Volkswagen “Dieselgate” Scandal! — What You Need To Know

"Dieselgate" Meaning

The scandal broke out on September 18, 2015when the United States Environmental Protection Agency (EPA) issued a notice of a violation by Volkswagen Group on its diesel vehicles.

Also Read: Volkswagen To Cut Jobs To Lift Its Operating Profits

Volkswagen was found that it intentionally programmed its turbocharged direct injection (TDI) diesel engines to activate some of the emission controls only during the laboratory emissions testing. However, during normal or regular road driving conditions, the diesel engines emitted more pollution than the stipulated rules.

The company was accused of fitting the so-called "defeat device" in vehicles between 2009 and 2015 to make them seem less polluting than they were. VW confessed to the cheat device in 11 million diesel vehicles globally, which dented the carmaker's image.

Volkswagen's Response

Post Volkswagen confessing to the cheat device on its diesel cars, the company recalled of all affected vehicles to fix the emission manipulation. VW has agreed to buy back cars and pay compensation; however, this is only for the owners in the U.S.

VW agreed to the settlement to resolve the scandal in the U.S. in June 2016 to a massive $14.7 billion. The offer has been approved by a US judge last month.

The settlement will see the carmaker refit or buy back nearly 480,000 Volkswagen and Audi cars with the 2.0-litre diesel units. Also, owners of the affected cars will receive a compensation of $10,000 each in cash. Some of the settlement will go towards environmental projects.

Volkswagen has been barred from selling diesel vehicles in the U.S. and still needs to resolve a slew of other U.S. complaints.

In October 2016, VW has agreed to pay $1.2 billion to its U.S. suppliers to settle claims which rose from the "dieselgate".

Implications On Volkswagen Brand

The first and foremost implication on Volkswagen is its financials. Its profit will be dented with the payouts and settlements. All the more, it is yet to reach many more claims and disputes in the U.S. and other countries.

Volkswagen says that they have set aside 18 billion euros to cover repairs, buy-backs and legal costs; however, many believe the final figure could be much more. Last year, Volkswagen Group reported a 1.6-billion euro net loss, its first in two decades.

Despite the "dieselgate" scandal, Volkswagen is right behind the largest automaker in theworld, Toyota to take over the top automaker title. This is simply because of the Volkswagen brand and the sales around the globe have been better, though it will come short of celebrating the success.

Customer's Reaction

In the U.S. the sales of Volkswagen Group has declined to nearly seven percent this year, but the European drivers have not been affected by the scandal.

The group maintains the largest share of European car market which is just short of 25 percent market share. Thanks to VW other brands of Audi and Skoda, which have helped to drive high sales in the first 10 months of 2016 compared to the previous period.

Observation

In the recent focus by many countries on global warming and the effects felt around the globe, the Volkswagen "dieselgate" scandal is indeed big. This will be a precursor for many auto manufacturers to be aware of such implications of not just their financials, but on the environment as well.