The VW emissions scandal has cast a cloud over the industry but what will be the long-term impact asks Geraldine Herbert
As the German car regulators (KBA) announce they are expanding their investigation of emission cheating software to more than 23 car makers, VW remains firmly in the headlines. The latest revelations relate to CO2 emissions declarations for diesel and petrol cars. They also have been accused by the US Environmental Protection Agency of having yet another “defeat device” in their 3.0 litre diesel engines. This is fitted to some Porsche and Audi models as well to VW models and was expected to effect at least 10,000 vehicles but in the last week however this has extended to an additional 75,000 vehicles dating back to 2009. The claim has been denied by Volkswagen but by implicating Porsche in the scandal it threatens to undermine the new CEO of Volkswagen Matthias Mueller ex head of Porsche.
The continuing scandal is not only damaging to the reputation of the brand and customer loyalty but the company’s crisis is also taking a heavy financial toll. VW initially set aside €6.7bn to cover costs resulting in the company posting its first quarterly loss for 15 years of €2.5bn in late October. But this figure does not include losses from discounting cars in some markets, in the US they are already offering a $1,000 gift voucher to owners of some diesel models. In addition loss of share price, heavy fines or legal judgments from lawsuits filed by discontented customers are all likely to put Volkswagen under severe financial pressure.
Meanwhile investigations continue internally to find the source of the illegal software. It seems unlikely that the claims of a few ‘rogue’ software engineers will be substantiated. Instead deficient corporate governance, a poor culture and a strategy focussed almost exclusively on growth are likely to loom large as the root causes.
But what about the implications for Ireland? The spilling over of the crisis from diesel into petrol and CO2 raises questions about car tax. While Matthais Muller has assured VW Customers that the company would meet the cost of any increased motor tax liability, the number of cars on Irish roads, affected by this new development is yet to be confirmed.
In the latest UK car sales figures Volkswagen saw their sales dip by almost 10 per cent in the wake of the ongoing diesel emissions scandal but in Ireland they remain the best selling brand. So what impact will “dieselgate” have on our car market and the buying preferences of Irish drivers?
Declan Allen, Head of Transport Engineering DIT
What is the likely long term impact on the car market? This could be a game changer for the automotive industry; it will be very hard not just for potential customers but for policy makers to ever believe anything the industry says in the future.
And the short term? This will very much depend on how VW handle the situation going forward and given their actions to date I am not overly confident they will recover from this scandal.
Do Irish people care about emissions? The Irish driver (particularly the rural driver) has had a love affair with the diesel engine for many years and the VW scandal is unlikely to upset this relationship. The younger urban drivers are more concerned with what comes out of the exhaust pipe
Will it spell resurgence in Petrol or merely a switch to hybrid and electric alternatives? The Toyota and Honda petrol hybrids will appear more attractive and the modern engines such as Ford’s Ecoboost will do well as result. The electric option is a long way off before it becomes a viable/realistic option for the main stream motorist.
How will it impact the future of Diesel passenger cars? The image/perception of dirty diesels is back in the minds of motorists; governments and lobby groups; perhaps in the not too distant future diesel vehicles may not be allowed to enter city centres. Any tax subsidies or rebates will have to be reconsidered.
What lesson should the automotive industry learn? The true comes out in the end.
Conor Faughnan, Director of Consumer Affairs for AA Ireland
What is the likely long term impact on the car market? Probably not that large in terms of sales although it may make the general public more cynical about marketing claims. From a policy point of view there is likely to be a sharper focus on things like fuel economy claims.
And the short term? Again not as big as you might think. The consumer will have made the new car purchase decision based on other factors so I would be surprised if the effect is noticeable, although I could be wrong of course.
Do Irish people care about emissions? Yes in the broadest sense; the typical consumer will express concern. But that concern may be wide without being very deep. I believe it is lower taxes rather than lower emissions that really affect people’s buying decisions for the most part.
Will it spell a resurgence in Petrol or merely a switch to hybrid and electric alternatives ? I doubt it, although petrol is fighting back for different reasons. I don’t see diesel-gate being huge and in fact the relatively low oil price recently probably drags against the sale of electrics and hybrids at the moment. ESB’s announcement of charging costs is a blow to electric sales as well.
How will it impact the future of Diesel passenger cars? That sort of depends what happens next. Personally I think that fuel-economy claims need to be scrutinised and standardised as well and that may be a bigger factor. Nowadays they are treated a little bit like claimed download speeds for broadband; no-one fully believes them but they are taken as a reasonable way to compare on car to another. But I do believe that diesel passenger cars will stay very strong at least in Ireland.
