Sales of Volkswagen-brand cars plunged by a quarter in the United States in November, and by 30 percent in Japan, as commercial damage from the automaker’s diesel-rigging scandal spread across two of the world’s most-lucrative auto markets.
The German carmaker, based in Wolfsburg, said it sold 23,882 VW-brand vehicles in November, down 24.7 percent from the same month a year ago. Sales of VW vehicles also plunged 30 percent in November in Japan, Reuters reported citing Japanese news agency Nikkei.
The decline came as most of VW’s biggest competitors reported U.S. sales increases of up to 11.8 percent.
“There is massive reputational damage, which will affect sales in the next few years, resulting in lower revenue and profits,” Frank Schwope, a car analyst at Hanover-based bank NordLB, said. “It will take a couple of years or up to a decade to overcome the impact of the emissions scandal.”
VW’s preference shares fell 2.9 percent to €126.35 euros on the Frankfurt Stock Exchange by noon local time, lagging behind the German blue chip DAX index, which rose 0.3 percent. VW’s stock has lost about 30 percent in value since the emissions scandal became public in September.
“VW had had the wrong offering of models the last few years, or the last decades. It will be difficult for the VW brand to return to profitability in the United States:”
VW is likely to see a double-digit sales drop in the United States, perhaps up to between 10 and 20 percent over the next few months, Mr. Schwope said. If VW hadn’t banned diesel sales, volume sales might have been a bit better, he said.
Europe’s largest carmaker tied the sales drop to its decision to halt U.S. sales of its 2-liter and 3-liter diesel engines after the automaker admitted in September that it had installed illegal software on up to 11 million cars worldwide — including 500,000 VW cars in the United States — to fake emissions compliance.
VW chief executive Matthias Müller expects Europe’s largest carmaker to need another year to handle the emissions scandal, the 62-year old manager told German magazine Stern in an interview. Dealing with consumer and investor claims, however, would “presumably (drag on) for years,” Mr. Müller told Stern.
U.S. authorities could theoretically slap VW with a fine up to $18 billion for violating environmental regulations. The carmaker has set aside €6.7 billion, or $7.1 billion to cover the costs of recalls and repairs, but analysts expect the bill to rise further in the face of hundreds of lawsuits.
VW has arranged the terms of a planned bridge loan worth €20 billion to help cover the costs of the emissions scandal, Reuters reported on Wednesday, citing unnamed people familiar with the matter.
In the United States, sales of VW luxury brand Audi held steady, rising 0.4 percent in November from a year before. But unit sales of VW brand Porsche fell 5.3 percent to 4,450. About 85,000 Audi and Porsche cars, including SUVs, also contain illegal software, VW confirmed last week.
VW’s U.S. market woes are in stark contrast to a high demand for cars in the United States. This year, some analysts expect U.S. car sales to exceed the 2000 record, when Americans bought 17.4 million cars. Rival car makers General Motors, Fiat Chrysler and Toyota all sold more vehicles in November, with increases of 1.5 percent to 3.4 percent.
VW might do well to reconsider selling VW models in the United States, a market where it has never built a strong presence, Mr. Schwope said.
“It might be more important to grow in countries such as India or other emerging markets in Asia. The United States is a relatively mature market where competition is tough,” Mr. Schwope said. “VW has had the wrong offering of models the last few years, or the last decades. It will be difficult for the VW brand to return to profitability in the United States.”
But the likelihood is small that VW would pull out its core brand from the U.S. market, Mr. Schwope said. “A big company is always a bit slow and many have the view it should be present in all large markets. Although one should consider being where money can be made. A market can be very large, but when operations are not profitable it may not make sense,” Mr. Schwope said.
The global fallout from VW’s dieselgate scandal comes amid signs that the legal risk may spread to a major German parts supplier, Bosch. Reuters on Tuesday reported that a VW diesel car owner from New York had sued Bosch, former VW chief executive Martin Winterkorn and VW U.S. head Michael Horn. The suit was filed in Detroit.
Bosch made the basic software at the center of the scandal, but has said the technology was intended to regulate the performance of emissions system and not evade emissions tests.
The U.S. Justice Department has said it is investigating whether to bring charges against Bosch. The parts maker, which is based near Stuttgart, has declined to comment on the situation.
Gilbert Kreijger is an editor with Handelsblatt Global Edition in Berlin, covering companies and markets. Astrid Dörner, a Handelsblatt correspondent covering finance in New York, contributed to this article. To contact the author: firstname.lastname@example.org