Kevin Kim, 16954004, BUSS506/03
Introduction to the Vehicle Manufacturing Industry
We are living in a society where we aim to lower our carbon footprint by altering our
purchasing behaviours to environmentally friendly products. According to Wilberforce et al.
(2017), the transport industry is one of the main contributors to the emission of hazardous
substances that negatively affect the environment with nearly 55% of the world energy
consumption dependent on fossil fuel. With an eco-friendly conscience, globally we are
facing a problem with an increasing number of conventional automobiles produced every
year over the recent past years, according to “oica” (2020). A solution the public has set
their eyes on are electric vehicles (EV) as it provides the same transportation but with
environmentally friendly fuel source. In the automobile manufacturing industry companies
are unwilling to produce EVs as the market for EVs is not profitable, according to Zheng et
al. (2018). In order to help lower carbon emissions governments like China is strategizing a
plan to help manufacturers by providing support to the production of EV, which in turn will
inherit environmental benefits.
Technological – Manufacturer’s Problem
With technology developing at an exponential rate over the recent years, electric vehicles
have become more advanced than ever before. On average electric vehicles can lower
carbon emissions by 30 to 50% and increase fuel efficiency by an estimate of up to 60%
according to Zheng et al. (2018). A much-improved carbon emissions and fuel efficiency, this
shows a promising business potential for vehicle manufacturers. Although electric vehicles
produce less carbon emissions and better fuel efficiency, due to low demand for EV in the
market, manufacturers are hesitant to manufacture them. Governments of China have
implemented a series of policy measures such as macroscopic demonstrations policy,
financial subsidy policy, technical support policy to help promote EV. One major concern
consumer have is the initial purchasing price of EVs being too compared to the cost of a
conventional vehicle, especially when the average household income although has
increased over the past few decades so has the gap in income inequality, according to
Stratford et al. (2016). Where consumers are very conscience about prices, they will be
more willingly to choose the cheaper alternative.
Technologically Electric Vehicles are becoming more and more advanced. Advanced EVs are
much more fuel efficient and have a significantly lower carbon emission rate than
conventional vehicles. The market demand for EVs is very low compared to conventional
vehicles fueled by fossil fuels. If governments were to implement policies and support
further research and development in manufacturing EVs, the demand for EVs will likely to
increase.
Global – Government’s Response to Manufacturers’ Problems
Consumers’ demand for electric vehicles isn’t as great as the demand for conventional
internal combustion engine vehicles (ICEV) as EVs financially affect consumers more than
ICEVs. Consumers’ purchase behaviour in deciding to purchase the cheaper option is a
major problem. A few reasons to the initial purchase price of EVs being higher than ICEVs
are manufacturers found it difficult to profit with the market’s demand for EVs is low and
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Kevin Kim, 16954004, BUSS506/03
are hesitant to increasing their production in a low demand product, especially when
manufacturing EVs is more costly than ICEVs. According to Wilberforce et al. (2017),
production of EVs is more costly and require expensive research for further development to
improve manufacturing costs and durability. Governments such as China are willing to offer
subsidy to vehicle manufacturers to conduct research in developing more cost-effective
methods and processes in manufacturing EVs.
Governments involvement in vehicle manufacturing is speeding up the process in replacing
and reducing the number of ICEVs to reduce carbon emission levels from transportation by
providing funds to develop more cost-efficient manufacturing methods. This transition to
low carbon emission vehicles will significantly improve the environment.
Environmental – Result of New Implications
To be able to support a more sustainability focused society, major economic powers such as
China are planning to focus their manufacturing in electric automobiles. Scholars believe
that electric vehicles can lower carbon emissions by 30% to 50% and improve fuel efficiency
by 40% to 60% on average according to Zheng et al. (2018).
In the long-term the cost of purchasing an electric vehicle will be much better when
compared to internal combustion engine vehicles. According to Weldon et al. (2018) from a
10-year study on costs of ownership of EVs and ICEVs although the initial purchase price for
EVs is higher than comparable ICEVs, consumers do not calculate the total cost of ownership
when purchasing a vehicle. The total cost of ownership of EVs were the most cost efficient
with the cost of petrol being a major factor to this, as small increases in petrol prices
occurred. If consumers were to take in to account the total cost of ownership and purchase
an EV, not only will they be saving money but also drastically reduce carbon emission from
their vehicle.
Summary to Changes in Vehicle Manufacturing Industry
The vehicle manufacturing industry over the years will transition to producing more electric
vehicles and less of conventional internal combustion engine vehicles as governments will
help manufacturers’ transition and development to produce EVs that meet consumers’
expectations. I believe out of the three areas, global will have the most significant impact on
promoting positive change to the automobile manufacturing industry. Consumers in our
current society are in favour of a green future and would more likely change their
purchasing behaviour if the purchase price for electric vehicles were to be cheaper than
they are currently. I suggest if governments were to support manufacturers with funds, they
would be able to research further and develop cheaper manufacturing methods and meet
consumers’ expectations to lower purchasing price and increasing electric vehicles’ battery
capacity and charging time. By meeting consumers’ expectations and lowering the cost to
purchase an electric vehicle, will eliminate consumers’ primary concerns of purchasing an EV
and will help consumers make their decision to purchase an environmentally friendly
vehicle. With increasing number of EVs replacing conventional vehicles we will be getting
evermore closer towards our society’s goal to reduce our carbon footprint.
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Kevin Kim, 16954004, BUSS506/03
Reference List
Production Statistics. (2020). International Organization of Motor Vehicle Manufacturers.
Oica.net/production-statistics/
Zheng, X., Lin, H., Liu, Z., Li, D., Llopis-Albert, C., & Zeng, S. (2018). Manufacturing decisions and
government subsidies for electric vehicles in China: A maximal social welfare
perspective. Sustainability, 10(3), 672.
Dabla-Norris, M. E., Kochhar, M. K., Suphaphiphat, M. N., Ricka, M. F., & Tsounta, E. (2015). Causes
and consequences of income inequality: A global perspective. International Monetary Fund.
Stratford, K., & Cowling, A. (2016). Chinese household income, consumption and savings. RBA
Bulletin, 9, 31-40.
Wilberforce, T., El-Hassan, Z., Khatib, F. N., Al Makky, A., Baroutaji, A., Carton, J. G., & Olabi, A. G.
(2017). Developments of electric cars and fuel cell hydrogen electric cars. International Journal of
Hydrogen Energy, 42(40), 25695-25734.
Weldon, P., Morrissey, P., & O’Mahony, M. (2018). Long-term cost of ownership comparative analysis
between electric vehicles and internal combustion engine vehicles. Sustainable Cities and
Society, 39, 578-591.
Fontaras, G., Zacharof, N. G., & Ciuffo, B. (2017). Fuel consumption and CO2 emissions from
passenger cars in Europe–Laboratory versus real-world emissions. Progress in Energy and
Combustion Science, 60, 97-131.
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