Dieselgate – and now?

Dieselgate - and now?

Since September 2015 the term Dieselgate is on everyone's lips. At the time, it was discovered that Volkswagen had used illegal software in its diesel vehicles to manipulate exhaust emissions and thus circumvent emission standards. But that's not all: the software in question was apparently not only used in the company's own brands Audi, Porsche and VW. Corresponding research also followed at other German automakers such as Daimler and Opel. The scandal has also spread abroad – manufacturers such as Renault and Ford also appear to have cheated on the emissions values of their diesel vehicles, as a study ordered by Transport Minister Dobrindt shows (Source).

A crackdown, or: the complete loss of confidence

Yesterday, Tuesday, the situation for the German auto industry now escalated completely when 230 police officers and nearly two dozen public prosecutors simultaneously combed eleven German Daimler locations in a raid. Whether and how many proofs for the suspicion of fraud and forbidden advertisement were found, we will probably find out in the next weeks. It's already clear that it's not just the brand and the stock price that have been damaged in the process. Instead, it is manifesting that the emissions scandal is not a VW-only problem, but a global, multi-manufacturer fiasco for the entire industry.

The future: mobility without VW, Mercedes and Co?

For a long time now, there has been a heated discussion, even in the Chancellor's Office, about the effects of the manipulations on the automotive industry, which is so central in this country. Even without improved emissions values, the future of diesel vehicles is wavering; in some German cities such as Stuttgart or Cologne, there are discussions about a driving ban because of the miserable particulate matter values. The Hamburg Senate already decided to ban older diesels from driving on two main urban arteries. For years, only half-hearted research was done on alternative propulsion methods like the electric motor. If the car companies want to see their brands continue to drive through German cities, they are now forced to rethink their strategy. Volvo, for example, has announced that it will no longer produce diesel vehicles starting in 2020.

Only those who rethink mobility have the right of way. Image: Flickr, CC0

The cuts for the entire industry are already clearly noticeable. On the one hand, the number of registrations of diesel cars is falling, of course also because of the great uncertainty as to how long and how widely a buyer will be allowed to drive the car at all. On the other hand, for the first time in years, the best-selling car in Europe is no longer called the VW Golf. One of the presumed reasons: Loss of trust due to Dieselgate.

Tradition seeks flexibility, courage and fresh ideas

Financially, the future is getting rougher for many suppliers. According to an analysis by credit insurer Atradius, small and medium-sized automotive suppliers are particularly affected. They often specialize in a particular technology or products. What used to be a competitive advantage has now turned into a tangible problem. For now, companies often lack the capacity and financial resources to keep up with the rapid changes in technology that have hit the industry since the emissions scandal. The result is shrinking margins, which have already been seen in recent years.

In the short term, the risk of insolvency and default among companies still seems low – however, according to Atradius, we will see this very thing in the medium term if companies are not able to develop their product portfolio through financial and strategic collaborations. The emissions scandal is increasing demand for lighter construction materials and alternative forms of propulsion for the cars of the future. Companies that specialize in these current mobility needs can emerge as winners. Especially providers of batteries or power supply for vehicles are currently forecasting golden times. Even more so when Volvo is followed by other companies that are increasingly relying on electric motors.

By the way, this is not particularly far-fetched, because quite apart from the current events surrounding Dieselgate, countries such as Norway or the Netherlands are already setting incentives from the government side to replace the internal combustion engine with an electric motor, or are even planning to stop granting new registrations for vehicles with internal combustion engines in a few years' time.

Don't get overwhelmed!

Times in the automotive industry promise to be exciting. The change in thinking – whether voluntary, qua law or due to a diesel scandal – and with it the change in technology have only just begun. No matter how the markets change: As a broker, we are at your side. If you have any questions about the current limit policy in the automotive industry or if you need trade credit insurance, please contact us!

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