Germany's VW dealers struggling to contain damage by dieselgate scandal

The dieselgate scandal in which carmakers from Germany and other countries manipulated the engines of their vehicles to cheat on emissions tests has severely damaged the business of many car dealers in the country and in many cases also contributed to their bankruptcy, Wilfried Eckl-Dorna writes for manager magazin. Especially dealers of Germany's largest carmaker VW are grappling with the diesel scandal's fallout, as a substantial loss in the value of used diesel cars has knocked their calculations on the head, Eckl-Dorna says. Buyers who lease cars have to decide after a given period of time whether to buy the vehicle or return it. The car dealer makes money by selling the car to the lessee or in the used car market, but this strategy is not viable for the car dealers if the vehicles are worth up to 30 percent less today than when the contracts started. "This weighs heavily on the account balance of car dealers, whose profit margins for selling cars are already quite small," he writes. The car dealers' difficulties could spell trouble for VW's e-car strategy. Car dealers would have to make investments to facilitate sales of vehicles with completely different propulsion systems. If they are struggling already, it might be difficult to reach potential e-car customers, he writes.

The dieselgate scandal broke in 2015 and went beyond VW to include nearly all of Germany's major car producers. The manipulation of millions of cars is costing carmakers billions of euros in legal costs and compensation payments at a time when the industry is already under pressure to adapt to the shift towards electric mobility.