Another scandal rocks VW as it understated fuel consumption
INVESTORS wiped another €3 billion (R45.5bn) off Volkswagen’s (VW) market value yesterday after it said it had understated the fuel consumption of some cars, opening a new front in a scandal that initially centred on rigging emissions tests.
The vehicle maker said on Tuesday that it had understated the fuel usage of up to 800 000 cars in Europe, meaning those vehicles affected were more costly to drive than their buyers had been led to believe.
The revelations – which added a new dimension yesterday to a crisis that had previously focused on environmental damage – were the first to threaten to make a serious dent in VW’s car sales since the scandal erupted, analysts said.
They could potentially deter cost-conscious consumers who have so far taken VW’s manipulation of smog-causing emission tests in their stride.
The effects of the scandal have so far been barely reflected in VW sales figures – although it was the only German car maker to report a decline in car registrations in Germany last month.
Shares in Europe’s biggest car maker were down 8.6 percent at €101.45 by 10.03am.
“Another week, another shock in the VW story,” Exane BNP Paribas analyst Stuart Pearson wrote in note.
“We add another €4 billion in recall costs and fear a harsher commercial impact,” Pearson added.
The German car maker also revealed on Tuesday that carbon-dioxide emissions had been understated – leading it to underestimate the fuel consumption – and added €2bn to the car manufacturer’s expected costs of the scandal.
The affair erupted in September when US authorities exposed VW’s use of “defeat devices” to cheat tests for emissions of smog-causing nitrogen oxide.
The car manufacturer admitted such software was installed in up to 11 million diesel vehicles around the world.
VW’s latest admission came after US environmental regulators said the car maker had failed to inform it that similar devices were installed on larger 3 litre engines used in luxury sport utility vehicles from Porsche and Audi.
VW has denied this, but said on Tuesday it would immediately start talking to “responsible authorities” about what to do about the latest findings on fuel consumption and CO2 emissions. “From the very start I have pushed hard for the relentless and comprehensive clarification of events,” chief executive Matthias Müller said. “We will stop at nothing and nobody. This is a painful process but it is our only alternative.”
The biggest business crisis in VW’s 78-year history has wiped almost €24bn – nearly a third – off the firm’s stock market value, forced out long-time chief executive Martin Winterkorn and rocked the automotive industry, an important employer and source of export income in Germany.
“From an outside perspective and we are sure for the majority of VW employees, the degree and extent of cheating that has been discovered so far is beyond imagination,” wrote analyst Arndt Ellinghorst of banking advisory firm Evercore ISI.