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In the Wake of Fuel Efficiency Scandals, Auto Makers Brace for Regulations

Posted by Paula Lucero | April 26, 2016

Mitsubishi has admitted to rigging data for its vehicles' fuel economy tests. What does that mean for the future of vehicle regulation?

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Last week, Mitsubishi, Japan’s sixth largest carmaker, admitted to rigging data and overstating the fuel economy levels of its vehicles. Approximately 625,000 cars sold in Japan were affected, compromising the fuel efficiency data of 157,000 eK Wagon and eK Space models along with 468,000 Days and Dayz Roox vehicles it produced for Nissan. Additionally, Sankei Newspaper stated that the carmaker is suspected of using non-Japanese tests on its RVR, Outlander, Pajero and Minicab MiEV models. Vehicle tests that were supposed to measure air resistance for fuel efficiency were not conducted: Data based on calculations were submitted instead. Fuel consumption readings appeared to use less fuel than in actuality.

The company, which sells over 1 million vehicles annually, immediately ceased the production and sales of the affected models. It also saw its shares plummet by approximately 40% of its market value in just three days. Akira Kishimoto, a JPMorgan auto analyst, estimated that Mitsubishi’s scandal will cost more than 50 billion yen, or roughly US $450 million, inclusive of payments to consumers and compensation to Nissan

What Does this Mean for Automakers?

In September 2015, Volkswagen was also involved in an emissions scandal. The United States Environmental Protection Agency issued a Clean Air Act violation notice to Volkswagen due to the discovery of defeat devices installed in the cars produced from 2009-2016. Among these models include the Volkswagen Jetta, Passat, Audi A3, A6, A7, A8/A8L, Q5, and Porsche Cayenne Diesel, among others, totalling up to 11 million affected units worldwide.

Governments and regulatory boards in the U.S. and Europe have stepped up efforts to investigate emissions data, especially since the environmentally-friendly performance of vehicles are crucial elements of competition in the automobile industry. Japan’s Transport Minister Keiichi Ishii added that the scandal could make consumers lose faith in the country’s auto industry. According to Daimler Chief Zetsche, carmakers will have to be more transparent as regulators step up scrutiny into lab results and real-world driving conditions.

Ultimately, automakers and their suppliers should expect tighter regulations. Stringent testing could affect vehicles' paths to consumers, adding delays and disruptions. Now is the time to touch base with your suppliers and ensure that all parties are in the know about any added time efficiency tests could incur. 

 

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