Volkswagen scandal may mean diesel’s demise

Eight years ago this week, a 53-foot semitrailer rolled out of Volkswagen’s U.S. headquarters on a four-month, cross-country mission to persuade America that dirty diesel was dead.

Today, the Dieselution Tour — which promised a new green era for diesel VWs and showcased the 2009 Jetta — doesn’t play well. As the world now knows, VW was cheating on U.S. emissions standards, including those for that new Jetta.

The cheating scandal, which has driven down VW shares more than 30 percent this week and cost chief executive officer Martin Winterkorn his job, could kill diesel in the U.S. — and perhaps even in Europe, where more than half of cars on the road burn the fuel.

“VW may have killed the niche, along with its reputation,” said University of Michigan business professor Erik Gordon.

Even before the scandal broke, diesels represented just 1 percent of the U.S. market. Wildly popular in Europe, where gasoline is relatively expensive, diesel cars have struggled to win converts in the U.S. and shake their old reputation as unreliable, oil-burning smog machines. “Clean diesel” was supposed to change all that.

Recently, VW had made some gains. Though Americans buy more than three times as many hybrids and electric models as diesels, according to Baum & Associates, hybrid sales have been slowing and actually slipped last year as gasoline prices fell. By contrast, sales of diesel vehicles have grown eight years in a row.

That’s a testament to VW’s relentless marketing of its Turbocharged Direct Injection technology. Many drivers shun hybrids such as the Toyota Prius because they deem them geeky and poky. VW Jettas and Passats are more fun to drive, and buyers could feel good about helping the environment. Plus, the cars are German. What could go wrong?

No group fell harder for the VW line than Generation X. Unlike boomers who well remember the smoky, clattering diesel cars of the 1970s, Gen Xers saw VW technology as an elegant compromise between horsepower and green cred. About 58 percent of Americans shopping for diesel cars this year were Gen Xers, according to TrueCar, which tracks industry sales.

Needless to say, many Gen Xers now feel like rubes.

Nikki Medoro, 36, almost bought a Prius when she moved to San Jose, Calif. She wanted to limit the expense and environmental impact of her daily commute to and from San Francisco. A friend at the radio station where Medoro is a news anchor persuaded her to buy a 2012 Jetta diesel sports wagon instead. It was her first Volkswagen. That was 133,323 miles ago.

“I’ve been their No. 1 fricking fan this whole time,” she said. “I told everyone about my car. I loved my car. Then this happened. I get madder every moment that passes by about this. Every mile of that I was just polluting. I feel so duped.”

Many VW buyers talked up the merits of VW diesels to friends and family, providing VW with incalculable word-of-mouth. Now the German automaker risks turning this group of former acolytes into boisterous detractors. Already, angry owners are blasting VW on social media.

It has never been easy to persuade Americans to buy diesels because they typically cost more than gasoline-powered vehicles. The diesel version of VW’s Touareg sells for $7,500 more than the regular SUV but offers 26 percent better fuel economy.

The question now is what will happen to VW’s vaunted diesel mileage once the company turns on the emission controls outside the testing lab. If, as expected, the fuel economy drops along with engine performance, suddenly that price gap makes a lot less sense.

Diesel is under threat even in Europe, where automakers received government subsidies to research and develop the technology. The VW cheating scandal will probably accelerate criticism from politicians such as Paris’ mayor, who say diesel emits more pollutants than gasoline vehicles.

Meanwhile, stricter air quality regulations have made it so expensive to build diesel engines that some automakers have stopped putting them in their smallest cars. On Tuesday, Max Warburton, a London-based auto analyst at Sanford C. Bernstein Ltd., distributed a note to clients titled “The Day Diesel Died.”

On Wednesday, the Diesel Technology Forum, a Maryland-based nonprofit dedicated to promoting the fuel, said that “circumstances involving a single manufacturer do not define an entire technology, or an industry.”

No automaker has put more of its chips on diesel than Volkswagen.

This story was originally published September 24, 2015 at 3:29 PM with the headline "Volkswagen scandal may mean diesel’s demise."