Quality Improvement through Regulation

As we heard at Federal Mogul part quality has improved remarkably over the past few years as regulation has forced car companies to improve the efficiency of their vehichles. Car manufacturers have to meet fleet standard for fuel economy by 2025. Specifically their fleet needs to have an average fuel economy of 54.5 miles per gallon. Furthermore emissions legislation is continuing to come out and manufacturers have great incentives to lower emissions as much as possible now so they won’t have to worry about it so much in the future. What that means for part companies, especially on the engine and fuel side, is that that their market is not driven by quality and not price. While overregulation has hurt other parts of the industry the improvement in quality and technology is one great benefit from government regulation.

1 comment to Quality Improvement through Regulation

  • Be careful how you use “quality” in an automotive context. The normal useage is to refer to (a lack of) part and/or vehicle defects. That can be broken down into final part quality (inclusive of shipping and packaging errors) as viewed by the customer, and process yield, quality at various stages of the production process.

    Here you seem to mean better vehicles in terms of characteristics, here as valued by regulators. Your argument seems to be that vehicles are also better in the eyes of purchasers. Now if you believe in perfect markets, companies would do this anyway if purchasers valued better fuel efficiency as highly as does Congress. We know however that at the moment the perceived benefits of hybrids and electric vehicles do not match the cost of these technologies, because they don’t sell…

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