The VW Emissions Scandal: How Will It Change Auto Industry?

Choppy Waters for VW

The auto industry has been barraged with one scandal after another in recent years, just as new players are poised to enter the market. In the same week that Apple announced that it plans to ship its electric cars in 2019, Volkswagen AG is embroiled in an emissions scandal that may impact more than 11 million vehicles across the globe.

Auto Industry Stumbles

As has been widely reported in the media, the U.S. Environmental Protection Agency (EPA) has charged VW with violating the Clean Air Act by installing an emissions “defeat device” on several vehicle models. When installed, the device disengages the emissions control systems during normal driving. However, VW systems are programmed to come back online during lab testing in order to meet pollution standards.

Unlike its predecessors, VW is taking a proactive approach to the emission scandal by accepting liability and pursuing its own criminal complaint. However, the company will still take a significant financial and public relations hit. In fact, the automaker is expected to face fines of more than $18 billion, in addition to any damages resulting from private litigation.

In the wake of its own scandal, General Motors recently agreed to pay $900 million to resolve criminal charges related to its failure to recall defective ignition switches that are now linked to more than 100 deaths. The American auto manufacturer was already hit with a hefty civil fine from the National Highway Traffic Safety Administration.

High-Tech Threats in Vehicles

From automatic braking to lane departure warnings to voice-controlled navigation, technology plays an increasingly important role in today’s vehicles. Given Apple’s proven track record of entering new markets and quickly raising the bar, the established automakers have reason to be concerned. Google, Tesla, and other high-tech companies also pose threats, as they continue to fine-tune on their electric and self-driving vehicles.

Of course, not everyone is convinced that Tim Cook and company can make the leap into the auto industry. “When it comes to actually making cars, there is no reason to assume that Apple, with no experience, will suddenly do a better job than General Motors, Ford, Volkswagen, Toyota, or Hyundai,” Bob Lutz, the former chairman of General Motors, told CNBC. “So I think this is going to be a giant money pit.”

Over the next several years, the auto industry is poised for a significant shift, as electronic and other high-tech vehicles look to become the norm rather than the exception. It will be interesting to see if the traditional automakers can put their scandals behind them and keep pace with the tech companies.