The automotive safety market is attracting particular attention from suppliers looking for new business opportunities. The interest is understandable. Suppliers watching the evolution of airbags, for example, like what they have seen: rising penetration rates; mandated installation; increasing sophistication (value-added advanced airbags); proliferation of product extensions (e.g. side, curtain, knee variants); and a global market. “Maybe we should be getting a bigger piece of the action,” goes the thought process of a supplier with capabilities that could be brought to bear on a safety-related application. Before sending resources in that direction, though, it is worth noting that the environment in which decisions on safety features are made includes some unfamiliar terrain.

A More Complex Set of Dynamics

For many core vehicle functions, development of a new program launches off of a fully established body of knowledge and experience. It seems fair to say, for example, that foundation brakes are a known quantity, with a “library” of designs and a well-defined set of major players to execute them. The interaction between the automaker and the brake systems integrator follows a well-worn path, because it can. For safety products, in contrast, other forces come into play that add an element of unpredictability because they come from outside the “system.” (see sidebar). (By “system” we mean the collaboration of the vehicle manufacturer and its suppliers to create a product that consumers buy.) Among the external forces:

The enigma of consumer interest

As long as brakes are quiet and stop the vehicle, relatively little consideration needs to be given to consumer preference. When it comes to determinations about adding safety features, though, extensive effort is given to divining the true interest of the consumer. The data is difficult to interpret, however. Surveys show that consumers say safety is important, but buy according to other factors. For automakers trying to decide whether they will be able to recoup the cost of a standard feature or add the price of an option, the mixed messages are confusing.

Politics as usual

Let an issue turn enough heads, and Congress wants to be seen doing something with it. Following hearings in 2000 spurred by the recall of 6.5 million Firestone tires, Congress passed the Transportation Recall Enhancement, Accountability and Documentation Act (which conveniently, and not coincidentally, condenses to TREAD). While this is certainly within the legislators’ purview, it is a force that changes the way the “system” might otherwise have prioritized safety features or consideration of the issues.

In addition, the National Highway Transportation Safety Administration (NHTSA) is charged with saving lives, preventing injuries, and reducing traffic-related health care and other economic costs. Fulfilling this mission is an extremely tricky proposition, partly because of honest disagreement about scientific and technical truths. The agency entertains an extraordinary amount of input, but it ultimately comes down to making judgment calls that can have enormous impact on individual companies.

Other powerful interest groups

Other parties that wield power in creating winners and losers include the Insurance Institute for Highway Safety (IIHS), an independent testing body. Its pending side impact tests will probably induce automakers to modify designs in some respects to perform well. Public watchdog groups are another type of external force that operate in the political/governmental arena and purport to represent the consumer.

Implications for Suppliers

Clearly, there are a lot of tails wagging the safety dog. What effect does this have if you are a supplier seeking a place in the market?

• Unlike with core vehicle functions, there is a threshold issue for safety features: “Do we need this particular one at all?” Automotive product development is a zero-sum game to some degree–allocating more funds in one area means less for another, so some good ideas do not make the cut.
• The interaction between the automaker and supplier remains, but the influence of external forces on safety features is significantly higher. It would not do you any good to win the automaker’s business on an indirect tire pressure monitoring system, for example, had NHTSA decided to require direct systems immediately.
• Priorities written in sand can be erased by the tide–you can extol the virtues of a safety advance as much as you want, but if you cannot show its relevance to implementation of the TREAD Act, you are probably wasting your time in the near term.
• Consumer acceptance has a material effect on the ultimate success of safety features. Your extruded rail might have operated perfectly in a passive seat belt system, but once they got cuffed on the head a few times by a moving seat belt, consumers were a little cross with that feature. Drivers were also uncomfortable with the noise and feel of anti-lock braking systems in action, and that proved to be an educational challenge for ABS proponents.

There are many attractive aspects of the safety market for suppliers. Long-term growth is virtually assured, although we are likely entering a period of growth at a slower rate due to economic factors that override all else. Although some safety features will be limited to high-end vehicles, there is a strong impulse to generate higher volumes to drive cost down and provide the broadest benefit. And finally, the non-market factors of outside influences can be your friend. They often work to someone’s advantage, after all.

Doing the legwork to keep track of, let alone influence, the many variables in safety system development is a big undertaking. Generally, you will not know or be able to predict the behavior and effects of other parties. As always, the attractiveness of an opportunity depends on how it compares to other options. It could very well be the case that, in spite of its challenges, the safety market is one of your best shots. 

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