Safety – Over-simplification Kills

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The issue of automotive safety is a serious one and needs to be addressed in a structured way. Unfortunately, most discussions in the media and outside it are over-simplifying things to the extent that the issue would never be logically resolved. In this two-part series, we look at why Indian cars are unsafe and how we will eventually reach there in a natural progression of technology.

Unless the Indian government suddenly wakes up and throws a spanner in the works.

Remember the Tombstone? Remember Death Race? For those – unlike this analyst – who do not excitedly watch cheap Hollywood action movies, Death Race was a 2008 sci-fi thriller starring Jason Statham. The Tombstone features in the movie – it is a huge iron block tied to the back of Statham’s 2006 Mustang. At six inches thick, the Tombstone could effectively stop a .50-Caliber bullet.

Now, at this point, we leave the Tombstone behind and move on to serious things. We promise if you read through all this, we will come back to it later and tell you more, but for now, let’s first look at the very serious issue of automotive safety.

Most Indian Cars are Unsafe

For many months now, in what has become a ritual, random testing agencies crawling out of the western woodwork have picked up random Indian cars, packed them with dummies, and crashed them against concrete blocks that you normally don’t find lying around on roads. They then look at the dummies, or whatever is left of them, shake their heads disapprovingly and then proceed to award these cars ratings ranging from zero to one star.

In doing that, they reaffirm what educated Indians have suspected for long – most Indian cars are unsafe.

We know this and we have known it for long. However, the aspect of safety is not a simple issue. Approaching it unilaterally, with a narrow mindset, and seeking out simple solutions like strapping on half a dozen airbags to a car otherwise made of poor quality Lego counterfeits will only make matters worse and may adversely affect the industry and, in turn, the economy.

For Once, Manufacturers Are Not At Fault

There are reasons why Indian cars are unsafe and the fault lies not just with manufacturers.

Actually, EMMAAA feels that the fault does not lay with manufacturers at all.

Let us explain using basic mathematics.

If a manufacturer sells a car for X and has a 15% margin per unit, the profit is 15% of X. Now adding two airbags, costing Y, to the vehicle will increase the price to (X+Y). On a 15% margin, the manufacturer now stands to make 15% of X+Y.

This is good for the manufacturer. They stand to make greater profits in the process. While the margins stay the same, the RoI and RoCE go up.

Pray, why don’t manufacturers do it?

Again, manufacturers are right in pointing out that the Indian customers demand lower price points and fitting the desired safety features in a car, especially at the entry-level, will result in a 15%-20% increase in prices.

In a competitive market, no manufacturer would like to travel the safety path alone. Your car costing 15% more than the rival’s simply means that your car would not find a buyer. So the only option of airbagising the entire fleet would be through legislation.

The problem is that such a move by the government would likely hurt the growth of the industry adversely. In percentage terms, the most impacted would be entry-level cars and the A & B segments together make more than 80% of the market. Throw in the antique utility vehicles, the rural market focused mini-trucks and other old generation Van type vehicles and we are looking at more than 90% of the market, which would be highly adversely affected.

Are Airbags the Big Hot Air Balloon That We Think They Are?

Let us put some data on the table to put things in the correct perspective. Based on 2011 data, the World Health Organisation counted more than 243,000 deaths in India related to road traffic related accidents. On absolute numbers, India was second only to China, which had recorded nearly 276000 (2010 data) road traffic related deaths.

However, India trumps China when we slice the same data on the basis of the number of cars on the road. For every 100,000 cars on the road, 212 Indians died. In comparison, only 133 Chinese died for the same number of cars on the road.

Even if you take China out of the equation, the numbers are appalling. The comparable numbers for average deaths per 100k people for developed countries in Europe is below 10. In fact, so low are the number of road traffic deaths in countries like Switzerland (269), Sweden (285) and Denmark (167) that a bus falling in a gorge in any particular year would have twisted the statistics badly.

We digress.

Coming back to the Indian situation, are large number of people dying on the roads due to the fast speed of vehicular traffic? Perhaps not, considering it takes me 15 minutes to traverse three kilometers to my office. Speeds are slow and most cars have nicks and cuts but very few are getting totaled on the roads.

The only plausible explanation is that a large chunk of the deaths are those of pedestrians being killed on the roads.

D-uh! Airbags may not be the sure-shot solution that some people think it is. Or maybe they are just not being fitted at the right spots in the car. 

