Helena Joyce
In 2015, the Environmental Protection Agency (EPA) found that many VW cars sold in America had a defeat device in their diesel engines. This device could detect when the cars were being tested and would change the performance to improve results. As a result, VW cars emitted nitrogen oxide pollutants up to 40 times more than what is allowed in the US. The scandal has cost VW billions of dollars in fines, penalties, and settlements. It has also led to a decrease in demand for diesel engine cars and a switch to petrol engine cars, especially in Europe.
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What You'll Learn
VW's defeat device
In 2015, the Environmental Protection Agency (EPA) found that many VW cars sold in America had a "defeat device" in their diesel engines. This device could detect when the cars were being tested and changed the performance to improve results. The German car manufacturer has since admitted to cheating emissions tests in the US and has recalled millions of cars worldwide.
The "defeat device" is a type of software that can sense test scenarios by monitoring speed, engine operation, air pressure, and even the position of the steering wheel. When the cars were being tested under controlled laboratory conditions, the device put the vehicle into a safety mode where the engine ran below normal power and performance. Once on the road, the engines switched out of this test mode. This resulted in the engines emitting nitrogen oxide pollutants up to 40 times more than allowed in the US.
VW has set aside billions of dollars to cover the costs of the scandal, including fines, penalties, and financial settlements. The company's shares have fallen by about a third since the scandal broke, and there have been investigations and lawsuits in several countries, including the US, Canada, Germany, Norway, South Korea, and Spain.
The VW "defeat device" scandal has had a significant impact on the company and has raised concerns about the legitimacy of emissions testing and the pollution emitted by diesel-powered vehicles.
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The VW scandal's global impact
In 2015, Volkswagen was found to have cheated on pollution emissions tests in the US, in what became known as the "'diesel dupe' scandal. The Environmental Protection Agency (EPA) discovered that VW cars sold in America had a "defeat device"—software in diesel engines that could detect when they were being tested, altering performance to improve results. This meant that the cars were emitting nitrogen oxide pollutants up to 40 times more than permitted in the US.
The global impact of the scandal was significant. VW admitted that about 11 million cars worldwide, including eight million in Europe, were fitted with the "defeat device". The company faced investigations and lawsuits in multiple countries, including the US, the UK, Germany, Italy, France, South Korea, Canada, and Norway. By June 2020, VW had spent $33.3 billion in settlements, fines, penalties, and buyback costs. The scandal also led to a decline in diesel car sales, with a predicted sharp fall in demand for diesel engine cars as consumers and governments sought to ensure Volkswagen compensated affected owners.
VW's brand image was damaged, with the company's shares falling by about a third following the scandal. The group's chief executive, Martin Winterkorn, resigned and was replaced by Matthias Mueller, who pledged to restore trust in the company. VW launched an internal inquiry and set aside €6.7 billion to cover costs, but the financial impact was expected to be much higher.
The scandal also had a broader impact on the automotive industry, with politicians, regulators, and environmental groups questioning the legitimacy of emissions testing for all carmakers. There were calls for stricter regulations and a radical overhaul to reduce deadly pollution from diesel vehicles. The VW scandal brought attention to the higher levels of pollution emitted by diesel-powered vehicles from various manufacturers, which often exceeded legal emission limits under real-world driving conditions.
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VW's emissions exceed standards by up to 40 times
In 2015, Volkswagen was embroiled in a scandal dubbed "Dieselgate", wherein the company was found to have installed a "defeat device" in the engines of its diesel-powered cars. This device allowed the vehicles to detect when they were being tested and change their performance to improve results. As a result, the engines emitted nitrogen oxide pollutants up to 40 times above the federal limit in the US.
The scandal raised awareness about the higher levels of pollution emitted by diesel-powered vehicles from various carmakers, which exceeded legal emission limits under real-world driving conditions. A study conducted by the ICCT and ADAC revealed that several car brands, including Volvo, Renault, and Jeep, showed significant deviations from expected emissions levels, resulting in further investigations into other diesel emissions scandals.
The Volkswagen emissions scandal had far-reaching consequences. VW's brand value plummeted, and the company faced significant financial losses, including fines, penalties, and settlements totaling over $30 billion. VW also suffered a leadership crisis, with CEO Martin Winterkorn resigning due to the scandal. Additionally, several VW executives were arrested and charged with various crimes related to the emissions scandal.
