Volkswagen: How Did It All Go Wrong?
Volkswagen and other car manufacturer’s recent difficulties with the diesel scandal have damaged reputations and dented profits. But are there even more serious problems looming?
Failing to keep up
Recent headlines in the UK about job losses in the car industry were blamed on Brexit but the issues go much deeper as Volkswagen and others let customers down and failed to keep up with shifting markets. Car manufacturers have operated in the same way for years by launching new models to expectant customers. Competition was limited as newcomers were a rarity and innovation was kept to a minimum, as each model improved in an evolutionary rather than revolutionary way. Even the introduction of electric cars didn’t ring alarm bells, as their impact on the industry was ignored.
The diesel scandal changed everything as customers shifted behaviour in a way that shocked the industry. Volkswagen’s mismanagement of the scandal prompted customers to go elsewhere, as the damage to the company’s reputation was enormous. The success of companies like Tesla and even Uber with its vision of car sharing rather than ownership is having an effect too. The push towards electric cars and other technologies to replace traditional engines has also caused trouble as buying habits change dramatically.
The diesel scandal
The diesel scandal also triggered action from governments as they announced the banning of vehicles in future years. In this regard, Volkswagen and other industry leaders can only blame themselves for allowing the scandal to escalate and for how badly customers were treated. Cities as well as governments banned older diesel vehicles, which triggered buyers to stop buying current models. Car ownership in major cities will become more onerous in the future too, as parking charges and the convenience of taxis make it a less attractive proposition. As a result, the cosy world of motor manufacturers has been shaken, as their model of doing business is weakened. They can no longer depend on a trusting public to guarantee regular profits while secretly damaging the environment they are expected to protect.
The staggering mistakes of the car companies will undoubtedly cause job losses and plant closures in different parts of the world. And it is difficult to predict whether or not they will win back sufficient numbers of disillusioned customers. Not least because there is already a shift from Western based manufacturers to Eastern groups in China and other locations. There is also a shift away from traditional companies as their reputations lie in shreds as a result of their complicity in a scandal of epic proportions. New companies and technologies that respect the environment and customers will win future market share.
So, Brexit is blamed for many things but the current crisis in the car industry was self-inflicted and the damage to reputations will last long into the future.
