After last year’s Volkswagen scandal, the automobile industry is once again found guilty to have rigged emissions tests. Exaggerated fuel-economy figures are, unfortunately, nothing new for this kind of sector. One could simply recall when Hyundai and Kia, the South Korean carmakers, suppressed rumors about overstated fuel-economy statistics.
The protagonist is, this time, Mitsubishi Motors, a multinational automotive manufacturer headquartered in Japan and regarded to be the sixth biggest Japanese automaker. For Japanese carmakers it is actually the first time that such kind of misconduct occurs, even though it is not the only scandal in which Mitsubishi was involved. In 2000, in facts, it came out that for decades the company, in order to safeguard its reputation, had hidden problems regarding a series of defects, such as failing brakes, faulty clutches and fuel tanks that fell off vehicles, which systematically affected their products.
This time the Japanese carmaker admitted that some employees had altered fuel economy data on more than 600,000 vehicles. To get more in detail, Mitsubishi stated that fuel efficiency was overstated by 5 to 10% on four different types of mini-cars sold in Japan. The whole story came out due to the fact that two of the four types were sold under the Nissan brand. The latter first discovered the discrepancies in fuel-efficiency data last year. It then called for an investigation which revealed the whole story. Vehicles were clearly found to have higher performance when on the road then in laboratory and further investigation came to discover that this had been the case since at least 2002.
The seriousness of the issue led to the halt of the sales of the inquired models and to the involvement of the government. Mitsubishi will now have to write a full and exhaustive report on the matter before the 27th of April.
The main concern related to the fact is whether the alteration of fuel-efficiency data is not limited to domestic market but also encompasses overseas markets. Even though the largest part of Mitsubishi sales are in foreign markets, it seems to be that the vehicles affected were only those sold in Japan. However, further investigation would be carried out to find evidence on the matter.
As to the consequences of the scandal this will regard both the company itself and the car-making industry as a whole.
An analyst at JP Morgan stated that costs for Mitsubishi are estimated to be even more than 50bn yen, approximately $450m, given that they should include both the cost of replacing parts and compensation to Nissan and consumers. In addition to this, the company lost a large part of its value on the market following the admission of guilt on April the 20th. Stock price fell enormously when news on falsified data came out, it experienced a drop of 15% on Wednesday and 20% the following day reaching a trading price of 583 yen. Investors’ reaction led the stock to loose a third of its market value and to hit a record low level. But this is not the end, trading in Mitsubishi stocks was suspended on Thursday due to a too much larger imbalance between willingness to sell and buy.
Mitsubishi is surely facing serious consequences for its mistakes but the scandal’s secondary effects could be even larger leading to a reduction in worldwide sales and negative outcomes could be felt by the whole automotive industry. Recent developments will sum up to the Volkswagen emissions scandal further deteriorating consumers’ perception and trust in the car industry.
The protagonist is, this time, Mitsubishi Motors, a multinational automotive manufacturer headquartered in Japan and regarded to be the sixth biggest Japanese automaker. For Japanese carmakers it is actually the first time that such kind of misconduct occurs, even though it is not the only scandal in which Mitsubishi was involved. In 2000, in facts, it came out that for decades the company, in order to safeguard its reputation, had hidden problems regarding a series of defects, such as failing brakes, faulty clutches and fuel tanks that fell off vehicles, which systematically affected their products.
This time the Japanese carmaker admitted that some employees had altered fuel economy data on more than 600,000 vehicles. To get more in detail, Mitsubishi stated that fuel efficiency was overstated by 5 to 10% on four different types of mini-cars sold in Japan. The whole story came out due to the fact that two of the four types were sold under the Nissan brand. The latter first discovered the discrepancies in fuel-efficiency data last year. It then called for an investigation which revealed the whole story. Vehicles were clearly found to have higher performance when on the road then in laboratory and further investigation came to discover that this had been the case since at least 2002.
The seriousness of the issue led to the halt of the sales of the inquired models and to the involvement of the government. Mitsubishi will now have to write a full and exhaustive report on the matter before the 27th of April.
The main concern related to the fact is whether the alteration of fuel-efficiency data is not limited to domestic market but also encompasses overseas markets. Even though the largest part of Mitsubishi sales are in foreign markets, it seems to be that the vehicles affected were only those sold in Japan. However, further investigation would be carried out to find evidence on the matter.
As to the consequences of the scandal this will regard both the company itself and the car-making industry as a whole.
An analyst at JP Morgan stated that costs for Mitsubishi are estimated to be even more than 50bn yen, approximately $450m, given that they should include both the cost of replacing parts and compensation to Nissan and consumers. In addition to this, the company lost a large part of its value on the market following the admission of guilt on April the 20th. Stock price fell enormously when news on falsified data came out, it experienced a drop of 15% on Wednesday and 20% the following day reaching a trading price of 583 yen. Investors’ reaction led the stock to loose a third of its market value and to hit a record low level. But this is not the end, trading in Mitsubishi stocks was suspended on Thursday due to a too much larger imbalance between willingness to sell and buy.
Mitsubishi is surely facing serious consequences for its mistakes but the scandal’s secondary effects could be even larger leading to a reduction in worldwide sales and negative outcomes could be felt by the whole automotive industry. Recent developments will sum up to the Volkswagen emissions scandal further deteriorating consumers’ perception and trust in the car industry.
Mitsubishi Motors OTC stock performance over the month of April.
Fiammetta Galzerano