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VW one year after Dieselgate

September 16, 2016

Volkswagen's emissions scandal may have hit the German carmaker's image but apparently not its sales. Reporting higher deliveries for August, VW is, however, far from closing the chapter on its worst crisis ever.

VW logo on building
Image: picture-alliance/dpa/J. Stratenschulte

As if nothing has happened, VW Group again reported an increase in global deliveries in August, selling 759,000 cars in the month - about 6.3 percent more than in the same period a year ago. The demand for its the cars was especially high in China - up 20 percent - boosting sales to customers there to two and a half million for the first eight months of 2016.

So at first glance, the German carmaker appears to have emerged largely unfazed from its diesel emissions scandal in the United States, almost exactly one year after news of its cheating broke on September 18, 2015.

However, nothing has remained the same at the world's biggest carmaker by sales, following its admission that it had installed illegal software in more than 11 million vehicles worldwide.

Since then, barely a week has passed that has not seen a fresh twist in the saga, forcing the auto giant to launch mass recalls, battle compensation claims from customers and dealerships, and negotiate settlement deals for its wrongdoings with authorities in the US and elsewhere.

Stefan Bratzel of Germany's Center for Automotive Management said the scandal "has had huge effects on Volkswagen and the whole sector."

VW emissions scandal: one year on

Dieselgate fallout

For decades, the Wolfsburg, Germany-based carmaker has been striving to become the world's car champion, now selling vehicles under 12 separate brands - from mass-market Seat, Skoda and Volkswagen to luxury brands Audi and Porsche. The firm rakes in 200 billion euros ($225 billion) in sales each year and employs 600,000 people globally.

But its emissions scandal - quickly referred to as Dieselgate - has rocked the car group to its core. The illegal software it built into millions of diesel vehicles - also known as "defeat devices" - is able to detect when cars are undergoing regulatory tests and lowers their emissions accordingly, giving them the appearance of being less polluting than they really are.

Dieselgate's first victim was former chief executive Martin Winterkorn, who fell on his sword while insisting he had known nothing of the scheme, leaving then-Porsche boss Matthias Müller to take over the whole group. But no change of the guard could protect VW from investors' wrath as they watched in horror as the company's stock lost 40 percent of its value in just two days - burning up 30 billion euros of market capitalization.

One year on, VW remains valued around 20 percent lower than it was before last September. And although the scandal didn't trigger a collapse in sales for the group, vehicles sold as Volkswagens have suffered a knock, especially in the United States, where the brand was already limping.

Legal tsunami

Also ensuing the scandal has been a barrage of lawsuits and compensation claims from the authorities, customers and investors. In the US, the firm was able to reach a deal settling some of the claims, agreeing to pay almost $15 billion in fines and in compensation to some 480,000 car owners.

VW car
Last month, VW agreed to spend more than 1 billion euros to compensate its 650 US dealers for their losses from the diesel emissions scandalImage: picture-alliance/dpa/Foto: Friso Gentsch/Volkswagen

But VW still faces other legal claims in the US as well as lawsuits and probes around the world, including in Australia, South Korea, Germany, France and Italy. And European authorities are stirring in Brussels, animated by the charge that American VW customers are being treated better than EU citizens affected by the scandal. So far, VW has refused to compensate Europeans or buy back their vehicles. Instead, it plans to retrofit the 8.5 million vehicles affected to meet emissions standards.

So far, VW has put aside 18 billion euros in legal provisions, which helped push the company to its first annual loss in more than 20 years last year.

Ferdinand Dudenhöffer, director of the Center for Automotive Research at the University of Duisburg-Essen believes that one year after Dieselgate VW may have gone "50 to 60 percent of the way."

"But there's still a lot to do," he told the news agency AFP. Industry experts have predicted the total bill could reach between 25 and 35 billion euros - a sum that would leave the firm once again raiding its piggy bank but not threaten its survival.

A boon for the industry

Dudenhöffer even suggests that Dieselgate could in the end be a "boon for Volkswagen."

That's because in the wake of the scandal, Müller has been forced to adopt a bold strategy, promising dozens of new electric vehicles in coming years as well as pushing into fields like car-sharing services and self-driving cars.

And industry expert Stefan Bratzel notes that the VW scandal has caused regulators to take a closer look at the industry's harmful emissions from polluting engines, marking a "turning point for diesels."

And indeed, from September 2017 carmakers will have to submit vehicles for on-road testing as well as laboratory probes, forcing them to invest in more effective anti-pollution systems. As a result, experts estimate that in the next few years there will be fewer diesels on European roads as new technological solutions to the emissions problem is likely to make them more expensive, thus opening up opportunities for electric cars.

uhe/jd/sgb (Reuters, AFP, dpa)