VW Exhaust-rigging Scandal Could Sound Death Knell for Diesel Cars

More than half of all new cars sold throughout Europe run on diesel engines, making the impact of the rigged nitrogen oxide readings in the US.

Published: 23rd September 2015 07:50 AM  |   Last Updated: 23rd September 2015 08:18 AM   |  A+A-

Delhi_Air Pollution

Motorists cover their faces to protect themselves from air pollution in New Delhi. |AP

LONDON: The growing Volkswagen scandal could spell the end of the diesel car engine, experts predicted last night (Tuesday), as the fallout from the firm's rigging of emissions data spread around the world and piled increasing pressure on its chief executive.

After VW admitted that false emission readings could affect 11m vehicles worldwide, analysts said the gulf between increasingly tough environmental standards and the real-world performance of diesel cars could prove too difficult to bridge.

>> Also Read: Petrol Cars Could Also be Rigged

The investment house Bernstein said the VW scandal "probably does" signal the end of diesel, after several decades of the European authorities promoting the fuel on the grounds that it produces less carbon dioxide than gasoline.

More than half of all new cars sold throughout Europe run on diesel engines, making the impact of the rigged nitrogen oxide readings in the US, and possibly further afield over the past six years, even more stark.

"The move against VW is going to act as a catalyst to speed up the fall in diesel market share in Europe and halt it in the US," Bernstein said in a note to clients.

"In fact, regulators will now be much more conservative about what they permit and much tougher real-world tests may prove either too difficult - or too expensive - for diesel to meet."

>> Also Read: Germans Vent Their Anger as Car Scandal Grips the Nation

The analysts also predicted that the revelations that Volkswagen used a prohibited "defeat device" to fudge the numbers on laboratory emissions testing on five US diesel models would lead to changes at the top of the world's biggest car manufacturer. VW's supervisory board was reportedly gathering last night, bringing forward a long-standing appointment to meet on

Friday to discuss chief executive Martin Winterkorn's leadership of the firm until 2018, which would keep him in post until he is 71.

Mr Winterkorn issued a second apology for the firm's practices yesterday alongside the news that the company was setting aside euros 6.5bn (pounds 4.7bn) to pay for the fallout from the scandal. Under the Clean Air Act, the US Environmental Protection Agency could fine the firm $37,500 for every car that breached standards - meaning the total bill for half a million non-compliant cars could be as high as $18bn (pounds 12bn).

"At this point, I don't have the answers to all the questions," Mr Winterkorn said. "But we're in the process of ruthlessly investigating the issue, and to that end everything will be put on the table as fast, thoroughly and transparently as possible."

The firm brushed aside as "nonsense" reports in the German press that Matthias Muller, the boss of Porsche, had been lined up to replace Mr Winterkorn as chief executive.

"We have totally screwed up," said Michael Horn, the head of the company in the US, where the firm made about 6pc of its global sales in the first half of the year. "We must fix the cars to prevent this from ever happening again and we have to make this right. This kind of behaviour is totally inconsistent with our qualities."

Shares in the Frankfurt-listed company plunged a further 20pc yesterday, taking its losses for the week so far to 35pc. This represents about euros 25bn in market value, or the equivalent value of Renault and Peugeot combined. Shares in car firms across Europe followed VW lower yesterday.

"We don't see any stop to this bloodbath unless there is a change at the head of VW and full co-operation with authorities. Some heads need to roll to get investors buying back VW," Vincenzo Longo, a strategist for IG Group in Milan, told Bloomberg.

Authorities around the world are now scrutinising their testing practices to establish the depth of the problem. South Korea pledged to investigate three VW models, while in Britain Patrick McLoughlin, the Transport Secretary, joined France in calling for a united European investigation.

The US justice department is said to be launching a criminal investigation led by its environmental and natural resources division.

According to the Society of Motor Manufacturers and Traders (SMMT), European tests are carried out in government-appointed facilities and will soon incorporate real-world driving as well as laboratory readings. The US Environmental Protection Agency tends to rely on tests conducted by the manufacturers themselves.

British factories will produce almost 900,000 diesel engines this year, 85pc of which will be exported. This represents about a quarter of all engine production in the country.

"This is just one manufacturer doing this," claimed Mike Hawes, chief executive of the SMMT. "It would be wrong to infer that it goes any wider."

He added that it would be very difficult for a vehicle manufacturer to get a car with a "defeat device" past vehicle testers in Europe, though he refused to deny it was impossible. He added: "Tests in the US are very different to our robust system in Europe which would reveal any unusual patterns."

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