China ranks first among Sweden’s many trading partners in Asia. At present, economic and trade cooperation is stable. The exchanges between China and Switzerland in various fields of politics, economy and culture are growing steadily and healthily, with frequent exchanges between the private sector and the business sector. Chinese leaders also visited the Swedish headquarters of Volvo, which is also an important partner of the China-Switzerland Road Safety Research Center established by the Chinese and Swedish governments. The relationship between the two countries has been governed and is in active development.
According to the agreements between China, Europe and the United States of America in WTO, the tariff on imported automobiles has been gradually reduced from 100% to 25%. The distribution rights monopolized by manufacturers have been decentralized. Trading companies can import automobiles by themselves. In addition to the monopoly channels of the original manufacturers, parallel import channels have also been opened in the market. China’s private automobile industry is one of the industries strongly supported by the government and has more preferential policies. Volvo, a Geely subsidiary, operates in China to avoid many foreign restrictions (Yiyi, 2017).
As for policy, with the rising cost of manufacturing industry in East China, the development of industrialization in Midwest China, and the acceleration of urbanization in China, the whole industry chain of automobile industry is shifting and expanding towards the central and western parts of China. Many automobile manufacturers have established complete automobile factories in Chongqing, Chengdu, Wuhan and other places. Volvo’s China plant is also in Chengdu, where it builds factories to produce cars. The automobile industry is still the highlight of China’s new normal economy, and its development is still rapid. China has issued a new energy automobile industry policy and planned a blueprint for the development of new energy automobiles in 2010-2025. This is of great significance to Volvo’s market in China (Yakob, Nakamura & Str? M, 2018).
In terms of the speed of economic development, traditional manufacturing industry is facing the challenge of industrial upgrading and eliminating backward production capacity. After 30 years of reform and development, high energy consumption and low value-added industries under the original industrial system will face elimination, and the original growth mode will be unsustainable. Equipment manufacturing industry is an important industry for transformation and development, and automobile industry is one of capital and technology intensive industries, which produces huge economic benefits and creates a large number of employment opportunities. Combined with the industrial policy of new energy vehicles, the automotive industry will usher in new development. Consumption demand has gradually become the main body in the economic growth structure. Consumption will become an important driving force for economic development. With the development of residents’ purchasing power, automobile consumption will become more and more frequent and become one of the main driving forces of household consumption.
Automobile consumption is supported by financial instruments. Flexible financial instruments can enable consumers to buy cars at a lower cash cost. Nowadays, in China’s automobile market, financial instruments have become the way most people will choose when they buy cars. People only need to pay 20 to 30 percent down payment. The rest is provided by bank loans, which are flexible and convenient. The emergence of financial instruments, encouraging people to consume ahead of time, greatly stimulates consumers’ willingness to buy, is an indispensable factor in the rapid development of automobile consumption.
However, for Volvo, Audi, BMW, Mercedes-Benz and Cadillac of the second camp all compete positively with Volvo. As the fastest growing segment of the passenger car market, the luxury car market has an unusually fierce competition. Audi, BMW and Mercedes-Benz of the first battalion hold 75% of the luxury car market. Their status is not shaken by other brands of the second battalion, but the gap between the first three battalions is narrowing year by year and the competition is intensifying. In the second camp, the rankings of Jaguar, Land Rover, Cadillac, Volvo and Lexus have risen alternately every year, occupying the fourth to seventh positions, showing a glue state and unprecedented fierce competition. At present, Volvo is in the product replacement period, the original best-selling models are in the last two to three years of their life cycle, and their sales are in the downward channel. Compared with its rivals, Volvo has certain disadvantages. Competition with competitors to launch new models, the external competition intensified.
From a social point of view, the huge purchasing potential of third and fourth-tier cities will gradually emerge. High growth opportunities for Volvo are in third and fourth tier cities.
The concept of automobile consumption is changing. It is surveyed that brand, safety and vehicle type are the top three factors affecting consumers. Volvo is facing strong competitors and has comparatively leading advantages in safety, environmental protection, ergonomics design, engine and so on.
According to the annual report, in the four years from 2011 to 2014, Volvo’s sales in China increased significantly after a slight decline in 2012, from 42,000 units in 2012 to 81,500 units in 2014. Volvo’s plan to sell 200,000 units in China by 2020 has taken solid steps. As Volvo’s largest single market, China’s sales grew by 27.6% in the first half of 2017, and by 30.9% in June, it continued to lead the global market. In the second quarter of 2018, driven by the growing demand for Shandong Lingong wheel loaders, Shandong Lingong and Volvo excavators, orders in the Chinese market grew particularly strongly, with a growth rate of 72%. Asia (excluding China) grew by 19%, while the Chinese market continued to grow by 47%(https://www.volvogroup.com/en-en/investors/reports-and-presentations.html).
In terms of technological environment, China has supported foreign high-tech investment, and made China’s high-tech develop rapidly. At present, the technology of Chinese automotive joint ventures is mostly in the hands of foreign companies, which is a very good opportunity for Volvo, which has a complete technology patent.
Volvo has developed the C30 pure electric vehicle as early as 2011 – 12, but it has not been vigorously promoted in view of the immature market. Establishing its own brand characteristics in the field of new energy is the most important thing to win business development in the next 20 years (Lei & Qin, 2018). As long as Volvo continues to invest in the new energy automotive industry, it also proposes to develop in the direction of standard setters in the new energy automotive industry, and create a new brand image with its strong accumulation of automotive driving technology and safety technology.
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