PESTLE Analysis On Toyota Prius

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PESTLE Analysis on Toyota Prius


Choon Keet Sin, Woon Cea Ng, Lin Weng Tan, Jia Qing Ong, Boon Cheong Chew
Faculty of Electronics and Computer Engineering
Universiti Teknikal Malaysia Melaka
Hang Tuah Jaya, 76100 Durian Tunggal, Melaka, Malaysia
[email protected], [email protected], [email protected], [email protected], [email protected]

Abstract
Toyota Prius Hybrid is using the Hybrid Synergy
Drive (HSD) that perfectly optimizes power from
both petrol engine and electric motor according to
the driving condition. The electric vehicle (EV)
which allows the vehicle run purely for low noise
and zero fuel consumption [1]. The objective of our
research paper is to investigate the factors that move
Toyota Prius into production. The research is based
on the PESTLE analysis (which is based on various
factors like P-political, E-economy, S-social, Ttechnology, L-legal and E-environment) by using
secondary data and qualitative analysis. In annual
sales worldwide since 1997 until 2011, Toyota Prius
is performed well and popular in global market.
Based on the analysis, Toyota Prius did move into
hybrid vehicle production which influenced by the
factors that mentioned above (PESTLE).
Keyword: PESTLE, Toyota Prius.
1.0 Introduction
In this project are mainly do research on what are
the rationales moves Toyota Prius into hybrid vehicle
production. The purposes of this task are to
investigate what are the rationales and to identify
what are the factors that move Toyota Prius into
hybrid vehicle production by using PESTLE
analysis.
Toyota Prius is a compact sedan which manufactured
and developed by Toyota. Prius was named with
meanings ahead or leading and the predecessor of
cars to come. The technology used by Prius is
Hybrid Synergy Drive (HSD) which developed by
Toyota. HSD is the technology that produces a full
hybrid vehicle that allow car to run on the neither
electric motor nor mechanical motor. The car design
is using the alternator current generator and direct
current motor which attached with the internal
combustion engine (ICE). [2] The battery in the car

is only used to start car combustion engine and also


run the accessories in the car. ICE is started by the
motor-generator (starter) use when higher speeds,
faster acceleration or more power for charging the
batteries.
Quality (Policy), affordable price (Economy),
comfort (Social), High technology-green technology
(Technology & Environment) and safety (Legal)
design are the factors that moved Toyota Prius into
hybrid design. The first generation of Prius
experienced great sales in US with 32% grow from
2001 to 2003. It became the world first massproduced gasoline electric hybrid car with aimed to
reducing air pollution and increasing fuel efficiency.
The second generation was redesigned as a mid-size
liftback, with the redistributed on interior design and
mechanical space significantly increasing luggage
room and rear-seat legroom. Besides, the all-electric
A/C compressor was used for cooling; electric power
steering system to further minimizes engine beltdrive engine accessories; the Smart Key System,
DVD navigation on the MFD, Vehicle Stability
Control and Bluetooth for hands-free calling. Prius
has been tested on 2004 in NHTSA of U.S for crash
testing and gets the five stars on overall testing and
good overall on IIHS crash tests, which side
curtain and torso airbags became standard on 2007
as American models. The third generation of the
Prius is a 5 door hatchback with 1.8 Liter Dual
VVT-I [3], which are the new body designs which
are more aerodynamic.
There are three optional packages that offered by US
Prius, the first package is a navigation package
which includes a voice-activated touch-screen DVDbased navigation system and an 8-speaker JBL audio
system. Second is a solar roof package includes the
navigation package and adds a power tilt along with
a solar powered ventilation system to prevent the
interior's heated air with the outdoors. A new remote
air-conditioning feature allows the driver to activate
the air conditioner prior to entering the vehicle. The
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third is an advanced technology package includes the


Navigation Package while adding a Pre-Collision
System, Dynamic Radar Cruise Control, Lane Keep
Assist and Intelligent Parking Assist. In 2009, Prius
plug-in hybrids (PHEV) is sent to limited
geographical areas and contain special data tracking
devices designed which allow Toyota to monitor the
Prius usage for further development of the plug-in
hybrid system. After that in the 2011, Toyota
announced a target of retail sales for the PHEV
which plans to sell tens thousands of Prius plug-in
hybrid car to the public.

impact on many vital areas such as


the environment of the workforce,
the humans health and the quality
of technology such as hybrid system.
Economic

This includes interest rates, taxation


charges such as the road tax,
insurance tax, economic growth,
inflation and tax incentive. In other
words, the costs have to pay more
for car users.

