Industry

Volkswagen emissions cheating probe spreads to Asia

Michael Horn, president and CEO of Volkswagen Group of America, speaks during the 2016 Volkswagen Passat reveal in the Brooklyn borough of New York.  

The scandal engulfing Volkswagen AG, which has admitted cheating diesel vehicle emissions tests in the U.S., spread east on Tuesday as South Korea said it would investigate three of the maker’s diesel models.

Volkswagen shares plunged by 19 per cent on Monday after the U.S. Environmental Protection Agency (EPA) said on Friday that the world’s biggest carmaker by sales used software that deceived regulators measuring toxic emissions and could face penalties of up to $18 billion.

Media reports say the U.S. Department of Justice has started a criminal probe into the allegations, which cover several VW and Audi-branded diesel models including the Audi A3, VW Jetta, Beetle, Golf and Passat.

The South Korean probe will involve 4,000 to 5,000 Jetta, Golf and Audi A3 vehicles produced in 2014 and 2015, Park Pan-kyu, a Deputy Director at South Korea’s Environment Ministry, told Reuters.

Timeline of Volkswagen's woes

  • 2001-2013: LEU-based clean air group ICCT* monitors carbon dioxide (CO2) emission levels of 540,000 diesel cars. Gap between actual CO2 levels and manufacturers'claims rises to 38 %.
  • 2013-2014: Joint ICCT and West Virginia University project in U.S. compares real-world tests on VW cars with lab tests by CARB. Results show nitrogen oxides (NOx) emissions and exceed lab tests by up to 35 times.
  • May 2014: U.S. Environment Protection Agency (EPA) opens investigation into Volkswagen.
  • December 2014:VW installs software patch to Engine Control Module (ECM) which operates engine and pollution control technology.
  • May 6, 2015:CARB begins testing cars with software patch-NOx emissions remain higher than U.S. limits.
  • July 2015:Regulators refuse to certify VW's 2016 models for sale in U.S. unless company explains anomalous emission levels.
  • September 3, 2015:VW admits to CARB and EPA that it cheated on emission tests.


The Ministry will consider recalling those vehicles after conducting the investigation, he said.

“If South Korean authorities find problems in the VW diesel cars, the probe could be expanded to all German diesel cars,” he said.

Volkswagen Korea declined to comment.

German rivals Daimler and BMW have said the accusations against VW did not apply to them.

The European Commission has said it was in contact with VW and U.S. regulators, but it was too early to say whether VW vehicles in Europe were also affected.

A VW spokesman in Australia said the company had contacted its head office in Germany asking for advice about how to proceed and whether it expected cars sold in Australia to be affected.

Australia’s Department of Infrastructure (DOI), the government ministry responsible for the matter, said it is monitoring developments.

“The Department is seeking urgent clarification from Volkswagen Group Australia, as to whether vehicles supplied to the Australian market use similar software to that used in the U.S,” the DOI said in an email.

‘Screwed up’

Overnight, VW’s U.S. head Michael Horn, who was attending a lavish event in New York to promote the 2016 VW Passat, admitted the company had ‘totally screwed up’ and vowed to make amends.

Mr. Horn’s presentation did not promote the environmental efficiency of the Passat’s ‘clean diesel’ model, focusing instead on the vehicle’s new sensor technology to assist with parking and avoiding accidents.

It is unclear what will be the ultimate cost of the scandal to VW, which also faces a class-action lawsuit from buyers, but sales of affected versions of the relevant models have already been suspended in the U.S. and Canada.

“I had to back out of a couple deals the same day,” said a dealer attending Mr. Horn’s event in New York. “That hurt me because we found out in real-time. What are you going to do?”

A member of VW’s supervisory board, Olaf Lies, who is also Economy Minister for the state of Lower Saxony, said there would also be a cost for those found responsible.

“I am sure that there will be personnel consequences in the end, there is no question about it,” he said.

German Economy Minister Sigmar Gabriel has expressed concern that the scandal could damage ‘the justifiably excellent reputation of the German car industry’, and South Korea, where two thirds of all car imports in the first half were diesel, could be a significant early gauge of customer response.

German car sales in South Korea have soared since a 2011 free-trade deal eliminated duties on vehicles imported from Europe. Vehicle imports from Germany rose 18.2 per cent to $4.5 billion in the first eight months of 2015, South Korean customs data show, following a 42.5 per cent increase for all of 2014.

Volkswagen and Audi accounted for 28.2 per cent of all foreign cars sold the in the first eight months, according to the Korea Automobile Importers and Distributors Association.

Suh Sung-moon, analyst at Korea Investment & Securities, said local brands such as Hyundai and its sister firm Kia Motors would benefit.

“South Korean consumers are very sensitive to news, and this emission news will have an impact on the import market,” he said.

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