VW scandal drags down Germany's brand

The fallout from the Volkswagen emissions scandal continues. The #link:http://brandfinance.com/news/press-releases/vw-risks-its-31-billion-brand-and-germanys-national-reputation/:Brand Finance# Nation Brands report - an annual ranking of countries according to brand value - has shown that Germany has lost its position as the most powerful nation brand. Its brand value – which factors both the country's strength as a brand and GDP data - tumbled by $191 billion (168 billion euros) to $4.2 trillion.

"The effects of the scandal are already being felt in the short term, and it's going to take a significant amount of time before Germany will be able to recover from the loss of trust in its brand as a nation," communications director Robert Haigh told DW.

"This could be a permanent lost opportunity."

Lost opportunity

The "lost opportunity" becomes all the more obvious considering how well Germany was doing at the beginning of the year. Brand Finance cited the "worldwide admiration" Europe's biggest economy reaped for its welcoming attitude towards refugees, and the boon these new arrivals would provide for the country's labor force. But that was all before Volkswagen.

Now it's not the first time in recent history that a company has faced a global public relations disaster of epic proportions. It was only last week that a $20 billion settlement was finalized against British Petroleum, five years after the 2010 Deepwater Horizon oil spill in the Gulf of Mexico. But Brand Finance said the Volkswagen scandal is viewed in a harsher light.

VW worse than BP

"I would say that the damage the Volkswagen scandal did to Germany's brand is much more significant than the BP oil spill's effect on the UK," said Haigh.

"One, the BP oil spill, while catastrophic, wasn't deliberate, whereas with Volkswagen we seem to be looking at a systematic, possibly industry-wide deception given the murmurs that other carmakers could be involved," Haigh added.

Haigh said that the perceived "hypocrisy" on Germany's part added insult to injury, given the country's touted reputation for an unimpeachable love of the rules.

According to Brand Finance, an intangible asset valuation consultancy, Germany was displaced as the most powerful brand by Singapore - which now has a reputation for being "modern, innovative and industrious, welcoming to outsiders" and for outperforming its neighbors like Malaysia.

Surprise movers

While the brand rankings have indicated that Germany has to grapple with its slipping reputation, it also features one surprisingly fast mover: Iran.

As the 46th most valued nation brand, Iran is a long way from the top. It also has unique challenges, like a strained relationship with Sunni countries like Saudi Arabia. But moderate leadership and the easing of sanctions are changing perceptions of the country – it helped Iran's brand value jump nearly 60 percent to $159 billion.

According to the consultancy, a 77 million strong market, a well-educated population and significant hydrocarbon reserves are also likely to give Iran's brand a boost.

US has most valuable national brand

In terms of brand value, the US ranks highest at $19.7 trillion, due mostly to the size of its economy. In addition, the US has a large and wealthy market inclined to "buy American." And it helps many companies to lean on an American identity, said Brand Finance.

"There are brands like Disney, whose ‘Americanness' is part of what they're selling," Haigh told DW.

"And then there are companies like Apple, which don't work quite the same way, but are more international in their appeal," Haigh said.

Brand Finance added that the US education system, as well as the powerful music and entertainment companies will also help the US hold on to the top spot and hold off the next contender: China.