Irish VW customers backing away from the brand

A week on and we are still none the wiser as to precisely how Volkswagen Group’s annus horribilis will play out. While the publicity and headlines surrounding the company’s cheating on its US emissions tests has been enormous, and its fallout has already toppled a CEO, the actual detail of how it will affect both Irish dealers and Irish customers is still an unknown quantity.

The Irish Times has attempted to contact a number of Volkswagen, Audi, Seat and Skoda dealers for comment. We have asked them what their customers are saying. We have asked them what head office has instructed them to say or do. We have asked them if they have lost business or orders as a direct result of the scandal. The answer to each question, from both dealers and Volkswagen Group Ireland alike has been a flat 'no comment'.

Enthusiasts concerned

There seems little doubt that the scandal is having an effect here though. Sam Dawson is a member of the committee of VAGE, the Volkswagen Audi Group Enthusiasts' Club of Ireland. He told The Irish Times that "people in the club are obviously shocked about this. We're enthusiasts through and through and we love our VWs but it's a blow. I'm hearing a lot of negative talk about VW in general, not just in terms of diesel and that's coming from outside the club. The dealers are keeping pretty schtum about it at the moment, but I had a talk with someone I know in the dealer network and he said that sales are definitely slowing down at the moment. It looks as if the stigma is holding people back.

“I was told that my call was only the second one he’d had that day, whereas normally it would be much more busy than that.”

Minister seeks meeting with VW

Minister for the Environment Alan Kelly said he is seeking an urgent meeting with the managing director of the Volkswagen Group in Ireland, Lars Himmer, over the car manufacturer’s emissions scandal.

Speaking before the 2015 Clean Air conference in Dublin on Monday morning Mr Kelly said the issue was “very concerning” and he wanted to talk to the company to assess the scale of the problem in Ireland.

“Last Friday I wrote to the MD in Ireland looking to meet with him urgently in relation to this issue and I’ll be working with my college Paschal Donohoe [Minister for Transport] in relation to that.”

German federal transport minister Alexander Dobrindt confirmed that diesel engines sold in European models featured the same software used to cheat US emissions tests.

Ireland would be part of the debate at a European level, Mr Kelly said: “ensuring whatever controls need to be in place to ensure one, that was has happened doesn’t happen again and two, that company is dealt with in the way in which they should be dealt with.”

In relation to the motor tax regime where people paid lower tax on cars thought to produce lower emissions Mr Kelly said it was “being monitored all the time.”

“There’s always a case for looking at that from an environmental point of view to ensure we have the best results from an environmental point of view and that is something that is being assessed all the time.”

80,000 Irish cars potentially affected

Thus far all that is precisely known is that between 2008 and 2013 Volkswagen equipped approximately 500,000 diesel-engined cars in the US market with ‘defeat device’ software that enabled it to artificially lower the nitrogen oxide (NOx) emissions of those engines while they were being tested. Volkswagen has admitted since that the same software was included in roughly 11-million cars sold worldwide, with some 80,000 of those sold in Ireland across all of its brands: Volkswagen, Skoda, Seat and Audi.

While the US Environmental Protection Agency (EPA) weighs up the punishment options that it will inflict upon VW, the picture in Europe remains rather more murky. While VW has admitted that the software formed part of the engine management systems for its cars in Europe, as yet there is no proof that this software enabled VW to circumvent the current New European Driving Cycle (NEDC) test - the bedrock of all official emissions and fuel consumption figures in Europe and therefore the basis for all taxation and vehicle approval and testing setups.

That’s the starting point. If VW can show that it didn’t cheat on its European tests, then there’s a chance this will blow over. If Europe can show that it was cheating then the ramifications could be ever greater. Certainly, the European Commission is taking this matter hugely seriously. Commissioner Elzbieta Bienkowska, responsible for Internal Market, Industry, Entrepreneurship and SMEs, said: “Our message is clear: zero tolerance on fraud and rigorous compliance with EU rules. We need full disclosure and robust pollutant emissions tests in place.”

It had already been decided that future official tests would include less time in the laboratory and more time spent driving cars under ‘real-world’ conditions, and there will now be loud calls to bring in these new tests, and make them ever more stringent. The car makers had been calling for those tests to be delayed or to have their severity reduced. Those calls, if any are still brave enough to make them, will now fall on deaf legislative ears.

Which may mean higher motor-related taxes for all of us. While VW’s deceit thus far only relates to NOx and only in the US, if real-world testing setups find that cars are emitting more carbon dioxide (CO2) than current official levels then all of our Vehicle Registration Tax (VRT) and motor tax rates are going to go up. This can be almost taken as a given - Transport & Environment (T&E) today released further figures which claim to show that cars are emitting far more Co2 in actuality than the lab-based tests show.

Gap between lab and reality

The gap between official test results for CO2 emissions/fuel economy and real-world performance has increased to 40 per cent on average in 2014 from 8 per cent in 2001, according to T&E's 2015 Mind the Gap report, which analyses on-the-road fuel consumption by motorists and highlights the abuses by carmakers of the current tests and the failure of EU regulators to close loopholes. T&E said the gap has become a chasm and, without action, will likely grow to 50 per cent on average by 2020.

“By exploiting loopholes in the test procedure (including known differences between real-world driving and lab simulations) conventional cars can emit up to 40-45 per cent more CO2 emissions on the road than what is measured in the lab. But the average gap between test results and real-world driving is more than 50 per cent for some models. Mercedes cars have an average gap between test and real-world performance of 48 per cent and their new A, C and E class models have a difference of over 50 per cent. The BMW 5 Series and Peugeot 308 are just below 50 per cent. The causes of these big deviations have to be clarified as soon as possible,” Greg Archer, clean vehicles manager at T&E, said.

“Like the air pollution test, the European system of testing cars to measure fuel economy and CO2 emissions is utterly discredited. The Volkswagen scandal was just the tip of the iceberg and what lies beneath is widespread abuse by carmakers of testing rules enabling cars to swallow more than 50 per cent more fuel than is claimed.”

Resale values

There will almost certainly be another issue for owners of Volkswagens to face and that is a reduction in their residual - or resale - values.

While the current scandal focuses on NOx, which has no financial consequence to the Irish motorists, there remains the issue of brand damage.

Nik Ellis, director of vehicle valuations firm Laird Experts says: “We have had several calls over the last few days regarding how this will affect the resale value of Volkswagens. Our view is that the disenchantment in the marque can only have a negative consequence. A vehicle bought for its green credentials is suddenly not the environmentally responsible car we once thought. We suspect that, should the emissions scandal spread, then we are likely to see a diminution of value of the affected models.”

In reality the likelihood is that potential buyers will look to the financial implications of the scandal - at presnt none - and then to usual array of key issues, such as reliability, safety and fuel economy. The former remain strong for the VW, Audi, Skoda and Seat brands but there may be doubts or a lack of trust now on the final element. And that’s what may impact on the used car value - not by a lot but by enough to matter.