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Why did VW take the risk of cheating, given the devastation that has followed? There seem to be three parts to the explanation. The first is an overwhelming desire for size. The company has been obsessed with surpassing Toyota and becoming the world’s biggest car company, despite making little money from its most high-volume products (cars carrying the VW badge make up 60% of sales but the profit margin on them is just 2%). This required that the company increase its small share of the American market—the largest after China (see chart 3). Making more of the SUVs that Americans covet was one obvious strategy. Getting them keen on the fuel-efficient diesel engines that VW sells elsewhere was another. In a modest way it was succeeding; though diesels account for only 1% of the American market for cars, last year VW had half of that slim slice.
Though these cars were substandard when it came to NOx, they didn’t have to be. According to a British professor who specialises in the subject, “you can solve any emissions problem if you throw enough engineering and money at it”. As VW spends more on R&D than any other company on the planet—€13.1 billion in 2014—it is very well positioned for such throwing. But here the second part of the explanation comes into play: fixes to the NOx problem come with trade-offs. Exhaust-gas recirculation, one of the technologies VW uses, reduces both fuel efficiency and power, which drivers tend not to like. Reports indicate that this recirculation was something the software turned off when regulators were not looking. Selective catalytic reduction, used in some newer cars, reacts NOx with ammonia, reducing the eventual level of pollution by a great deal. But designing, installing and operating these systems all add to a car’s cost. Easier not to fix the problem, if you think you can get away with it.
Apparently some people at VW thought they could get away with it. And this leads to the third bit of the explanation: a large part of their reason for believing this would have been that carmakers, particularly European ones, are used to getting away with a great deal in such matters.Their trickery is an open secret within the industry; new scrutiny in the aftermath of the NOx revelations seems likely to make it an open scandal to the world at large. This may be why VW’s competitors, too, are seeing their share prices fall. Its crimes may be particular, but it is far from the only carmaker producing vehicles that fall far below the performance that regulators require of them.
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