Volkswagen Emissions Scandal: Crisis deepens

Volkswagen Touareg 2015

Thus far the effects of the Volkswagen emissions scandal, which centres on the manufacturer installing “cheat devices” on certain diesel models to sidestep emissions testing rules, have been hard to gauge. Certainly the company has lost massive market value, and faces paying massive fines, but in terms of actual sales… there has not been a marked slowdown.

Recap on the emissions scandal here

But the latest revelations that the manufacturer has also lied about the CO2 emissions and fuel consumption of some 800 000 cars could change all of that. You see, with the emissions scandal thus far centring on NOx emissions, the customer has not experienced any major impact where it tends to hurt most – in the wallet. CO2 and fuel consumption are different animals altogether, and cost-conscious customers may now indeed look elsewhere.

Cars are increasingly purchased based on fuel economy grounds, and if Volkswagen has lied about these figures, then customers’ true running costs will be higher than they had anticipated. Now add the fact that most emissions tax systems are based on CO2, and running costs/taxation will be felt even more severely in the pocket. At this stage it is unclear whether South African models are affected by the latest revelations – it is said that 200 000 of the affected 800 000 vehicles are on European roads. Remember, the South African tax is also based on CO2 emissions.

The consequences of all of this are already being felt in other markets. Germany will retest all Volkswagen Group (VW, Audi, Seat, Skoda) cars, whether they are petrol or diesel, for accurate CO2 and NOx figures. With models powered by the company’s 3.0-litre turbodiesel V6 engine now apparently also included in the cheat scandal, sales of models equipped with that engine have been stopped in the American market. These include vehicles such as the Porsche Cayenne, Volkswagen Touareg and Audi Q5.

Moody's has since downgraded Volkswagen's credit rating to A3/P-2 with a negative outlook due to the latest revelations. Shares in Volkswagen were down another 9,5% on Wednesday, with 3 billion Euros wiped off its market value. Since the scandal broke VW’s has lost a third of its market value (Euro 24 Billion).

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