Although the jury is still out on damage to the Volkswagen brand in South Africa as the scandal engulfing the German car manufacturer – whose name translates as the “people’s car” – grows, it seems there might be some respite for VW in (the People’s Republic of) China, where sales tax on small cars was halved as of Thursday.
Though most likely unrelated, the tax cut in China, designed to revive growth in the world’s biggest automobile market, could well provide a much-needed shot in the arm for the German carmaker at a time when it needs it the most. The emissions scandal choking VW, which started in the US, has spread to a growing number of countries, including Germany, the UK, Italy, France, Canada and even South Korea.
A source at South Africa’s National Regulator for Compulsory Specifications told ANA on Thursday that it was still evaluating whether the car manufacturer broke any rules in the country.
Internationally, analysts and competitors of VW, which has admitted fitting cars with software that manipulates emissions levels during testing, are increasingly questioning the company’s storyline that knowledge of the misconduct was limited to a small group of technicians and engineers.
VW has acknowledged that the software that cheats emissions testing systems, the so-called defeat device, was installed in 11 million cars worldwide. VW’s boss in the US Michael Horn admitted, “We’ve totally screwed up”, and the company’s group chief executive Martin Winterkorn was forced to fall on his sword, tendering his resignation despite denying any wrongdoing.
While the company has admitted from the start that the misconduct was serious, it has consistently characterised the scandal as the fault of a small group of technicians and engineers. Statements seem to suggest that the news has come as as much of a shock to its senior executives as to drivers who paid a premium to enjoy the view from the moral high-ground of the driver’s seat of a ‘cleaner’ diesel car.
The worst business crisis in VW’s 78-year history began on September 18 when the US Environmental Protection Agency (EPA) issued a notice of violation to the manufacturer after discovering that the company had equipped vehicles with software that enabled emissions controls only during laboratory testing. This caused emissions produced, and measured, during testing to be much lower than those produced during normal driving, when the affected vehicles emitted up to 35 times the legal limit of nitrogen oxides.
The EPA has made it clear that the software appeared in Volkswagen and Audi models over several years, from 2009 to 2015. It can be assumed that during this period of time all sorts of developments – from staff changes to software updates – must have introduced leaks into what is not likely to ever have been a water-tight clique. Volkswagen, nonetheless, is sticking to its story.
In the heavily polluted People’s Republic of China, where about 1.7 million cars were sold in August, change is the order of the day. The government’s decision, effective today (October 1) and due to last until the end of 2016, reduces taxes on cars with engines smaller than 1.6 litres. VW makes five of the 10 best-selling models in this category, which account for nearly 70 percent of total sales in China.
Yale Zhang, the head of Shanghai-based consulting firm Automotive Foresight, said the tax cut could lead to additional sales of about 100,000 vehicles per month for the rest of the year. “I am expecting some 300,000 to 500,000 additional sales for the last three months of the year in total,” he said.
This move comes after manufacturers had already been attempting to arrest a decline in sales with heavy discounting and other incentives. “Some are assuming lower sales taxes for new car purchases are not going to help much, but a government move like this is so heavily and widely publicised by Chinese media that it is more effective than deals advertised by companies,” Zhang said.
