Even though the Volkswagen emissions scandal first came to light nearly two years ago, the German giant continues to struggle with the fallout. In the first three months of 2016, pre-tax profits were €3.2bn, a decline of 20 per cent

However, Volkswagen isn’t the only automotive manufacturer to undergo controversy. Most recently, Japan-based Mitsubishi admitted to manipulating test data that overstated the fuel efficiency of some 625,000 cars, forcing its share price to an all-time low.

For Bernard Aw, Market Analyst for the world’s number one CFD provider IG, a gloomy global outlook will have a bigger impact on the Asian automotive industry than recent emissions scandals.

The impact of automotive scandals on the industry

Despite the fact that both Volkswagen and Mitsubishi have suffered market difficulty due to their respective blunders, the financial performance of other manufacturers is explained by the wider economic climate.

“Strangely, there were no significant spill over effects on other auto companies, even when there was a growing list of carmakers whose diesel cars were reported to emit more pollution than in regulatory tests,” notes Aw. “Instead, the overall soft performance in the last couple of years was attributed to a challenging business environment.” In fact, a recent rally in global stocks was accompanied by a recovery of automotive shares. But this was short-lived, as economic uncertainty continues to heavily influence investor confidence.

Aw also goes on to add that while the fortunes of carmakers are tied closely with global equities, automotive shares have been underperforming the benchmark indices. What’s more, the BI global automotive index, which comprises 40 major manufacturers, showed that the sector pulled back in late April.

The returns of Asian carmakers were also lower than the broader stock universe. However, several marques and manufacturers are going against the grain by posting profitable figures.

The contrasting fortunes of Asian carmakers

“Among the carmakers in Asia, Guangzhou automobile, Mahindra & Mahindra, and China Motor Corporation were the only companies to post a positive return,” revealed Aw. “Other major Asian auto companies saw their share price under pressure, including the Japanese autos.”

As you can expect, Mitsubishi Motors was the worst performing brand in the BI Asia Pacific Automobile competitive peers index. Then again, Japanese manufacturers were among the best performers too, with Mazda Motors and Isuzu Motors at the top.

But after enjoying large profits since 2012, Toyota expects a 35 per drop in net income this fiscal year. Although this was due to a stronger Japanese yen, Toyota’s pessimistic forecast was significantly below analysts’ estimates.

So, while the automotive scandals have affected the manufacturers involved, it seems as though the fortunes of other carmakers are dependent on a range of other factors. Scandal, it seems, is just one factor in a complex market.

“The prospects for car sales remain challenging, as global economic growth continues to splutter,” says Aw. “The slowdown in China, the sluggish recovery in the US and Europe would keep the pressure on sale performance of auto companies. On an optimistic note, the need to replace old cars and improvements in economic conditions could help offset flattening demand.”

As for Singapore, no matter how expensive it is to own a car, the demand for cars will never wane. Just look at the price of the recent COE and you can easily come to a conclusion that we are still a long way to becoming a car-lite country.