Government in?uence have mixed results on the automotive industry.
Accidents and fatalities on the road have been steadily decreasing around the world. The National Highway Traf?c Safety Administration recently announced that passenger car occupant fatalities in the United States have dropped for the sixth year in a row while light truck occupant fatalities fell for the third year in a row. Fatalities on American highways dropped 9.7 percent from 2007.
The EU27 has experienced an 8.3 percent decrease in fatalities between 2007 and 2008 and a 28 percent drop since 2001. Japan has seen decreases in deaths each year since 2001, most recently a 10.3 percent decrease in 2008 over 2007 data.
While statistics show that roads are becoming safer overall, it�s difficult to attribute these gains to any specific action. Europe has placed great importance on public education, while the United States has recently begun to refocus on legally enforcing the use of seat belts. But these are only steps along the way toward pushing road deaths even lower and elevating automotive safety to new heights.
To help accomplish this goal, our governments play an important part. As lawmakers, governments dictate safe speeds or proper licensing of drivers. Gradually, however, governments have begun to exert influence over the automotive industry itself in the form of mandates. While mandates often have positive effects on the state of road safety, they can have mixed results on the automotive industry itself.
The positive
The goal of mandating or requiring a technology or system is to help ensure that everyone eventually will experience its benefits. With regards to automotive safety and Advanced Driver Assist Systems (ADAS), a mandate brings an elevated level of safety not only to the new vehicle but, by extension, to the rest of the road. Even if a mandate only initially requires new models to be equipped with autonomous cruise control, for example, the effects of the system can eventually be experienced by others as well in the form of improved traffic flow or by the gradual phasing-in and ubiquitous availability of the application once the mandate is fully implemented.
Widespread deployment of any ADAS technology also has the opportunity to bring refinement and innovation. Any system that satisfies a mandated safety application likely would be subject to a rigorous approval process, ensuring that a competent and confident system is available for mass adoption. While the initial product serves its function well, having a larger client base use the system can also generate more feedback and more improvements to the technology, leading to better and more efficient systems that can bring added value to customers and often at lower prices.
Government mandates of safety technologies could also help elevate the revenues of automotive suppliers. Several ADAS solutions currently are being introduced on high-end luxury vehicles of a small number of OEMs and are slowly spreading across the rest of the brands� model lines. Consequently, system volumes begin small and increase only slowly, with revenues doing roughly the same.
Nevertheless, iSuppli Corp. notes that lane departure detection systems have grown from 80,000 unit sales worldwide in 2006 to an approximate 549,000 in 2009. While this represents more than a six fold increase over four years, if lane departure detection systems become mandatory, unit sales would multiply even faster as attach rates approach 100 percent and suppliers would reap the benefits.
The negative
On the other side of the price equation, however, sit the OEMs. Once able to collect revenue from often expensive safety options, the OEMs must now cover the cost on their own. This can be of particular importance on smaller-segment models whose prices often begin low and see significant increases with optional ADAS packages, accounting for as much as 9 percent of the base Manufacturer�s Suggested Retail Price (MSRP), as in the case of the Mercedes-Benz A- and B-Class.
Furthermore, those OEMs that were proactive in their adoption and deployment of the newly mandated technology now also lose a distinguishing feature that helped set them apart from competitors. While some brands will continue to be recognized for providing additional safety features above what is required by law, the safety-conscious niche occupied by OEMs such as Volvo and Mercedes-Benz have occupied risks slow erosion or dilution as more high technology becomes mandatory.
Mandating a safety application can also adversely affect OEMs that do not already offer the given technology. Forcing OEMs to offer a certain system or functionality when they are not prepared could force the deployment of an unprepared technology, a hastened selection of supplier or disruption of production, for example.
While mandates often give generous preparation time, the relatively slow-moving automotive product life cycle can last for many years. This can result in either proactive upgrades ahead of the mandate or untimely updates to models that don�t necessarily warrant them.
Lastly, OEMs could also be forced into upgrading production facilities, an additional expense in order to satisfy a regulation that is ultimately outside of their control.
A mandate also could have consequences for drivers as well. Many people find new technology confusing. If a government mandated lane-departure-detection systems, it is possible that a vibrating steering wheel or seat could distract or confuse drivers who are unfamiliar. The same logic could be applied to any system that assumes autonomous control of the vehicle: While the ADAS solution increases safety, many drivers could take issue with giving up control of the vehicle.
The end
Individual actions, laws, mandates or initiatives could never hope to have a significant effect on road deaths or road safety on their own. Instead, an approach combining each of them into a comprehensive action plan is necessary to continue to make roads safe. Thus far, it appears that these actions have had the desired effect, as most roads appear to be getting safer even as they are travelled more often.
However, each of these actions also has consequences. While the positive effects are visible in many road safety statistics, the negative repercussions can be less easy to foresee. Government mandates could have significant and unintended consequences for any member of the value chain, especially in the highly competitive automotive industry.
The automotive industry has been resilient and has absorbed the shock of mandates and legislation, but it is important for governments to keep this perspective in mind in a climate when new mandates are proposed at a more frequent pace. Particularly in light of the current economic climate and precarious financial position of several members of the automotive industry, awareness and foresight will prove invaluable.
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