Unless you’ve been living under a rock, you have probably followed with interest the emissions scandal that affects a number of brands under the VAG umbrella and has rocked the industry. It’s not really a secret that official emissions tests don’t reflect the real-world situation, but for a major manufacturer to utilise an engine’s ECU to ‘cheat’ an official test is unprecedented.
To put it into context, in the US there are tight controls around NOx (nitrogen oxide) emissions as these pollutants cause harmful smog in major conurbations. In Europe, these restrictions are looser, with our main tests based on CO2 emissions, and road fund licence brackets reflect this. However, NOx is a major contributor to poor health, and diesel engines emit far more of it than petrol equivalents. Reducing NOx emissions typically requires a diesel engine to run slightly richer, lowering MPG and raising CO2. Other ways of reducing it include urea injection, but this is bulky and needs to be topped up, whilst capture systems only have so much capacity.
In the case of the EA189 diesel engine, fitted to a variety of VWs, Audis, Skodas and SEATs, a crafty piece of programming enabled the car’s ECU to recognise when it was on the testing cycle – likely based on steering angle, load through the driving axle and engine running speeds. When the ECU realises it’s being tested, it switched to a different mode, reducing the emissions and ‘defeating’ the test.
With the fallout of this so-called ‘scandal’ resonating around the globe, not least in Europe, VAG’s main market, the impact on the brands involved in terms of resale values and outright sales is now in the spotlight. As the brands affected are gathering their thoughts, coming up with a recall plan and steeling themselves for the impacts to come, it is the dealers on the front line that need clarity on how to move forward profitably.
Both CAP and Glass’s Guide have been looking into the affect on resale values. On the one hand, CAP doesn’t believe that there will be a significant impact with Dylan Setterfield, Senior Forecaster, stating; “We do not expect there to be any significant impact on used values for VAG models in the UK as a direct result of the US emissions scandal,” reasoning that, “The last global recall was the Toyota/Lexus issue, and despite the fact that this had serious safety implications, there was no discernible impact on used values.”
However, Glass’s suggested that there was already a minor impact on RVs – 0.2% according to the valuation experts through September. Set against an increase in the overall value of used diesels of 2.8% during the period, however, and the actual fall in the value of used Volkswagens totals 3%.
The SMMT’s registration figures for September don’t say a great deal, either. Registrations of the brands affected is in line with typical growth of these brands. In addition, registrations of Diesels has been slowing through 2015, so the 4.1% rise in September and 3.1% rise year-to-date doesn’t scream of a backlash from UK customers. With new VAG cars now meeting stringent Euro 6 emissions standards, it’s going to be the used market for these vehicles (with the EA189 Euro 5 engine) that will suffer.
Of course, if there is going to be an impact, it will take a bit of time to bite. But as various commentators have said, the cars affected are well-built, reliable and desirable. That they’ll be recalled and the emissions issue fixed suggests that whilst the financial impact on VW will be big, the long term result of the scandal may be less disastrous than some have suggested.