Emerging markets are taking vehicle safety seriously (at least on paper!)

China has shown immense progress in adopting car safety standards, but other developing countries, such as Mexico, India, and Brazil, lie far behind. Indraneel Bardhan of EOS Intelligence, takes a closer look

Across emerging and frontier markets, most car buyers have generally focused on pricing, maintenance cost, and fuel economy, thereby ignoring the very important aspect of safety. The governments in these countries have also not given safety due importance, with basic safety features such as airbags and ABS still not a legal requirement. Taking advantage of this nonchalance among customers and governments, OEMs have long compromised on safety features in cars sold in developing markets.

C-NCAP JAC J4In recent years, however, with customers becoming more aware and global safety organisations cajoling for higher safety standards, some emerging countries have introduced increased safety measures, which in turn will require significant changes in the cars sold by leading OEMs. While this is expected to affect the bottom-line of OEMs in these price-sensitive markets, not abiding to the changing environment is likely to prove equally costly – if not in the short term, then certainly over the medium-to-long term.

Vehicle safety standards in South Korea match European levels, while China has also shown immense progress in adopting standard car safety equipment and technology. But other developing countries, such as Mexico, India, and Brazil, lie far behind. As per current car safety standards, David Ward, Secretary General of Global New Car Assessment Programme (Global NCAP) rates China-7, Brazil-5, and India-3 on a scale of one to ten. “This rating is based on three key factors – the state of legislation, level of penetration of different technologies in the market place, and consumer awareness levels.” However, with India and Brazil initiating the implementation of several safety standards in recent months, they are likely to match global standards at least for crash testing. Crash prevention, on the other hand, remains a long-term goal.

The Indian automotive industry received a major blow in 2014 when Global NCAP conducted tests on some of its most popular entry-level variants (Maruti Suzuki Alto 800, Hyundai i10, Ford Figo, Volkswagen Polo, Tata Nano, Maruti Swift, and Datsun Go) and awarded zero-star adult-protection rating to all of them. This, in addition to having the highest number of road fatalities globally, instigated the Indian government to commit to introducing regulations for mandatory safety standards. As per new regulations, by October 2017, all new cars will be required to pass frontal and side crash tests, with the deadline for new versions of existing models extended to October 2019. To pass this test, cars will need to have reasonable body shell strength and be equipped with airbags and other standard safety features. For conducting the test, the government plans to develop two crash test facilities, which are expected to come online in 2015/2016. In addition, the authorities plan to launch an Indian NCAP. India is also creating a vehicle recall policy, which will encompass testing for manufacturing defects. However, this legislation is yet to be passed.

Ironically, the focus on safety standards in India is a cause of concern for those car manufacturers selling locally, which have for so long focused on pricing and fuel efficiency. In terms of manufacturing infrastructure and technology, minimal changes are required to adapt to these proposed changes in safety standards, because most models offer basic safety features – such as airbags and ABS – in their higher variants, and the OEMS use India as major export hub for their cars destined for Europe and the US. However, with India being such a price-sensitive market, this will have a considerable impact on the OEMs’ bottom line. Moreover, many Indian car buyers still fail to value safety, thereby restricting the price tag that OEMs can attach for these features.

“The first reaction of the OEMs is that they are not very happy, since it will make their cars more expensive. But in the longer term, they will adapt to it as they have done in other countries. People will become aware and ask for safety. The OEMs’ focus will be to meet the safety standards at affordable prices. For example, child support restraints are not made in India and are imported. OEMs can ask the government for concessions on these imports,” says Rohit Baluja, Director, Institute of Road Traffic Education, India.

Safety standard levels across the major emerging automotive markets
Safety standard levels across the major emerging automotive markets

Several leading OEMs have criticised the government’s call to boost safety standards in India. An engineer working with a leading car manufacturer in India stated, “At this moment, there are no talks about any changes being introduced to the body. These matters are handled at a very strategic level. Nothing has been discussed on this aspect as of now. In India, safety can’t really become a USP right now. Price is and will continue to remain the main selling point. If we talk about metro cities, the demand for frontal airbags has increased. So yes, safety has become more important. But this is the case in metro cities only.”

It also seems that the government has succumbed to pressure from the OEMs and has softened several of the safety standards. As per the regulations, India will be following China’s footsteps and introducing crash testing at a speed of 56kph (35 mph) instead of 64kph, which is followed globally (while China started testing at 56kph in 2006, it also increased its speed from 56kph to 64kph in 2011). Moreover, the authorities plan to conduct only ‘head impact’ tests for Indian pedestrians rather than the ‘head and leg impact’ norms adopted by Euro NCAP. It has further slashed the requirement for the use of child dummies for some side impact tests, which is a global standard. Decisions regarding mandatory safety belt alarm, child alert alarm, pre-tensioners, and airbags are also pending.

While several leading OEMs have not been very supportive of the Indian government’s decision to introduce mandatory crash tests, those which have pre-emptively incorporated these features in their cars have been the winners. Toyota, which made airbags mandatory in all its models in October 2014 in India, saw sales surge by 34% between October 2014 and April 2015. Volkswagen, which in February 2014 made airbags a standard feature in all its Polo hatchbacks, has seen the sales of its entry-level variant rise since making that decision. Since its poor performance in the Global NCAP crash test, Nissan Motors has also worked on strengthening the body shell of its Datsun Go by using higher-grade steel – 520 MPa instead of the earlier 320 MPa – and adding side beams to enhance the strength and rigidity of the vehicles.

