MarketLine Blog

Renault Car Emissions: New allegations threatens French car manufacturer

The accusations against Renault published in the French press follow on from a 2015 report detailing cars which exceeded environmental rules by over 300%. Stretching back to 1990, the hierarchy at Renault is said to have known about and been involved with cheating emissions tests. The influence of the French government, and therefore the French taxpayer, will be important given the upcoming presidential election and shareholding. If reports of nearly one million cars being sold with devices used to distort the results of emission testing, the scandal could involve the whole company in a similar fashion to Volkswagen.

Were allegations proven against Renault, the financial situation at the French company could come under severe pressure. The potential for fines running into billions of euros is very real, and Renault cannot absorb multi-billion losses as easily as Volkswagen has done. Consequently, lasting damage would be done to the company, threatening prospects in developing markets and exposing the company to overdependence on the French car market. The share price dropped by 5% when the damaging story was published; if resignations were to happen or legal proceedings take place further substantial drops can be expected. The ability for Renault to financially compete with other major players would be hobbled.

Given the relatively early stages of events, comparisons with the emissions scandal at Volkswagen are worthwhile. The beginnings of problems in Germany have interesting similarities regarding the initial reaction from Renault, as do the nature of the initial allegations. That the comparison can be made does not bode well for the French manufacturer.

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