Diesel scandals could destroy big car makers' future
Car makers including Fiat Chrysler, General Motors and Daimler could suffer in the long-term from scandals surrounding the use of software to manipulate diesel car emissions levels, according to Jack Ewing, European economics correspondent for the New York Times. He cited how Volkswagen's emissions scandal has so far cost $22bn in the US alone, and said that while disruptive firms like Tesla find innovative ways to mass-produce electric cars, diesel sales will wane because of pollution concerns and the rise of automated driving and car-sharing.

The most immediate impact of the emissions cheating scandal that has engulfed Volkswagen and may be spreading to automakers like Fiat Chrysler is an environmental and public health crisis. Worldwide, diesel vehicles are producing about 50 percent more nitrogen oxide than regulations allow, according to a new study, which links those emissions to 38,000 premature deaths in 2015.

But, in the long run, the diesel fallout could reach further, helping set up carmakers as the next industry to be upended by Silicon Valley. As shifts like autonomy, electrification, and shared ownership change the way people use and buy cars, these companies will have enough trouble navigating the coming decades.

Dedication to diesel adds to the challenge, chaining automakers to a losing technology. And for those caught breaking the rules, expensive legal settlements and fines, which for Volkswagen have exceeded $22 billion in the United States alone, will divert funds from research and development just as these changes in driving technology threaten to render traditional carmakers obsolete.

Jack Ewing Jack Ewing is European economics correspondent for The New York Times and author of Faster, Higher, Farther: The Volkswagen Scandal (W.W. Norton). He is based in Frankfurt.

In the past century, few industries have been as closed to new entrants as the car business, with its massive overhead costs, complex supplier networks, and slim profit margins. That’s changing as self-driving technology, electric propulsion, and manufacturing advances create an opening for disruptive new competitors. Tesla is the first new car company to gain a foothold in decades, it’s unlikely to be the last.

This opportunity arrives just as a growing number of the traditional carmakers stand accused of using engine software to fool regulators and hide excess emissions of nitrogen oxides. In May, the Department of Justice sued Fiat Chrysler Automobiles for allegedly programming about 100,000 Jeep SUVs and Ram pickup trucks to hold back emissions just long enough to pass the standard Environmental Protection Agency tests. Fiat Chrysler has denied doing anything illegal.

General Motors faces a class action suit, filed in May, that accuses the company of rigging some of its large pickups to cheat on emissions tests. GM calls the allegations baseless. Even Daimler, the maker of Mercedes-Benz cars synonymous with German engineering prowess, is under investigation for possible emissions cheating in Germany and the United States.

These automakers are unlikely to suffer the same financial damage as Volkswagen, which between 2009 and 2015 sold 11 million cars equipped with illegal, emissions-cloaking software, then compounded its sins with a blitz of false advertising. But fines and settlements could easily amount to billions of dollars they need to be spending on research and development. Moreover, these scandals make the carmakers look like polluting dinosaurs of the past, not purveyors of exciting new technology.

Even carmakers not swept up in the diesel scandals are vulnerable. They tend to operate on thin profit margins—Fiat Chrysler’s return on sales in 2016 was less than 2 percent. Google, which is preparing to bring autonomous vehicles to market, is worth more than three times as much on the stock market as all the German carmakers combined. In April, Tesla’s market capitalization surpassed Ford’s. Investors have made it very clear who they think owns the future.