Measuring the Cost of the VW “Cheating” Scandal… So Far

Guest Post by Eric Peters

The VW emissions “cheating” scandal has been below the fold for a couple months now, but the repercussions are beginning to hit home.

Literally.

At home.

If you are among those who own a diesel-powered VW – whether “affected” of not – its resale value has dropped by about 20 percent, according to data compiled by Kelley Blue Book. The average auction price paid for a used VW diesel last month was down to $10,674 vs. $13,196 last August.

That’s a big hit – especially for cars that (pre-scandal) were known for holding their value better than average.

But expect resale values to take a real dump come June 28 – next week –  when Uncle will finally allow VW to tell owners of some of the “affected” vehicles how much they’re going to get for turning in their cars to be destroyed. (The company has decided that “fixing” some of these cars is not economically doable; that it’s cheaper – and easier –  to just offer to cut customers a check for the value of the car and be done with it.)

Even if VW offers full MSRP (original purchase price) rather than 20 percent (or more) depreciated price, the value of other VWs will fall through guilt-by-association.

And even if your TDI-powered VW is not going to walk the Green Mile but will instead merely be “fixed” (software/re-programming in order to appease Uncle) it will take a hit, too – because it’s now public knowledge that the “fix” will probably hurt mileage and performance.

Which Uncle doesn’t care about, of course.

But people who buy diesel-powered cars do.

The taint of “scandal” has badly gimped VW sales generally. They are down 13 percent through May – and the company’s share of the U.S. market has slipped below 2 percent.

Part of this decline is due to the fact that Uncle has refused to grant the company permission to sell any new/2016 models powered by the TDI diesel engine. There are thousands of them sitting at depots, tucked out of sight somewhere… waiting. Uncle may finally grant permission next week, but it is probably too late to avert a catastrophe because we’re approaching mid-year/high summer and the 2017s will be soon be arriving at dealerships.

This virtually assures fire-sale prices of the stacked-up inventory of left-over 2016s.

This, in turn, will further depress the values of the diesel-powered VWs already in circulation – as well as VW vehicles generally.

Which will likely further gimp sales of new VWs as people shy away from the brand.

That plus double digit billions in actual and potential liability in the form of fines and class-action litigation could result in VW abandoning the U.S. market and perhaps going away completely. It is entirely possible. The amount of fines alone is high enough that VW has publicly announced it may not be able to pay any dividends to shareholders; high enough that VW might not make a cent in profit for several years to come.

VW (which includes Audi and Porsche) is a big company, but that’s a big hit. It might not be survivable.

All of this is tragic – and it’s easy to blame Uncle, whose Inspector Javert-like obsession with almost nonexistent emissions from cars that have harmed no one stands in sharp relief to his shrugging indifference about millions of mandated air bags that have actually killed people.

But VW has not helped itself – much less its customers – by failing to defend itself.

Yes, the company “cheated” on Uncle’s tests.

So what?

The tests are based on standards that have become all-but-impossible to comply with. That are laid down – by Uncle – with no regard for the cost vs. the benefits. Which benefits – contrary to what most people assume – are barely quantifiable at this juncture. We are no longer talking about whole number differences but fractional ones. It is not 1974 – or even 1994. The tailpipe emissions of modern cars – gas or diesel – are practically nil.

But Uncle continues his jihad – no matter the cost.

It is not enough that the “affected” VW cars would have easily met all the standards in place circa five years ago – standards that were already extremely strict. Most people are not aware of the fact that since the 1990s, harmful exhaust emissions have been reduced to almost nothing; that for the past ten years at least, EPA has been chasing fractions of the remaining 3 or so percent of what comes out of a new car’s tailpipe that’s potentially an issue, air-quality or health-wise.

At some point – and we’ve arguably passed it – we’ll either have to accept that internal combustion will never be 100 percent “clean” but that 97.5 percent “clean” is clean enough – or internal combustion will have to be outlawed.

Which may be exactly what the end game is.

The “affected” VWs are not – by any sane standard – “dirty.” They are – at most – fractionally less clean than prior models.

Which were extremely clean.

EPA cannot produce a single “victim” of VW’s supposed evildoing. The entire hullaballo is based on nothing more than having affronted an arbitrary regulatory standard based on a hypothetical risk to computer-modeled “victims.”

Enough, already.

That’s what VW should have said – publicly.

Our cars are not “dirty.” No one’s cars are dirty anymore.

But the government is crazy.

Or, determined to outlaw IC-engined cars (see here) but unwilling to come “clean” about that.