The Future of Diesel in America: Has Volkswagen Finally Done What GM Couldn’t?

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Volkswagen Beetle, also available as a diesel

Indeed, at the 2015 Detroit auto show, numerous car makers announced more diesels were to come. Jaguar Land Rover announced that every vehicle in their lineup, save one, would offer a diesel option, Mercedes introduced a midsized SUV coupe, the GLE 350d, Audi showed off the redesigned 2016 Audi Q7 TDI Clean Diesel, and Volkswagen added yet another, to become available in the spring, the Golf SportWagen TDI.

FUTURE OUTLOOK

As, it turned out, all this was a bubble, not terribly different than the economic bubbles built on companies such as Enron, AIG, and Worldcom,, which were built on accounting fraud.

Volkswagen used technology to circumvent EPA emissions standards, its then CEO, Martin Winterkorn, apologized publicly, twice, resigned, and is now the subject of a criminal investigation. Dozens of lawsuits have been filed in the United States against the automaker, and customers and dealerships, as well as Volkswagen employees, have been left shaking their heads.

Volkswagen, which has a history of innovative advertising and which has created tremendous trust in its brand, carried a goodwill valuation of $23 billion on its balance sheet in 2014. This represents the value of the brand, what the name or logo represents.

The value of the Wolfsburg automaker’s goodwill has, needless to say, plummeted in the past two weeks, along with sales of its automobiles.

The sales of diesel passenger cars and SUVs in the United States, which increased as much as 25% year over year since 2008, should have seen as much as 7% market penetration for 2016 based on The Diesel Driver’s analysis of the market.

It is now likely that the diesel market will significantly downsize, especially given the removal of all VW models except for the Touareg TDI as well as the Audi A3 TDI from the market for the foreseeable future.

Ironically, this comes at a time where it is easier than ever for automakers to certify diesels in the United States, given the advent of the Euro VI regulations that align closely with current U.S. NOx requirements.

As a result of the Volkswagen affair, it is likely that diesel passenger car and SUV market penetration will return to earlier levels and remain at that pace for several years.

(Photos: Accura Media Group)

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