Social

This factor takes into consideration


all events that affect the market and
community socially. Thus, the
advantages and disadvantages to the
people of the area in which the
project is taking place also need to
be considered. These events include
cultural
expectations,
norms,
population
dynamics,
healthy
consciousness, career altitudes and
global warming.

Technology

New technologies create new


products and new processes.
Technology can reduce costs,
improve quality and lead to
innovation. These developments can
benefit consumers as well as the
organizations
providing
the
products.

Legal

Organizations also have to adjust


their products and ways of operating
to the different regulatory and
legislative framework that govern
each of the products areas and
countries in which they are active.
Other than that, the programs also
need to take into consideration. [13]

Environment

Environmental factors include the


weather and climate change. With
major climate changes occurring
due to global warming and with
greater environmental awareness
this external factor is becoming a
significant issue for firms to
consider. [14]

Table 1: Sales of Toyota Prius from 1997 until 2011

Source: Various
2.0 Literature Review

Along this research, the tool that we used is the


PESTLE analysis. The PESTLE analysis is a tool
that is used to identify and analyze the key drivers of
change in the strategic or business environment.
(Johnson et al., 2008) [11] The abbreviation stands
for Political, Economic, Social, Technological,
Legal, and Environmental factors. The tool allows
the assessing of the current environment and
potential changes. [12]
The PESTLE analysis tools are listed in table below.
Table 2: PESTLE analysis tools and its components.
Analysis
Components
Tools
Political
This refers to government policy
such as the usage of renewable
energy. Political decisions can

Source: summarized from various literature

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3.0 Research Methodology

4.1 Political Factors

Our research methodology is using the secondary


data analysis. Secondary data analysis can be
literally defined as second-hand analysis. It is the
analysis of data or information that was either
gathered by someone else (e.g., researchers,
institutions, other NGOs, etc.) or for some other
purpose than the one currently being considered, or
often a combination of the two (Cnossen 1997).
Besides that, Secondary data can be a valuable
source of information for gaining knowledge and
insight into a broad range of issues and phenomena.
Review and analysis of secondary data can provide a
cost-effective way of addressing issues, conducting
cross-national comparisons, understanding countryspecific and local conditions, determining the
direction and magnitude of change trends, and
describing the current situation. It complements, but
does not replace primary data collection and should
be the starting place for any research activity
(McCaston, 1998). [15] Therfore, the secondary
data also know as the re-use of the qualitative data.

Based on our research, Toyota Prius have positive


political impact. By producing the environmental
friendly cars which use less gasoline and reduce
dependency on petrol, Therefore, the country itself
reduce the dependence of the petrol (import from
other country) especially U.S government and
western country which does not produce oil and need
to focus on the way to obtain oil from the foreign
countries. President of U.S Obama stated that he
wants to end Americas addiction to foreign oil
which encourages the people to use the hybrid car
and contribute on his plan to decrease U.S reliance
on foreign oil.

The reason for choosing secondary data analysis as


our research methodology due to the secondary data
analysis can be carried out rather quickly when
compared to formal primary data gathering and
analysis exercise in our research paper. Besides that,
whenever it is a good secondary data is available, we
can save time and money by making good use of
available data rather than collecting primary data,
thus avoiding duplication of our effort.
Most of the secondary data is collected from the
reference books, technical report, scholarly journals
and the World Wide Web1. After the confirmation of
using the secondary sources, there are few steps that
will take into consideration. The steps that had been
undergo are formulating our research problem,
extensive the objectives, developing research
objectives, collecting the information, analysis of
information , generalization and interpretation and
finally preparation of the paper.
4.0 Discussion
In this section, we will discuss each of the factors,
PESTLE accordingly.

