Dieselgate: No long-term effect, says VW
Volkswagen expects petrol models to make up sales shortfall from suspended diesel salesOutgoing Volkswagen Group Australia chief John White believes there will be no long-term effects on the German automotive brand as a result of the 'Dieselgate' scandal affecting 11 million vehicles globally and almost 100,000 in Australia.
Speaking at the launch of the new Passat this week in his final public appearance before taking early retirement for personal reasons as announced in early August, White said he did not believe the future of Volkswagen was at stake due to the NOx emissions-cheating debacle.
"There will be financial impacts for the group, but do I have any concerns for the company's viability? No," he said.
VGA last week became the first Volkswagen subsidiary to announce a recall resulting from the scandal that broke late last month, identifying 61,189 Volkswagen passenger vehicles, 17,256 Volkswagen commercial vehicles and 5148 Skodas fitted with the suspect 1.6 and 2.0-litre EA189 diesel engines, establishing a public website to check if specific vehicles are affected and apologising publicly three weeks after the issue was uncovered.
White was quick to point out that 95 per cent of VGA's model range is unaffected, including all petrol VW and Skoda vehicles, all Touareg, Amarok, Multivan, Transporter, Crafter and new (B8) Passat models, the 2015-2016 Golf 7 TDI and the Skoda Fabia, Rapid and Octavia.
However, VGA is yet to advise owners of affected vehicles – including diesel versions of the VW Jetta, B7 Passat, CC, Tiguan and Caddy, and the diesel-powered Skoda Yeti and Superb -- when their cars will be fixed, what the fix will involve and whether the performance of their vehicles will be affected.
White, who predicted in April last year that Volkswagen would become a top-five brand in Australia once local car-making ceases in 2017, conceded there will be a short-term sales impact following the suspension of sales of affected models, about 600 of which were now frozen in dealer stock.
Volkswagen has been the eighth-best-selling brand in Australia since 2011, but its sales have remained static at around 55,000 for the past two years. Sales are up 14 per cent so far in 2015 following a 15 per cent spike in September, but White said sales impacts would not emerge until October's registration figures given the scandal broke on September 20.
"Those 600 cars that we can't sell, I'd like to think we would have sold them all. So we can't sell those cars and we'll be holding on to them until we can," he said.
"We're not going to be selling affected cars so there's no doubt that's going to have some effect.
"Are we looking at a dip? Perhaps a dip as it pertains to our run rate but the jury is still out right now as to how we'll perform versus last year.
"There's no issue with Golf, which is our bread-and-butter car. I wouldn't really expect to see any changes there and it's too early to speculate on next year."
"Obviously diesel customers are providing a lot of feedback. We still posted some pretty strong sales for the month of September. We'll see how we go in October."
White said more petrol vehicles could be ordered to make up for lost sales of diesel vehicles, which account for just 17 per cent of VGA's passenger car sales but 70 per cent of its commercial vehicle volume.
"We'll look at our mixes to see if we can pick up lost business with petrol," he said.
"We're going to look at it on a model by model basis. We've asked our sales and product planning teams to look at it.
"We have a six-month order to delivery pipeline in Australia because of the distance so when you look at that and you have a projected fix you'd like to think those cars will come with the updated equipment.
"So this is what I would call normal ongoing operational planning that we'll have to monitor in the same way as any other supply and demand situation.
"Right now if we want to sell Jettas and we have an issue with Jetta then obviously we'd only order petrol engines, get those in and sell them, then once we know we've got a fix, we'd bring diesels again. We're adjusting our mixes."
White said Dieselgate would not trigger a move away from diesel Volkswagen vehicles in Australia, where the Polo diesel was discontinued as part of a midlife upgrade earlier this year.
"Polo diesel was phased out because we had a low take-up rate and we tried to reduce our complexity," he said.
"When I look at the success with we've had with Polo we've done quite well without diesel in that segment.
"Touareg is diesel-only but I wouldn't start offering petrol engines to pick up maybe a few lost sales.
"You've got to look at it on a model by model basis. A PR exercise will be required, we'll have to monitor the situation, but for us right now is let's get the fix determined and launched to take care of our customers."
Incoming VGA MD Michael Bartsch said he did not expect Dieselgate to have a long-term effect on the popularity of diesel vehicles in Australia.
"I think it would be premature to speculate the demise of the diesel over this," he said.
"EU6 diesels are completely compliant in terms of exhaust emissions and there's an extremely strong culture in Australia with people towing and so on. They understand the technical value of the relationship between torque and horsepower.
"Diesel has its own particular aficionados and there are particular advantages of diesel over petrol. The reality is that if you own a property and you need diesel for your trucks and you're tractors it makes sense. There's no argument on the range.
"The reality is we're going to have to do some PR work, but I think it's unlikely diesel will disappear as a consequence of this."
Asked if he expected residual values of Volkswagen vehicles to reduce as a result of the scandal, White said: "No. We'll be fixing their cars as in any other recall and making the cars right."
VGA says it expects to begin repairing affected cars by early next year and to complete the recall process by the end of 2016, in line with the European timeframe, but is yet to determine what modifications will be required for specific models.
"The expectation is we'll start seeing some solutions at the end of January," said White.
"Software updates will be sufficient for some cars, others will need hardware modifications. They're still determining the fix. Is the fix the same on a 1.6 as a 2.0-litre? In Europe we also have 1.2 TDIs, so it might depend on the engine, it might depend on the model, it might depend on the jurisdiction.
"In the US they have EU6 'plus' so there may be something different than for Australia's EU5. You might have different fixes for different emissions requirements."
However, Volkswagen cannot guarantee all owners of all affected vehicles will choose to carry out recall work.
"We've identified the vehicles and once we've fixed them we believe that like in any other recall the objective is to make sure the customers are satisfied," said White.
"[But] We're looking at a fairly large number of vehicles. It's not only dependent on us but also dependent on the customers. Traditionally recalls get a high take rate but I've not seen 100 per cent.
"One of the good things about a recall is we have access to all the customer data, so we can get ahead of the curve, contact them, make sure that they know on a step by step basis where we're going."
Asked if some affected owners will need convincing to make their vehicles compliant, White said: "I don't know, I can't comment.
"When these cars come back to the dealer network the dealer has an obligation as well. When the customer sells his or her car there's an obligation.
"So I'd like to think the majority of people are going to get their car fixed, just like in any other recall, but it's hard for me to say what customers will do."
Volkswagen has said it will support "to the best of our ability" its 102 Australian dealerships, which are currently shouldering the cost of holding 600 affected vehicles and unable to sell seven VW and Skoda vehicles, but would not outline how until its national dealer council meeting this week.
"We're not going to leave them hanging," said White. " We have a good relationship with our dealers, we have a very solid dealer advisory board.
"One of the things I like our dealers is that we can work with them collaboratively, so we'll see what we can do about supporting them and coming up with solutions."
Dieselgate related reading:
Aussie Volkswagens and Audis recalled
Dieselgate won't tarnish other German brands
Huge recall planned, other brands hit
Audis affected top two million
ACCC issues statement on VW emissions saga
Müller locked in as Volkswagen CEO
BMW forced to deny emissions rigging
Volkswagen boss Winterkorn to go as crisis spreads
Dieselgate worsens, 11m vehicles could be affected
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