Volkswagen's slogan “Das Auto” was one that I esteemed as much as I did the performance of its vehicles. It is a phrase that is circulated in international media with that tough German emphasis and has achieved monumental meaning from two little words, also known as “The” Car. Whereas in Turkish, we can vary this as “this is the car” or “this is what you call a car” or simply use the name of the car.
Volkswagen (VW), which, with the maturity of turning 70 in 2007 deemed suitable the “Das Auto” motto for its brand, struggled greatly to express this claim in numbers. After all, competing with Toyota was not a walk in the park. However, it is obvious that VW slightly overdid it while trying to achieve its goals.
As you know, it was revealed with a scandal that broke out in the recent weeks that Volkswagen installed a software in its diesel vehicles, which dodged the emission tests. With this application, VW cars managed to adjust the engine through the smart device that was activated at the time of testing and show the emission level as low. Obviously the company wanted to show that the vehicles it produces are clean, powerful and economical to become an authority in the diesel vehicle market, particularly in the U.S.
However, even if VW found the perfect formula during the marketing process, it is not that simple to achieve it in the production stage. As is known, the diesel engine is more economical in fuel consumption compared to petrol. Additionally, it outdoes the petrol engine in terms of nitrogen oxide which is hazardous to health. While on the one hand the customer demands low fuel consumption, on the other hand it becomes difficult to make a concession from performance for the sake of emission. Hence, a trade-off comes into question. It seems that this is why VW preferred fuel economy over regulations.
As you know, today, regulations on carbon emission are a hot item on the global agenda. Although the nitrogen oxide matter is not as prominent, there are places where there is pressure on this subject, particularly in the U.S. Currently, including those in the U.S., 11 million vehicles are affected by the scandal.
So, what is going to happen now? The scenario for Volkswagen in the short-term, in addition to the burden of recalling hundreds of thousands of vehicles, might be expected as facing ginormous penalties, experiencing problems in the finance department and being tested with sales. The level the incident will impact VW also depends on the actions countries other than the U.S. have taken or will take. In addition to this, damage to perception is going to be a negative factor in the general sense.
Of course, all these incidents bring to mind questions not involving VW: What are other diesel vehicle producers trying to survive in the same trade-off world doing? Is the problem with VW alone or are there similar problems in the industry? The effects of this on brands such as Audi, Seat and Skoda in relation to VW are already on the agenda. With tight inspections that are likely to be introduced, all associated actors may be held subject to a brand new test.
On the other hand, beyond VW and other vehicle producers, the upcoming period is going to hold doldrums for Germany's economy as well. Foreign trade figures alone show that one-sixth of the country's export revenue in recent years is from motor vehicles. There is no doubt that this is going to put a damper on the other sectors in the chain. In fact, even beyond that, it wouldn't be wrong to say that VW's exhaust smeared the “Germany” image. And to take it another step further, the EU, too, will take its share from this, whether within or without. In brief, systemic risks should not be taken lightly.
The big picture
The reason the scandal surfaced in the U.S. is because nitrogen oxide emission-related regulations in the country are strict. In addition to this, I think here, like in all traumatic incidents, it is important to look at the likely big picture. First it should be underlined that the software installed in the vehicles is serious matters and it is not really possible for the management to be unaware of it. In fact it is highly likely that the matter leaked outside the corporation some time before. Regardless of the past, in the end, the U.S. has chosen to use this information “today.”
In this context, the incident can affect the nature of the Transatlantic Trade and Investment Partnership (TTIP) between the U.S. and the EU. While the TTIP, one of U.S. President Barack Obama's critical plans, which we discuss from time to time in this column, encourages certain regulatory concordance between the two sides, the motor vehicle industry is one of the shining industries of the project. As the dreams regarding the sales of German cars in the U.S. will be fading as a result of the VW incident, more importantly, the European side's hand will weaken regarding the general regulations within the scope of the TTIP. As for standards, the always patronizing EU is going to be an embarrassed EU, whose control mechanism is confirmed to have flaws. The results of this situation will be one of the determiners of the traces of Obama in the last leg, who is struggling for the Trans-Pacific Partnership (TPP) in the Pacific front as well.
Additionally, the scandal and related dead-ends are like a test for the survival of the diesel market. Unless the cost, performance and emission contradiction is resolved, it is going to become harder for diesel to survive in a world of stricter regulations. In response to this, the electric vehicle front may pick up. All this will have implications on motor vehicles, extending all the way to the oil industry. Thus, as a result of the VW incident, there are now arrows being shot toward the future. Every dynamic will bring along with it different shifts of power.
Getting back to the cause of the matter, naturally, the future plans of Volkswagen, which had an accident in the car game, are going to change. Let alone claiming to be the people's car, “Das Auto,” it seems, from now on, VW will have to make do with being “Ein Auto.” It is better than being “Kein Auto.”
On the other hand, for VW, which wants to save both its lifelong efforts and future, it can also be hoped that the incident serves as a creative debacle. For instance, focusing on the field of electric vehicles to provide a service to the world can be a costly but visionary approach. This requires new engineering achievements.
Hence, the company should be asking itself this meaningful slogan, which it only recently asked its target audience:
“Isn't it time for German engineering?”