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Volkswagen Scandal Likely To Have Broad Ramifications

Volkswagen Scandal Likely To Have Broad Ramifications.

“the transportation sector could be affected if this emission test crisis affects consumers and regulator’s attitudes towards cars and pollution”

Auto manufacturers should avoid taking too much pleasure from Volkswagen’s embarrassed writhing after it admitted scamming U.S. diesel rules because the fall-out from the crisis will be felt industry-wide, according to Fitch Ratings.

Politicians may well be emboldened to toughen up already harsh fuel and emissions rules, and tighten timelines. Europe may be forced to return back towards to petrol engines. Investment in new cleaner, more efficient engines will have to accelerate.

“More broadly, the whole transportation sector could be affected if this emission test crisis fundamentally affects consumers and regulator’s attitudes towards cars, driving and pollution. Volkswagen and regulators’ current and future measures in reaction to the crisis will be crucial to mitigating or, conversely, accelerating the impact of this scandal on the group’s own credit profile and broader industry transformations,” Fitch said in as report.

Fitch said it was too early to assess fully the impact.

Accelerating test cycles
“Regulators will reassess the timeline to reach planned more stringent emission limit targets and could review the targets themselves. Test protocols will undoubtedly be toughed and the move towards real driving emission testing cycles will accelerate,” Fitch said.

“The scandal could accelerate the underlying growth of vehicles with alternative power-trains, including fuel cells, electric and hybrid engines. It could also lead to a shift back towards petrol engines in Europe, where diesel engines now account for more than half of sales. In particular it may hit manufacturers of small diesel-engine cars harder than their premium manufacturers, which have greater price elasticity to absorb higher costs,” Fitch said.

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