VW and the Emissions Scandal – Enough for a recovery?

It is difficult to judge precisely how Volkswagen’s emissions scandal will damage its business long-term.

Its reputation has obviously suffered, with the company falling from eighth to 267th on the Reputation Institute’s rankings.

However, this will not necessarily result in a dramatic impact on performance – although one cannot ignore revenue figures, which show that VW’s sales are continuing to decline.

While the European Automobile Manufacturers’ Association found that new car sales rose by 5.7% across Europe last month, VW’s sales fell by a worrying 1.6%.

Its first quarter market share of registrations hit a five-year low of 23.4%. Buyers were found to look elsewhere towards rivals such as BMW and Mercedes.

Although 1.6% may not sound like a significant drop, VW’s sales plight appears more negative amongst the industry-wide backdrop where demand across Europe is clearly recovering.

When the overall trend is improving, it is never good to be the anomaly among the pack. VW was the only brand amongst the top ten to experience a decline in sales during the first quarter of 2016.

Since the company was forced to reveal that eleven million diesel vehicles produced worldwide were provided with the software to elude vital emissions tests, the outlook for VW has been bleak.

With a vast array of lawsuits to overcome, the manner in which VW’s PR have handled the response has been feeble, and not particularly convincing.

One could argue that its status as Europe’s largest carmaker is responsible for the company’s apparent complacency, which has seen a lack of clear, concerted effort to address the issues in a satisfactory manner.

While VW has promised that there will be a ‘significant reduction’ in performance-based payments to members of its management board, the final figure has yet to be announced. This strategy was supposedly an effort to demonstrate to both VW’s workers and the general public itself that the company is not only serious about cost-cutting, but that its superiors are facing the consequences for its wrongdoing.

It is yet to be seen if the falling sales are a genuine result of the newly-publicised environmental concerns, or whether consumers are more concerned with potential lower resale values.

Either way, Volkswagen remains in serious need of careful and consistent efforts to address the falling sales before competitors begin to gain the upper hand.

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