VW’s Dirty Diesel Secret & What it Means to BMW & MINI

VW USA’s diesel scandal has shaken the auto industry. With numbers like $19B in potential fines and 11M cars affected, it’s easy to see why. But just how bad is it and what does BMW (and MINI) do differently to avoid these issues?

About 10 years ago automakers began engineering solutions for clean diesels in the US. For most (including BMW) that included urea tanks that allowed diesels (which typically emit high amounts of dangerous NO2) to burn much cleaner. However VW went about things differently. They explained at the time that their 2.0L diesel was so clean it simply didn’t need the extra urea injection to burn off excess NO2. It turns out that that was a bold face lie.

What VW was actually doing was loading its cars equipped with the 2.0L diesel engine with software that would allow it to run clean only when being tested. In its normal mode of operation the car achieved its performance and efficiency numbers but would emit more NO2 than was legal. The irony here is that VW’s diesels were actually more efficient when allowed to run dirty. A fine trade-off you say? The EPA doesn’t think so considering how dangerous NO2 is. NO2 alone has been shown to cause so many acute health effects that large European cities (where diesels were never mandated to burn “clean”) are considering outlawing the vehicles.

So when US regulators realized what VW was doing last week, they were furious. The EPA has announced that Volkswagen had “very flagrantly” violated the Clean Air Act and has let the company know they could be liable for fines up to $37,500 per vehicle. The first mandate they made was for VW to fix the affected vehicles. However in doing so (replacing the car’s software) every one of the 482,000 cars will be slower and less efficient. As you’d expect many owners are not eager for this change and are wondering what happens if they refuse to get their cars updated. On the other side of it you have people that feel they’ve been wrongly promised a clean burning diesel and feel duped. Class action lawsuits have already started popping up online.

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What does this mean for diesel BMWs and the long rumored diesel MINI? For years BMW has quietly gone after former VW diesel owners that Audi has historically failed to capture. With this scandal one could assume BMW has a lot to gain in offering its 3 Series diesel sedan and sports wagon to those current VW diesel owners. And with that rational MINI likely has even more to gain with a diesel Clubman or Countryman.

The other thought (and it’s one we unfortunately believe will pan out) is that diesel is now effectively tarnished beyond repair in the US and potentially globally. Consumers may simply lump this scandal with all diesel offerings and instead turn further towards electrified cars and trucks. If BMW and MINI sees evidence of the latter, we could quickly see the pair shift away from a diesel strategy altogether in the US at the very least.

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What of the long rumored diesel MINI Countryman and/or Clubman? We believe that product has been engineered and is virtually ready to go. It’s now just a matter of debuting the right car (likely the Countryman), production logistics and timing. However if that car is released, there’s a good bet it might be the only diesel from MINI for a long time if ever. And with the upcoming plugin hybrid Countryman/Clubman scheduled for roughly two years out, MINI’s efficiency needs may be better served without dealing with diesel’s potential baggage.

While a potential diesel downfall seems quite a change from just a few years ago, it’s actually not surprising. Over the last 12-18 months BMW and other automakers have quietly told the press that development of diesels will slow and eventually cease as petrol power plants become more efficient and hybrids become cheaper. Ultimately most companies see electrification (pure or hybrid) as the answer to the world’s increasingly stiff regulations.

Diesel isn’t dead. But this scandal may do more than just take down VW’s diesel ambitions. It may ultimately damage the entire industry beyond repair.

  • lavardera

    This was a huge breach of faith. I really can’t see why VW should be allowed to sell cars here right now. I’d like to see them kicked out for 10yrs.

    • ulrichd

      That’s a lot of lost jobs. Why punish the thousands of people who work directly for and indirectly with VW here in the US for the arrogance of corporate decision makers?

      • lavardera

        If jobs are lost, that deed is already done by VWs acts. There is going to be plenty of work for VW techs correcting these cars and their plants manufacturing the new parts required to meet the promised performance. Just make it part of the terms of the punishment – no lost jobs.

        • ulrichd

          Well we know one guy that’s already lost his job.

        • GoRixter

          Probably with a massive severance. He (or somebody) needs to do some jail time for justice to be served.

        • Technom3

          Wow.

          That is an incredibly short sided comment. You truly have no idea what that would mean to not only the global economy but the US economy.

          There are what 400k cars that need to be fixed in the US. All they need is the ad blue UREA injection. I would say that likely within 6 months of having all parts available the cars would be corrected. 400k cars just isn’t that many especially when thats all that you would be doing.

          There are other jobs other than techs at a VW store.

