Daniel Trotier
AP Mirco/Macro Economics
Mrs. Straub
10/19/15
The Death of Diesel?
Recently, a massive scandal shook the automotive market: Volkswagen AG, one of the largest automotive corporations in the world with over 350 Billion USD in holdings, was found to have software in the ECU’s of their diesel engines that would give a false reading of emissions to be within US Standards during emissions testing. This allowed for the cars to give off higher emissions without being caught and at the same time increase the amount of power put out by the engine, most likely to increase customer satisfaction with the car. Prior to this scandal, Volkswagen had the comparative advantage in the market for producing diesel cars. So why would they jeopardize their status with this illegal move? There are several reasons, but the main one has to do with reviving a failing market in which Volkswagen has a near monopoly.
It’s an indisputable fact that diesel cars are on the brink of extinction. Richard Gane, an automotive expert at consultants Vendigital, stated in an article published by the BBC that, “In the US, the diesel car market currently represents around 1% of all new car sales…” (Hotten). Although diesel engines are more efficient, they have a lot more negatives than gasoline (or petrol) engines. This video explains the difference between the two types of combustion. A decrease in the demand (a shift to the left) of diesel would have a large negative impact on the Volkswagen Group, as a good portion of their fleet is diesel powered. In fact, nearly 72% of Diesel Car Sales in December of 2014 were by Volkswagen. (Hobb) This comes to show Volkswagen’s domination and resulting high standards that they are held to by consumers. To maintain their large customer base, Volkswagen needed to continue to separate themselves from the other producers in their market. They did this by providing an extra “kick” to their diesel engines and at the same time advertising that their cars were “Clean Diesel”, while unbeknownst to the public, they were increasing their emissions. Audi, a subsidiary of Volkswagen, launched a sports car racing campaign centered around “Clean Diesel” that is still running, and has gone on to win several championships including 8 Overall Victories at the 24 Hours of Le Mans (More info here). In addition to the advertising campaign, the cars were very reliable, leading to many positive reviews, and increased demand (a shift to the right). The reprogramming of the engines, which began as early as 2009, went unnoticed because of all the positives received from the market, so in the consumer’s mind, there was no need to question their practices. Now in 2015, this scandal leads consumers to question other auto manufacturers and their honesty on emissions.
In the long run, this scandal may have rang the death knell of diesel in cars. Facing already increasing scrutiny for the amount of soot they produce, diesel cars have become less and less popular. However, many important modes of transportation depend on diesel such as trains, trucks, and cargo ships. So although the end of diesel automobiles is on the horizon, diesel power will remain with us for a long time.
Works Cited
"Audi R10 TDI." Wikipedia. Wikimedia Foundation. Web. 20 Oct. 2015.
Cobb, Jeff. "December 2014 Dashboard - HybridCars.com." HybridCars.com. 6 Jan. 2015. Web. 20 Oct. 2015.
Hotten, Russell. "Volkswagen: The Scandal Explained - BBC News." BBC News. 7 Oct. 2015. Web. 20 Oct. 2015.
Kedrosky, Paul. "An Engineering Theory of the Volkswagen Scandal - The New Yorker." The New Yorker. 16 Oct. 2015. Web. 20 Oct. 2015.
Stansfield, Jem. "What's the Difference Between Petrol & Diesel? - Bang Goes The The Theory - Brit Lab - BBC." YouTube. YouTube, 16 May 2015. Web. 20 Oct. 2015.
First off, I love the title. Great creativity. The fact that Volkswagen would go out of their way to do something illegal is very interesting to me. Initially, I was wondering how they could possibly go through with something like that, but you made it very clear what their incentive was. They are the main source for diesel cars, so why not try and increase emissions? I thought you did a great job with the essay.
ReplyDeleteYour analysis of the VW's motivation to deceive customers and regulators is highly astute and accurate. An additional factor which helped motivate them to evade emissions regulation was their lofty growth targets, specifically their goal of becoming the world's largest car manufacturer. Obviously this was not a easy goal to achieve, however Volkswagen was able to make this task significantly easier by increasing the demand for diesel vehicles, a production field they were already dominating, with their advertising and false performance data.
