It has not been a good week for VW. Its chief executive has resigned, its share price has plummeted, and its reputation has taken a battering.
Some 11 million cars worldwide are thought to be affected by the “defeat devices”, which VW has admitted using in the US to improve their vehicles’ emission results and by-pass the clean air rules. Around 500,000 cars have been recalled in the States.
It is not yet clear the extent to which the devices have also been used in Europe, or whether they would succeed in beating the tougher European emissions testing regime.
The fallout for VW is clear. The more interesting question is how this debacle might impact on consumers, shareholders and the motor resale and leasing industry.
David Niven, head of transport at Penningtons Manches LLP, says: “Businesses such as fleet car companies, car rental and leasing companies may all have invested significant amounts in VW cars on the basis of their green credentials, reliability and strong resale value. They will understandably be concerned as to how VW’s self-confessed “screw-up” will affect their bottom line. For example, car lease companies calculate lease costs on predicted residual values, which may well be considerably lower as a result of VW’s actions. It may be possible for these affected businesses to bring legal claims against VW to recover those losses. Companies that provide cars for employees may also find themselves facing substantially higher bills for road taxes, if the amended testing results in the cars being recategorised for tax purposes.”