Five years after Dieselgate, has VW changed?
Yesterday, almost exactly five years after admitting to a brazen diesel emissions deception, Volkswagen AG unveiled a new electric car. Scott Keogh, the CEO of American operations, called it “the most important launch for Volkswagen since the Beetle.”
It’s not an understatement.
The world of Volkswagen — and of electric and diesel vehicles generally — is very different now than it was at the time of Dieselgate, as the scandal came to be known.
Every month sees another automaker showing off a new electric vehicle. EV startups are the darlings of Wall Street. Electric utilities are spending hundreds of millions of dollars to build charging stations. Diesels as passenger cars are nearly extinct.
And Volkswagen, catalyzed by its public shaming, has gone further than any other global automaker, declaring loud and often that it is putting all its chips on going electric.
It claims to have committed almost $35 billion on the effort by 2023, and aims to launch 70 electric models, with a goal of selling 22 million of them in the next decade.
The U.S. subsidiary is spending $800 million to build an EV factory alongside its existing plant in Chattanooga, Tenn. Furthermore, the electric “skateboard” that underlies these vehicles is crucial to its business plan, since it plans to sell them to other automakers, including Ford Motor Co.
The car that debuted yesterday, a compact SUV dubbed the ID.4, is the linchpin of that strategy.
It is aimed not at Tesla fanatics but at drivers of more traditional small SUVs like the Honda CR-V or the Toyota RAV4. With a driving range of 250 miles and a sticker price of $40,000, it is how VW, the world’s largest automaker by sales, intends to win Americans over to the EV experience.
But Volkswagen has deceived before.
“It remains to be seen how real those investments and commitments really are,” said Gina Coplon-Newfield, director of the clean transportation program at the Sierra Club.
What has happened so far, in any case, is impressive to some of the researchers who helped uncover VW’s sophisticated, worldwide effort to cheat on diesel emissions.
“The progress has been truly spectacular,” said John German, whose research while at the International Council on Clean Transportation showed VW’s diesel cars vastly exceeding U.S. emissions standards.
German was speaking not just of VW’s corporate makeover.
Changes at VW are bound up in the legacy of the U.S. government’s case against it, which led to a consent decree in 2016 that cost the company billions of dollars and forced it to reimagine the future.
Dieselgate dawns
First, the facts: In 2013 and 2014, a group of obscure American researchers discovered something curious when they compared the emissions that Volkswagen diesels produced on the road with what happened in the lab.
The road emissions were far higher. Dan Carder, who led the inquiry from his position as head of a vehicle emissions testing lab at West Virginia University, first thought that something was wrong with his testing equipment.
It turned out that these researchers had discovered one of the biggest corporate scandals in history. Starting in 2009, Volkswagen had installed “defeat devices” on its diesel models that caused vehicles to clamp down on emissions while being tested — but only in the lab. On the road, emissions were up to 40 times higher.
The tidal wave started to break over Volkswagen on Sept. 18, 2015, when the California Air Resources Board (CARB) and EPA publicly accused the automaker of violating the law.
For Volkswagen, the news was catastrophic and has continued to reverberate through the years.
Its stock price plunged by a third, and Volkswagen’s CEO, Martin Winterkorn, was forced to resign. Earlier this month, a German court said Winterkorn would stand trial for his role in the deception; just yesterday, German prosecutors announced charges against eight more Volkswagen employees.
Caught in the limelight were figures like German of the ICCT, which commissioned the original study, and Carder of West Virginia University.
The next three months, Carder said in an interview, were “10- to 12-hour days on microphone, on camera or on the phone” with news outlets around the world, explaining the details of the deception.
The stress was intense. In December, German had a minor heart attack (he recovered). “It transformed my daily activities,” Carder recalled. “I had obviously never been part of something like that.”
Crime, meet punishment
In the United States more than anywhere else, the scope of the scandal is as important as the scope of the punishment.
The evidence was so damning that VW admitted its guilt. Between October 2016 and May 2017, a series of consent decrees were negotiated among VW, CARB, EPA and the U.S. Justice Department that resulted in billions of dollars of fines for the company.
The ruling had several parts. The first was $10 billion to buy back most of the nearly 600,000 diesel cars that VW had sold in the United States and compensate their owners.
While physically removing hundreds of thousands of diesels and removing a leading carmaker from the market, the consent decrees also played a role in souring Americans on diesel as a fuel.
Almost no diesel-powered passenger cars are now sold in the United States, according to the Diesel Technology Forum, though there remains a market for diesel trucks and vans.
Second, Volkswagen was required put $2.8 billion in a fund to be shared among the states to remove nitrogen oxides (NOx), smog-forming chemicals that are byproducts of burning diesel. The decree’s goal was to remove as much NOx from the atmosphere as VW’s deceiving diesels had added to it.
That money is being spent slowly.
Two years after the first project money was awarded, only 21%, or $597 million, of the entire pot had been spent as of June this year, according to data compiled by Atlas EV Hub, a research firm. Nine states have spent none of their money at all.
But even that limited slice has had a substantial effect, especially in an environment where neither the private sector nor the federal government has spent much to stimulate the purchase of electric vehicles.
It has been the single biggest force building a market for electric buses. Cash-strapped transit agencies have spent $133 million on electric buses, and school districts $48 million. Another part of the funds has prompted the construction of $62 million of EV charging stations.
Finally, the United States required Volkswagen to spend a separate $2 billion on building the infrastructure for charging stations. Of that, $800 million was sent to California because it had a lot of diesel turbo-charged engines on the road. The remaining $1.2 billion was divided among the other states.
Volkswagen’s answer to that decree was to establish Electrify America, a subsidiary that would use the penalty to build a new business unit that it hoped would one day be profitable (Energywire, Jan. 3, 2019).
So far, Electrify America has built a national network of 450 charging stations, most of them placed to make highway driving in an EV more practical. It has also been a lifeline for the companies that make charging equipment. More than half of the funds still remain to be spent.
In Europe, the Dieselgate scandal played a role in turning the public against diesel vehicles, and sales have plunged.
But, German said, Europe hasn’t been as successful at channeling public disgust at Volkswagen’s misdeeds into productive solutions.
Those closely involved in the dollars flowing from Volkswagen realize the difference it has made.
“All these activities, in the aggregate, serve to raise the profile of electric vehicles and supporting infrastructure to raise consumer awareness and comfort levels with the technology, as well as provide EV manufacturers and infrastructure providers a market to build upon,” emailed Paul Miller, the executive director of Northeast States for Coordinated Air Use Management, a nonprofit that coordinates among the states and other players to distribute funds from the consent decrees.
“For better or worse,” he added, “this wouldn’t have happened within this time frame and at this level but for Dieselgate.”
In the unveiling of the ID.4 yesterday, Keogh, the VW executive, made a passing reference to the scandal that led in so many ways to the new electric vehicle he stood in front of.
“Five years ago, Volkswagen was thrust onto the global stage to make an apology,” he said.
Whether that apology will result in a more electric world for Volkswagen is still a question mark.
“I think it’s likely, but you can never be sure,” said German, the researcher who helped reveal the wrongdoing. “Any auto manufacturer, when they start any initiative, they always want to make it sound as good as possible.”