Brief Analysis of How EUs Policies Have Influenced the Car Industry - Term Paper Example

Brief analysis of how EU’s policies have influenced the car industry Brief analysis of how EU’s policies have influenced the car industry Table of Contents Introduction…………………………………………………………3 Brief Analysis……………………………………………………….4 The individual car owner…………………………………………..9 Review of the effects………………………………………………10 Conclusion………………………………………………………….15 Sources……………………………………………………………..16 Introduction The European Union (EU) is a disciplined and integrated market. All of its industries are well-informed and the policies adopted by the political leadership have consonance with the economical segment they apply to. This, however, does not provide the EU blanket immunity against mishaps. On the contrary, the teething problems associated with regional formations are not over. The EU is not even two decades old yet. Nonetheless, there is broad consensus on macro-policies such as the non-political nature of the office of the directors of the European Central Bank based in Frankfurt who cannot be dismissed by political decision (Paqué, Karl-Heinz, p7). Such autonomy on major discipline like finance at once gives the EU due credibility and recognition notwithstanding the inner turmoil that may occur with economic and industrial ups and downs with different member nations pulling in different directions or one stakeholder in the industry lobbying to protect his interests. The car industry is no exception. The policies framed by the political leadership for the car industry are based on the information provided by different stakeholders and the push and pulls are strong and strategic. Hence, such policies have to be balanced so that they do not appear to lean in favor of one stakeholder at the cost of another. The major stakeholders in the car industry viz. the manufacturers, the OEMs, the distributors, society and the environmentalists make their contributions and influence the decision of the policy makers. These contributions and influences do not always coincide and can be quite diverse and even confrontational. For instance, the contributions of car manufacturers and the environmentalists are so diverse that any government will be hard put to frame policies agreeable to both parties. Brief analysis of how EU’s policies have influenced the car industry. The car industry is stagnating in the United States (US) and the European Union. This industry has shown a rise in developing economies like China, India, Brazil and Eastern Europe. In United States and the EU, the survival of the industry depends on innovation, variety and technology fusion (Ahlgrimm, Michael, p3). Customer demands for these are high in the US and the EU. Constant innovation also play useful role in higher energy efficiency. There is a sea change in the car market. Until the 1980s, the market was dominated by few big players who monopolized and were in position to roll out specific models though user-friendly were not really individualized to suit the requirements of individual customers. This has now changed. There is greater awareness of customer specifics when designing cars of different models. The car market is no more the sellers’ market. It is the buyers’ market. Sensitivity to customer preferences and tastes rules the industry. The purchasing power coupled with the discernment of the customer decides the unique sales points of the car market. In this scenario, it is not only cost but also the salient features built into the car system that prevails in the market. The EU is aware of the importance of the car market not only in Europe but also the rest of the globe. Travel and communication are the two main pillars in business today. This may be the factor weighing in the minds of people who frame policies in the EU. However, the complexities in the car market today make it a difficult proposition to support the industry in prevailing conditions. It is well known that motor cars contribute a great deal to the greenhouse effect. Despite the greenhouse effect, the EU has been supportive of the car industry under the impression that the industry will address the issue of global warming, even if it is not at the desired rate. The R&D of the car industry, although changed and decentralized to cater to the modern requirement of “external inflow of innovation” (Ahlgrimm, Michael, p8) rather than the “closed innovation model” (Ahlgrimm, Michael, p9) that previously dominated the R&D has not been able to accelerate technological changes to make cheaper eco-friendly cars. In the competitive market, prices play a determining role in acquisition of commodities. In majority of the countries in Europe, almost every family owns a car. This means the car is available at affordable price so that every family irrespective of the income level has the capability to own a car. Such situation will cease to exist if EU makes it mandatory for everybody to own eco-friendly cars since eco-friendly cars come in the higher price range and are affordable only by the very rich in the present circumstances (Mayes, David G). The problem in the free market is that one can only do so much to contain prices, especially recurring costs like fuel. For the moment, it appears improbable that prices of eco-friendly cars could be brought down to the levels of a regular car. It will require a tremendous amount of political will on a wide scale for governments to either legislate or subsidize technological and fuel costs so that eco-friendly albeit high-cost cars are made available to the common man (Mayes, David G). The EU is in an unenviable position as far as the car industry is concerned. It is damned if it serves the cause of the car industry and it is damned if it does not. For the moment, it appears to be toeing the line of the car manufacturers. However, sooner or later, it will have to address serious environmental factors and in the process not only enforce binding measures on car manufacturers but other manufacturing units as well in order to reduce the greenhouse effect. These measures will be all-encompassing and will begin right from the power sector where there is CO2 emission due to use of fossil fuel. The need to reduce CO2 emission is not the responsibility of the car industry alone. It cuts across a wide swathe of industries most of which consist of the travel industry such as aviation, buses and trucks. The need to reduce the greenhouse effect must be politically motivated so that it finds acceptance at the right places. However, in the current situation, the