2nd ICAI 2022

International Conference on Automotive Industry 2022

Mladá Boleslav, Czech Republic

(ie the year following the introduction of the Euro 6 emission standard), the shares of the monitored car manufacturers performed significantly worse than the national indices (between 2016 and 2021 car manufacturers performed worse than the national indices by 10,09% than national indices). Given the fact that Euro 6 was introduced in in September of 2015, we can say that the Chart 1 illustrates the negative affect the regulation (in this case emission standards Euro) has on automotive industry.

Chart 1: Average YOY stock performance comparison between car manufacturers and their national indices

Source: Own data collection and processing based on information in Table 1, 2 and 3. As we all know, Euro 6 is the first emission standard that has been challenging from the technical perspective (as mentioned earlier in the text) to most car manufacturers. At the same time current emission standards severally affect the need of investing into research and development of which the costs are rising, it affects margin, profit and prices of final outputs (cars) etc. If we take possible fines for exceeding the emission limits into consideration, we can say that car manufacturers have no other option than to invest research and development and come up with new technologies that will help them to fulfil the strict requirements. Charts (2, 3 and 4) showing the growth of research and development costs of the monitored car manufacturers and the deterioration of financial results (profit) despite the sale of a larger number of new vehicles until 2020, can be found in the appendix of the paper itself as a proof of the conclusions mentioned above. It is necessary to admit that there are several reasons that can be used to explain underperforming of car manufacturers’ shares since 2016 despite the fact that the European car market was flourishing until the beginning of 2020. It should be borne in mind that stricter emission standards do not cause the decrease in the performance of car manufacturers’ shares directly. It is predominantly the “trigger” of the domino effect, that causes rise of research and development costs, production costs, etc.

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