When the US government revealed it had found Volkswagen – among the largest car manufacturers in the world – had been using what’s known as a defeat device to manipulate emission tests in order to pass them for a number of years, the automotive world went into shock. Volkswagen shares tumbled, senior executives issued apologies, and government officials called for thorough investigations in various countries around the world.
While this has, unsurprisingly, made national headlines, there are a number of questions which still need answering: for a start, how sure can we be that Volkswagen is the only company employing such tactics to artificially lower its emissions results? Shortly before the Volkswagen announcement, non-governmental organisation Transport & Environment (T&E) had said that nine out of ten diesel cars being sold in the EU today don’t comply with Euro 6 emissions regulations in the real world, and manage to get through testing by ‘gaming’ the system.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
A number of other commentators have since speculated on the topic. For example, Peter Garnry, head of equity at Saxo Bank said: "Why should Volkswagen be the only one? If they were the only one who cheated on the emission data they would be standing out from the competition so much that everyone would be wondering, but they’re not."
Both the SMMT and EU Commission have spoken about testing since this all came out, so it seems likely this will be a topic of much focus in the immediate future.
Then there’s the future of Volkswagen itself. Already its share price has plummeted and VW chief executive Martin Winterkorn has resigned. At the time of writing a number of National papers are suggesting more may follow. We already know that the manufacturer has put aside €6.5bn to help deal with the potential fallout of the case, but it is facing a maximum US fine of more than double this.
And that’s before any further countries look into proceedings. We could, potentially, be seeing the start of a new world order for car makers, one where VW no longer sits near the summit.
Again, though, it comes back to the fact that there could potentially be other manufacturers who have employed illegal methods of passing emissions tests – though there’s currently no evidence to suggest this. If a number of manufacturers face multi-billion dollar fines, we could see a potential exodus of capital from the industry. This will have huge ramifications for everyone in the industry, from the largest manufacturer down to niche challengers. There are also questions about what impact this will have on captive houses, which have been able to offer subvented finance propositions in the UK in some instances. We’ll likely start to see the answer to this in the not-too-distant future.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataThen there are questions over the residual values of diesel VWs. In this magazine, we explore the growth of PCP in the used car market. PCP obviously relies on reasonably accurate predictions on this front, something Glass’s and CAP are able to provide. But this scandal could have unforeseen impacts on these values, and this could knock-on to the independent finance market in the UK.
It also raises questions over the role of regulation in imposing change. People we speak to in the motor finance trade are always keen to say how much they’ve embraced regulation, and how they see it as a good thing for them. This is as good a reminder as you’re going to get that this can’t be lip service. You can’t be looking for ways around regulation. Instead you need to embrace it, work within it, and look for innovations to make up for shortfalls. Because, as VW is currently finding out, and as any number of banking executives and payday lenders who crossed the FCA found out, if you’re caught out, the situation will only go from bad to worse.
