The official Irish numbers are out: 79,348 Irish motorists own cars fitted with software designed to cheat emissions tests. A further 30,000 used imports may also be affected, although that has yet to be clarified. They are party to a scandal that has torn up the reputation of one of Europe’s industrial giants and may ultimately change the motoring landscape.
Two weeks after the scandal first broke, attention is rightly focused on the immediate impact: recalls, potential tax implications and damage to resale values.
To recap: the scandal relates to an admission by VW that software code designed to cheat US emissions tests for nitrogen oxide (NOx), a harmful air pollutant, was included in the engine management system of its EA189 diesel engine. But what does it mean?
Irish motorist
First priority is to get more information on what VW is referring to as the refit. Customers will be contacted in the coming weeks to get the software replaced on the engine management system of their cars.
Indications are that there will be no impact on the NCT. Even if the new software system means a higher NOx emissions figure, NOx is not directly measured in the test. According to a spokesman for the Road Safety Authority, which oversees the test, these emissions are not part of the EU roadworthiness directive upon which the current criteria is based.
In the longer term, brand damage is a serious issue for owners, particularly when it comes time to sell. They can take succour in the fact that, unlike recalls by Toyota, GM and the recent controversy of failing airbags, this is not linked to a safety issue. Despite all the anger and ire, the affected cars remain as reliable and safe as they always were. The issue is that VW effectively lied about the emissions. However, a great deal of research shows we have been fooling ourselves about official emission levels from all cars for years.
For now, after the refit, the main focus for owners of affected cars will be on the implications for motor tax.
Motor tax
On this we are still in the dark. VW has not said yet whether removing the defeat device software will also affect fuel economy and carbon dioxide (CO2) emissions in vehicles where the software has been activated and, if so, how it plans to address this.
Our tax regime is based on carbon dioxide (CO2) emissions for all new cars registered from July 1st, 2008. The Department of Environment says any new figures that result in a new certificate of conformity being issued for these cars “would affect the rates of motor tax applicable”. “The matter will be kept under review,” it said.
Revenue says in the event of revisions to emission ratings, it “will consider the implications for vehicle registration tax (VRT)”.
Take, for example, a 2012 Audi A4 2.0 TDI 136PS. It's currently rated with CO2 emissions of 120g/km. Just 1g more and it falls into the higher tax bracket, incurring an extra €70 in motor tax under the current charges. A 1g CO2 rise would also mean it should have incurred a higher rate of VRT when it was initially sold.
If tax rates rise on these cars, legal sources suggest owners will move quickly to the courts for compensation from VW.
VW and its brands
In an airport lounge in
Germany
, the unfortunately named VW board member
Olaf Lies
this week told the BBC: “Those people who allowed this to happen, or who made the decision to install this software, they acted criminally. They must take personal responsibility.” He said the first he heard about the test scam was at a board meeting just before the scandal broke.
It was widely regarded as another attempt by top-level management to forgo responsibility for this corporate fiasco. While board members claim they didn’t know, clearly several senior figures must have. According to reports this week, Volkswagen’s staff and one of its suppliers warned years ago about software designed to thwart emissions tests.
One of VW's key suppliers, Bosch, warned Volkswagen in a 2007 letter that the planned use of the software was illegal, according to German newspaper Bild. In the US, the firm faces enormous fines – up to $18 billion – and class-action lawsuits that could also run into billions of dollars.
Depending on the impact on CO2 emissions from the fix, more lawsuits in Europe may follow. Across Europe the reaction of national authorities has been to launch inquiries, demand repayment of green subsidies or instigate criminal proceedings. So far, the Irish authorities are keeping matters "under review". The managing director of Volkswagen Group Ireland, Lars Himmer, has been asked to attend the Oireachtas transport committee to answer questions on the scandal.
It’s too early to say how these proceedings will play out. The goal of becoming the world’s biggest car firm seems to be over as the reputational damage in the US, a key market particularly as the growth in new car sales in China tapers off, is enormous.
VW’s share price has collapsed by 40 per cent since it closed September 18th at €162, wiping more than €20 billion off its value and investor portfolios. Even with this massive hit, it’s hard to say if all the potential scenarios have been priced into the stock at this stage. VW’s annus horribilis has only just begun.
Regulators
One thing is clear: current emissions tests are a joke. The New European Driving Cycle (NEDC) test, from which all official CO2 and fuel economy figures are taken, allows car makers to set up their cars in such a way that no one could really drive them on the public road. Spare wheels and interior trim can be removed to save weight, body panel gaps can be taped up to improve aerodynamics, and wing mirrors removed for the same purpose. The car’s battery can be externally charged and the alternator disconnected to reduce strain on the engine.
Air conditioning is never used and nonstandard low-rolling resistance tyres can be fitted, and they can be overinflated to near the point of exploding, all in the name of setting the best possible figure on the official test. All of this is entirely legal and above board, under the current system. It puts Volkswagen’s actions into perspective.
