How Much has the Diesel Scandal Affected VW Sales?

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How Much has the Diesel Scandal Affected VW Sales?

It has been a tough go for Volkswagen since it was served a notice of violation by the Environmental Protection Agency (EPA) back in September.

The company has had to put a stop-sale on its diesel-powered vehicles because they don’t comply with the U.S. agency’s emissions standards. The vehicles were discovered to have illegal software that made it easier to pass emissions testing. Besides facing possible criminal investigations, Volkswagen is also furiously working on a fix for its affected vehicles, which will either include a software flash (which is likely for newer vehicles) or an expensive hardware retrofit.

The brand image has certainly suffered, as the German automaker has been labelled as cheaters and liars. Consumer sentiment has definitely been tarnished, but have sales taken a similar turn downwards?

“We did recently run a consumer survey on dieselgate, and people are 28 percent less likely to buy a VW after the scandal,” says Alex Klein, from Autolist, an online service that polls new and used car buyers and helps connect customers to dealers to help find their next vehicle.

Weathered the Storm? Not Really

While Klein’s analysis says that people are less likely to buy a VW since the scandal broke, it’s interesting to see that the company hasn’t seen a huge slide in terms of sales.

“People look at VWs and think, ‘Wow, massive rebates on great cars that are brand new? I have to check it out.’ ” he said. “There is no thought given to the idea that VW could still be cheating; it seems impossible.”

Timothy Cain, who has been tracking new cars sales on Good Car Bad Car for several years, explains Volkswagen’s current situation.

volkswagen-diesel-compensation-fund

“VW initially held sharp declines at bay with strong incentives and decent inventory,” Cain said. “As the inventory began to dry up, and as the tolerance for a tarnished product decreased, we now see January’s result, where VW owned just 1.7 percent of the U.S. market.”

Cain notes that the brand has been struggling for the whole year compared to 2014.

“VW owned 2.3 percent of the market in December 2014 and 2.0 percent of the market in January 2015,” he said. In August 2015, they were at 2.0 percent, December 2015 at 1.9 percent, and finally down to 1.7 percent in January 2016.

“January was the worst performance for the brand in the U.S. in 60 months, however, as the launch of the facelifted Passat essentially [went] unnoticed,” said Cain. “Fewer than 4,000 Passats were sold last month, a drastic result in a category where top sellers routinely top 30,000.”

There are a few reasons why the brand struggled in the U.S. in the past years, even before the scandal.

“Among mainstream automakers, Volkswagen was already a fairly niche entity in the U.S.,” explained Cain. “How a brand fares after a scandal depends largely on the perception of the brand prior to the scandal.” Cain pointed out that the brand had already been suffering with a poor dealer image and quality concerns in the country.

2015-volkswagen-golf-tdi

He added “not being allowed to sell the [diesel equipped] vehicles, which accounted for 20% of your brand’s traditional volume, is a major problem.”

Klein agrees that the diesel stop-sale is the major factor in the company’s sales decline. “The VW diesel scandal has been relatively contained to the used, affected diesels,” said Klein. “The only measurable drop-off in sales performance for VW can be attributed directly to the fact that VW was forced to stop selling all diesels in the U.S.”

Dealer Lots Face Harshest Impact

Klein points out that used car lots see the biggest hit to their sales.

“VW does not publish used VW sales statistics, nor do any other OEMs, because that metric is not a crucial business driver,” he explains. “However, for dealers on the ground — VW affiliated and non — there are serious consequences. There are hundreds of thousands of cars out there needing a recall that are essentially dead assets on lots, unable to be sold. Thus, the economic drain is not felt at the VW parent level so much as on the local level, which is what makes the scandal all the more disheartening.”

Klein explains that there’s nearly $20 million of value being lost on cars on the lot. According to Autolist’s survey, the list prices for scandal vehicles are down 5.5 percent below expectations, and non-scandal vehicles are down 1.8 percent. On average, VW list prices have dropped $2,000 and dealers still cannot move them off lots. Additionally, cars are sitting on dealer lots 71 percent longer.

