Remember the Volkswagen emissions scandal, more popularly known as “dieselgate”? In 2015, it was discovered that Volkswagen intentionally programmed diesel engine cars to temporarily pass U.S. emission standards, only to later emit 40 times the legal limit on air pollutants.
“Dieselgate is a complete disaster for the auto industry,” says Hedgeye Industrials analyst Jay Van Sciver. More specifically, it’s a “competitive nightmare” for electronic car maker Tesla (TSLA), Van Sciver says in the video above from The Macro Show.
Here’s a look at why.
As a result of the VW scandal, carmakers are being closely scrutinized to meet emissions standards in the U.S., Europe and China more than ever. In order to meet more stringent environmental regulations, automakers can offset the sale of gas-guzzling vehicles by selling electronic vehicles. “The industry has a history of being willing to lose money selling efficient cars, so they can sell inefficient cars and make lots of money,” Van Sciver says.
In other words, the market for electronic vehicles is about to get a lot more competitive. And Tesla will find its existing competitive advantage significantly diluted.
Watch the video above, where Van Sciver digs into the numbers and explains this aspect of his Tesla short thesis.