Media – Ringing Alarms

In recent months, many mainstream media outlets have jumped into the bandwagon of evangelizing safety. Earlier this week, the Times of India and Economic Times, two of the nation’s largest circulated newspapers carried stories on how manufacturers are foregoing safety in the Indian market. The broad outlines in both the stories was the same – Indian manufacturers remove the safety cars from global models while selling them in India.

In the ET story, several senior industry executives were quoted. The equivocal response was on the lines of – One, we don’t need high-end safety features as our average speeds are slow; Two, we are not putting safety features in our cars because it will drive the prices, and Three, we will add the safety features if you rap us on our knuckles with a legislation.

Nothing unpredictable, nothing wrong.

The TOI story meanwhile has a slightly different theme and reasons that since most mainstream models are being offered with INR 40,000 – 50,000 discounts, manufacturers have enough room to fit airbags.

Referring to the Times of India story quoting S P Singh, coordinator at pressure group (A bit of a side track – How do pressure groups make money?) Indian Foundation of Transport Research and Training (IFTRT), where he raises question marks over the pricing mechanism adopted by companies for their vehicles. He says, “If you have the capacity to offer such massive discounts (referring to the 40,000-50000 discounts being offered on various car models), then what is the fairness of the prices?”

Singh further says that companies are raising the argument of affordability only to pressurize the government against mandating safety features.

So, basically what Singh is arguing is that if you can discount a car by INR 40,000-50,000, why not throw in a couple of airbags and a coffee machine and keep the price same?

No sir, it doesn’t quite work that way

Most products in the world work on the concept of Product Lifecycle Management (PLM) and follow a sort of half bell curve for pricing. When the product is new, prices are at the top. These are often called the sticker prices. As the hotness declines, prices correct. The manufacturer is not counting losses or profits per unit but is looking at the same across the entire product lifecycle.

This pricing behavior is not scumbaggery on the part of manufacturers, it is normal pricing mechanism, and is a prevalent practice across various product segments. Take apparel – the same pair of trousers sold at sticker price right at the start of the season or at the start of the particular fashion trend, is available at a 50% off in the off-season. Going by Singh’s argument, the trousers should maintain constant sticker pricing and companies should compensate through internally attached Kevlar underwear.

Or take smartphones – the price at the launch is miles above the price of the device just a few months down the line. Again, the Singh doctrine should have the devices maintain standard pricing throughout the life and instead carry a toothbrush attachment.

Understanding Manufacturers’ Reluctance

The key point is that the manufacturer is able to shift cars only when they offer big discounts. Most of these cars are at the fag end of their lifecycle and only discounting will keep them alive till the successor arrives. Some others are depressed due to the overall state of the market and a shot of discount would be good for sales.

And then some of these are GM and Tata models

Throwing in a couple of airbags and raising the prices by INR 40,000 would not be a good idea and will only result in sales grinding to a halt, something that no one wants.

So this is the “Our hand are tied” excuse that most manufacturers are offering for not adding much-needed safety features. We see the point there and grudgingly agree with them.

The other reason why your econocar would not come with airbags anytime soon is customer greed. We Indians are suckers for value and cannot (yet) see the point of fitting two inflatable balloons in the car. We also believe that we are the safest drivers in the world and cannot fathom why we would ever need airbags.

More than being suckers of value, we are outright greedy. We want our vehicles at the cheapest possible prices and things like safety and environment concerns are way down in our priority list.

Have you ever noticed the huge spike in truck sales just before stricter emission norms come into play? Often, there is a time-period of a few months around the date of change when units complying with the older / lower emission norms as well as the newer / higher emission norms are available in the market.

Guess which one gets more customer interest?

Age and Super Profits

The customer greed for low prices has another interesting side effects – obsolete antique products. Notice we crossed out obsolete, as technically an obsolete product is something of the past. What we have are antique products with fresh names being sold in the Indian market.

Literally half the industry is selling these antiques. Manufacturers including Maruti-Suzuki, Mahindra, and Tata have been selling products based on platforms dating back a few decades.

No shit, they won’t meet any safety norms. The only way for some of them to meet safety norms is when you tie a Tombstone (see, we told you we will bring it back) to the front and rear ends of the vehicle.

However, manufacturers have commercial reasons for continuing with these products. In an industry notorious for shrinking model lifecycles and escalating costs, an antique product is a gold mine. You have been selling the product for many years now, significant volumes have been stamped out from your factories and you, your suppliers, and their suppliers, have all amortised the cost of dies, jigs & fixtures many times over.

