Volkswagen news - South Korea suspends sales of 80 models, levies $16 million fine
Markets Forex

2 Likes 0 Dislike 2 Replies
1 year ago

In potentially big news for Volkswagen – and may I suggest, for the auto industry as a whole – South Korea has taken strong action against the car company. First, it has temporarily banned the sale of 80 Volkswagen models, including premium brands like Audi and Bentley. Additionally, it has imposed a fine of $16.1 million (17.8 billion won) on Volkswagen. These steps have been taken as a response to Volkswagen systematically cheating on emissions tests.

Now, these steps by South Korea lead to some interesting questions. Is it likely that this is just the first in a series of such bans, etc. against Volkswagen? If so, isn’t this a great time to short Volkswagen? Further, some other car companies have also admitted to falsification of data, cheating on emissions tests, etc. Thus, is it fair to assume that the auto industry would face greater scrutiny in future and more such cases (and such punishments) could emerge? In other words, should we rub our hands in glee and quickly go short on auto stocks in general?

Posted 1 year ago 0 Likes   0 Dislikes

Hi Brian,

It might be too early to go short on the auto sector in general. I must say I agree with you that there could be greater scrutiny and some more fines and bans. But, bans for a few companies may actually benefit other companies as they face lower competition. Do keep that in mind.

@Old Tom That's good advice, Tom. I will definitely look at TESLA. 

Posted 1 year ago 0 Likes   0 Dislikes

Hi Brian

VW has certainly plunged today, but compared with the dramatic one from Feb/Mar 2015 to Sep 2015, I would be surprised if you see anywhere near an equivalent fall. As always, I am prepared to eat my words, should that happen.

If you are going short, be sure to lock in some of your profit when it gets to 116 or there about. Personally I stear clear of car manufacturers. But, this might be a time to consider the likes of TESLA, if you are looking longer term - e.g. short DAI.D long TSLA.

Best of luck