Volkswagen scandal: Emissions cheating threaten’s VW’s growth plans in emerging markets

Volkswagen scandal: Emissions cheating threaten's VW's growth plans in emerging markets

BEIJING/MUNBAI — Volkswagen’s diesel-engine emissions scandal is casting a shadow over the German carmaker’s future in emerging markets, which the company was counting on to sustain its growth.

     Although the direct impact is expected to be limited in these markets, where diesel-powered cars make up a small share of sales, Volkswagen’s brand looks likely to be dimmed.

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The damage is already apparent in China, its largest overseas market. In 2014, VW sold 3.68 million cars, nearly 40% of its global sales, in China; diesel models, imported from Germany, accounted less than 0.1% of that — a mere 3,000 cars or so.

     However, since Volkswagen was caught cheating on diesel exhaust tests for cars sold in the U.S., using software designed to give misleading results, social media in China have been full of complaints from consumers. The company’s Chinese sales could be badly dented because car buyers in the country rely heavily on word of mouth when making purchases.     

     A sales representative at a Volkswagen dealer in Beijing claimed the automaker’s future does not look rosy at all. German cars have traditionally enjoyed a reputation for the highest technological standards among Chinese drivers, but the recent revelations have undermined that perception.

     But an official with the company’s Chinese subsidiary acknowledged Volkswagen may have to slash its sales forecast unless the company turns the problem around quickly. Industrywide, auto sales in China have already fallen for five straight months through August.

Emerging threat

The Brazilian Institute of the Environment and Renewable Natural Resources, meanwhile, announced Friday it will investigate whether Volkswagens sold in Brazil are violating emissions standards.

     A press release from Brazil’s environmental protection agency said it is taking the fraud very seriously. The German carmaker may be subject to a fine of up to 50 million reals ($12.6 million) in Brazil, where it is the country’s No. 3 auto company. The scandal may hurt sales.

     Volkswagen’s plans to develop markets in India and Southeast Asia by building new auto plants are also threatened. The company still has a low profile in these fast-growing markets. Volkswagen has a market share of 1.7% in India and around 0.1% in six Southeast Asian countries.

     Thailand is increasingly worried about VW downsizing or scrapping investment plans. The company had applied to the government for preferences granted to manufacturers of fuel-efficient compact cars.

      Volkswagen had expected to invest 31.4 billion baht ($882.3 million) in Thailand, but the plan may now have to be revised. Production at a new plant was supposed to begin in 2019, according to local press reports, although the names of the models to be made in the country were not mentioned.

Nikkei staff writer Hidetake Miyamoto in Sao Paulo contributed to this story.

Volkswagen scandal: Emissions cheating threaten's VW's growth plans in emerging markets