Monday 24 October 2016

Volkswagen test-cheating scandal could kill diesel car market in US and Asia, Continental chief warns

Georgina Prodhan

Published 03/01/2016 | 02:30

Volkswagen had been promoting diesel as a clean fuel in the United States before the scandal in September
Volkswagen had been promoting diesel as a clean fuel in the United States before the scandal in September

Volkswagen's emissions test-cheating scandal could kill nascent markets for diesel cars in North America, Japan and China, the chief executive of automotive supplier Continental has said.

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"The diesel passenger car could sooner or later disappear from these markets," Elmar Degenhart said in an interview with German newspaper Boersen-Zeitung.

He said that diesel had a market share of only 1-3pc in these countries, compared with 53pc in Europe.

In Ireland, the scandal has had little effect on Volkswagen's sales, with the manufacturer retaining top spot by marque and model (Golf) last year.

Last month, Continental's finance chief said that it was having similarly little effect on diesel markets in the US or Europe.

Volkswagen, Europe's biggest carmaker, had been promoting diesel as a clean alternative to gasoline in the United States, a market where it was struggling for a breakthrough, before the cheating came to light in September.

Degenhart said Continental had not supplied any software to manipulate emissions tests to any of its clients, reiterating what a company spokesman told media in October.

"We developed and supplied the engine controllers in line with VW's specifications. The installation and tuning of the software, the so-called calibration, was done by VW," he said.

He added that Continental was not aware of any legal investigations against it in connection with the scandal.

Staff at Continental's arch-rival Bosch, the world's biggest automotive supplier, are being investigated by public prosecutors in the German city of Stuttgart to find out whether they were involved in VW's test-rigging.

Continental is striving to build up its software, electronics and sensors business, which is already bigger than its core tyres business, as carmakers demand services such as mapping and traffic information for Internet-connected cars.

"The likelihood that we will begin to support the building of this new business with acquisitions is relatively high," Degenhart said, adding that large acquisitions were possible but unlikely in this area and not currently planned.

He added that Continental had not given up on the development of electric car batteries despite a joint venture with South Korea's SK Innovation ending last year.

"We are convinced that it is only a matter of time before electromobility, and there I include hydrogen power in the long term, prevails," Degenhart said.

But he said the price would have to fall below €100 per kilowatt hour of storage capacity from €250-€300 currently for electric cars to succeed.

Asked what he would do to keep shareholders happy, Degenhart said he did not rule out raising Continental's dividend payout ratio in coming years from 15-30pc of net profit currently.

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