How the Volkswagen scandal could push up car-tax costs

Why should Irish motorists care about the Volkswagen scandal?

Put simply, it may end up costing you more in motor tax and new car prices.

While the focus is rightly on VW’s deceitful practices, the scandal will concentrate minds on the testing regimes in all jurisdictions.

Campaign groups have long claimed that car firms are cheating on the official tests and say the results bear little relationship to real-life driving.

A report by European campaign group Transport and Environment last week found that just one in 10 diesels complied with the new Euro6 emissions standards.

While the scandal centres on nitrogen oxide (NOx) emissions, if the EU test system is overhauled to reflect real-life driving conditions rather than test lab conditions, then it’s likely to result in higher official figures for both fuel consumption and CO2 emissions. The latter has been the basis for applying annual motor tax and Vehicle Registration Tax on all cars since July 1st, 2008.

Will my VW or Audi be recalled?

No word as yet. Only the US regulator, the Environmental Protection Authority (EPA), has ordered a recall so far – of 482,000 cars.

The models affected were built between 2009 and this year and involve Golfs, Passats, Beetles and Jettas along with Audi A3s.

However VW admitted on Tuesday it now estimates 11 million of its cars were involved. The issue centres on the system used on the engine-management software for its 2.0-litre turbodiesel engine code-named EA189.

However it seems the investigation has broadened with authorities also examining the engine management systems on the VW Group’s V6 diesel engines.

The company declined to say how many of these might be on Irish roads.

The scandal focuses on VW’s efforts to deceive tests for NOx. European tests focus on carbon dioxide (CO2) and fuel economy.

There would seem to be little urgency to recall cars in Europe even if the nefarious software was fitted to cars here.

What is the scandal all about?

The EPA on Friday said diesel variants of VW and Audi models sold in the US over six years featured sophisticated algorithms to deceive the laboratory testing regime. The software could detect when the car is being tested and could run treatments to reduce NOx.

But once out on the road, the cars were discovered to produce pollutants up to 40 times the legal limits.

NOx emissions are known to be a major contributor to serious respiratory disease.

What do the European authorities have to say?

Relatively little so far. Everyone is seeking to confirm whether the software used by VW to deceive US regulators features in models sold in their markets. So far VW has not been forthcoming with more detailed information.

EU regulators said they were in contact with Volkswagen and US authorities, while the German transport ministry has launched an investigation and requested access to documents.

What does VW to say for itself?

Volkswagen chief executive Martin Winterkorn on Monday reiterated apologies he made on Sunday that his company is "deeply sorry" for the emissions-cheating scandal and will do "everything necessary in order to reverse the damage this has caused".

That night, Michael Horn, the head of the brand in the US, said: "In my German words – we have totally screwed up."

What does it mean for VW?

VW has set aside €6.5 billion to deal with the scandal, but it could face fines of up to $18 billion in the US alone, and further costs from potential lawsuits from customers.

The share price has plummeted and Mr Winterkorn is under pressure to resign. If he does go, others may follow.

It will certainly hurt the brand’s reputation in the US market, where it was hoping to grow its share, particularly as the Chinese market slows down. While VW is a major brand in Europe, it is not held in the same esteem in the US. It has struggled against Japanese rivals such as Toyota and Honda. It has also been a major advocate of diesel technology in a market where petrol engines dominate.

Any chance of converting Americans to opt for diesel seems to be scuppered for now. Given the prevalence of diesel technology among European brands, that in turn is going to hit any plans they had to push these engines in the US market.