The automotive industry is regulated by very strict government regulations. As time passes, they become more severe, and there is a general belief this actually leads to problems instead of solutions. Ideally, everything is created with the main purpose of increasing safety features but this makes it more expensive for manufacturers. They end up cutting corners, build in other countries and look for many different ways to minimize their expenses. People want cars that are cheaper and cheaper but government regulations make new cars more expensive.
The Impact On Car Design
During the fifties many different car types were released on the market. The designs were sometimes outrageous and there was absolutely no standard for how a car should be built. This made some cars much more appealing and sales did increase but when we saw the launch of the 1953 Mercury Monterey everything changed. This is because there were sharp heating system levers that could have impaled drivers when the vehicle was involved in a collision.
As time passed, regulations appeared and there are differences between what auto manufacturers have to respect in the USA and in other parts of the world. The car manufacturers are practically forced to build a vehicle that would meet regulations all around the world. A failure to do this would limit sales. This is not something that would be taken into account, no matter what design change is made.
Government regulations force the cars to become much more similar in terms of design. Innovation is encouraged in theory but when looking at the evolution of car design, we see that most manufacturers move towards something that is highly similar for all the models in specific categories. We can say that government regulations make cars much less appealing as designs become standardized.
In order to meet regulations and still make a profit, some manufacturers end up sacrificing safety, without even wanting to in many cases. We have the huge example of the air bag lawsuits that recently hit the market. Trying to save money with the airbag system while respecting regulations led to the appearance of air bags that became dangerous for people inside the vehicles.
Volkswagen was also hit by controversy in 2015 when it admitted that fuel usage and the CO2 emissions of close to 1 million cars in Europe were understated. Their vehicles were actually more costly when driven, with the buyers not knowing about it. Although not a security problem, it did lead to a worldwide debate about better controlling manufacturers’ claims.
The example with the airbags was quite shocking since we are talking about around 24 car brands that have to recall millions of cars. This is an unprecedented large scale event that could easily negatively affect all the brands and can be a potential cause of injury or death for millions of people.
This risk to safety came about because of the shrapnel-shooting inflator parts included in the system and manufactured by Takata, a Japanese supplier. Tests proved that the device can deploy improperly when a crash happens and metal fragments would be thrown towards passengers. According to reports, there are close to 42 million vehicles that are now potentially affected. This is just in the US. The number of worldwide vehicles that are affected is not yet known.
US manufacturers keep being faced with high financial burdens because of the stringent fuel economy regulations. These regulations are enforced on the highly cyclical and mature automotive industry. Ford, General Motors and Chrysler managed to diversify through foreign sales and vehicle production, moving towards other industries like defense electronics and financial services. Profitability for companies is normally determined directly by vehicle demand. However, because of regulations, it becomes important to move towards other industries or profitability would continue to go down in the US.
Regulations that govern how vehicles are constructed are not the only ones in play affecting this industry. There are also many that exist in employment laws. We even have specific employment trends that must be taken into account. Employment actually declined in the automotive industry. The decline is sure to continue. The industry adjustments associated with employment will actually reduce employment.
One thing that many do not actually know is that Japanese automakers have a highly efficient product-development process, one that is much more effective than what is seen in the US. Developing new automobiles in the US takes an average of around 60 months but in Japan, their more efficient product cycle means that only 47 months are needed. The man hours needed in the US are double those in Japan. U.S. regulations associated with product development in American auto factories are responsible for this.
There is no way not to notice the fact that stricter regulations force the car manufacturers into making decisions that could be dangerous for buyers. While this is not something that is desired, problems still appear. However, it is difficult to come up with something different since the regulations are there due to safety issues.
There is a constant debate going on at the moment but history taught us that when the regulations were not in place we had some problems in vehicle safety and corners were always cut by the manufacturers with the main desire to increase profit.
As noted above, there are many different ways in which the automotive sector is impacted by government regulations. Many other effects could be mentioned. Unfortunately, because the large manufacturers need to keep an eye on profits, stocks, investors and so many other things, cutting corners is still a fact of life. There are always loopholes to be discovered in legislation. These are the ones that will be analyzed by lawyers and people working for the auto makers.
It is hard to conclude whether or not such tight regulation is a good thing. However, the regulations do have to be respected and safety is very important for consumers. New regulations will appear and car brands will have to adapt.