Toyota cooperate website

Based on the result of U.S survey which conducted


by Hudson Institute are 75% of Americans prior to
reducing their reliance on foreign oil and gas.
Secondly, about 83% of Americans agree that the top
for the next administration must be focus on the
reducing our dependence on foreign oil. Moreover,
the 91% of Americans believe that when come to
energy, they must relies that on its own ingenuity
and innovation but not depend on Saudi royal
family.
The dependence of the natural gas and oil from the
foreign source will directly and indirectly affect one
country economy growth and also the national
security. In the past decade, the dependence on oil
and gas has cost many western country economy
dearly until the alternative energy vehicles start
become more commonplace. For U.S in 1979 to
2000, U.S cost around 7 trillion on natural gas and
oil which as much as spent on national defense in
the same period. Nowadays, the oil price keep raise
and the transportation of this country become more
and more expensive.
Therefore, Government Policy such as the degree of
using the renewable energy should be focus so that
the environment and economy of country were
protected.
We also found that the international and national
policies moved Toyota into hybrid vehicle production
is United State Federal Law. The energy Policy Act
of 2005 established a federal income tax credit up to
$3,400 for the new hybrid vehicles, purchased or
placed into service. Vehicles purchased after
December 31, 2010 are not eligible for this credit.
The law limited the tax credit to the first 60,000
eligible vehicles per carmaker. Why the energy
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policies want to do so? It is because this energy


policy act encourages the purchase of low emission
vehicles. Besides that, the Energy Independence and
Security Act of 2007 expanded these incentives to
include emerging electric vehicles and plug in
hybrid, technology.
Besides that, Toyota Earth Charter notes four
principles:
(a) Contribution towards a prosperous 21st
century
Aim for growth that is in harmony with the
environment, and to challenge achievement of zero
emissions throughout all areas of business activities
and set as a challenge the achievement of zero
emissions throughout all areas of business activity.
(b) Pursuit of environmental technologies
Pursue all possible environmental technologies,
developing and establishing new technologies to
enable the environment and economy to coexist
harmoniously.
(c) Voluntary actions
Develop a voluntary improvement plan, not only
based on thorough preventative measures and
compliance laws, but one that addresses
environmental issues on the global, national and
regional
scales,
and promotes continuous
implementation.
(d) Working in co-operation with society
Build close and cooperative relationships with a
spectrum of individuals and organizations involved
in
environmental
preservation
including
governments, local municipalities as well as with
related companies and industries [16].
Furthermore, according to Corporate Average Fuel
Economy (CAFE), the purpose is to reduce energy
consumption by increasing the fuel economy of cars
and light trucks. NHTSA administers the CAFE
program, and the Environmental Protection Agency
(EPA) provides the fuel economy data. NHTSA sets
fuel economy standards for cars and light trucks sold
in the U.S. while EPA calculates the average fuel
economy for each manufacturer. This site contains
an immense amount of information about the CAFE
program including a CAFE overview, rulemaking
actions, fleet characteristics data, compliance
activities, summaries of manufacturers fuel
economy performances since 1978, and related
studies [17].

