Reference no: EM13557881

Lithio Car            

The Lithio Car company was formed six years ago to commercially exploit the pioneering work two professors at Beeland University. Over a number of years, the professors had developed and then patented processes which allowed them to use Lithium-ion batteries to power an electric car, which could travel up to 180 kilometres before it needed recharging.

Together with two other colleagues from the university, the professors founded Lithio Car to put the car into commercial production.

At the same time, the area around Beeland was suffering from major industrial decline, and the former factory of Royston Cars had recently been shut down by its parent company, after over 50 years of continuous vehicle manufacturing on that site. Many skilled production workers were made redundant as a result, in an area which was already suffering from high unemployment.

However, Lithio Car was able to benefit from grants from the regional council and interest-free loans from the government to purchase and re-furbish part of the Royston Cars factory, and employ 50 of the skilled workers that had been made redundant by Royston Cars. A number of the other workers, who had worked at the Royston factory for a long time, chose to retire when the factory closed.

As a result, although unemployment remains high in the area, Lithio Car has found it difficult to recruit skilled labour, and this shortage has been reflected in increased wages and staff costs in its factory.

Table 1 compares the Lithio Car with a similar petrol-fuelled car (the Gassio) and a hybrid car (Hybrid1) where the petrol engine in supplemented by power from an electric motor.

Table 1: Comparison of the Lithio car with petrol and hybrid cars

Hybrid cars are a popular way of reducing emissions and fuel consumption. There are also experimental cars, not yet in production, which are fuelled by other low-emission alternatives to petrol, such as hydrogen.

The Lithio Car can be re-charged from a domestic electricity supply. However, to supplement this, the government has recently funded the development of 130 charging stations for electric cars spread throughout the country. The government of Exland (in which Beeland is situated) has also given businesses tax incentives to switch to electric cars and is heavily taxing cars with high CO2 emissions because of the detrimental effect of excess CO2 on the environment.

Despite the industrial decline around Beeland, Exland remains a prosperous, developed country with a well-educated population. The Lithio Car is largely bought by 'green' consumers in Exland, who are prepared to pay a price premium for such a car. However, some consumers are also attracted to the Lithio car by the high price of petrol, which currently costs about $5 per litre in Exland. Only 5% of Lithio Car's production is currently exported.

Last year, Mega Motors the second largest car manufacturer in the world made an offer to buy Lithio Car, which the professors rejected. Although car production at Lithio Car is currently still very low, Mega Motors believes that demand for electric cars will be very significant in the future, and buying Lithio Car would be a way of entering this market. Mega Motors believes that the Lithium-ion batteries (which power the Lithio Car) will eventually become lighter, cheaper and give better performance and range.

Required

Perform a five forces analysis of Lithio Car's industry environment, and explain how this could be used to help evaluate the company's performance.