Automotive holdings spectacularly rose during the first part of the year, thanks to the start of recovery in Europe, robust development in the United States and a Chinese market that looked calm.
But the top performers soon turned into sore losers as the carmakers have been feeling the pressure of the Chinese sales slowdown, then the European continent saw its euro currency rise and hit offshore businesses and now the largest automaker in the world by sales (interim) has been involved in a massive scandal. Many fund managers have been taken completely by surprise last week on Friday when the US EPA announced the company had cheated in US tests of emissions when it came to its diesel-powered cars. The German group then took center stage and admitted they had rigged the pollution controls and now also acknowledged they did it on a global scale – eleven million cars are affected worldwide.
Naturally, the automaker lost a third of its value in a matter of days, with a total of almost about 23 billion euros ($25 billion) on Monday and Tuesday alone. And the scandal has spread like an infectious disease towards the rest of Europe’s auto stocks. And the industry was already cornered by the euro rebound and the concerns about China’s falling economy. “This can be a much, much wider scandal,” comments Michael Woischneck, a manager of $148 million at Lampe Asset Management in Dusseldorf, Germany. Most of the traders and experts are now weary the “defeat device” used by VW actually comes down the supplier chain, meaning a lot more carmakers could be affected.