In the aftermath, VW implemented a cultural shift, prioritizing ethical practices and collaboration with regulators and NGOs to drive ambitious standards for reducing pollution and promoting e-mobility. The company formed a Sustainability Council, which worked closely with VW's leadership to transform the company into a world-leading provider of sustainable mobility. VW also advocated for ambitious decarbonization policies and collaborated with EV charging companies and governments to build a reliable charging infrastructure across its markets.
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VW's financial fallout
In 2015, the Volkswagen (VW) emissions scandal, dubbed "diesel dupe", came to light. The Environmental Protection Agency (EPA) found that VW cars sold in America had a "defeat device" or software in diesel engines that could detect when they were being tested, changing the performance accordingly to improve results. VW admitted that about 11 million cars worldwide were fitted with the device, with 482,000 cars in the US alone.
The financial fallout from this scandal has been significant for VW. Firstly, the company's shares fell by about a third after the scandal broke. VW also had to recall millions of cars worldwide, setting aside €6.7 billion to cover costs, which resulted in the company posting its first quarterly loss in 15 years. The costs of possible legal action by car owners and shareholders are also expected to be substantial, with at least 34 class-action lawsuits filed in the US and Canada as of September 2015.
In April 2017, a US federal judge ordered VW to pay a $2.8 billion criminal fine for cheating on emissions tests. As of June 2020, the scandal had cost VW $33.3 billion in fines, penalties, financial settlements, and buyback costs. The company has also faced legal action from Norway's sovereign wealth fund, one of its largest investors, as well as investigations and lawsuits from various other countries, including Germany, France, the UK, Italy, South Korea, and Canada.
The scandal has also impacted VW's sales and marketing strategy. Diesel sales were already slowing before the scandal, and VW's push to sell diesel cars in the US with a focus on low emissions was dealt a significant blow. The scandal is likely to lead to a further sharp fall in demand for diesel engine cars, particularly in Europe, where a large tranche of the market may switch to petrol engine cars.
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VW's false advertising
In 2015, the Environmental Protection Agency (EPA) discovered that many VW cars sold in America had a "defeat device" in their diesel engines. This device could detect when the car was being tested and would change the performance to improve results. As a result, VW admitted to cheating on emissions tests in the US, with about 11 million cars worldwide fitted with the "defeat device". This scandal, dubbed the "diesel dupe", led to a significant decrease in diesel car sales and raised questions about the legitimacy of VW's emissions testing.
The Federal Trade Commission (FTC) charged Volkswagen with false advertising and deceiving customers. The company agreed to spend up to $14.7 billion to settle allegations and compensate affected customers. VW was also ordered to pay a $2.8 billion criminal fine for rigging diesel-powered vehicles to cheat on government emissions tests. The scandal cost VW $33.3 billion in fines, penalties, and settlements as of June 2020.
The VW emissions scandal led to a wave of class-action lawsuits and criminal investigations worldwide. More than 230 lawsuits were filed in the United States and Canada, accusing VW of breach of contract, fraudulent concealment, false advertising, and violations of federal and state laws. Norway, South Korea, and Germany also launched criminal investigations and legal actions against Volkswagen. The company's shares fell by about a third, and multiple executives, including the CEO, resigned.
The VW diesel emissions scandal had far-reaching consequences, impacting the company's reputation, sales, and financial stability. It also raised awareness about the higher levels of pollution emitted by diesel-powered vehicles from various carmakers, leading to increased scrutiny and calls for stricter emissions regulations. The scandal exposed the false advertising and deceptive marketing practices of VW, damaging the trust of customers and the public.
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Frequently asked questions
In 2015, the Environmental Protection Agency (EPA) found that VW cars being sold in America had a "defeat device" in diesel engines that could detect when they were being tested, changing the performance accordingly to improve results.
The VW cars emitted up to 40 times more pollution than emissions standards allow. The major pollutant was oxides of nitrogen (NOx), a smog-forming pollutant linked to lung cancer.
The scandal led to a sharp fall in demand for diesel engine cars. VW recalled millions of cars worldwide and suffered financial losses, including a $2.8 billion criminal fine in the US. The company's shares also fell by about a third.
The scandal initially started in the US but spread to other countries, including the UK, Germany, Italy, France, Canada, and South Korea.
VW faced legal action and class-action lawsuits from car owners and shareholders. The company agreed to settlements and buyback programs to compensate affected customers. VW also underwent leadership changes, with the group's chief executive, Martin Winterkorn, resigning.