CAFE has special standards for alternative and dual


fuel vehicles. These will increase the manufacturer's
rating which make hybrids a good deal for everyone
because it offsets those low-economy, high-profit
trucks and SUVs [18].
Other than that, according to the Energy Policy Act
(EPAct 1992) of 1992, it is aims to reduce U.S.
dependence on imported petroleum and improve air
quality by addressing all aspects of energy supply
and demand, including alternative fuels, renewable
energy, and energy efficiency.
EPAct 1992 encourages the use of alternative fuels
through both regulatory and voluntary activities and
approaches the U.S. Department of Energy (DOE)
carries out. It requires federal, state, and alternative
fuel provider fleets to acquire alternative fuel
vehicles.
EPAct 1992 also defines "alternative fuels" as:
methanol, ethanol, and other alcohols; blends of
85% or more of alcohol with gasoline (E85); natural
gas and liquid fuels domestically produced from
natural gas; propane; hydrogen; electricity; biodiesel
(B100); coal-derived liquid fuels; fuels, other than
alcohol, derived from biological materials; and PSeries fuels, which were added to the definition in
1999.
Under EPAct 1992, DOE has the authority to add
more alternative fuels to the list of authorized
alternative fuels if certain criteria are met. DOEs
Clean Cities initiative was established in response to
EPAct 1992 to implement voluntary alternative fuel
vehicle deployment activities [19].
4.2 Economic Factors
Economy is also another impact to almost all country
around the world. The consumers start to choose the
hybrid car based on the benefits of fuel savings over
time which means the paid back. Moreover, the
cost of insurance and road tax for hybrid car are
much lower than a gasoline-car. Due to the oil fuel
become higher and higher nowadays, this means that
the hybrid car users can save more money.
The inflation of fuel prices causes the negative effect
on the nations gross domestic product. The higher
the fuel efficiency offered by hybrid cars shields
families and business from fluctuating oil prices and
leaves more money available to circulate through
economy.
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In year 2008, oil prices raised to $120 per barrel, as


a result oil responsible for 75 percent of the U.S.
trade deficit, according to RCF, a Chicago-based
economic consulting company. Anything that
reduces oil imports has a positive net effect on the
trade imbalance because domestic supplies have
peaked and environmental and cost concerns make
extraction of the more difficult to reach reserves
untenable. Broader market permeates of hybrid
vehicles will eliminate the oil imports, which are the
single biggest driver of the trade deficit no matter
what the price of oil is. [20]

The potency and number miles which hybrid car will


go on a single battery has result battery-powered cars
manufactured largely in early of 21st century for
highway driving in United Stated. However, the
limitation can be reduces when the battery charging
station become common at every places.

Moreover, we will discuss the extension and


enhancement of tax incentive application period
hybrid cars. Due to the decrease in the excise duty by
50%, so the price of Toyota Prius in the market will
lower than the previous price in the market. With the
reasonable price, the people are affordable to buy a
hybrid car. As a result, the reduction in the tax
incentive will become an encouragement for Toyota
into hybrid vehicles production.

4.4 Technological Factors

4.3 Social Factors


The social factors that moved Toyota into hybrid
vehicle production will be discussed. Due to the
climate change become a serious topic nowadays, so
Toyota should produce a vehicle which it will not
bring pollution to the environment.
Moreover, fossil fuel is a non renewable energy
which it will exhaust at one day, so to overcome this
problem, Toyota need to produce a vehicle which it
will not only depend on fossil fuel. After hybrid car
technology has been invented, high demand from
those country which are not producing fossil because
they do not need to depend on the country which
producing the fossil fuel.
Conventional cars are significantly cheaper than the
hybrid cars due to the high technology used on the
hybrid cars. This reflects on the new technologies
developed during the early of the 21st century.
However, the price of the hybrid car should decline
accordingly after the hybrid cars technology become
more familiar.
A hybrid car has an electric battery which serves as
fuel cell for the car. However, because of the
complex electronic configuration of hybrid cars, they
are often heavier than conventional gasoline engines
cars. These factors must be counted with the fuel
savings for hybrids once they make it onto the road.

However, a more serious environmental problem is


the disposal of spent battery packs in hybrid and
electric cars. Car manufacturers are aware of this
issue; as a result they make research and develop less
toxic battery packs for electric and hybrid cars. [21]

