When a global corporation gets things wrong, the repercussions spread far and wide. A contrarian might look to see if the damage to a company’s share price is over cooked leading to a buying opportunity. In Volkswagen’s case however, the repercussions of their actions could suppress their share price for years to come.
Even more significantly, the scandal could have a long term fundamental impact on the market for diesel engine cars increasing demand for petrol, hybrid and electric vehicles. Focusing on electric cars, I have been following the Tesla Motors story closely this year and particularly its investment in a lithium battery plant in Nevada. With the growth in the electric vehicles market expected to reach US$271.67 billion in terms of revenue by 2019 from just US$83.54 billion in 2012. The high cost of running conventional vehicles and the eco-friendliness of electric vehicles is shifting consumers more and more away from petrol and diesel. The Volkswagen scandal will only increase this trend.
All views expressed are the personal views of the author and accuracy cannot be guaranteed. The views expressed are for entertainment and informational purposes only and do not constitute investment advice. Always seek the view of a professional qualified adviser when considering making an investment.