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Lux: VW “actually in a strong position to innovate their way out of this mess”

Reflecting on the implications of the still evolving Volkswagen emissions testing scandal (“a vehicle emissions scandal of unprecedented proportions”), analysts at Lux Research suggest that one outcome of the crisis could be an aggressive push by Volkswagen to accelerate the push towards plug-in hybrids and electric vehicles.

VW was slowly moving beyond conventional gasoline and diesel engines anyway, Lux noted, with plans of putting out 20 more plug-in vehicles by 2020 (earlier post)—such as the production version of the Audi e-tron quattro. (Earlier post.) Volkswagen has also invested in next-generation batteries, including lithium-sulfur and solid-state. (Earlier post.)

VW is actually in a strong position to innovate their way out of this mess. They have been spending most on the R&D of any OEM (about $11 billion in 2013), and they are the largest automaker by volume. Arguably, no major OEM is better positioned than they are to decisively accelerate the push towards plug-in hybrids and electric vehicles, putting the shine back on their tarnished image. However, they probably lack the vision, leadership, and ambition to do it, so they will most likely carry on as usual after some apologies.

—Lux Research

Other outcomes projected by the Lux team include:

  • Regulators will try to improve, but will need better equipment. It’s striking, Lux said, that the US EPA, with its $8-billion budget and workforce of 15,000 staff, couldn’t catch VW, but a small team of researchers from West Virginia University could. Lux suggests that regulators need to revise their testing protocols for real-world performance.

  • Automotive software will come under pressure to open up. OEMs have in the past successfully lobbied regulators to use the Digital Millennium Copyright Act (DMCA) to keep OEM software locked up and proprietary, and off-limits to diagnostic and repair companies the OEM does not like. The EPA has sided with OEMs, fearing that if the software is open-access, then consumers would modify it at the expense of emissions. VW misused the protection of the DCMA to the software cheat, Lux said.

  • Diesel passenger vehicle sales in the US will drop drastically. Due to strict NOx emission standards in the US diesel passenger vehicles have failed to make any significant market penetration, representing less than 1% of passenger vehicles and only 3% of all vehicles on the road. In part, slow adoption was due to the requirement of installing the urea-containing SCR unit to control NOx emissions in diesel engines, which is expensive.

  • AdBlue systems and renewable diesel will infiltrate Europe’s existing diesel passenger vehicle market. The Euro 5 NOx emission standard that is applicable to vehicles prior to 2015 is nearly six times more lenient than that in the US (180 mg/km compared to 31 mg/km). This has resulted in diesel powertrains present in approximately 35% of passenger vehicles and 53% of all vehicles and biodiesel making up 62% of Europe’s biofuels market.

    With Euro 6 approved and increased attention to NOx emissions (80 mg/km), and implementation of AdBlue systems in diesel passenger vehicles, it’s truly inevitable to achieve “clean diesel”, Lux said. While biodiesel has carbon emission benefits that’s been the primary focus of Europe’s biofuel mandates, it can have higher NOx emissions—up to 10% depending on blend percentage.

    With the push for nonfood biofuels and new focus on NOx emissions, Europe offers potential for renewable diesel growth. Renewable diesel has been shown through third-party testing to emit up to 9% less NONOxx compared to conventional diesel, and the region will see nearly 300 million gallons per year (MGY) of capacity come online by 2018, nearly doubling what it is today, according to Lux’s Alternative Fuels Tracker.

Comments

Davemart

Here is a preliminary analysis of what would be involved in retrofitting equipment:

http://www.thetruthaboutcars.com/2015/09/heres-might-cost-fix-vw-car/

'The long list of items needed to fit models of the Volkswagen Golf, Jetta, Beetle and Audi A3 doesn’t include the engineering needed to retrofit the cars and the costs to crash test the models after the significant modifications. That’ll add hundreds of millions to the bottom line.


Our own Bozi Tatarevic provided his preliminary list of additions (retail prices) that would be needed for each car based on the systems included in the Passat TDI — which still didn’t pass:

• Cooler ($361)
• Aftertreatment Fuel Tank ($534)
• Dosing Valve ($240)
• DPFE ($105)
• Temperature Sensor ($171)
• EGR ($401)
• Catalyst ($688)
Total = $2,500

Bozi points out that the urea tank most likely couldn’t be installed into the rear trunks due to the corrosive nature of the fluid. The secondary tanks would likely need to be installed under the car, next to a smaller, also-replaced, fuel tank. That would be an additional cost to Volkswagen (hundreds of dollars for each car) and further necessitate all new safety ratings.

The parts costs don’t take into account the hours of labor, which for a Jetta is 6-7 hours to change the diesel particulate filter alone. Such a substantial retrofit on their cars could take dozens of hours, incurring thousands in labor costs that Volkswagen would have to reimburse its dealers for. Labor rates, typically ~$100/hour, would likely be less for Volkswagen and the automaker would only reimburse dealers for the completion time detailed in the recall order.

Any sort of recall repair work and would need to be weighed against the cost for VW to buy back its own cars, which for a 2009 Jetta TDI, starts at about $7,000.'

