VW Emissions Scandal

2nd Oct, 2015

Since the US Environmental Protection Agency released their findings earlier this month relating to the “defeat device” installed in Volkswagen diesel cars that allowed them to cheat emissions tests, commentators have been predicting a dire future for VW and indeed all diesel cars.

“The scandal has already hurt the VW and Audi brands’ reputations in the country, according to polling firm YouGov, while consultant Brand Finance estimates the VW marque’s value could be cut by about one-third, or $10 billion”

Bloomberg Business

 “Does this development may mean the end of light diesel vehicles…..yes, it probably does.”

 – Bernstein Research automotive industry analyst Max Warburton

At Trajectory we always try to place current events and the resulting consumer reaction in the context of longer term trends. Here are a few trends that lead us to think that the reaction against VW may be different in the UK to what one might first predict.

The New Morality means little focus on sustainability

This is a trend that Trajectory has been tracking since the last recession and it has shown no sign of changing despite the improving economic environment. Fewer consumers are concerned today about what a brand or business is doing for the planet, than what they (the brand or the business) are doing personally for them and their family – especially in terms of price/value for money.  If, and it’s a big if, VW and other diesel manufacturers begin to act in a completely transparent way, the brands’ reputation for producing good value, long-lasting products could save them.

Emissions testing across the whole industry is likely to be discredited – this includes all manufacturers, diesel and petrol

The International Council on Clean Transportation (ICCT) – the European organisation that first reported issues with VW emissions results and prompted the American EPA to carry out their tests – has reported that the gap between test results and real-world performance is not just limited to VW diesel cars, it’s widespread across the industry and it’s increasing; from a total gap across all cars tested of 8% in 2001 to 31% in 2012 and 40% in 2014.

Source: Derived from Spiritmonitor data from ICCT, 2015

Source: Derived from Spiritmonitor data from ICCT, 2015

Given that these disparities are so widespread, it seems likely – again, only if VW act in a suitably contrite way – that UK consumers will not just punish the first brand named and shamed – the long term brand values may again save VW.

British car sales are at an all-time high

Will UK consumers stop buying so many cars? This August saw the end of 42 months of continuous growth in new car sales – a new record. Will this event shift our behaviour and turn us into a nation of electric car drivers? Given the proportion of consumers who put the environment above all other considerations is only about 5% and has stayed at that level since the 1980s – we think this is unlikely. Further, British Social Attitudes research also shows that the proportion of people who think that they should be able to use their car as much as they like even if it damages the environment has increased by ten percentage points over the last 10 years from 16% in 2004 to 26% in 2014.

Overall, there are many more value driven “petrol heads” in the UK than environmentalists and as a result we expect the ramifications of the current emissions crisis to be less dire and more short lived than many commentators are currently predicting.

 Editors Note: Charlotte is a driver of a 13 year old Nissan Micra called Mavis.