The technology used in Plug-In Hybrid Electric


Vehicles (PHEV) is the idea of using the battery
powered car. The recharging time is 1.5 hours for
240V AC or 3 hours for 120V AC and the maximum
of the electric vehicle cruising range is
approximately 15 miles at a speed of up to 62 miles
per hour. Beyond that, the plug-in will switch to
hybrid mode, providing an estimated 49 miles per
gallon. [22]
Toyota Prius using a 1.8 Liter displacement engine
which able to generate higher output and torque.
Another advantage of Toyota Prius is the elimination
of the drive belt along with using an electric drive
water pump to reduce the supplemental of engine
load. Moreover, the engine also has a Cool-EGR
system which able to recalculate exhaust temperature
as well as recirculation system that reuses heat to
help the Prius warm up faster.
Besides that, the Toyota Prius also using the
advanced of the aerodynamics to reduce drag. When
driving on the freeway, most of the work of the Prius
engine does goes into pushing the car through the
air.
For the Toyota Prius, low-rolling resistance tires
were used. The tires on cars are optimizing to give a
smooth ride with the minimum noise and also
provide good traction in variety of condition. The
hybrid car uses the special tires that are both stiffer
and inflated to a higher pressure than conventional
tires.
Besides that, the material to build the Toyota Prius
body also is the lightweight materials such as carbon
fiber, aluminum, magnesium, titanium which used to
reduce the overall weight of the vehicle body and
increase the mileage.
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4.5 Legal Factors


For legal and policies, available PHEV technology
will decrease emissions of conventional air
pollutants substantially as compared to a standard
vehicle on the roads today. While similar emission
reductions can be achieved with, for example
compressed natural gas (CNG) and clean diesel
vehicles
with
advanced
emission
control
technologies, the PHEV combines both non-CO2 and
CO2 reductions.
PHEVs decrease fuel consumption substantially
compared to conventional vehicles used today and
also compared to CNG and the new generation of
cleaner diesel vehicles. Calculations have shown that
over the average PHEV useful life time savings can
amount to 6,000 L of fuel.
While PHEVs are more expensive initially, the fuel
savings are recouped based on mileage and driving
conditions. Analysis has shown that the PHEV life
cycle cost, including the cost of purchase, fuel and
maintenance costs, is, in most cases, less than
owning a conventional vehicle. However, these
calculations are strongly dependent on fuel prices,
taxes and rebates.
PHEVs, HEVs, full electric vehicles, and fuel cell
vehicles share basic technologies such as electric
motors, batteries, and power electronics. Therefore,
plug-in hybrids and HEVs function as stepping stone
technologies to the large-scale electrification of fleets
that is required for a long-term reduction of CO2
emissions from road transport, and a low carbon
transport sector.
According to the U.S department of energy load
programs office (LPO) mission which is to accelerate
the domestic commercial deployment of innovative
and advanced clean energy technologies at a scale
sufficient to contribute meaningfully to the
achievement of our national clean energy objectives
including job creation; reducing dependency on
foreign oil; improving environmental legacy; and
enhancing American competitiveness in the global
economy of the 21st century. LPO endeavors to
encourage
commercialand
utility-scale
development and adoption of new or significantly
improved energy technologies. Besides that, fund
innovative technologies which reduce greenhouse
gas emissions also been created by LPO. Moreover,
LPO also create jobs by financing the growth of
commercial clean energy technologies and provide

direct loans to eligible automobile manufacturers and


component suppliers for projects that re-equip,
expand, and establish manufacturing facilities in the
U.S. to produce advanced technology vehicles and
components for such vehicles. Last but not least,
LPO also protect U.S. taxpayers by ensuring the
loans and loan guarantees we provide have a
reasonable prospect of repayment [23].
On July 11, 2002, the California Legislature passed
landmark legislation to propose adopting the first
Greenhouse Gases (GHG) emission regulations on
motor vehicles in the United States. AB 1493,
expected to be signed into law by the Governor of
California at the time of publication of this report,
could significantly enhance the objectives of the
States LEV and ZEV program. The law requires
the CARB to adopt regulations for carbon dioxide
emissions from passenger cars, light trucks, and
SUVs by January 1, 2005. The bill directs the
CARB to adopt regulations that achieve the
maximum feasible reduction of GHGs emitted by
passenger vehicles and light-duty trucks and any
other vehicles in the state [24].
4.6 Environmental Factors
Respects with environment, the gases that produce
by our car were carbon dioxide, carbon monoxide,
sulphur oxides, oxides of nitrogen (NOx), and
hydrocarbon and also lead. These gases will cause
climate change, aggravate existing heart, lung
diseases, acid rain, damage the ozone layer and lead
released will damages organs, effect humans brains,
blood and also heart.
One of the major objectives of Toyota go into the
hybrid (green) car is concern about the
environmental effect of the Prius bring to us. For the
first generation of Prius model NHW10 was sold at a
loss due to the cost of Prius as much as US$32,000
but only sales at US$16,929 per vehicle. This show
that the effort of the Toyota launches the green
vehicles that aimed to reduce the air pollution and
also increase the fuel efficiency.
As we know, the Toyota Prius is a hybrid car which
requires less gasoline to run and with the and
therefore cheaper to run. For the public benefits of
using Toyota prius is less gasoline use which leads to
less pollution, less greenhouse gas emissions and less
dependence on the non-renewable oil.

