The Volkswagen Stocks Take a Fall
After the US regulators found out that Volkswagen (VW) misled them, the stocks of the company crashed by 20% on Monday; thereby decreasing VW’s value by 16 billion euros (equivalent to $18 billion). The company hit their lowest level in about 3 years, pulling down the shares of other German auto manufacturers with them.
Federal and state regulators found that the German-operated car company failed to comply the environmental standards by programming some of their diesel cars to only turn on the emission controls when they are being tested.
Recently, VW is crowned as the biggest carmaker in the world in terms of sales; the company also owns Audi and Porsche car brands.
The software program is installed in about 500,000 cars running around the US roads, including some of those luxurious Audi cars.
The Program Installed in VW Automobiles
According to Andrew Lee, an auto specialist at Frost & Sullivan, these vehicles would have 10 to 40 times more emissions than what was initially tested.
The software was used to manipulate the results of the emission tests performed in the US. The attempts made by VW to defend themselves from scrutiny before they admitted their mistake include being cheated by a few of the engineers that had gone rogue.
This is the primary reason why VW was asked by regulators to recall these programmed vehicles. The company was said to cease sales of some of their cars in the country.
German authorities, on the other hand, said that they will also perform their own tests in order to ensure that VW cars equipped with diesel engines have complied with the environmental law of Europe.
According to the spokeswoman of the European Commission, they have contacted VW and the Environmental Protection Agency for some details regarding this matter.
What models were affected?
The VW models affected are VW Jetta, Golf and Beetle that were released from 2009 to 2015. The Passat model from 2014-2015, as well as Audi A3 released from 2009 to 2015 were included as well. Owners of these models already filed lawsuit against the company as they claim their cars to have a “CleanDiesel” technology.
Emission Tests for Cars
Emission tests are performed in cars to ensure that they are environmentally-friendly and to ensure that they have complied with the environmental regulations of the state or nation.
Note, however, that it is possible to reduce nitrogen oxide levels being emitted by cars having diesel engines; nitrogen oxide is actually a gas that contributes greatly to the formation of smog in the air and is linked to various respiratory diseases such as asthma, bronchitis, and emphysema.
The technology utilized by VW also decreased the performance of the car, as well as fuel economy. The VW cars sold in the US side-stepped this trade off as they chose to give a misleading low nitrogen levels during the test.
The software are able to detect several factors that enable the cars to sense that they are being tested including the steering wheel’s position, the car’s speed, as well as the barometric pressure. Thus, the engine of these cars then configured themselves to decrease the emissions of nitrogen oxide to the air.
The Effects on Stocks
As the VW scandal becomes worse, the stock market took a hit from falling prices of commodities on Tuesday.
The Dow and TSX suffered a 3-digit fall, thereby reversing the gains they made the day before. Copper and gold also were falling; as well as corn, soy beans, and palladium. Furthermore, stocks on oil are also falling. Other automakers were also pulled lower. While Hong Kong and Shanghai stocks increased, there are still widespread losses in Europe.