political entities do not appear to be enough inclined to address the issue to the convenience of the environmentalists. Thus, although there is the demand to reduce CO2 emission through technological advancements, this issue is not being taken too seriously by developed economies like Germany in the EU. The technology to reduce CO2 emission is available but at higher costs that make it difficult to sustain in competitive conditions (Car industry flexes its muscles…). Currently, EU’s policies are clearly influencing the car industry and not the environmentalists. While the car manufacturers in the EU, especially Germany, have vast resources the environmentalists do not match the manufacturers in resources. The environmentalists make lot of noise to be heard and they do get heard eventually. However, the manufacturers with their resources are in position to arm-twist the policymakers into acquiescing with their cause. The manufacturers are particularly strong on the issue of employment and workers welfare that would be put to stake in case of any hard policies with regard to compulsory reduction in CO2 emission. Binding measures to being about reduction in the CO2 emission will entail reduction in the manufacture of automobiles resulting in loss of jobs (Car industry flexes its muscles…). Voluntary measures for reduction of CO2 emission through improvement in technology do not appear to be having the desired effect. Binding measures are bound to be counterproductive. In the circumstance, there is the immediate need to look for ways to bring down the greenhouse effect through means other than requiring the car industry alone to shoulder the burden. The bone of contention between the car manufacturers and the environmentalist in the European Union is the level of carbon dioxide (CO2) emission. While the car manufacturers association maintain target of CO2 emission at 130g/km, the environmentalists want it pegged at 120g/km (Car industry flexes its muscles…). This is just one major point of diversion between the parties whose views are considered in framing policies. The car manufacturers are aware that they have to fall in line with the environmentalists. CO2 emission level is threatening climate changes the world over and this has reached a level where unless remedial measures are adopted the future does not appear bright due to increasing temperatures and rise in the sea water levels that can create worldwide problems due to receding coastlines and disappearing atolls. Vehicular traffic is a major contributor to CO2 emission of which automobiles comprise a huge chunk. The car manufacturers are already under pressure to turn out eco-friendly automobiles as customers are increasingly opting for vehicles that are eco-friendly. The criticality of the environment issue is not lost on the EU. At the same time, the EU is also aware of the implication in the event of a thumb rule in having to pressurizing the car manufacturers to tone down CO2 emission through production cuts if not by technological improvements. Thus, the car industry in Europe is caught in a catch-22 situation. The car industry comprise of customers who are largely well-informed and are aware of the need to opt for eco-friendly automobiles. Nonetheless, there is the tendency to go along with the policymakers and hope for the best even if the car manufacturers are unable to meet the set targets for reduction in CO2 emission. Clearly, the EU’s policy is to help the car manufacturers continue producing even if the technology is not meeting the standards required to reduce greenhouse gas emission to the desired level. The EU and the United States are among the world’s most prolific users of automobiles. They also comprise the zones responsible for most of the CO2 emissions. However, they are also the ones to display reluctance to adopt tough measures on their industries for environmental purposes. The car manufacturers in the EU are aware of this weakness on their governments’ part and have exploited the weakness to the hilt. The individual car owner Everybody wants a car but there are few who are willing to make do without a car for the sake of the environment. This is precisely the cause that the car industry in the European Union has banked on to survive amidst the environmentalists’ uproar to curb CO2 emissions (Car industry flexes its muscles…). The automobile lobbyists are particularly strong in Germany where some of the slickest models of the car are designed. The German car manufacturers, viz. BMW, Volkswagen, and DaimlerChrysler have strong reasons that include business promotion and workers’ welfare to skirt the environment issue. Nevertheless, the environmentalists are in no mood to relent. The environmentalists may not have enough resources. However, they have sufficient resolve to make themselves heard. Review of the effects the developments associated with the establishment of the Single European Market or EMU have had on the car industry The EU is a union of 27 states within the continent of Europe. It was founded on 01 November 1993. This union has brought about many benefits to its members and also other countries around the world. It is the major financial hub and donor for welfare activities around the world. The car industry has benefited from the union because the union has increased the market size, eliminated taxes and duties that had existed due to political boundaries, and has made negotiations through diplomacy and lobbying more effective (European Union). The EU is well-known for its commitment to excellence, rule of justice, and commitment to community. It has a commitment to safeguard environmental concerns, ensure that the best products and services are found in the market, work at keeping the figure of unemployment low in member countries, respect human rights, and remain responsible to society at large. The EU is also known for its commitment to use state-of-the-art technology to provide the best products to the citizens of its member states. It manages its innovation processes by focusing on alternative energy and latest technologies. However, its record of curtailing greenhouse gases is not so bright. It has to establish itself as a world role model to attract other regions in the globe as a leader in addressing environmental concerns. The car industry is the focal point on this issue. It is not that EU is not trying. But EU is not doing enough to establish its role as a world leader in addressing environmental concerns. The EU has evolved from the European Commission (EC) and the European Economic Community. The