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ICICI Lombard Expert Blog
 

Storm Thickens Around the Volkswagen Emission Fraud

October 28 2015
 
Storm Thickens Around the Volkswagen Emission Fraud

The storm gathering around Volkswagen (VW) over the emissions from its rigged diesel cars has thickened, with the retrofit requiring repairs for an estimated 11 million diesel cars, to comply with pollution regulations. Considered as one of the most comprehensive recalls in history, VW will have to settle fines and pay compensation costs to dealers for storing unmarketable cars, in addition to bearing the repair costs.

Bill Visnic, an independent automotive analyst, estimates the per-car costs conservatively at "at least several hundred dollars per car, maybe higher." While the VW forecast has set aside 6.5 billion Euros for this recall, experts Sandford C. Bernstein Ltd. state it will be insufficient. "We believe a figure of 15-20 billion Euros is an able estimate at this stage for cash-out costs," Bernstein said.

Volkswagen, which had a net liquidity of over 21.5 billion in June 2015, is equipped to deal with this blow. Further, it has sold its shares worth 3.4 billion is Suzuki Motor Corp. and is delaying or cancelling all new non-essential projects.

However, Volkswagen cars in the Indian market are not likely to face the brunt of the recall, primarily because India follows the less-stringent Euro IV level pollution norms compared to USA.

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