Ford Figo crash test

Thus the way forward definitely begins with OEMs embracing the introduced changes. It is not incorrect to say that the consumers continue to be price sensitive, but that is because they are not well informed about safety. Thus, to see a genuine shift towards safety, both the government and car manufacturers have to work together to change the mindset of the consumer and promote vehicle safety as an equally important factor in purchase decisions.

“It’s a shared responsibility of government and manufacturers to inform the consumers and move the market forward. Our project of testing cars has also helped build awareness and get media attention. We will do more testing at the end of this year and get results beginning next year. The combination of government action on regulation, the response of individual manufacturers and the work done by NCAP will improve the whole situation in India,” says Global NCAP’s Ward.

To see a genuine shift towards safety, both the government and car manufacturers have to work together to change the mindset of the consumer and promote vehicle safety as an equally important factor in purchase decisions

Brazil has a similar story, where the cheapest models of some of its best-selling cars, such as the Volkswagen Gol Trend, Fiat Palio, Chevrolet Celta, Ford Ka, Peugeot 207, and Fiat Novo Uno, received only one star when crash tested by Latin NCAP. In a similar test, a model put forward by Chinese OEM Geely was awarded zero stars. This was underpinned by the absence of basic safety features such as airbags, lack of body reinforcements, lower-quality steel, weaker weld spots to support the vehicles, and outdated car platforms. As a result, the Brazilian government mandated airbags and ABS on all cars in 2014. Just as it had done in India, this regulation faced much criticism from OEMs and was on the verge of being postponed in the face of resistance due to it leading to an increase in the prices of basic models, and employees being laid off in the case of models being discontinued. However, the government pushed ahead with the regulations as decided, but offered lower import tariffs for key safety equipment to subdue the expected price rise.

In addition, the government is considering making electronic stability control (ESC) a standard in all cars; however, that remains in the future. The Brazilian government also plans to launch a US$50m independent crash test centre by 2017. While the centre is expected to run as a government body, OEMs may provide part of the funding for its operation and even use the facilities, raising some concerns about the lab’s autonomy. Moreover, since the regulations lack a ‘conformity of production’ clause (which requires automobile safety performance to be spot checked for the entire time the model is produced), the car models are only required to meet the crash test requirements once. Companies can also send a car of their choosing. These factors further may compromise on the credibility of the testing.

Thus, as safety standards improve across emerging markets, the onus now lies on OEMs to adapt to these changes. While this will impact the profits of the vehicle manufacturers, it also presents them with an opportunity to gain a strong market foothold by offering these safety features at a low price. Moreover, although these changes are happening primarily in India and Brazil, companies must be prepared for similar regulations to come in Mexico and other Latin American countries in the coming years.

As well as crash test standards, there is considerable discussion about crash prevention technology, the most important being electronic stability control (ESC). While this has already become a standard technology in several markets, such as Australia, Canada, the EU, Israel, Japan, South Korea, the Russian Federation, Turkey, and the USA, Global NCAP is working towards making ESC mandatory in all cars manufactured by 2020. “Our overall priority is to ensure that all passenger cars, irrespective of where they are produced, must have the appropriate minimum crash test standards and the most important crash prevention technology (i.e. ESC) by 2020. To achieve this, the most important countries to act are China, India, and Brazil,” states Ward. With crash test standards also becoming a ‘standard’ among key emerging markets, the introduction of ESC also does not seem far from reality. In fact, Brazil and China have already begun considering mandating ESC. The OEMs that anticipate this and work towards it will be at an advantage.

It has taken time for several key emerging and frontier automotive markets to realise the importance of vehicle safety, both for drivers and passengers, as well as for other road users; nonetheless, the fact that governments have recently begun introducing policy measures to bring about this change is to be applauded.

The implementation of regulations and the variation in standards that exists across these markets remains a cause for concern, as are aspects that OEMs might use to their advantage by bypassing certain global standards. It is important that consumers also make safety a priority when purchasing a vehicle, which would force OEMs to ensure that global standards are also followed in emerging and frontier markets. Brazil, China and India must lead the way, so that OEMs implement safety as standard across other emerging and frontier markets.

Case study: China

Unlike India and Brazil, the tightening of China’s vehicle safety standards stems from the country’s C-NCAP (China New Car Assessment Programme) initiatives. While the Chinese government has only mandated the use of seat belts and frontal airbags, the number of airbags in vehicles in China is reaching European and US levels. This is primarily due to the aggressive promotion of C-NCAP’s safety assessment by the Chinese government, which has encouraged the country’s population to value car safety. “We undertake a lot of promotional initiatives such as advertisement and highway hoardings to promote safety features among consumers. This has really helped in making consumers aware of the importance of safety,” says C-NCAP. Furthermore, C-NCAP has upgraded its test protocols to match its European counterpart and expects standards to be on a par with each other by 2018. C-NCAP has also started focusing on accident research and plans to include a test for pedestrian protection in future vehicles. It has also been considering including test scenarios for AEB systems that will further help mitigate pedestrian collisions.

Even in the case of China, the pricing of the vehicles increased with the addition of safety features but the entire price is not passed down to the con\sumers, especially in the base-level cars.

However, one of the key reasons why China has upped its vehicle safety standards is to build a good reputation for exports. As Chinese cars gain traction due to competitive pricing and design, they suffer a poor reputation when it comes to quality. Thus, they have consciously increased focus on safety norms to meet global standards. While they are on the right lines, they still have a long way to go to reach global safety standards.

This article appeared in the Q3 2015 issue of Automotive Megatrends Magazine. Follow this link to download the full issue.

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