The Cost of Doing Business in a Safety-Focused World

Crash-test dummies talking

When an automaker begins to develop a new model, one of the earliest decisions it makes is where the vehicle will be sold. While it seems logical to produce one model and sell it in as many markets as possible, red tape abounds, with safety standards being the thickest ribbon of all.

For example, the Volkswagen Scirocco is produced and sold in Europe. As such, the Scirocco was designed to comply with European safety standards. But given of the exorbitant cost associated with re-fitting that car to comply with U.S. safety regulations, Volkswagen determined the model would not generate enough revenue in U.S. sales to justify the expenditure. It works both ways, too: despite having started production in 1964, the Ford Mustang wasn’t sold in Europe until 2015, when the entire car was redesigned and built on Ford’s new global platform.

Just how much money are we talking about? Well, the Center for Automotive Research (CAR) recently concluded a study which showed the auto industry’s cost of complying with two separate sets of safety standards ranged from $1.68 to $2.26 billion in 2014. Automotive-specific tariffs levied on U.S.-E.U. trade in the same year totaled $1.6 billion. Thanks to differing safety standards, the cost of selling a car across the Atlantic is more than twice the tariff rate.

Now, tariffs are decided upon and enforced for a reason. Primarily, the intent of a trade tariff is to incentivize businesses to employ workers and manufacture goods in the country in which the goods are being sold. Just ask the folks in Toledo, OH, how they would feel if the Jeep Wrangler’s production was moved to Shenzhen. That being said, it’s hard to understand why two differing—but overlapping—sets of safety standards are necessary, especially now that we understand the costs associated with them.

Sure, there are some pretty critical differences between crash testing in Europe and the United States. Here, we have an unbelted crash test, where crash-test dummies are seated in a vehicle without their seat belts on and then sent on their way to the inevitable impact event. Europe doesn’t require an unbelted test, meaning U.S.-market cars almost universally include larger airbags than their E.U. counterparts.

However, manufacturers are now claiming that the overlapping standards employ safety testing extensively enough to produce cars of equal defense. They now see the Transatlantic Trade and Investment Partnership (TTIP) as an opportunity to avoid the substantial costs of complying with two different sets of rules. Streamlining auto safety testing would save manufacturers literally billions of dollars, and while it may be a stretch to say those savings will be passed on to consumers, it’s still a nice thought to entertain.

Do you think governments should streamline European and U.S. safety standards?

-Matt Smith

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