Anything that you sell now has a huge profit margin, something that your brand new creation, even with the fat media adulation it received, would be unable to match. In short, Old is gold in the Indian automotive market.

Most manufacturers still have a huge number of vehicles on antiquated platforms selling every month. Mahindra sells nearly 20000 units every month of its pickups, Thar and Bolero utilities and various other UVs. Maruti sells more than 10000 Omni and Eeco vans every month and Tata sells nearly 5000 of the old generation Indica and Indigo eCS every month. It also sells about 1200 units of its Sumo and other utility vehicles. Then there is also Force Motors, which has a museum list of utility vehicles in its range.

Percentage of sales from old generation platforms

This is huge money and manufacturers would hate to lose it. More importantly, the continued demand for these vehicles means that customers still look at them favorably and manufacturers don’t see any reasons to withdraw them from the market.

The above-mentioned reason of development and tooling costs having been recovered many times over is primarily the reason why old-generation products are so competitively priced. This keeps them attractive for the customers who either doesn’t care about safety (over affordability), or are not well informed on the subject.

Over the natural progression of time, customers should ideally shift from old generation platforms to new ones. So a Bolero customer should shift to the XUV in due course. At least, that’s what Mahindra would secretly be hoping.

However, this natural progression has been slower than expected in the Indian market. As a result, old generation platforms continue to thrive.

And that is a big spanner in the safety wheel.

The Right way to Safety

As we stressed at the start of this analysis, safety is a complicated aspect and needs to be addressed in a mature manner. We cannot just go anal on airbags and ignore other aspects of safety.

Starting from the very basic, safety in automotive parlance has two aspects. The first is Active Safety, which by definition includes vehicle systems that help in avoiding an accident. The basic systems here would be brakes and steering. However, in the last two decades, electronics and sensors metamorphosing in Anti-lock Braking Systems (ABS), Traction Control Systems (TCS) and about a dozen more catchy abbreviations that make cars safer have overwhelmed this area.

Sadly, our mainstream cars come with none of these abbreviations.

The other aspect of automotive safety is Passive Safety, which by definition includes systems which improve occupant safety once he has crashed the car after a drink too many. The very basics are a strong body structure and seat belts though airbags are widely being regarded as the magic bullet in this area.

Out of the above bundle of features, only seatbelts are mandatory by Indian regulations.

However, in the last decade, as the customer’s (at least the top 5%) sensitivity about safety aspects has increased, manufacturers have started introducing advanced safety features like airbags in the top-end of their product range. Like any good technology, this percolates downwards and EMMAAA expects nearly 70% of all car models to be fitted with airbags across their range within the next five years.

That is, if the government doesn’t jump the gun and makes them mandatory earlier. There is a chance, as the Hindustan Times reports, citing Vijay Chhibber, a bureaucrat in the Road transport and highways department.

That would be a terrible thing to do. Like most government actions, this would be myopic, not thought through and badly conceived, much like the National electric vehicle mission and the recent Green tribunal rulings in New Delhi.

The recent Green tribunal ruling in Delhi is hilarious – in one stroke they ban vehicles older than 15-years to ply on Delhi roads. So no vehicle testing, no road-worthiness evaluation, no nothing – why fuck around with these complicated maneuvers when you can simply ban every old vehicle with one signature.

Making Airbags and ABS Mandatory would be Similar

Now don’t get us wrong. We love airbags and only buy cars with twin airbags walk to work. However, we believe that by making airbags and ABS mandatory, the government is wrapping poop in silver foil and wants us to pretend that it’s candy.

Main Issue – Pedestrian Safety & Traffic Discipline

As pointed out earlier, a large number of the above reported gazillion deaths are those of pedestrians. The developed world works on the principle that pedestrians have the first right to the road. A keen observation of driver training and driving license tests in developed world reveals that the most stress is given to maintain pedestrian safety. Dedicated training and tests on aspects like lane driving, zebra crossing discipline, traffic signal discipline, speed limits enforcement in special areas like schools and hospitals, and a stress on road etiquettes ensure this.

The Indian system stresses on…nothing.

Indian highways and city roads are poorly designed and ignore all standards of pedestrian safety. In about 98% (we make this number up; frankly it would be even higher) of Indian roads, there are no pedestrian walkways. New highways are being built without any overbridges, even at busy spots.

