Cost of Volkswagen Scandal Could Hurt Company’s Electric Vehicle Push

Cost of Volkswagen Scandal Could Hurt Company’s Electric Vehicle Push

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Volkswagen has announced ambitious plans to offer a lineup of battery-powered vehicles beginning in late 2019 that would be affordable for middle-class buyers. Herbert Diess, the head of the division that makes Volkswagen brand cars, has said that he sees Tesla as a more important competitor than traditional rivals like Toyota.

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The German company aims to deploy its enormous manufacturing network to churn out battery-powered cars faster, and in greater volume, than Tesla, which has had trouble meeting demand. But those plans may be difficult to reconcile with cuts in the research and development budget.

The diesel scandal remains a dead weight on the company’s finances and reputation. Volkswagen said Friday that legal settlements and other costs related to the emissions cheating have drained €14.5 billion this year from company coffers. That is money that Volkswagen would certainly prefer to spend developing new products.

Volkswagen might be able to find savings in other areas, for example, by diverting money that could have been used to develop new diesel engines, said Stefan Bratzel, director of the Center of Automotive Management at the Fachhochschule der Wirtschaft, a technical university in Bergisch Gladbach, Germany.

Still, Mr. Bratzel said, “it really hurts that this money is gone and is not available for the future.”

The damage from the scandal, Volkswagen said in a statement, was “nowhere near an end and would continue to necessitate great efforts throughout the entire group.”

Andreas Hoffbauer, a Volkswagen spokesman, said the company was responding to investors who have long complained that the research and development budget was spent inefficiently and was too large compared with rivals’ budgets.

The good news for the carmaker was that sales in the third quarter rose 6 percent, to €55 billion, thanks in part to a new SUV model introduced in the United States and economic recovery in Latin America.

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But there were also signs of trouble. In Germany, where Volkswagen has long dominated the market for affordable cars, sales fell 2 percent even as most competitors recorded sales gains. The company acknowledged that it has suffered from a buyer backlash against diesel, long one of its strongest selling points.

In a reflection of growing anger in Germany toward Volkswagen, despite its position as a pillar of the economy, the number of lawsuits by aggrieved diesel owners has almost tripled to 4,600, the company said. Unlike the United States, Germany does not allow class-action suits by owners, who take a considerable financial risk by suing Volkswagen as individuals.

Volkswagen sales in Western Europe, its core market, rose 1 percent. But the overall market in the region rose faster and the company’s share has slipped so far this year.

The company acknowledged in the earnings report that one reason for the mediocre performance in Europe was “the fact that customer confidence has not yet been fully restored following the diesel issue and to customer uncertainty generated by the public discussion on driving bans for diesel vehicles.”

London’s city government this week began imposing a daily charge of 10 pounds, or $13.20, on older diesel cars to drive in the city center, on top of the existing congestion charge of £11.50 per day. Other cities like Stuttgart and Munich are also considering restrictions on diesels, which are blamed for high levels of harmful nitrogen oxides.

In a positive development, Volkswagen made more money from its namesake brand than it did last year. Operating profit from cars with the VW logo doubled to €2.5 billion in the first nine months of 2017 compared with the same period a year earlier.

But the company remains dependent on its luxury brands Audi and Porsche, which generated more than twice as much profit, even though they sell fewer cars. Audi sales have slipped this year, also an ominous sign.

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