Penske Automotive Group SWOT and PESTLE Analysis

Strength

This section is available only in the 'Complete Report' on purchase.

Weakness

This section is available only in the 'Complete Report' on purchase.

Opportunity

1. Sales of vehicles will be increased after removal of several government restrictions: Presently federal and state governments have placed several restrictions and limitation on vehicles sale in the markets in order to combat environmental effects. For examples, in U.S automotive manufacturers are subject to federally mandated corporate average fuel economy standards. Furthermore, numerous states and other jurisdictions, including California, have adopted or are considering regulations requiring the sale of specified numbers of zero-emission vehicles. Removal of such standards will improve the sales of vehicles in old markets and in turn will introduce many opportunities to grow in new markets. Moreover, several countries, including the U.K. and Germany, have announced or are considering plans to ban or restrict the sale of diesel or combustible fuel vehicles. Significant increases in fuel economy requirements and new federal or state restrictions on emissions on vehicles and fuels could adversely affect prices of and demand for the new vehicles that they sell, which could materially adversely affect them. In September 2018, new fuel economy testing and Co2 emissions legislation known as “Worldwide Harmonized Light Vehicle Testing Procedure” (WLTP) was implemented and required all vehicles sold in the United Kingdom and Europe to comply with new fuel economy testing and Co2 emissions standards. Compliance with the new rules has proven to be challenging for certain manufacturers, resulting in a shortage of product availability. Increased tariffs, import product restrictions, and foreign trade risks that may impair our ability to sell foreign vehicles profitably, including any eventual tariffs, resulting from the threats from the Trump Administration to add 25% tariffs on foreign vehicles or parts. This will be a great opportunity for the company to go into electrify their vehicle offerings. They can sell electric and hybrid/gas vehicles more through their franchised dealership. The relaxation of this rules will come when the sales of electrify and battery operated cars will be more, which ultimately help Penske to enter into an improvised new technology business and earn more revenue. Also the relaxation of the rules depends upon the government ruling over that country, as soon as the government changes rules and policy changes. For e.g. Trump’s EPA is fighting California over a fuel economy rule, so the results of this case will decide the fate of the companies like Penske Automotive in California.

2. The stand-alone supercenters are expected to grow: The Company operates in 14 supercenters, five in the U.S and nine in U.K plus one reconditioning center in U.K. In 2018, PAG retail to nearly 70,000 vehicles through the supercenters and generated approximately $1.2 billion in revenue. The company is expected to grow the stand-alone used business through a mix of e-commerce and new market presentation. The company is developing four new stand-alone sites, which are expected to be open in the latter half of 2019. This will help in spreading their business and generating more revenue.

3. Increasing urbanization and building of smart cities will boost demand for connected cars: Penske Truck Leasing has entered a coalition of industry leaders to educate and assure the public about automated cars. The techniques are not just complete autonomy — what industry leaders call "level 5" autonomy — but a variety of alternatives including driver support software. Penske Automated has started selling smart cars from 2008 only. Penske, who runs retail outlets of most U.S. and UK brands, scheduled to add a second Smart model, a bigger hatchback constructed by Nissan, but Daimler AG said its Mercedes-Benz USA subsidiary intends to take over the U.S. distribution and marketing of the Smart mini vehicle brand from the Penske Automotive Group Inc. dealership chain. Smart for two sales jumped an impressive 63 percent this year in the U.S. Till April 2019 Smart operated under the Mercedes-Benz Cars division of Daimler AG, offering the for two coupe, for two cabrio and for four hatchback. In 2019 Daimler announced a new production plant that will be built in China with the support from Geely and will start production of next-generation Smart Cars in 2022. But Penske Automotive wanted to enter into this market again and this is the best time due to urbanization and building of smart cities. Penske had tried to spread the vehicles through a 77-dealer network, but the sales of the only model of Smart USA, the two-seater for two, continued to slow down. Spain's worldwide sector leaders addressed future transport alternatives in a smart city at the latest Smart Mobility Congress in Barcelona. In just a few years, the use of linked sensors, big data, mobile apps, and mobile payments can make transport much more effective and meaningful. Cities are getting smarter every day. Municipalities are increasingly using information and communication technologies (ICT) to enrich and enhance city life, which is paramount in planning the cities of the future. The rapid growth and expansion of the Internet of Things (IoT) result in a fundamental impact on the development of smart cities and their mobility options. A broad range of apps, services, and techniques can connect a car to other cars (V2V), infrastructure and environment. A connected vehicle involves the communication equipment that can be integrated or a mobile in the car that allows in-car connectivity to other machines in the same car. Hence, for PAG this will be a huge opportunity now and in the future.

