So, How Much Is The Diesel Disaster Going To Cost Volkswagen? We're Guessing $25 Billion+

October 8, 2015

Volkswagen's slowly unfolding diesel emissions scandal is many things to many people:

  • To the public, it's a page-turning whodunnit of deception.
  • To regulators, it's a wake-up call and a kick in the pants.
  • To lawyers, it's a guaranteed source of future income.
  • To the Environmental Protection Agency, it's a vindication of the 2025 fuel economy guidelines against which Volkswagen loudly railed, while proclaiming the importance of its "clean diesel" vehicles.
  • To owners of affected VW, Audi, Porsche, and Seat cars, it's the final scene of Seven. (Poor Gwyneth.)

And, of course, to Volkswagen itself, "Dieselgate" is an earth-shattering legal, logistical, and political nightmare that could tear the company apart -- or, at the very least, ruin Volkswagen's reputation and its chances of becoming the world's largest automaker in the immediate future.

It is also going to be very, very, very expensive for Volkswagen.

How expensive? We won't have final figures for months, if not years, but we can do a little back-of-the-envelope math:


Fixing cars: $7.3 billion+
Repairing 11 million vehicles won't be easy. Each affected make and model is different, with additional tweaks required to account for variants and model years. A software upgrade can likely enable full emissions controls, though it's just as likely that some kind of physical device will need to be installed on the vehicles, too. The time, labor, and materials needed to implement those repairs won't come cheap.  

Fines: $18 billion+
In the U.S., Volkswagen could face civil penalties of $37,500 for each vehicle that fails to comply with federal clean-air rules. Multiply that by 482,000 vehicles, and you've got a very spicy meatball. And of course, that's just fines from the EPA. It doesn't include fines from other U.S. agencies, and it certainly doesn't account for the 10.5 million other vehicles in other countries.

Return of tax incentives from U.S. government: $50 million
The United States Senate has launched an investigation of federal tax credits that Volkswagen shoppers received for purchasing "environmentally friendly" diesel vehicles. As we now know, though, Volkswagen's sneaky software helped those cars cheat on emissions tests, allowing them to spew more than 40 times the stated limit of pollution into the atmosphere. Depending on the Senate's findings, Volkswagen could have to repay those Alternative Motor Vehicle Credits itself. 

Return of cash and incentives from Tennessee: $485.5 million
Volkswagen's U.S. homebase is in Chattanooga, Tennessee, and the state has worked long and hard to keep it that way. But in light of the Dieselgate revelations, Tennessee legislators are reconsidering some of the tax incentives they shelled out to convince Volkswagen to stay put.


Loyalty bonuses: $$
Volkswagen has begun issuing $2,000 incentives to VW owners in the hope of encouraging them to buy another VW. Will it work? Maybe for those who own gas and hybrid models, but for those who own diesels, it could be a tough sell, since VW isn't currently offering its 2.0-liter diesel vehicles to consumers. 

Loss of brands: $$
Volkswagen's new CEO, Matthias Mueller, told reporters this week that the company is planning for a financial crunch, and part of that planning involves thinking strategically and honestly about each brand in the Volkswagen family. Smaller brands like Bugatti could get the axe, or at least get mothballed, which would reduce expenses but also cut potential sales at a time when the world's auto markets are doing well.

Lawsuits from owners: $$$
Volkswagen's fix for its diesel VW, Audi, Porsche, and Seat vehicles will almost certainly result in a loss of fuel economy. And that, as any lawyer will tell you, can lead to claims of false advertising, which is grounds for a whopping class-action lawsuit. The fun is likely to spread to owners of non-diesel VWs who are mad about the brand damage that the diesel scandal has done to their vehicles, reducing trade-in and resale values.

Lawsuits from families of those killed: $$$
Though no one has complained that Volkswagen's diesel vehicles were an immediate cause of death for family or friends, the pollution those cars emitted had a serious effect on air quality. Estimates suggest that between 106 and around 150 deaths could be blamed on Volkswagen's deceptive diesel vehicles here in the U.S. If those same stats can be carried over to other countries, you might argue that at least 2,300 people died as a result of pollution caused by those vehicles. Would that argument hold up in court? A better question might be: Would Volkswagen want to risk fighting it in court?

Delays on new diesel vehicles: $$$$
Here in America, Volkswagen has withdrawn all applications to have 2016 model-year diesel vehicles approved by the EPA. Those vehicles would ordinarily be rolling into showrooms very soon, but now, who knows? And if they're not in showrooms, they can't be sold. If Volkswagen does the same thing in other countries, that's a big ol' bite out of the company's revenue estimate.

Fixing Volkswagen's reputation: $$$$
How much will Volkswagen spend on "we're sorry" campaigns and re-branding campaigns and conventional product campaigns to get back to where it was before the Dieselgate scandal broke? We'd be surprised if the sum were below ten figures. 

Add all that up, carry the one, drop in a dozen things we haven't even considered here, and you have the result: $25.8 billion and a whole lot more.

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