Capitalmind
Capitalmind
Actionable insights on equities, fixed-income, macros and personal finance Start 14-Days Free Trial
Actionable investing insights Get Free Trial
Commentary

Mitsubishi: Rigs Fuel Efficiency Tests

When the world was still digesting the Volkswagen emission scandal, the sixth biggest auto giant of Japan, Mitsubishi Motors is hit by a fuel efficiency scandal. Mitsubishi motors have admitted of rigging fuel efficiency tests in violations of Japanese law. Mitsubishi manufactures light passenger cars DayZ and DayZ Roox model vehicle for Nissan.The problems were pointed out by the Nissan, when it encountered discrepancy in the fuel efficiency data. Mitsubishi ordered an internal enquiry and found the tire pressure data was manipulated to achieve higher fuel efficiency.

It was also noted that the fuel efficiency test used were not in accordance with Japanese law. According to the  NHK (local public broadcaster in Japan) out of the 6,25,000 vehicles affected 1,57,000 units of its own brand eK Wagon and eK Space  and the rest 4,68,000 vehicles of Nissan DayZ and DayZ Roox model. All the vehicles are below 660 cc petrol engines, which are mainly hit in Japanese market but have seen lesser exports. 

The reports have resulted in largest single day crash of 15% on the first day, The second day was followed by another 5% decline , which eventually wiped out its $2.5 billion market value. The current share price of Mitsubishi Motors stands at 583 JPY ($5.31).

Tetsuro Aikawa, President of Mitsubishi Motor Corp bowed down before the press meet, and also accepted the fault was from the company. He also stated the misconduct was reported to the Japanese Transport  Ministry. The company has also said it is working with Nissan to look further into the problems. It also said they have set up an internal committee to further look in to the matter. The company has also stated that they will temporarily halt the production of the affected models.

The company in total has sold 1 million vehicles till now.

Mitsubishi motors is not new to the scandals. Mitsubishi was hit by repeated recalls in the last decade. the recalls were mainly due  faulty brakes and vehicle safety, resulting in accidents. The Takata manufactured faulty airbags also which prompted Mitsubishi to recall vehicles in 2013. The previous scandals almost dried up the company’s reserves and lost customers trust. It was struggling hard to gain the trust wit its initiatives like “Customer First Program”. It has seen a recent increase in sales after a long time but again with this event, they seriously need to look into their vehicle quality issue.

In 2014 , South Korean auto giants Hyundai and Kia Motors agreed for penalties for overstating fuel efficiency in US.

The latest being the Volkswagen AG embroiled in controversy for rigging the emission test. It has set aside 4.8 billion Pound to cover the costs. It has sent millions of their vehicles for recall.

(Source: BBC News)