The Impact of Often-Changing Rules and Legislation on Auto Manufacturers

The burdens introduced by regulation, which impact both new and existing products, must be taken into account by all companies. Like in any other industry, governmental standards dictate the production of automobiles by regulating engineers’ and designers’ creativity. The main role of these standards is to increase driver and passenger safety (both on the road and against theft) and to control the environmental impact of vehicles.

Each country (or region) has its own regulations. This implies that car companies should adapt their production standards in order to distribute their products in different markets around the world. However, in 1952, there was a huge step towards globally harmonized regulations on vehicles with the creation of the WP.29 (now the World Forum for Harmonization of Vehicle Regulations, a working party of the United Nations).

For more than 50 years, this institution has facilitated open discussions on motor vehicle regulations and offered all country members of the United Nations the possibility to become a contracting party to the agreements which the Forum administers. Ultimately, harmonizing standards should help reduce trade barriers.

This section discusses two aspects of the vehicle manufacturing industry strongly impacted by regulations: car global safety and environmental impact. However, it is important to bear in mind that other form of legislations can affect markets. For example, China recently decided to limit auto growth by restricting the number of new plates created every year.

Global Safety Regulations

Although vehicle security continues to improve, safety issues are always at the center of attention when it comes to new regulations.

In the United States, for instance, the National Highway Traffic Safety Administration (NHTSA), the National Transportation Safety Board (NTSB which recently recommended collision avoidance systems should be standard) and the department of transportation create and enforce regulations on motor vehicle safety.

Other entities such as the ARC Quality Centers also ensure that regulations are respected and that quality is always improved for a better safety.

Equipment such as tires, wheels, lighting, brakes and gears are therefore subject to strict standardization in order to prevent crashes and reduce human and financial losses. A lot of vehicle recalls (e.g. Ford in 2015) are thus caused by these stricter regulations.

In-car software safety improvements also have to be made since experts reported that telematics systems such as OnStar can easily be hacked.

Automotive Environmental Regulations

According to one of KPMG’s reports on environmental regulation in the automotive industry, governments have been imposing stringent environmental regulations on OEMs (Original Equipment Manufacturers) to control CO2 emissions.

For example, in Europe, the European Commission has adopted legislation on emissions, fuel consumption and fuel quality:

  • By 2021, cars emitting more than 95g of CO2/km will not be allowed on the market.
  • By 2021, manufacturers must produce light-duty vehicles which consume less than 4.1l/100 km of petrol and 3.6 l/100 km of diesel.
  • By 2020, greenhouse gas intensity of automobile fuels should be cut by 10% in order to improve fuel quality.

Other factors can also influence the enhancement of road safety, especially technology innovation such as anti-drunk driving systems.

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