The Strategist

Volkswagen gets green light to sell diesels in the US

03/30/2017 - 15:44

The US Environmental Protection Agency (EPA) granted Volkswagen with a permission to sell diesel cars of 2015 models after updating the emissions accounting software, said spokesman for VW Group of America Jeannine Ginivan.

The EPA required to change not only software, but also the engine itself. According to the company’s representative, components required for this will be available early next year. However, dealers do not have to wait: according to Ginivan, the company is already developing a corresponding program.

The permission applies only to 67 thousand cars of models-2015, of which 12 thousand are already kept in dealers’ storages, so the EPA’s actions are mostly symbolic. Volkswagen also said that American buyers will not be offered new models of diesel cars. The company strives to take a strong position in the market of electric cars, so shipments of diesel cars will be reduced.

As you know, everything that does not kill us makes us stronger. The so-called Dieselgate scandal cost Volkswagen a lot of money. Now, however, the company is increasing efficiency of its operations, and starting to regain market share. As for other respects, Dieselgate turned out to be counterproductive. It marked the end of the diesel cars era, and stimulated development of hybrid and electric cars, yet did not convince the government that the carbon tax works better than strict standards for automobile exhaust. 

The Association of European Automobile Manufacturers (ACEA) reports that in November 2016, VW increased market share from 24.6% to 24.8% for the first time since September 2015, when the scandal broke out. Thus, the company for the first time in the year equaled its pace of development with the European automotive market as a whole. From January to November, the company remained the undisputed leader of the regional market, but lost 0.9%.

The corporation’s growth is obliged not to the Volkswagen brand, but to others, such as Audi, Skoda, Seat and Porsche. A good example of the changes is Seat, which sales, grew by 28.6% yoy. The Spanish unit again went into profit, and a pretty small SUV called Ateca unexpectedly showed the best growth indicators. Freedom of units within the group with a common technical platform still plays into VW's hand. Even when sales of the main brand stop or decline, it is compensated by foreign or premium models.

Many expected that the concern would have offered discounts and poured investments in advertising to restore the shattered reputation. Instead, however, VW managed to reduce administrative and marketing costs. Given the volume of court costs, improving efficiency is a harsh necessity. Settlement of civil claims in the US is estimated at $ 14.7 billion, and analysts expect that the agreement on criminal prosecution will cost another $ 3 billion. The European countries have not yet received their compensation for the fact that the group was selling cars deceiving standard tests for cleanliness of the exhaust. To cope with these costs, the concern is now saving money - since the end of last year, the company’s accounts have replenished by 5 billion euros.