EC was formed in the 1950s to secure lasting peace for Europe through the coming together of Belgium, France, Germany, Italy, Luxembourg and the Netherlands (A peaceful Europe…). The European Commission ultimately culminated as the European Union. So, although the EU is relatively young, its evolution dates back to the 1950s, and as such it has enough experience to fall back on to handle ticklish issues such as the one under discussion, viz. the car industry. The going is tough with the car industry because the association of car manufacturers in Europe have smartly and deftly used the soft corner the EU has for workers in Europe. The political bigwigs in Europe are at a loss to address environmental concerns without upsetting the workers’ applecart. As a whole, the industrial advancement in Europe has come to a stage where they are left pussy-footing on the question of a simple issue as the environment. They cannot deal with the issue without the fear of undoing all the good that the business world has achieved for Europe. If competition is the biggest success in Europe it is also the biggest culprit if it comes to environment. Europe would rather dictate to other regions in the world and garner carbon credits than see to it that the first step for environmental rejuvenation is taken at home (Carbon credits). The march of progress has been stupendous in Europe in the last sixty years. It has evolved from a continent of warring nations to a union of powerful nations. It has managed its growth by focusing on latest technologies and innovation. However, the cost of these technologies and innovation is now being felt with the effects of global warming. The result is a confused and dithering leadership. It is important for EU to get into the act of determinedly pursuing the goal of greenhouse gas reduction through discipline and education. The issue is serious enough to be treated on war footing. There are two ways of going about the issue of environmental cleanup. It consists of improving the present product sufficiently enough so that it is more eco-friendly or improving technologies for environment-friendly alternative energies. It also means cutting down on travel by automobile and relying more on other means of travel such as the bicycle. First of all, it is difficult to bring the leaders in the EU to the conclusion that it is possible to undo climate change through austere means. While the leadership in the EU is grappling with myriad issues, it is allowing the main culprits of ecological disaster to get away with easy targets for carbon reduction. The political leadership must press for greater cohesion for better results. If they allow economical leaders to decide the course of action for ecological results, they will have the current results of failed attempts at corrective measures. The Netherlands has already shown that it is possible to cut down on carbon emission through collective measures. The possibility exists to bring down the level of greenhouse gases in Europe if the industrialized nations in the EU resolve to use the automobiles less frequently. The information and communication technology (ICT) has made great strides in recent years to allow for work to be done at home, thus reducing the need to commute to work places on daily basis. Thus, EU’s leadership has enough scope to establish an attitude of competitive and healthy growth with socio-economic thrust that balances social needs with economic advantages. Much of the commuting seen nowadays is nothing but a mixture of social and economic activities. These activities must be encouraged without the need to commute by automobiles. Changes in climatic conditions necessitate a change in the entire scheme of things and not one sphere of activity. One may not teach people to buy less number of cars. But one can surely educate a population to use the cars less. The right people to take initiative in these directions are the corporate leaders. There is tremendous goodwill generated by leaders of industries if they are more forthcoming and show concern for environmental issues by asking their customers to be more judicious in the use of their products. Clearly, the political as well as the industries’ leadership in the EU are lacking the nerve to lead from the front when it comes to environmental issues. The writing is very clear on the wall. The world is headed for disaster if environmental issues are not duly addressed by the industrialized nations. The EU is ahead on almost all other issues except on the issue of environmental interest. I am not for a moment suggesting that the car industry cut down on its progress to increase car sales. It is important to bear in mind that the austerity measures are only for certain time so that alternative arrangements are made for cheaper and better fuel. These measures are intended to tone up the entire system of business through careful and coordinated approach. The present success of the EU in allowing car manufacturers to reap benefits even if its benefits are detrimental to the environment is success in the negative form. This success is bound to boomerang in the form of environmental disaster in a few decades. The EU leadership must also consider the long term benefits of subsidizing eco-friendly automobiles so that such benefits translate to betterment of the environment. It may not be able to subsidize the entire population of cars. However, even if it able to subsidize 10-15% of the models, it will have a long term effect for the better on the environment. Conclusion There is no doubt that the car industry has benefited by the policies of the EU. It has benefited in the sense that the industry is selling cars and making profits even if the market in the EU is stagnant. However, there is a greater issue looming large in the form of environmental degradation. This issue must be addressed with the importance it deserves. It would be unfair to single out the EU and expect it to act unilaterally to address the issue. However, the EU must accept moral responsibility and set the stage for recovery as its member nations are among the top in industrial ratings. If the EU has been engaged in activities that has brought the world to the brink of disaster, then it must also act and require others to act to bring down the greenhouse effect to manageable levels. The EU must not be engaged as a market alone. It must also reflect the aspirations of the world by engaging in activities that make the world a better and safer place to live in. 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