A recent German regional court decision backing an effort to ban diesel-engine vehicles in Stuttgart is a setback for the country’s domestic auto manufacturers – and could produce some backfire on German and European auto asset-backed securitizations, as well.

In a report last week, Moody’s Investors Service said the court decision requiring Stuttgart to sharply improve emission levels in the city – which could involve a diesel-car ban requested by a local environmental group – could eat into the performance of existing ABS deals, many of which have large concentrations of diesel vehicles that could face punitive declines in resale (and recovery) values.

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