          You forget that what would be lost are sales jobs. Tens of thousands would be out of jobs. Plus, all of the support staff of detailers, window tinters and even the accountants would be out of jobs. Hell even the hired companies who do janitorial services for the dealerships would likely feel the burn.

          Then you have anyone who accepts VW advertising… which is many many many publications… hell probably even some sports arenas.

          The amount of collateral damage is so large you would have to be an idiot to really say that that is something you would want to see happen after understanding all of the unintended consequences.

          If you want to hurt VW. Hurt VW. Not the american worker.

          I would recommend punishing them severely by regulating the hell out of them. Make then run through the gauntlet of EPA certifications twice. Make them produce cars that are more efficent than the other manufactures to make up for what they did. Award those who purchased the cars a pool of money to offset the value those people are going to loose on the their cars.

          Revoke the passports of the upper managment. Make them do community service. Not just fines. Community service. Make them clean up the planet they polluted. Drive the individuals responsible into the ground. If any of them are US Citizens then they should go to jail and face personal fines. Look at what the government will do to a local muffler shop if they install a used catalytic converter? 20k plus fine and jail time if I recall. multiply that by 400k times.

          If you are out for blood. Cripple the individual not the corporation and more importantly the US worker

        • lavardera

          No, you are way inflating the collateral fall out. Sales lost to VW will be sales gained at other marks. Sales staff, 3rd party vendors and businesses will all shift to other marks. If the world worked the way you suggest there would have been huge fall out to Plymouth, Olds, Pontiac shuttering. There was not. I say send them packing – who needs VW.

        • Technom3

          Not inflating it at all. I have been in the automotive business since the day I turned 16. I have seen and gone through some of these shut downs and yes it makes a much larger difference than you think.

          When a company merges they often do it because the overhead makes more sense to combine. There is a fallout of jobs. Always. If each company has 100 accountants they don’t keep 200 accountants. The number might be 150. The number might be 135. The work load just increases.

          The sales may go to another brand sure. But that doesn’t mean they will hire additional support staff on a 1 to 1 scale. They don’t need 2 receptionists. They will just stick with one. You are assuming that all of the other business that are absorbing the additional customers are operating at 100% capacity. They are not. Also, the real story is… if VW were to shut down, the sales would likely get spread over several manufacturers. Its not going to go to just 1 brand. Sort of like peeing in the ocean. The other dealers aren’t going to really be stressed enough to pick up addtional workers, and if they are… it certainly won’t be a 1 to 1 ratio.

          Concerning the vendors… how is a janitorial service supposed to clean lets say 15 buildings when one of them is now closed. there are still only 14 buildings to clean. That person lost almost 7% of their income. This stuff ads up.

          And what of the people that take advertisements? The struggling newspapers (not that I care really) VW and VW dealers often support alot of small entertainment events. Without that money some of the smaller local shows may not happen. there is a chance that others could step in, but the reality is with one less buyer or bidder it really does make a difference.

          As far as the Plymouth Olds Pontiac shuttering, there was indeed fall out. There are sections of towns that still have large dealerships sitting vacant for several years now because those dealers are gone. That probably hurt the bank that financed it, it hurts the property owners around it and we wont even get into what vacant buildings attract.

          I understand your anger for VW. But again to broad brush the subject just doesnt make any sense. Too much collateral damage. There are significantly better options, which is why VW will never be banned from selling cars in the US.

          If you truly want to get mad at anyone. You can get mad at the US government. the people who made the laws for manufacturers to self certify. Yup. Look into that one.

        • lavardera

          No, you are exaggerating. Dealers have to stay in place to service the cars under warranty and to effect repairs on affected models. They may not be able to stay in place profitably, but that should become VW’s expense, not the dealerships. And so the transition of jobs will be gradual as warranty work and repairs wind down. Then we’ll do well to be without VW for a while.

        • Technom3

          Nope still not exaggerating. You are making up hypothetical situations that just run on into infiniti. So now… you want VW to not sell cars here for 10 years. But you insist on them staying to warranty the cars. Ya… not sure that would happen in the real world. If you were to ban a manufacturer they would probably just take their toys and go home. The US market isn’t big enough for VW. Also you must think the VW owns the dealerships or at least heavily subsidizes the rent etc… They don’t. Its a private individual.

          “Should become VWs expense” ??? Should? ya… lets see how that plays out…. Yup thats going to fall on the individuals who run the individual stores and has ZERO to do with the VW AG.

          Your utopia of perfect world scenerios seems like a great place to live.

          I get it… you don’t like VW. Neither do I… but banning a manufactuer hurts the US individual worker. Not VW AG.

