A league of its own
When Volkswagen’s emissions fraud was first uncovered last September, investors panicked, believing it presaged an industry-wide scandal. After Volkswagen had been outed for installing devices that allowed some of its cars to pretend to meet environmental standards in the United States, shares of rival European carmakers plummeted by as much as a fifth.
Yet despite tight scrutiny by regulators, environmental campaigners and the industry itself, it has taken seven months for another auto company to admit cheating. Mitsubishi Motors on Tuesday said that it manipulated the fuel economy data of 625,000 mini-cars sold in Japan.
Investors punished the Tokyo-based company by incinerating $1.2 billion, or 15 percent, of its market value. It’s bad news for Mitsubishi today that may bring good news to the sector tomorrow by potentially hastening consolidation among Japan’s overcrowded car business. With annual production of just 1 million vehicles, $6.6 billion Mitsubishi is the sixth-largest Japanese carmaker.
But the wider impact of Mitsubishi’s misconduct seems limited. The most important read-across is that outright emissions fraud in the industry seems to be less prevalent than investors first feared. For now, the scope of Mitsubishi’s misconduct appears smaller and domestically confined. Volkswagen, meanwhile, had equipped 11 million diesel vehicles globally with so called “defeat devices” designed to hoodwink regulators. The German company remains in a cheat league of its own.
This by no means implies that the industry’s headache over vehicle emissions has passed. Most carmakers comply with the text of the law, if not with its spirit. The International Council on Clean Transportation says real-use carbon dioxide emissions of passenger cars sold in the European Union are currently 40 percent higher than in official laboratory tests. In 2001, before tighter emissions targets were in place, the gap stood at just 8 percent. Carmakers are using any loopholes in the test procedures they can find, such as optimising aerodynamics by removing wing mirrors, or using oven-hardened tyres.
Following the scandal at Volkswagen – for which its stock is still 20 percent underwater – cavalier approaches to minimizing emission-control technology costs have no future. Policymakers are already tightening test procedures, and some manufacturers, like Peugeot are commissioning independent audits. In the case of Mitsubishi, it appears as if an inquiry by Nissan Motor, one of its partners, precipitated the revelation. The bad eggs it seems are few, and unable to hide.