Volkswagen's American blues

Martin Winterkorn was the man who beat Toyota. He edged out the Japanese and turned Volkswagen into the best-selling automaker in the world. But there was one particularly stubborn market where the company always had trouble breaking out.

In the United States, Volkswagen watched its sales decline by 10 percent in 2014. The company lagged woefully behind in the compact and mid-sized car markets. Diesel, driven by about three percent of Americans, was the only sector where Volkswagen and its Audi brand had established dominance.

"There was a lot of work they'd been trying to do for a number of years to increase their market share in the US," Bruce Belzowski, an expert on the global automobile industry at the University of Michigan, told DW. "This is something that was one of their major goals as a company."

Winterkorn's downfall

Volkswagen now looks farther away from achieving that goal than ever before. The Environmental Protection Agency has accused Volkswagen of violating the Clean Air Act. Software installed in its diesel-model cars allegedly falsified nitrogen oxide readings to cheat emissions tests. Once these cars hit the road, they reportedly emitted 40 times the legal limit in the most extreme cases.

"This is a shock to the Volkswagen brand," Patrick Anderson, chief executive of the Anderson Economic Group, told DW. "This is a systematic effort to misrepresent the performance of their vehicles."

Winterkorn resigned over the scandal on Wednesday, though Volkswagen said the chief executive had no knowledge of emissions cheating. Nearly 500,000 diesel cars are affected in the United States. Volkswagen could face up to $18 billion in fines. The company has admitted that similar software is installed on 11 million diesel cars worldwide.

"It's a serious matter and it's one that clearly justifies the level of management concern that you've seen among the Volkswagen executives over the last 72 hours," said Anderson.

Impact on market share

If the allegations are true, Volkswagen didn't just cheat EPA regulators. According to Anderson, US drivers who buy diesel are willing to pay a premium in the belief that they're receiving better fuel economy and helping reduce emissions and fossil fuel consumption. They now potentially have to worry about the re-sale value of their Volkswagen diesels.

"One of the things you brag about with diesels is performance and fuel economy and this would have worked against that," Belzowski said.

Dealerships with Volkswagen diesel inventory sitting on their lots or orders placed could face disruption to their business. Volkswagen and Audi models powered by a 2.0-liter turbocharged diesel engine manufactured between 2009 and 2015 are potentially affected. Models include the Jetta, Golf, Passat, Jetta SportWagen, the Beetle and the Audi A3.

Volkswagen has set aside 6.5 billion euros to deal with the scandal. Customers will likely either receive compensation or have their cars repaired. Doing business with the world's best-selling automobile might begin to look increasingly unattractive.

"Unquestionably this is going to affect Volkswagen's market position in the United States and it's also going to affect their market position in Europe," Anderson said. "It may not affect them that much in China where concern for emissions is obviously quite spotty."

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