ReplyDeleteThis is one of the more talked about issues in recent news. This definitely will leave a lasting impact on the American buyers. I love your research and you definitely knew what you were talking about. I wonder by how much the Volkswagen stock will fall because of this. I am also curious as to how they would continue to fool the testers for that many years. It makes you wonder how good the testers are. Additionally, it makes you wonder why Volkswegen just didn't continue to develop a clean diesel car or at didn't list it as clean diesel. But great job.
ReplyDeleteSome believe that the program that was developed as a result of engineers "tuning" the engine, and that overtime the changes eventually ended with the software and scandal.
DeleteThat is quite shady of them to pull that, as I have looked into buying one of these cars for awhile. I believe just lying to the public is going to cause their sales to decrease knowing that they were being lied to for such a long time. I always thought that these vehicles were in fact clean and were not bad for the environment, but now knowing this is makes me kind of mad that they were still putting them out there even though they knew how bad they were for this planet. Are planet is polluted enough but why keep selling a car that you know is pushing out a lot of bad emissions? I'm just surprise that such a high end company like Volkswagen would do something like this, definitely is going to drop down a lot of people's respect for them.
ReplyDeleteSurprisingly, there was poll published recently on the German's view on Volkswagen, and a majority (65%!) still supported them and thought the whole scandal was overblown, contrary to what many analysts expected.
DeleteWhen I saw this in headlines I didn't pay it much mind because I just chalked it up to another shifty business thing to increase sales, out of greed, but I never realized it was due to such a threatening decrease in demand for diesel automobiles. I had always assumed the sale of diesel cars was fairly stable, clearly I was wrong! When you added that there will still always be a need for diesel because of vehicles such as trains, plains, and cargo ships it's almost a funny thought that maybe VW would *try* to make something for those industries in place of selling diesel cars.
ReplyDeleteIn addition to the other car companies Volkswagen owns like Porsche, Audi, and Lamborghini to name a few, they also own Scania and MAN which are two prominent European Truck Companies. So even if the Diesel Market in cars dies off, they'll still have a fairly large share in the European Market for trucks as MAN and Scania trucks are not sold here in the US. They also have a Marine Division for which they make diesel engines, so it could be possible that this scandal could extend to many other markets.
DeleteWith me being the car enthusiast I am I actually like diesel cars just because they're turbo'd stock. For the sake of the article and not being biased I believe diesel cars and trucks will always exist just because the larger trucks needed for towing bigger things are diesel. There will never be a such thing as "clean diesel" in a car because as long as they are around the car guys that buy them will want to roll coal. I also agree that if we stop making diesel vehicles there will be a decrease in diesel but it will still be around for a very very long time just because the current vehicles will still need it.
ReplyDeleteVolkswagen put out false data to the public and attempted to hide this because they wanted to continue to grow. They wanted demand for their newer types of cars to go up. This car company had the reputation of low emissions before this software was discovered, and now that it’s out in public, their sales are going to be largely affected. I also agree that the popularity of diesel in cars is declining, but I also agree that it will remain with us in other methods of transportation such as trains and trucks. It will be interesting to see how this decline will happen.
ReplyDeleteIts interesting how far VW would go just to try to increase demand. I guess the reason they may have done this, is because they had nothing to lose if the demand kept decreasing. But would they fake the "clean diesel" that they were trying to achieve? They could have put some research into this topic and actually made their goal, and instead of losing costumers, could have increased the demand for their car.
ReplyDeleteI really enjoyed what you wrote because I personally drive a Volkswagen Jetta and to see how it is impacted the economy with having diesels die out is surprising. Reading more into the demand and supply curve with the company having a decrease in cars make me wonder a little bit. Volkswagen's however, are very touchy with more and more repairs considering that I have to go to the auto store a lot to get a tune-up. Overall it was a interesting topic to read and makes me want to learn a little more about diesels and how it is affecting us today.
ReplyDeleteMike S (A3)
Because of the high demand for public transportation there will always be a high demand for diesel engines so diesel isn't going anywhere. The production of diesel cars that are available for everyday people are probably going to decrease or go extinct as people have to pass emissions.
