VW’s ‘Dieselgate’ and Brand Damage

In September 2015, it was discovered that Volkswagen had intentionally set their diesel engines to activate specific programming during emissions testing. When activated, these ‘defeat devices’ produced compliant emission readings, but were, in reality, producing diesel emissions that were 40 times the legal limit. Nearly 12 million vehicles worldwide that were manufactured between 2009 and 2015 have these devices installed.

The scandal has become known as ‘Dieselgate’, and Volkswagen sales have since plunged by 20 per cent, according to the Society of Motor Manufacturers and Traders (SMMT), costing the automaker an estimated £7 billion. These figures are in stark contrast to the overall healthy performance of UK car sales, which saw an increase of 6.2 per cent over the previous year.

In a matter of a few short months, Volkswagen’s brand has been heavily damaged by its emissions tampering—but it may not be irrevocable. Still, the process of restoring its tarnished brand will be slow and potentially difficult for the automaker. It needs to earn back the respect and loyalty of the global public.

As a motor trader, you may think brand damage suffered by the manufacturer will not affect you greatly (unless your business predominantly deals with VW stock). However, there is still the potential that customers may not distinguish between your brand and that of the automotive manufacturer. Moreover, savvy customers will be aware that Volkswagen share parts with other manufacturers, including the likes of Audi, Seat and Škoda. For that reason, it is important to be aware of the potentially brand-destroying incidents of manufacturers, as they may impact how and what you sell. In addition, keeping information related to a scandal or recall from customers in order to sell a particular vehicle may be as damaging to your brand as the manufacturer’s questionable decisions.

The decisions that Volkswagen made in an effort to increase profits demonstrate the importance of operating with integrity and honesty. And, while you cannot control what is happening higher up in the supply chain, staying informed can help you provide concise, up-to-date information to your customers—thus proving your honesty.

For more beneficial information and guidance related to the motor trade, get in touch with Bollington, the UK's leading motor trade insurance provider.