December 31, 2015 / 1:57 PM / 2 years ago

VW scandal could kill U.S. diesel car market, Continental CEO says

FRANKFURT (Reuters) - Volkswagen’s (VOWG_p.DE) emissions test-cheating scandal could kill nascent markets for diesel cars in North America, Japan and China, the chief executive of automotive supplier Continental (CONG.DE) has told a German newspaper.

The logo of German carmaker Volkswagen is seen at a dealership in Glenview, Illinois, September 24, 2015. REUTERS/Jim Young

“The diesel passenger car could sooner or later disappear from these markets,” Elmar Degenhart said in an interview with markets daily Boersen-Zeitung published on Thursday.

He added that diesel had a market share of only 1-3 percent in these countries, compared with 53 percent in Europe.

Last month, Continental’s finance chief said the scandal was having little effect on diesel markets in the United States or Europe.

Volkswagen, Europe’s biggest carmaker, had been promoting diesel as a clean alternative to gasoline in the United States, a market where it was struggling for a breakthrough, before the cheating came to light in September.

Degenhart said Continental had not supplied any software to manipulate emissions tests to any of its clients, reiterating what a company spokesman told media in October.

“We developed and supplied the engine controllers in line with VW’s specifications. The installation and tuning of the software, the so-called calibration, was done by VW,” he said.

He added that Continental was not aware of any legal investigations against it in connection with the scandal.

Staff at Continental’s arch-rival Bosch [ROBG.UL], the world’s biggest automotive supplier, are being investigated by public prosecutors in the German city of Stuttgart to find out whether they were involved in VW’s test-rigging.

Continental is striving to build up its software, electronics and sensors business, which is already bigger than its core tyres business, as carmakers demand services such as mapping and traffic information for Internet-connected cars.

“The likelihood that we will begin to support the building of this new business with acquisitions is relatively high,” Degenhart said, adding that large acquisitions were possible but unlikely in this area and not currently planned.

He added that Continental had not given up on the development of electric car batteries despite a joint venture with South Korea’s SK Innovation (096770.KS) ending last year.

“We are convinced that it is only a matter of time before electromobility, and there I include hydrogen power in the long term, prevails,” Degenhart said.

But he said the price would have to fall below 100 euros ($109) per kilowatt hour of storage capacity from 250-300 euros currently for electric cars to succeed.

Asked what he would do to keep shareholders happy, Degenhart said he did not rule out raising Continental’s dividend payout ratio in coming years from 15-30 percent of net profit currently.

Reporting by Georgina Prodhan; editing by Jason Neely

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