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

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


Katherine Davidson

Katherine Davidson

Portfolio Manager, Global & International Equities

Scott MacLennan

Analyst, European & UK Equities

The cost of reducing emissions

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.

NB. NOx is nitrous oxide

However, companies will find it harder to pass these added costs on to customers via higher pricing given the industry’s ‘image problem’ and low fuel prices.

Anecdotal evidence suggests consumers are less likely to pay for fuel efficiency technology when they are not making a significant saving on fuel costs.

We have written in the past about the threat to the auto industry from:

  • Autonomous driving
  • Structurally declining demand
  • A maturing Chinese market

In our view this episode only creates further headwinds to long-term industry profitability.

That said, the broad-based sell off in auto stocks suggests risks are increasingly priced-in.

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.

For related content see:

VW emissions scandal: How will it impact the auto industry?

The end of the road: Has the developed world reached ‘peak car’?

Or download the full report below

Important information: The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This article is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results, prices of shares and the income from them may fall as well as rise and investors may not get back the amount originally invested. Issued by Schroder Investment Management Limited, 31 Gresham Street, London EC2V 7QA, which is authorised and regulated by the Financial Conduct Authority. For your security, communications may be taped or monitored.