Are The German Automakers In Trouble Once Again?

by Trefis Team
+15.99%
Upside
33.45
Market
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Trefis
VLKAY
Volkswagen AG
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Germany’s automotive manufacturers seem to be in deep trouble again, and this time they’re under fire for alleged collusion. Just a few days after Daimler’s announcement to upgrade three million Mercedes-Benz cars with reduced emission features and less than two years after Volkswagen’s admission that it rigged its diesel engines to bypass emission tests, this is a new development that has resulted in the declining of share prices for all the big names in Germany’s automotive industry. German car makers are now being suspected of colluding on technology for over decades. EU antitrust officials have started their investigations for a possible cartel among these car makers and for a breach of regulatory standards. The European Commission had confirmed that along with the Bundeskartellamt (German cartel office), it is currently assessing the information that they’ve received on this matter. In case the allegations turn out to be true, this can spell a significant loss to these car makers, along with a resultant setback for Germany’s industrial sector.

What Is The Nature Of The Alleged Collusion?

According to a report last Friday by Der Spiegel, a German news outlet, there might have been an industrial collusion between Volkswagen, Audi, BMW, Porsche, and Daimler. These entities have been blamed of agreeing upon parameters such as costs, suppliers, technologies, as well as the prices of diesel emission treatment systems. Till now, only BMW had denied the claim while the rest of the car makers have chosen to remain silent about the issue.

What Are The Possible Consequences?

The confirmation of such a collusion can cost a significant amount to both the car makers as well as Germany’s economy. The regulatory commission is known as the top antitrust agency in the EU and the confirmation of the allegations can result in the car manufacturers paying fines of up to 10% of their worldwide turnovers along with the imposition of changes in how they conduct their businesses. The automotive industry is an important one for Germany and it contributes around one-fifth of the nation’s total industrial revenues, while employing around 800,000 people.

There Were Collusion Related Scandals In 2016, As Well

In the last few years time, Germany’s automotive industry faced fines worth billions of euros, both in Europe and in the U.S. on the allegations of collusion in lighting systems, bearings, and engine coolers. In July last year, the European Commission had fined around €2.93 billion to companies such as MAN, Volvo/Renault, Daimler, Inveco, and DAF for their collusion on truck prices.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Volkswagen

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