Elon Musk Tells Volkswagen Group Not to Correct Emissions Scandal
Volkswagen AG (ADR) (OTC:VLKAY) should focus on becoming a zero-emissions car company rather than fix its emission-cheating diesel cars (which is what sparked “Dieselgate”), suggests Elon Musk of Tesla Motors, Inc. (NASDAQ:TSLA) and SpaceX fame. Could this be good for VW stock?
Indeed, in the open letter, dated December 17, Musk and other Silicon Valley leaders, such as eBay’s president, Jeff Skoll, suggested that for VW, it’s not even worth the effort to attempt a fix for the emissions scandal . Why? “A great sum of money [will] be wasted in attempting to fix cars that ‘cannot all be fixed,” read the letter. (Source: “In a letter, Elon Musk tells Volkswagen to ‘cure the air, not the cars’,” Quartz, December 21, 2015.)
Elon Musk stated that he would prefer to see the Volkswagen Group promoting zero-emission technology (perhaps using some of Tesla’s batteries from the “Gigafactory?”) in the open letter that was addressed to Mary Nichols, chair of the California Air Resources Board (CARB), one of the United States’ environmental regulators. (Source: Ibid.)
The open letter, signed by Musk as well as the heads of various companies noted for their “green virtues” suggests that “there is no real solution” to the VW diesel cars that are already in circulation and describe remedies offered by the Volkswagen Group as being “expensive and impractical.” (Source: Ibid.) In this respect, presumably Musk is also considering the effects of the ‘fix’ on VW stock, because his suggestions are not only inspired by ‘social responsibility’ but by practical results. Green technology is not just an ideology for Musk, it is a new way of doing business.
VW Drivers Will Be the First to Notice…
VW had noted that the changes to ensure that the vehicles affected by the emission scandal (dieselgate) comply with the regulations were not intended to impact performance, but Musk and associates are convinced that the gap will be felt. Indeed, the signatories suggest that the first to complain will be the motorists themselves. (Source: Ibid.) Of course, Musk and the other signatories propose a solution, which, coincidentally, happens to involve electric cars.
Musk and the others are urging CARB to forget about obliging VW to fix its diesel cars currently circulating in California, “which represent an insignificant portion of total vehicles emissions in the State.” Rather, they urge CARB to encourage VW to make more electric cars and to invest in new factories, as the amounts to be paid through investments would be equal to the fines paid within a period of five years. (Source: Ibid.)
Nevertheless, Musk and the other “green” prophets notwithstanding, VW already has a plan to introduce 20 new electric and hybrid plug-in models by 2020 as part of a strategy the VW Group will announce at Consumer Electronics Show this year (CES 2016) – and not just because of dieselgate. (Source: “VW teases electric concept for CES,” Autoblog, December 11, 2015.)