It just ain't gonna happen - far cheaper to scrap, aside from VW not having anything like the numbers of service engineers needed to carry out the fix on hundreds of thousands of cars in the US and millions elsewhere in any reasonable time.

clett

Good point on the number of engineers required to fix the cars in a timely fashion. Looks like a buy-back / replacement scheme is the most likely outcome.

Trees

A easy way out of the EPA regulation mess; buy back the vehicles and produce an E85 conversion kit for vendors. A new chip set for controller, intake manifold with port injectors, additional fuel tank, wires, and fuel lines. The bi-fuel engine utilizing E85 fuel would drastically reduce diesel emissions. Keep the OEM diesel side, just utilize the E85 upon high temperature, power cycle. This should improve emissions to best in class and multiply engine torque. This vehicle probably would sell at premium in Midwest. The optimized E85 fueled vehicle is currently an undeserved market. Even for heavy trucks and agriculture equipment.

Account Deleted

LUX is absolutely right to point out that the VW scandal is also a global regulatory scandal because none of the government agencies created to monitor the auto-industry at any country in the world detected anything despite having 10s of thousands of employees and billion of USD in resources. The scandal was uncovered by a West Virginia University professor and a few of his assistants working on a 50,000 USD budget. Well done! Below is a link to CNN's interview with this professor.

The regulatory scandal is unfortunately quite predictable because lobbying from the auto industry (in particular VW) has made these agencies largely dysfunctional. The rules they work under are heavily influenced by auto industry lobbyist that hitherto has no consideration for the public good unfortunately. We need to fix that by overhauling this legislation so that these agencies can start to function as intended. My advice to EPA is to get as tough with VW in the US as you possibly can. Give them the maximum fine for their cheating in order to induce a large change in industry behaviour. Use the current public support and momentum to uncover other corpses in the coffin so to speak and go after that too with maximum effort.


CNN interview of the man who uncovered the VW cheating.
http://money.cnn.com/video/news/2015/09/21/volkswagen-emissions-tests.cnnmoney

Dr. Strange Love

I don't believe a Urea/SCR retrofit based on the current is an option at this point based on the above outfit. It is only possible if it can be simplfied and approved by the EPA. This approach appears to me to be too risky over the long run.

I beleive VW will offer to buy back the vehicles. Or, they will propose to revise/reflash the current ECM emissions sw to run the correct EGR and NOx trap regeneration routines if customers prefer to keep their vehicles knowing that performance and mpg will degrade. VW will also probably offer to clean the Intakes for Free because of the Increased EGR and cover the other emissions components as well.

This is fun to watch.

Contrary to Lux, however, I also believe that diesel light duty applications will decrease in the short term, but will ultimately increase because of increased investment in aftertreatment research and solutions in coming years. This is actually good for diesel.

SJC

This is probably why VW cheated in the first place, it costs less. Industry has a long history of cheating to make higher profits, if the public suffers for it so be it. Profits are the goal of any private sector for profit corporation, the "externalized" costs such as health are not their problem.

Engineer-Poet
I beleive VW will offer to buy back the vehicles. Or, they will propose to revise/reflash the current ECM emissions sw to run the correct EGR and NOx trap regeneration routines

Buybacks are not on the table.  VW will re-flash the controllers and offer compensation to owners for the increased fuel cost, or perhaps a coupon good for a discount on a new, compliant VW vehicle.

Dr. Strange Love

EP. I now agree that buybacks will not be an option. Also, the intake on these vehicles will require more frequent maintenance because of greater cummalative EGR usage. Will owners be compensated for this. This is why EGR delete kits are sold on earlier models that do not require emissions testing.

CheeseEater88

This doesn't bode well for VW... but I don't see them doing anything other than fiddling with the electronics... The scope is huge, and a mechanical solution would be costly... not only in raw material but in man hours.

There are many models affected... which would require many solutions... which really wouldn't be viable to fix... sure the cost for the parts may be $2500/per retail... but it may cost them $10,000-20,000/per to carry it out(it would have to be recertified, if a change were made). I don't know why you would have to have a DPF on it, to do an SCR type setup. I thought the concern here was NOx. The EPA will most likely accept a half measure and fine for the shortfall.

They most likely won't have to meet the standard 100% but just have to get close. Though it is a foreign maker, so probably they will get the full fine and the cars will be banned from the roads...

Tuning can get them very close. If the EPA doesn't go for that, or like the solution next bet like others said would be a voucher program... but honestly it would likely run up to a buyback because people might not want another VW. VW would probably only pay the market price of the car right before the scandal+incentives. I mean we are talking 10-15K for the older vehicles, 20-30K for newer.

CheeseEater88

Most of these vehicles are under emissions warranty... so any solutions will likely come out of lemon laws... buy backs/ fixes/ exchanges.


It could be $10B just to fix the problem. Fines could be $18B. Lawyers/class action could probably seek another $20B. That's just in the US. EU, and other places could probably end VW depending how the fines/ solutions play out.

That's why I think they will get off with just a programming fix... Its hard to think where the Big 3 will stand on letting VW fall... the suppliers won't like it... but that opens up EU for Ford and GM.

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