The 'Long Shadow' of Volkswagen's Cheating Scandal Falls on France’s Renault

The cloud left by Volkswagen's emissions scandal is casting a shadow over its European rival Renault, which is now under additional scrutiny from French regulators.

Investigators say they haven't found the kind of software Volkswagen used to cheat American diesel emissions tests. But they raided three Renault offices Thursday, and the whiff of trouble had stockholders burning rubber.

The French Agency for Energy and Climate is testing 100 domestically built cars, including 25 Renault models, to find out whether they exceed normal limits for carbon dioxide and nitrogen oxides. Renault confirmed Thursday that investigators from a government technical commission carried out "on-site and material investigations" of the company's suburban Paris headquarters and technical centers in two other cities.

The company said it was "fully cooperating" with the government, which has tested four Renault models so far. Those test results will allow regulators to have "productive discussions" with its engineers, Renault said.

"This is good news for Renault," the company said.

Related: Here's How Elon Musk Wants to Punish Volkswagen for Cheating

You wouldn't have guessed that from the reaction in the markets: Renault stock plunged nearly 9 percent after the news broke. And while the company may not find itself in the same straits as Volkswagen, it may end up facing tougher tailpipe standards, industry watchers said.

"What this actually indicates is whether or not there is an actual defeat device or a fraud aspect present, it still shows us that our concern with high real-world emissions still persists," said Anup Bandivadekar, director of the passenger vehicle program at the International Council on Clean Transportation (ICCT). There may be no software that disables pollution controls, he said — "But it appears they're not necessarily complying with the regulation and its spirit and producing vehicles that actually have low emissions, not only in the laboratory but also on the road."

The industry has known for a long time that European emissions tests "are not representative of real-world driving," said Dave Cooke, vehicles analyst at the Union of Concerned Scientists. And it's a bigger issue there than in the United States, since diesels are far more common in Europe.

"That issue is a concern irrespective of the defeat devices that Volkswagen got caught for," Cooke said. But the Volkswagen scandal "has really forced them to confront this challenge head-on," he said.

"If you used the same test year to year, and your goal is to continually produce reductions, then as long as you're matched against the same benchmark, cars should be getting cleaner and cleaner," he said. But because the tests are "so disconnected from real-world driving behavior," European officials are being pressured to improve the tests.

Volkswagen has taken a beating since September, when tests commissioned by the ICCT found it had installed software on some diesel models that disabled pollution controls once the car was off the test stand. It faces billions of dollars in penalties and a $48 billion civil lawsuit by the US Department of Justice after admitting to installing the defeat devices in more than 600,000 vehicles in the United States, as well as several million in Europe.

The company has blamed a small group of engineers for the scandal, which forced the ouster of VW chief Martin Winterkorn. Vehicles operating with the defeat devices put out up to 40 times the amount of nitrogen oxides allowable under US regulations, according to the US Environmental Protection Agency.

Related: It's Going to Be a Long Road to Recovery for Volkswagen

The issue has financial as well as environmental implications: Most European Union countries now charge some sort of tax or registration fee based on a vehicle's carbon emissions, Bandivadekar said. And the same tests can be used to determine a car's CO2 or nitrogen oxide emissions, he said.

Even if they don't go as far as Volkswagen did to game the standards, he said, manufacturers have designed emissions systems that do better in the static environment of a lab "as opposed to designing a system to function well across a broad range of operating conditions found in practice." And the same day that French investigators were leaning on Renault, the European Parliament put off a vote on a measure that would try to close that gap.

"The contrast is pretty interesting," Bandivadekar said. "There are these continuing suspicions about diesel emissions on one side, and that's what we would call the long shadow of the Volkswagen scandal. But at the same time, efforts to really bring emissions under control are being resisted. That shows to us that there is more work to be done to actually reduce emissions."

Follow Matt Smith on Twitter: @mattsmithatl