Volkswagen to have an impact on Hungary

HUNGARY - In Brief 28 Sep 2015 by Istvan Racz

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It would be terribly difficult to tell at this point , what exactly the effects of the ongoing Volkswagen case will be. However, it is increasingly for sure that the global impact will be significant and, more importantly for us, Hungary is unlikely to remain unaffected, because of its significant dependence on car manufacturing, more accurately on German car manufacturing. That the Volkswagen group and, more broadly, the German car industry is suffering on the stock market, is only an immediate first impact, of course. The true size of the problem has just started to take shape. Volkswagen has said that about 11 million of its running cars are affected at the group's level: 5 million Volkswagens and the rest are Skodas, Audis (specifically one type of the latter), etc.). One type produced by BMW has also proven to be affected. The German supervisory authority requires Volkswagen to come forward by October 7 with measures to bring its emission levels in line with domestic legal requirements, otherwise the affected cars might be banned from the roads. This seems to be an extreme threat but as such, it does not help to maintain customers' demand for the products of the affected carmakers. Rating agencies have taken initial negative action, and the ECB excluded Volkswagen from its asset-purchase program, as it is difficult to know how much the group's ABS debt is actually worth. It is certainly beyond our expertise to form judgement on the global impact of this case. But we must warn our readers that the car industry is an important part of the Hungarian economy, with a 10% contribution to GDP in the broad sense (including metal, plastics and electronics producers serving...