A small drive from New Delhi to Gurgaon reveals that there are exactly two overbridges over the first 22 kilometers stretch of the expressway. Considering that the highway was built on land acquired from villages and that the natives still need to cross the eight-lane expressway on foot multiple times a day, common sense should dictate at least one overbridge per village.

None were there when the expressway was thrown open a few years back. The two that are there today and the two more that have been promised by politicians have been a result of agitations when people had died crossing the expressway.

Contrary to cars that pay money (toll) for using the expressway, pedestrians don’t pay anything to cross it. No wonder they don’t feature high on the wish list of any government department.

Take a left from Exit 10 of the same expressway and we are on the six-lane Gurgaon-Sohna highway. The road is freshly paved but has no lane markings and zero overbridges over its entire stretch. Worst, the median has been covered by dividers four feet tall that require para-military training to cross. There are no zebra crossings as well, not even at the four busy junctions where traffic lights seem to be working.

None have been planned revealed an official a few months back. In essence, an executive staying at one of the apartment complexes on the highway and working in an IT-park across the road would still need to drive to work. That puts a few hundred cars unnecessarily on the road every day.

That sums up the story of road safety in India – greedy customers not willing to pay for safety and a greedier government treating pedestrians (and cyclists) with disdain.

Focusing on airbags and ABS is like ignoring the bull and admiring its testicles.

We abruptly break the analysis here and will continue this on 18th Dec. In the second and concluding part, we look at who stands to win if the government was to go ahead with its idea of making airbags mandatory. Also, EMMAAA takes a look at technologies that may actually improve road safety and makes recommendations on where the government should be focusing its resources.

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6 Responses

Leave a Reply
  1. Ganesan
    Dec 04, 2014 - 01:32 PM

    Well the government has to start somewhere right..taking baby steps in the direction of safety. Let’s be patient. Like every other affair in India, a desperate situation, some random steps, getting the hang of it, and finally, no looking back!

    Reply
    • DR
      Dec 05, 2014 - 12:27 PM

      Government action is often directed by lobbying and money from the industry. We are worried that the actions being taken would just be a terrible wasteof money.

      Reply
  2. Pundrick
    Dec 04, 2014 - 06:34 PM

    Hello, do you know what’s stopping manufacturers from offering safety features as optional across the variants. They can put waiting periods if they want to mass manufacture such optional variants.

    As someone said, even exceptions run in millions in India, there are a good bunch of consumers who would spend 40 k extra instead of paying 1 lac for top variant.

    Reply
  3. Badhri
    Dec 05, 2014 - 02:07 AM

    Nice article. As said the average speed in India is low, what needs to be done is stricter fines for rash driving ( and proper implementation of those!) , better infrastructure( if not to european standards atleast, things like meridians that wont allow pedestrians to walk in the road etc.) and of course the whole of customer perception to compromise on price for safety. But in a big country like India will this ever happen? I seriously doubt it.

    Reply
  4. MANJUNATHA D S
    Dec 05, 2014 - 06:22 AM

    The article rightly points to the fact that Pedestrian Safety & Traffic Discipline should become the focus. This step alone will drastically reduce the number of road accident deaths. Safety features in the vehicles will further reduce these numbers.

    Reply
  5. Avik Chattopadhyay
    Dec 05, 2014 - 10:55 AM

    DR, there are more dummies running the auto companies and in crucial policy-making positions than in the cars being tested. While the customer can blame the automaker who blames the policy maker who in turn blames the industry [back] who in turn blames the economy that in turn blames the ‘stupid’ customer [again] while the media person takes turns to blame everyone [including Kim Jong-un!], the basic fact is that it has to start somewhere…at someone’s table…at some point in time. To me, it rests squarely with the automaker. One…just ONE automaker has to have the balls to decide that the ‘antiques’ need to be phased out and replaced by little new modern motorised motion-marvels. The automakers have made enough money in this market. Those that have not, having tried, should convert their operations into museums [wish HM had done so…imagine the visitor queues a Uttarpara!!]. It is time for them to put some, quite some, of it back into making responsible products. Let them not worry about the customer. He / she will pay that Rs.40,000 more for a safer car…it works out to just the number of the beast every month over a 5 year loan! Toyota did discontinue the Qualis to bring in the Innova. That is surely a lesson for all. Let somebody stand up for once…

    Reply

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