While the dieselgate scandal has certainly influenced how people think about Volkswagen’s image, the impact on sales is harder to explain, and planing an exact dollar figure or number of cars is nearly impossible. Sales were already struggling in the country, but are now being stripped of its biggest strength, the diesel equipped vehicles. However, the dealerships are the ones that are really suffering, as the cars lose value, sit on lots longer and are being sold at significant discounts. The impact of the VW scandal goes far beyond just sales.

Discuss this story on our Volkswagen Forum

  • erth

    all they have to do is start selling diesels again, and their sales will go up. i don’t know about anyone else, but i am waiting patiently for the tdi’s to be sold again so that i can buy one.

  • Steve

    you can buy ours. 2015 golf sportwagen, 9000 miles. Vienna, VA

  • erth

    you know, if i was closer, and an american, i would. but i am a canadian and i would have to figure out what import duties and all of that. sorry. don’t you like it?

  • Tony Clifton

    I have a 2012 Passat TDI. I’ll likely switch to a gasoline model after this, I don’t want to wait for something that may not ever be sold. I’d buy a 2016 Passat… love the car. One thing the article doesn’t consider is that TDI owners who may be in the market for a new car don’t want to miss out on a settlement. (Like me)

    The longer it takes Kenneth Feinberg to offer compensation, VW defers future purchases, and risks losing customers as indecision lingers. When they lose me, I won’t be back for 5 years.. I was ready to buy in September 2015. That Kia SUV gets more tempting, as I consider a cut and run.

  • Joseph 6

    You will be sad when VW buys back everyone’s car if you sell now.

  • I love my VW’s; great cars. 2014 R-Line Beetle, 1965 Beetle. Because of TDI scandal you can buy a VW for less than before. My dealership treats me like a VIP. Some good can come out of the negative. Their cars are good cars. TDI scandal not dealers fault. TDI’s are great cars…Sad part is TDI buyers were most loyal. VW was #1 in world before all of this. Their racing teams are awesome. #varx #redbullgrc

  • Car of the year…How quickly we forget?

  • New Honda Civic has engine failure issues. Car of the year 2016? And.. I love Hondas too. Glad they are joining Red Bull GRC! Air bag thing in lots of cars………

  • Jan

    The EPA take down of VW is ridiculous. Next they will be arresting smokers. Meanwhile the coal plants, industrial agriculture, etc destroy the environment with impunity and the EPA is helpless. they can only go after companies that are not protecting by Congress, small (US marketshare) foreign companies and small cap domestic companies. The point source pollution by the serious US polluters is orders of magnitude more serious than TDI exhaust.

    The GM fleet of recreational “sport utility” vehicles being sold and driven as passenger cars, but regulated as trucks, is orders of magnitude more severe pollution. VW’s crime was selling passenger cars instead of “light trucks” to commuters.

  • Paul621

    Jan I disagree. The REAL issue is ” … The vehicles were discovered to have illegal software that made it easier to pass emissions testing. Besides facing possible criminal investigations … “.

    That illegal software installed by THEMSELVES was there to decieve the EPA … but also their own CUSTOMERS.

    In our business, it’s the customer that signs our paychecks.

  • Paul621

    Looking at the comment “However, the dealerships are the ones that are really suffering, as the cars lose value, sit on lots longer and are being sold at significant discounts. ”

    And the headline “Dealer Lots Face Harshest Impact”. Are you kidding !?!?

    I certainly feel for the Dealers, and expect we’ll see a huge class action suit against VW.

    But ALSO, the point missed is the even greater impact on the CUSTOMERS who own one, and the drop in resale value. Who compensates those loyal customers who trusted VW?

  • TellTheTruth11

    There is NO resale value. I recently tried to sell my 14 Jetta TDI, as I buy a new Audi or VW every 2 years. Not ONE call from my ad. Not ONE! And the car is very nice and has the premium package. So…

  • DoctorFeelgoodMD

    Bottom line is VW purposely deceived the US EPA and lied to TDI owners. Either way, VW scammed a US government agency and no ones gets away with that without paying the piper. The EPA is now investigating Mercedes-Benz diesel vehicles so the party has just begun. I’m a TDI owner by the way.

  • DoctorFeelgoodMD

    What amazes me is VW was bound to get caught sooner or later. What on earth were they thinking? Now I know why Germany lost the war.