Business For Dummies

The economics of the weirdest niche in the car safety industry

- Bryan Gruley

At first glance, Humanetics Innovative Solutions Inc. looks like it has a pretty sweet business model. The suburban Detroit company is the world’s largest maker of crash-test dummies, the steel-and-vinyl humanoids stuffed with electronics that gauge how a car crash could injure a human body. The company enjoys a global market share exceeding 70 percent, and its dummies can cost as much as $1 million apiece. Regulators in the U.S. and other countries effectively require Humanetics customers to buy at least some of its products.

With a setup like that, you might say, even a dummy could make a fortune. This makes Humanetics Chief Executive Officer Christopher O’Connor laugh, though for a different reason than you might think. He’d much rather discuss the implications of 3D printers and driverless cars than how Humanetics, or any dummy maker, turns a profit. “I’ve said to myself, if I had $10 million, I wouldn’t invest in this business,” O’Connor says. “I love it, but the reality is, you’re not going to make a ton of money. The margins are always going to be tight.”

The business of making and selling crash dummies is odd, and not only because it involves faceless mannequins acting as proxies for the mangled and the dead. Dummy makers spend years and millions of dollars developing products that customers profess to admire but decline to buy. Vehicles and drivers have changed dramatically, but the model of dummy used in many government-required crash tests has been around for four decades. The industry sells a mere 200 to 250 dummies in a decent year and generated $111 million in revenue globally in 2016, according to market- research company Technavio.