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VWRust

Ever since VW acknowledged installing so-called "defeat devices," in its diesel vehicles, there'south been speculation almost just how deep the problem might run. The EPA officially widened the scope of its investigation yesterday, when it stated that six-cylinder vehicles from Audi and Porsche, including the Porsche Cayenne, were designed to deceive regulators about their emission levels.

Specifically, the EPA alleges that "VW developed and installed a defeat device in certain VW, Audi, and Porsche light duty diesel vehicles equipped with 3.0 liter engines for model years (MY) 2022 through 2022 that increases emissions of nitrogen oxide… up to nine times the EPA's standard. The vehicles covered by today's Nov are the diesel fuel versions of the 2022 VW Touareg, the 2022 Porsche Cayenne, and the 2022 Audi A6 Quattro, A7 Quattro, A8, A8L, and Q5."

"VW has once once more failed its obligation to comply with the law that protects clean air for all Americans," said Cynthia Giles, Assistant Administrator for the Office for EPA's Enforcement and Compliance Assurance. "All companies should exist playing by the aforementioned rules. EPA, with our state, and federal partners, will continue to investigate these serious matters, to secure the benefits of the Make clean Air Deed, ensure a level playing field for responsible businesses, and to ensure consumers get the environmental performance they expect."

VW's response, thus far, has been "Nuh-uh!" Officials with VW, Porsche, and Audi are claiming that the EPA is wrong, stating:

"Volkswagen AG wishes to emphasize that no software has been installed in the iii-liter V6 diesel power units to change emissions characteristics in a forbidden style," the company said in a argument, adding that "Volkswagen will cooperate fully with the EPA clarify this matter in its entirety."

VW-Phaeton-0

VW is also pushing into electrical cars with a new iteration of its Phaeton.

After the debacle of the by half-dozen weeks, nosotros're non much inclined to believe the German manufacturers claims that the EPA and California Air Resources Lath are merely wrong. What's much more likely is that VW relied on optimizations that fell into grey areas, or places where information technology felt information technology could skirt legal requirements without outright breaking them. Ironically, this positioning is something of an improvement for VW, since its other vehicles were institute to exceed acceptable EPA emission levels past 40x, rather than a "mere" 9x. VW's attempt to paint the entire affair every bit the actions of a few rogue employees looks more than dubious the wider the scandal grows.

Will the emissions scandal harm sales?

When news of the scandal showtime hit, conventional wisdom predicted a sharp backlash against VW as consumers retailiated confronting the company for lying over the state of its vehicles. That backfire, thus far, hasn't materialized. VW'southward October sales really rose slightly, up 0.24%. This doesn't necessarily bode well for the company nevertheless, given that VW dealers take been offer huge discounts to tempt Us buyers to buy, with some stores slashing prices by $vi,000 or more on new 2022 and 2022 cars.

Seen from that perspective, the uptick in sales doesn't seem like much of an comeback. Operating margins on auto sales aren't very good at all, typically in the i-two% range; this is ane reason why and then many automakers offer their own vehicle financing divisions and operate extensive repair shops. Cutting prices equally much as VW reportedly has normally isn't sustainable.

Even if VW's gasoline sales don't suffer much in America, the company is all the same likely to be striking by huge fines from both the United states and European regulators. The Eu has shamefully immune motorcar manufacturers to laugh in the face up of standards for a decade or more (the average EU vehicle'southward claimed fuel economy is reportedly 48% higher than actual real-world testing). While it's absolutely true that no single drive cycle will ever match the real-earth driving conditions of every single driver, EU law allows manufacturers to use ridiculous tactics to test cars, including stripping off all outside mirrors, non-standard bike alignments, overinflating tires, manually manipulating the restriction pads, taping or epoxying over all gaps in the frame to reduce drag, and testing vehicles at high altitude to reduce drag. Vehicles are too stripped of every single extraneous ounce of weight and tested on low-resistance surfaces.

I reason we suspect VW and other auto manufacturers are in for a tough fourth dimension of it is because VW's emission scandal exposed just how cozy things had become between the European union'south regulators and the High german company, while on this side of the pond, the EPA had to resort to independent investigators to find the fault (budget limitations forestall the EPA from testing more than than about xv% of vehicles). In both cases, authorities regulators expect like chumps — and no one volition thank VW for that particular gift.

I don't expect fines to kill VW equally a company, at least not in the U.s.a., but the European regulators where VW's marketplace is much larger could react more than harshly. The long-term health of the company as a event of these scandals could nevertheless be in dubiousness.