Threat

This section is available only in the 'Complete Report' on purchase.

Political

1. Change in U.S tax laws: On December 22, 2017, the U.S. Tax cuts and Jobs Act was incorporated into law. The Act modifies several provisions of the Internal Revenue Code related to corporations, including a permanent corporate income tax rate reduction from 35% to 21%, effective January 1, 2018. The Act also significantly changes U.S. international tax laws for tax years beginning after December 31, 2017 and requires a one-time mandatory deemed repatriation of all cumulative post-1986 foreign earnings & profits (“E&P”) of a U.S. Shareholder’s foreign subsidiaries, effective during 2017. This law forces the notable shift in transit PAG to be burdened, including, in relation to other factors, modifications in U.S. federal tax rates, forcing enormous additional impediments to interest deductibility and moving to another global tax collection agreement .There is a significant vulnerability with respect to both the planning and the subtleties of how these progressions will influence their organization, their clients, and the clients of Penske Truck Leasing, any of which changes might be antagonistic to PAG.

2. Change in laws at the state or government levels: New laws and guidelines at the state and government level might be established which could substantially unfavorably sway their business. For instance, in 2013, a ballot activity in California titled the California Car Buyers Protection Act was suggested that would have dissolved their capacity to help financing client vehicle buys, among different issues. These federal or state level activities or other unfriendly changes in the law when promulgated could spell brickbats for PAG. In the U.S., state law, for the most part, gives assurances to the franchised vehicle dealer from prejudicial practices by producers and from an outlandish end or non-restoration of their franchise agreement. In the event that these franchise laws are cancelled or revised, producers may have more noteworthy adaptability to terminate or not renew their franchises. Franchised car dealers in the European Union work without such insurances.

Economic

This section is available only in the 'Complete Report' on purchase.

Social

1. Decline in population of Japan translates to lower revenue in Japan: Panasonic and other homegrown Japanese companies such as Sony, Sharp, Toshiba and other have seen a decline in their business on their own home turf, a reason that contributes to this decline in business is that Japan is suffering a cultural malaise where in the major population of Japan has aversion to human contact in a society dominated by technology, this leads to an extremely low birth rates in Japan because of which Japan is experiencing an irreversible decline in its population, Japan’s population peaked in 2010 at 128 million and since then it has been on a steady decline, Japan is also one of the very few countries to have a negative population growth (-0.1%). Because of this declining population the growth of Panasonic has stagnated severely in their own home country which contributes a significant portion of their international revenues.

2. High average age of Japanese population and high labor cost: Besides the issue of declining population, the average age of Japanese citizen is around 48 years one of the highest in the world whereas average age of India’s population is expected to reach around 29 years by the year 2020. Because of such high average age of population, Japan is seeing a decline in overall expenditure, Last year Japan’s GDP growth rate was around 1% and to make matters worse the labor costs in the country are extremely high which makes it worrisome for companies like Panasonic to increase their revenues within the country and also the high operational cost that the company has to bear due to high labor cost to operate in Japan. Over the years Panasonic has seen decrease in the percentage of the revenues that their Japan’s operations contribute compared to their global revenues.

Technological

1. Accurately track and trace every load: In the face of growing after sales competition, automakers and dealers need to rethink and create value propositions that help customers tailor their mobility packages. There is critical need to smartly predict car inventory, replacement cycles and new sales. Penske logistics uses ClearChain® technology suite to track and trace every supply chain element. Customers may see freight details and will be able to know exactly what is being shipped and where it is at every point during the journey through data capture and real-time communication. A customer can compare the number of pieces ordered to the number that shipped. The customers will be able to receive text and email alerts when the load is picketed up, enter a certain location and if delayed. The various advantages that the company will gain end to end visibility in the automotive supply chain, improve on-time delivery, experience the benefits of automation.

The remaining section of “Technological” is available only in the 'Complete Report' on purchase.

Legal

This section is available only in the 'Complete Report' on purchase.

Environmental

This section is available only in the 'Complete Report' on purchase.