The VW emissions scandal: The death of diesel and the impact on the auto industry

Katherine Davidson, Global Sector Specialist - Autos and Telecoms
Scott MacLennan, Analyst, European & UK equities

Our specialists discuss the investment implications of the VW scandal for the auto industry and find pockets of opportunity where companies have been oversold.

The Volkswagen (VW) emissions scandal has rocked the auto world in recent weeks, and the knock-on effects will be felt all down the supply chain. We expect all automakers to face higher costs associated with meeting tighter emissions standards under more stringent testing procedures, and the prospects of passing this on to customers via higher pricing are now worse given low fuel prices and the industry’s ‘image problem’.

We have written in the past about the threat to the auto industry from autonomous driving, structurally declining demand and a maturing Chinese market, and in our view this episode only creates further headwinds to long-term industry profitability. That said, the broad-based selloff in auto stocks suggests risks are increasingly priced-in, and as investors we see pockets of opportunity where companies with decent short-to-medium term prospects, some even benefiting from this episode, have been oversold.

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