The tests are carried out by certified testing organisations overseen by National Type Approval Authorities. Most of these testing organisations are in countries where there is a manufacturing base. Ireland has no certified testing organisation for cars, and so, like many smaller non-car manufacturing nations, depends on the certified results from tests carried out in other EU member states.
Campaigners have complained for a long time about the tests, but few listened. The EU agreed in May to introduce real-world testing element to tests by 2017. Given that a great deal of public policy – from Ireland’s tax regime to urban air-quality standards – is based on these test results, testing standards need to be radically improved.
Motor industry
On Tuesday we got a front-seat view of an industry in the midst of a revolution.
As VW's Olaf Lies played the blame game and the 78-year-old motoring behemoth struggled to stay on the road, across the Atlantic the new faces of the auto world were showcasing their latest wares. Tesla boss Elon Musk delivered the first of his firm's new all-electric SUVs to customers in California.
The impressive Model X has the option of a biodefence system which, according to Musk, can fill the cabin with medical-grade air and keeps out viruses, bacteria and spores. That it could also protect you from dirty European diesel emissions was the obvious – but unsaid – punchline to his presentation.
Earlier this month Tesla opened a new European factory to speed up delivery of its Model S to customers. At present, its factory in California is running at full capacity to keep up with demand.
Tuesday also saw Google showcase its latest iteration of the fully autonomous car. While Google said earlier this month it wasn't looking actually to build its own range of cars, the message on self-driving autonomous vehicles is clear: it's real. It's revolutionary. It's coming.
This emissions scandal may be the moment when motorists seriously consider alternatives to petrol or diesel powertrains.
Ironically in an industry where mechanical might is being challenged by tech know-how, it's a nefarious software code that may herald the most serious threat yet to motoring's old guard. Kyoto protocol: Why did we ignore NOx until now? Under the Kyoto protocol climate-change agreement in 1997, most wealthy western countries were obliged to reduce CO2 emissions by an average of 8 per cent over 15 years. Given the role of the car in the climate debate, it was a particular focus of attention.
In the United States and Asia, legislators dismissed the climate-change debate, instead focusing on air quality issues. Those who recognised the risks from greenhouse gases looked to the advent of petrol-electric hybrid engines – and ultimately the electric car – as a way to reduce all types of emissions.
In Europe, it was noted that diesel could offer a quick affordable fix and would be far less costly than the hybrid systems, which were still in their infancy. Diesel engines produce on average 15 per cent less CO2 than equivalent petrol powertrains.
It also helped that European car firms had the lead in diesel technology. If it could become the answer to climate-change concerns, European car firms would have a distinct advantage on the world stage. Governments were encouraged to promote low CO2 emissions, and diesels, through their tax policies. Ireland took up the mantle in 2008.
The problem is that while diesel may be better for the climate in terms of CO2, it’s much worse in terms of air quality. A diesel engine emits nitrogen oxide (NOx) and other tiny particles that penetrate the lungs, brain and heart.
Prof Martin Williams, of King’s College London, has estimated that in Britain emissions from diesel cars cause roughly 5,800 premature deaths each year.
Diesel was always recognised as dirty. EU legislators hoped, however, they could force a gradual reduction in NOx through ever tighter industry standards. These came in the form of EU emissions regulations, which gradually imposed stricter emission levels on diesel engines.
The reality, however, was that these limits were required to be met only under the EU’s existing lab-based regulatory test (NEDC), now widely recognised as being unfit for purpose. They bore little relation to the everyday emissions of these cars in the real world.
Research compiled by Adac, Europe’s largest motoring organisation, shows that some of the diesel cars it examined released more than 10 times more NOx than revealed by existing EU tests. It found new diesel cars from Renault, Nissan, Hyundai, Citroën, Fiat, Volvo and other manufacturers emit substantially higher levels of pollution when tested in more realistic driving conditions.
This is in line with a report this month from Brussels campaigners Transport & Energy, which found nine out of 10 new diesel cars break the latest EU pollution limits when tested on roads rather than lab conditions.
“Gaming and optimising the test is ubiquitous across the industry,” says Greg Archer, an emissions expert at the group.
In Ireland, NOx has never really been on the motoring radar. While we were fixated on CO2 thanks to its integral role in the motor tax regime, we largely ignored the air-quality issues. The Road Safety Authority has confirmed NOx is not measured in the NCT.
Europeans dismissed the US focus on air quality as a cynical ploy to protect its petrol-focused auto industry from more fuel-efficient European diesel rivals. In hindsight, even if that was partly the reason, the focus on air quality seems to have been right.
As one engineer from a leading car firm told The Irish Times earlier this year: “We might save the planet from global warning by all turning to diesel, but if we do, we’ll all be too busy dying from [the pollution] to enjoy it . . .”