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Car owner know that driving a Prius provided a


public benefit at the same time Prius also did not
compromise quality, safety and functionally.
Therefore, Toyota Prius provide the consumers with
a role in addressing environmental concerns.
For the new model of Toyota Prius which using
plug-in hybrid electric vehicle (PHEV). PHEV
deliver the largest global warming reduction
compare to other cars. Besides that, in regions of the
country that have a relatively clean generation mix,
PHEV is also reduces the smog-forming and also
soot pollution.
5.0

Conclusion

After done our research, we came out with a


conclusion it is enable higher accessible that moves
Toyota Prius into hybrid vehicle production based on
PESTLE analysis. For political view, the
Government Policy using the renewable energy aims
to reduce the dependence on foreign oil which will
directly and indirectly affect the countrys economy
growth and security due to the raising of the oil
price. These energy policy acts establish new
technologies to enable the environment and economy
to coexist harmoniously by achieving zero emissions
throughout all area. There are some international
and national policies such as United State Federal
Law, Corporate Average Fuel Economy (CAFE),
Energy Independence and security Act of 2007.
The fuel saving is one of the economy factors since
the keep rising of oil price. Moreover, the cost of
insurance and road tax for hybrid car are much lower
than a gasoline car. Based on the economy analysis,
it moves Toyota Prius into hybrid vehicle
productions. The replacement of the renewable
energy instead of using fossil fuel not only resolves
the climate changes problem. It can reduce the
burden of drivers that everyone able to afford for
owning a hybrid vehicle. Conventional cars are
significantly cheaper than the hybrid cars due to the
high technology used on the hybrid cars.
Hybrid vehicle is Plug-In Hybrid Electric Vehicles
(PHEV) which is using the battery powered car.
Toyota did make a big step in technology that using
1.8 Liter displacement engine which able to generate
higher output and torque. Other advance
technologies such as using electric drive water
pump, Cool-EGR system, advanced aerodynamics
and low-rolling resistance tires that push the Toyota
Prius into high technology vehicle in global. Toyota

use lightweight materials such as carbon fiber,


aluminum, magnesium, titanium which used to
reduce the overall weight of the vehicle body and
increase the mileage. After having the technology
analysis, the advance systems or technologies move
Toyota Prius into hybrid vehicle production.
The PHEV technology will decrease emissions of
conventional air pollutants and fuel consumption
substantially. The new hybrid vehicle with PHEV
technology fulfilled U.S department of energy load
programs office (LPO) objective which reducing
dependency on foreign oil improving environmental
legacy; and enhancing American competitiveness in
the global econom\y. Besides, LPO strict in
greenhouse gas emissions, the growth of commercial
clean energy technologies, provide direct loans to
manufacturer facilities and protecting the taxpayers.
The California Legislature adopting the first
Greenhouse Gases (GHG) emission regulations on
motor vehicles in the United States.
The major environment problem nowadays is climate
changes which may affect human health. Toyota
launches the green vehicles that aimed to reduce
the air pollution and also increase the fuel efficiency
which leads to less pollution, less greenhouse gas
emissions and less dependence on the non-renewable
oil. Plug-in hybrid electric vehicle (PHEV) delivers
the largest global warming reduction which reduces
smog forming and soot pollution.
Last but not least, PESTLE analysis is a simple and
easy tool to understand and use in our research.
Besides that, it is also a tool that encourages the
development of strategic thinking due to its analysis
tools (PESTLE). Thus, after analysis, it shows that
the Toyota Prius did move into hybrid vehicle
production which influenced by the factors.
6.0

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