The political environment of any nation affects its business environment directly and indirectly. It can have a direct impact on the economic environment of the nation and thus the level of economic activity and employment too. The political environment affects the regulatory environment too. If the political environment of a nation is stable, it also leads to economic stability and gives rise to higher economic activity and prosperity. On the other hand if there is political instability, it can result in economic instability and disruption. It can lead to business and operational disruption and thus financial losses. Governments can choose a more direct approach to affect the automotive industry by forcing industry players to manufacture vehicles that meet the current regulatory requirements in terms of safety, fuel economy and green-house gas (GHG) emission standards. Moreover, the way companies can sell their vehicles is also regulated by government laws. Especially in countries where a large part of the supply chain of an international business is located, political disruption or chaos can lead to disruption in the supply chain and then business loss. Geopolitical issues and terrorism can also disrupt businesses and difficulties in political relationships between nations can also make business between the two difficult. incentives provided by governments on going green involves tax credits to reduce the initial cost and the operating cost of EVs, and various nonfinancial incentives.
Economic:
Economic forces have a very important role in the business world and can affect the fortune of businesses in various ways. This has occurred due to several reasons. With rising economic activity, the level of employment has also risen globally and that has led to higher spending on goods. Automobile is a cyclical industry, meaning its overall performance is sensitive to the business cycle. Revenues for companies that operate within a cyclical industry are generally higher in times of economic prosperity and lower during economic downturn. The price of crude oil has significant influence over the automotive industry. Fluctuations in crude oil prices affect the cost of production, as well as customer demand. If gasoline prices are high, owning an ICE car can be costly that might encourages people to seek another means of transportation, and vice versa. Downturns in the economy tend to lead consumers to delay the purchase of a new car, unless replacement is necessary. Rising commodity prices leads to pressured margins and costs that cannot be passed on to consumers, due to the competitive pressure and long lead-time in the industry. automakers have relatively high purchasing power over suppliers, and the industry have therefore not experienced major cost peaks except for the a general cost increase in components . Interest rates rise with inflation, and decrease the availability of credit. As a result, interest rates play an important role in ...
