Mazda Leads Japan Carmakers Lower on VW Emissions Scandal

  • Japan stocks resume trading after three-day public holiday
  • Volkswagen reconsidering introducing diesel cars in Japan

Mazda Motor Corp. led Japanese carmakers lower as Tokyo resumed trading for the first time since Friday, when the U.S. environment regulator called out Volkswagen AG for cheating on pollution tests.

Volkswagen has tumbled 31 percent since admitting it used “defeat device” software to pass diesel emissions tests, leading declines on the 30-member Bloomberg World Auto Manufacturers Index. Japan resumed trading Thursday after a three-day break, with Mazda falling 6.8 percent, Honda Motor Co. dropping 3 percent and Nissan Motor Co. down 2.5 percent at the close. The benchmark Topix Index fell 2.4 percent.

“We expect the market to consider the situation to be a risk factor for Japanese carmakers as well,” said Heo Pil Seok, who helps oversee $10 billion in assets at Midas International Asset Management Ltd. in Seoul. “Still, shares of carmakers and parts-makers that are more focused on other engines, such as hybrids and electric vehicles, are expected to recover and become beneficiaries.”

Diesels Investments

Japan’s carmakers have been investing in diesel technology to compete with their European rivals, with Mazda offering diesel engine options in the CX-5 sport utility vehicle and Mazda2, Mazda3 and Mazda6 cars. Honda also sells Civic compacts and CR-V SUVs using diesel in Europe, and Nissan is preparing to begin deliveries of its redesigned Titan pickup in the U.S. with a diesel engine supplied by Cummins Inc.

Even Toyota Motor Corp., which has long emphasized its hybrid technology over diesel, earlier this year introduced new turbo diesel engines for models including the Hilux pickup and Land Cruiser Prado SUV. Toyota fell 1.9 percent in Tokyo on Thursday.

In Japan, Volkswagen is reconsidering its plan to introduce diesel engines in the country for the first time early next year because of the scandal in the U.S., according to spokeswoman Dorothea Gasztner. The Volkswagen brand has been the most popular foreign marque in Japan for the past 15 years, though it is lagging behind Mercedes-Benz in the first eight months of this year. 

Volkswagen’s cheating on diesel emissions tests hurts the auto industry’s reputation, Mark Rosekind, head of the U.S. National Highway Traffic Safety Administration, told an industry group this week. The carmaker’s foiling of U.S. clean-air rules puts the entire industry under scrutiny for similar violations, Rosekind said.

Wider Scrutiny

“If they did it, anyone else can do it,” he told reporters following a speech in Michigan. “You’re not just going to worry about one person, unfortunately that now is extended to the entire industry.”

Regulators from Germany, France, South Korea and Italy have vowed to scrutinize Volkswagen’s vehicles, and several U.S. states, including New York, have begun investigating its diesel engine emissions. This may lead to higher compliance costs for carmakers as regulators tighten and intensify vehicle testing, according to brokerage Shenwan Hongyuan Securities Co., which estimates expenses could rise by about 5 percent over the next five years.

“Regulators will ramp up the standards and procedures of these auto-related test to be more stringent, detailed, and unforgiving,” said Kim Pill Soo, an automotive engineering professor at Daelim University College in South Korea and an adviser to the government. “If this thing blows over to other carmakers, there’s no telling who might be the next to get caught and right now we can’t say who’s safe or who’s not.”

Auto-parts suppliers to Volkswagen also fell in Japan trading Thursday.

Aisin Seiki Co., which counts Volkswagen as its biggest customer after Toyota, fell 7.4 percent. NGK Spark Plug Co. dropped 4 percent while NTN Corp. slumped 8.5 percent.

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