VW crisis may benefit system suppliers
Vehicle emissions-control system manufacturers such as Johnson Matthey and France’s Faurecia are set to gain more from the scandal that Volkswagen is currently caught up in, investors say.
VW needs to fix up to 11 million vehicles worldwide, and the scandal is likely to lead to tighter regulation for the automotive sector as a whole.
This can only benefit makers of emissions control systems, whose shares have climbed 15 to 27 per cent since late September, a stark contrast when compared to the 40 per cent fall in Volkswagen’s shares since the scandal broke last month.
‘The Volkswagen issue could have a silver lining for some auto component companies as they would be selling more sophisticated emissions control equipment to carmakers,’ said David Battersby, investment manager at Redmayne-Bentley.
‘Johnson Matthey provides such an opportunity. We increased our exposure to the stock this week and are looking to buy more in the coming days.’
An Italian broker said the scandal would require additional emission technologies and companies such as Johnson Matthey, Germany’s ElringKlinger, France’s Valeo and Faurecia and Belgian group Umicore had the right skills to benefit in the long term.
Analysts believe shares in these firms are likely to keep climbing even after their surge since late last month. The European auto index, which had lost 20 per cent from mid- to late September, has since rebounded 14 per cent.
HSBC, which has a ‘buy’ rating on Johnson Matthey and Faurecia, said in a note that the scandal and moves towards ‘real-world driving emissions’ (RDE) testing were largely positive for vehicle catalyst makers as the new legislation would force carmakers to use new and more powerful catalytic systems.