Volkswagen scandal splits Asia's auto stocks

A general view of Volkswagen Group's headquarters in Wolfsburg, Germany.
Alexander Koerner | Getty Images

Volkswagen's emissions cheating scandal has divided investors in Asia's auto stocks, providing a fillip for South Korean carmakers that hope to get an edge, while depressing Japan's with worries about heavier testing.

South Korea's Hyundai Motor closed up 0.6 percent on Thursday, while its sister firm Kia Motors erased early gains to finish flat.

Shares of both companies powered up more than 3 percent on Tuesday, when the German carmaker acknowledged rigging vehicle emission tests in the United States, before the South Korean carmakers succumbed to a region-wide selloff on Wednesday that was triggered by a grim reading of China's all-important manufacturing sector.

Analysts reckon, however, that Volkswagen's scandal could be a longer-term boon for South Korea's carmakers.

Read More The rapid fall of VW's Martin Winterkorn

"For the first eight months of 2015, Hyundai Motor and Kia's combined market share in the U.S. was 8.1 percent, versus 3.8 percent for Volkswagen. Although Hyundai Motor doesn't have much of a diesel line-up in the U.S., the news could result in market share gains for both Hyundai and Kia," Sung Yop Chung, analyst at Daiwa Capital Markets, wrote in a Tuesday note.

"Furthermore, Volkswagen also has a competitive advantage in emerging markets. If the scandal becomes more global, it could provide tailwinds for [South Korean carmakers]," the Seoul-based analyst added.

Logistics company Hyundai Glovis and automotive parts supplier Hyundai Mobis closed up 4.3 and 0.9 percent respectively, outpacing the broader Kospi index which ticked up 0.1 percent on Thursday.

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By contrast, auto-related names in Japan were crushed amid intensified scrutiny worldwide on the industry's environmental testing standards. Markets in Tokyo were trading for the first day following a five-day long weekend.

Nissan and Honda tanked more than 2 percent each, while Suzuki Motor, Mitsubishi Motors and Mazda Motor tumbled between 4.1 and 6.8 percent. Toyota Motor – a direct competitor of Volkswagen in Japan – got off comparatively lightly with a 1.9 percent fall.

The fallout from the scandal also left Japanese manufacturers of diesel particulate filters - Ibiden and NGK Insulators - reeling on Thursday. The stocks plummeted 7.8 and 7 percent respectively.

"The major selloff in automakers worldwide over the news around Volkswagen's emissions scandal did not bode well for the reopening of the Japanese markets," IG's market analyst Angus Nicholson wrote in a note.

Volkswagen CEO steps down over emissions scandal

How the scandal unfolded

Volkswagen, the world's top-selling carmaker, admitted to U.S. regulators earlier this week that it had programmed its diesel cars to alter the running of their diesel engines to conceal their true emissions during emissions tests. The German carmaker has issued apologies, with its U.S. boss, Michael Horn, saying the company had "totally screwed up" in an event in New York on late Monday.

Following the revelation, authorities from France to South Korea announced investigations and threatened legal action, prompting the German company to set aside $7.2 billion in provisions for the third quarter to cover the potential costs of the scandal which could impact 11 million cars worldwide.

Australia's Competition and Consumer Commission said it was "considering the rights of consumers under the Australian consumer law" to see if car-buyers were misled by Volkswagen on their purchases. VW has not yet confirmed whether any of the cars sold in Australia are affected.

On Wednesday, chief executive Martin Winterkorn resigned in a bid to contain an issue that has taken down Volkswagen's shares by around 26 percent so far this week. In a statement on Wednesday, Winterkorn said he would "accept responsibility" for the "irregularities that have been found in diesel engines."