ReplyDeleteBecause of the high demand for public transportation there will always be a high demand for diesel engines so diesel isn't going anywhere. The production of diesel cars that are available for everyday people are probably going to decrease or go extinct as people have to pass emissions.
ReplyDeleteI do not think that diesel will forever be gone in other vehicles because it is more efficient for like semi trucks and people who have to travel far distance towing things. For consumers get more mpg with diesel. Also considering that emissions testing it not done everywhere the demand for diesel will not decease. However it is kind of surprising that a "reliable" company would go to such great lengths just to increase their demand for these new makes of car.
ReplyDeleteIt is surprising that diesel cars are only making 1 percent of the sales even though they are more efficient than gasoline engines. It is interesting that a company like this would make it so they would be more efficient but break emissions codes. This really ruins the companies name now after what they did.
ReplyDeleteI believe that the sales of Volkswagen will decrease because of the recent scandal in which they had faked their emissions test. Volkswagen had advertised 'Clean Diesel', lying to consumers and the government about the emissions rating two models had received, when in actuality the cars were producing large amounts of emissions, more than the average diesel car.About a month ago, Volkswagen was accused of false advertising and faking the federal mandated emissions tests, The heads of the company are being prosecuted for breaking the law and will be sentenced.
ReplyDeleteIt amazes me that a company as prestigious as Volkswagen would try a move like this just to try and increase consumer satisfaction, while knowing the downfalls of how it would impact the environment and eventually how people would react to such a scandal. I wonder if now after this has come to attention people will stop buying Volkswagen vehicles and the demand for their cars will begin to deplete. Then maybe they will have to switch from a diesel fuel to something more efficient such as regular gasoline or even electric engines.
ReplyDeleteIt amazes me that a company as prestigious as Volkswagen would try a move like this just to try and increase consumer satisfaction, while knowing the downfalls of how it would impact the environment and eventually how people would react to such a scandal. I wonder if now after this has come to attention people will stop buying Volkswagen vehicles and the demand for their cars will begin to deplete. Then maybe they will have to switch from a diesel fuel to something more efficient such as regular gasoline or even electric engines.
ReplyDeleteI understand that will a failing company is this type of economy you want to do all that is possible to sell more of your product. But to do something such as this where you are willing to break the law is unnecessary. If you want to sell more of your product take the time to increase the quality of it legally not try to cut corners and make it illegally.
ReplyDeleteI was honestly not to surprised to see this in the news due to the fact that as we push car companies to meet higher standards eventually they would reach a point where engineers couldn't meet the standards of costumers and government regulations. It did however, shock me that Volkswagen was the first and only company caught mostly because they're considered a leading company in diesel car production. At the end of the day the company will not see a significant drop in stock prices or sales due to the fact that as you stated they have many subsidiaries, and they weren't reliant on the sale of diesel cars.
ReplyDeleteAny idea how they got caught? Also I feel this will hurt VW beyond their diesel line. VW tends to market towards people deemed as hipsters. This market is generally supportive of environmental protection. They may be hesitant to a company who is harming the environment and is dishonest while doing so.
ReplyDeleteThis is a great topic to talk about considering like you said Volkswagen is truly a leader in the diesel car industry. For them to be holding software that has been giving false advertising is a big disappointment due to the fact that they are the leader in this market. This could cause them now to lose sales and potentially customers to buy there products. One thing that you could have added was displaying charts on how big their advertising campaign was and how it impacted the consumers. Also you could have shown with charts how much diels trains, trucks, and cargo ships, and cars emit diesel pollution to give us the big picture on how big of an impact this really is. But overall you did a really good job conveying the topic on how it impacts our economy.
ReplyDeleteMy first question is why would they (Volkswagen) make such a desperate move? I understand that diesel cars are very low in popularity though Volkswagen doesn't just sell diesel cars. Since they were caught, in many perspectives, this makes their company look bad/untrustable. Was there another way the company could have handled the situation? If I was them, I would have admitted the mistake and made the correct (even if this would cost the company money). Otherwise, good job on writing about this interesting automobile news.
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