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Why VW pulled the plug on diesels in the US: It's time to focus on EVs

Volkswagen sees little or no future selling diesel-engine cars in the US. This week VW brand chief executive Herbert Diess issued the gloomiest statement yet about diesel’s future here, more strongly than he’d spoken just weeks before. Volkswagen recognizes diesel is hurting its reputation here. Even a company as big as VW has finite R&D capabilities and now may be the time to put research dollars into electric vehicles.

It’s possible Audi will still sell diesel engine cars here, but maybe on just one model, the Audi Q7 SUV that is the biggest vehicle in the Audi fleet.

2016 VW Passatt

Volkswagen’s latest positioning was reported by Handelsblatt, a German business daily, and confirmed by Reuters. The VW Group positioning appears to have changed dramatically in two months:

In September at the Paris Auto Show, Diess told Reuters that VW was not ready to wind down diesel and could continue offering diesels in the US, at lower levels than before.

Fast foward to last week at the Los Angeles Auto Show and Hinrich Woebcken, CEO of VW Group America, said diesel would not “come back in the same magnitude as we’ve seen it up to now” in the US. At the peak of popularity, a quarter of VW sales were diesels here. He added, “Emissions standards in following years are getting tougher and tougher. Why don’t you put the money and investments … to comply with these standards, why don’t you put the money on the spot where the future is?” That is a reference to electric vehicles.

Volkswagen in the US agreed to a $14.7 billion settlement covering 475,000 TDI (diesel) vehicles whose emissions software only functioned fully when the cars were on test stands. The settlement includes an agreement to spend $2 billion on zero-emission vehicle (ZEV) projects in the next decade.

Some legislators questioned whether VW was allowed to earn revenue from the research (into ZEVs it might sell). This week the EPA’s head of enforcement, Cynthia Giles, wrote, “The ZEV investment requirement will be a business investment made by Volkswagen. VW may see a benefit from mandatory ZEV investments, and that would not be inconsistent with the [consent decree]. Volkswagen could have decided to make these investments even without this enforcement case, but now it is required to do so.”

Some competitors say it’s an unfair advantage that part of VW’s settlement is money effectively paid to itself to develop technologies it has to, regardless, if it wants to stay a force in the auto industry. VW has plans to roll out two dozen electric cars in coming years.

VW has laid out its plans for four-cylinder TDI VWs: cash-back make-good checks, the right to sell the cars back to VW at blue book values set the month before the emissions scandal broke, the right to turn in a lease car before the term expires, and the right to get their diesel cars repaired if owners prefer to go that route. (There may be some earlier VWs where the repairs aren’t feasible.)

The majority of owners driving diesel-engine VWs prefer to take the buyback, plus the cash settlement dollars. The settlement moneys are paid out whether or not the owner keeps the car.

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