The European car industry was shaken yesterday after Volkswagen’s share price fell almost 20 per cent over its admission that it cheated on US emissions tests, triggering calls for a broader inquiry into the sector.
More than €13 billion was wiped off VW's market capitalisation, triggering a wider fall in carmakers' shares, after Martin Winterkorn, the group's chief executive, apologised and ordered an external investigation into the affair.
It has emerged, however, that for more than a year, VW executives told the US regulator, the Environmental Protection Agency (EPA), that discrepancies between the formal air-quality tests on its diesel cars and the much higher pollution levels out on the road were the result of technical issues, not a deliberate attempt to deceive Washington officials.
Executives only admitted using software deliberately designed to cheat on the tests this month.
The admission came only after the EPA threatened to withhold approval for the company’s new 2016 Volkswagen and Audi diesel models, according to letters sent to company officials by the EPA and California regulators.
The German government has called for an urgent probe into whether VW and other carmakers had also manipulated emissions' tests in Germany. German vice-chancellor Sigmar Gabriel said it was a "bad episode" for the car industry.
The world’s second-biggest carmaker was ordered on Friday to recall nearly half a million cars in the US after it admitted to cheating the tests.
The EPA and California Air Resources Board have now begun procuring other manufacturers’ vehicles to test for similar devices, while Berlin plans to examine whether emissions data have been manipulated.
Investor concerns
The news prompted a fall in carmakers’ shares with
Daimler
,
BMW
,
Renault
and PSA Peugeot Citroën each being sold off amid investor concerns over the potential scale of the cost to the broader industry. VW faces billions of dollars in fines and warranty costs, possible criminal charges for executives and class-action lawsuits from US drivers.
The European Commission said it was taking the matter "very seriously" and was in contact with both Volkswagen and the EPA. One top 10 shareholder in VW said it could be very costly to VW's reputation. "There is scope for a whole array of lawsuits in a variety of jurisdictions. The other question to ask is: is this an industry-wide problem? Will other car groups admit to similar cheating?"
Jochen Flasbarth, junior minister in Germany's environment ministry, said: "We are facing a case of blatant consumer deception and environmental damage. I expect VW to reveal, without any gaps, how and to what extent these manipulations have taken place."– (Financial Times Limited/New York Times Service)