What lesson should the automotive industry learn ? Stop lying to us. Honestly, diesel-gate has been a disgrace. Collectively the industry needs to look at its conscience and stop making technical, fuel & crash test claims which do not stand up to scrutiny. It should get itself a step ahead of regulators because US, EU and other governance bodies will now be looking at every claim the industry makes with a much more cynical eye.
Michael Rochford, Managing Director of Motorcheck.ie
What is the likely long term impact on the car market? Certainly manufacturers will come under huge scrutiny regarding the claims they make about the technical performance of their vehicles not only in relation to CO2 but also covering other nox gases and additional metrics such as MPG etc. We may see the establishment of an independent body (like NCAP) responsible for auditing such metrics.
And the short term? The short term impact on the wider car market will be relatively minor. VW and other brands still produce exceptionally good cars that will be desirable in the used market for years to come. Locally the shortage of good used vehicles means that residual values won’t suffer hugely. It’s true to say that the trust of VW customers has been damaged greatly but they will be working exceptionally hard to put this right over the months and years to come.
Do Irish people care about emissions? The relatively recent changes to the VRT and Road Tax regimes by the Government has meant that emissions has become one of the primary concerns when buying a car. This concern is probably led more by price and running costs rather than by environmental issues. However, this was a commendable strategy and it has been successful in bringing emissions to the forefront in the buying decision.
Will it spell a resurgence in Petrol or merely a switch to hybrid and electric alternatives ? Diesel is still by far and away the biggest seller (72% in 2015). However, in 2014 the growth in the Petrol sales outstripped the growth in Diesel sales and this trend has continued in 2015 with a 26% growth in Diesel compared to a 40% growth in Diesel. The emissions scandal will probably accelerate the growth of Petrol sales further but the market has been swinging that way anyway.
How will it impact the future of Diesel passenger cars? This remains to be seen. If the pricing and running costs of diesel engines are adversely effected by new legislation (or a tightening up of existing rules) it could lead to a greater acceleration in the growth of the petrol sector and may even see further acceleration of the move to electric and hybrid alternatives.
What lesson should the automotive industry learn ? Obviously cheating the system doesn’t pay. The automotive industry needs to refocus attention on the fact that its actually not the bad guy when it comes to emissions when compared to industry at large. In Germany for example automotive only accounts for only 12% of emissions. Automotive has taken enormous strides in recent years so it doesn’t need to cheat to show the good work that it has done and continues to do in reducing impact on the environment.
Teresa Noone – PR and Marketing Manager, SIMI
What is the likely long term impact on the car market? It is difficult to say at this stage as a variety of factors can have an impact on the Market such as economic growth, consumer sentiment, external economic factors etc. Really, the long term impact of the car market has seen some move slightly towards petrol in the last couple of years. With consumers who do lower mileage benefitting from petrol as VRT and road tax are not as high as it once was. We also now see better choice in relation to petrol with new technologies emerging.
And the short term? All the forecast for next year will actually see an increase in the new car market in Ireland both Independent and Industry analysis suggest that. In Ireland of the new cars sold to date diesel accounts for around 71% of the market. There may however be in the short-term some move towards non diesel cars but diesel will still account for the majority of the new car market 2016.
Do Irish people care about emissions? Yes if you look at the change to C02 based taxation in 2008 we saw cars by CO2 Band A account for 3.64% while now in 2015 cars registered under Band A account for 71.94%. Undoubtedly part of the reason for the change was the taxation benefit of having a lower CO2 car but also people are becoming more environmentally aware. As we see changes in environmental legislation coming into effect in various aspects of the consumers lives for example the recycling of electrical equipment, greater use of green bins, bottle banks, reuse of plastic bags etc. All of these environmentally focused actions are replicated in the buying patterns of consumers for cars.
Will it spell a resurgence in Petrol or merely a switch to hybrid and electric alternatives? As stated above there was already a slow move towards petrol, as petrol cars with better CO2 profile have become available in recent years and this was naturally going to happen. It’s too early to predict what the extent of this move is but there is no doubt there will be a bigger mix of petrol as well as hybrids and electric in the next few years.
How will it impact the future of Diesel passenger cars? The future of diesel passenger cars was going to be impacted in any event with the increased tariffs from the EU and the move towards real driving emissions. In addition Euro 6 emissions regulation requires improved NOX performance and NOX emissions so it’s already happened. Diesel cars continue to become more CO2 and NOX friendly. Certainly over next decade diesel will continue to play an important role in Ireland and EU.
What lesson should the automotive industry learn? It underlines the importance of transparency in dealing with both regulators and customers. If the Industry is going to retain the confidence of its customers, than it is important that the information provided to them is accurate and up to date.
11th December, 2015