The Strategist

Mitsubishi Motors market cap fell by 15% after another engine scandal


04/20/2016 - 15:49



This morning, the Japanese manufacturer Mitsubishi Motors vehicles announced that its compact cars have not passed the test for fuel economy. The market reacted with the immediate fall of the company's shares by 15%, resulting in market cap loss of $ 1.2 billion for Mitsubishi Motors.



S-8500 via wikimedia
S-8500 via wikimedia
The sixth-largest Japanese automaker Mitsubishi Motors announced that some compact models of the company could not pass the saving fuel tests. In a statement, the company acknowledged that these tests had been carried out in violation of the requirements. Kyodo agency reported that during the test, load on the wheels of cars was distributed so crafty that the car performance looked much better. 

The company president Tetsuro Aikawa commented today at a press conference in Tokyo: "We found that the tests were carried out in circumvention of the rules to indicate a lower fuel consumption in the documentation. Furthermore, it was found that the testing methods are not consistent with the Japanese rules. We bring deep apologies to our customers and shareholders."

The Japanese company says that the problem affects about 600 thousand eK series compact cars, which were produced mainly in Japan under the brand name of Mitsubishi. Above that, there were DayZ model, produced for Nissan Motors. "The problem, perhaps, is different from that in Volkswagen, - said in an interview with Bloomberg analyst at Tokai Tokyo Research Center Seiji Sugiura. The market, however, is now very sensitive to this kind of news. This situation can affect both the sales and reputation of the company. "

The company's shares reacted to the news with the fall of 15%; the market cap has dropped by $ 1.2 billion. This is the largest drop in shares for Mitsubishi Motors in the past 12 years.

Scandals with understating fuel consumption in vehicles occur regularly. The latest example was Volkswagen, which admitted underreporting of carbon dioxide emissions and fuel consumption (associated values) in 800,000 vehicles sold. Later, the company said it conducted additional tests and variations fit into the norm. In September 2015, the US Environmental Protection Agency (EPA) accused Volkswagen in use of the software, underestimates emissions performance when testing the toxicity of exhausts. The agency also acknowledged the falsification of emissions in 11 million cars with diesel engines EA 189 series. Among them were Audi, VW, Skoda and Seat, 482 000 of which were sold in the US and 8.5 million - in Europe.

In January, the capitalization of the French Renault fell by a record in the last 17 years, 25%. The nose-dive occurred after reports of searches in the company’s offices, related to the ongoing state commission checking the conformity of vehicles with environmental standards. After the ‘Dieselgate’ scandal, the French Ministry of Ecology started testing about hundreds of models from different manufacturers for the local market. The ministry said it hadn’t found any deceptive software in cars of Renault and other manufacturers. Nevertheless, in the beginning of April Les Echos magazine reported that the tests of first 50 models showed non-compliance with all the procedures, including fuel consumption and emissions of carbon dioxide consumption.

Erroneous data on the fuel consumption can cost $ 900 million to Hyundai.

In 2013, Hyundai Motor and Kia Motors were convicted in the US in the understatement of fuel consumption. In total, they had to pay approximately $ 400 million in compensation to motorists. Ford Motor had also been accused of understating fuel consumption. After that, the company lowered fuel consumption rating for several hybrid models 2013 and 2014 release. 

source: reuters.com




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