        • lavardera

          I’m saying these things are the terms that the EPA negotiates as part of VWs penalty. Yup – they pay to keep the jobs and sustain the dealers for a period of time. Not the whole term, because you want VW to have costs to re-enter the market. You want them to have to rebuild a dealer network. But you make VW pay the expenses required to alleviate the workers pain, so the dealers and employees are not punished. VW balks? Great then take your ball and don’t come back.

          I don’t like companies that bald face lie to us and our regulators. Its one thing to cause harm because you are not so good at what you do (ahem GM), but its totally different thing to plan to deceive. We don’t need companies like this in the US. Period. There are plenty of other car manufacturers to fill gap, I’m sure any number of which would be happy to buy VW’s NA plants at fire sale prices. Good riddance to them.

    • lavardera

      As I expected the EPA has identified that this emissions cheat is present in other VW group diesels, so now the scandal (and the penalties) spread to Porsche and Audi.

      http://www3.epa.gov/otaq/cert/documents/vw-nov-2015-11-02.pdf

  • B. Wong

    As the owner of one of the affected cars (VW Jetta Sportwagen TDI) I have been trying to read everything I can to see what VW will eventually do for owners. I drive a R53 but my wife drives the VW. We both love the torque and efficiency of the car and afraid of what will happen with the fix. I’ve read of some saying that VW should offer to buy back the cars especially if there will be compromises to performance and/or efficiency since they did not provide what was falsely promised. The other thing that we’ve been proud of was what we thought was a “clean diesel” is, in fact, not. The only thing we can do now is to wait and see what happens. I was even looking forward to what MINI was going to offer as far as diesel in the future but now may have second thoughts.

  • John L.

    Diesel cars are never going to make up a significant part of the traffic on U.S. highways. The infrastructure and economics don’t support it. The idea that diesel or electric cars can replace those powered by gasoline in the near future in the U.S. is a myth.

    Most U.S. refineries use a catalytic cracking process to produce gasoline, diesel and other products from crude oil. Using catalytic cracking, crude oil produces about 50 percent gasoline and 15 percent diesel. The remaining 35 percent becomes various other products from home heating oil to jet fuel. In most of the rest of the world, including Europe, refineries use a hydrocracking process. This refining method produces about 25 percent gasoline and 25 percent diesel from the crude oil with the remaining 50 percent becoming other products.

    So in the U.S. approximately three times as much crude oil is required to produce a gallon of diesel as to produce a gallon of gasoline. In Europe and most other countries, roughly an equal amount of crude is required to produce a gallon of gasoline as to produce a gallon of diesel.

    A 42 gallon barrel of crude oil produces approximately 21 gallons of gasoline and approximately 6.3 gallons of diesel. These numbers vary slightly depending on additives and the content of the crude oil, but these numbers are an average for refining the light sweet crude most commonly used in the production of gasoline and diesel.

    Taking the Volkswagen Golf as an example, the basic Golf costs $18,495 and is rated 25 mpg city and 37 mpg highway. The Golf Diesel (if you could still buy one, which as of today, you can’t) costs $22,345 and is rated 30/45 mpg. Assuming diesel and gasoline cost the same per gallon (diesel actually costs more than premium in most places in the U.S.) you’d have to drive the Golf TDI Diesel about 250,000 miles to pay for the $3,850 increased purchase cost compared with the gasoline powered Golf.

    A barrel of crude will produce enough gasoline for the Golf to travel 777 highway miles and enough diesel for the Golf TDI to travel 284 miles. It would take 2.75 barrels of crude to yield the same number of highway miles in the Golf TDI as in the gasoline Golf gets from one barrel of crude. A Prius, rated at 51/48 mpg would get just over 1,000 highway miles on the gasoline from a single barrel of crude.

    Refineries cannot just be switched from one cracking method to the other. New refineries would have to be built to switch our production method and increase the amount of diesel produced from a barrel of crude. Petroleum companies are not going to spend the kind of money required to replace the number of refineries required to significantly shift the balance of gasoline vs. diesel production. Even if they did, they’d be passing the costs to the consumers.

    The oil companies aren’t building many new refineries. Most of the currently operating refineries were built between 1970 and 1998. The concept behind these refineries was, and still is, to maximize the amount of gasoline from each barrel of crude. Whatever diesel was produced would be sufficient to power the trucks and trains that used most of it. If we were to suddenly increase the number of diesel cars on the roads, supply and demand would cause diesel prices to increase considerably. That would affect the economics of owning a diesel car, but more importantly, it would increase transportation costs for virtually everything we buy. Everything we buy and consume, from food to clothing to household goods to automobiles, reaches us by truck and/or train. Increased cost of diesel for these users affects all of us.

    While I’m on a rant, lots take a quick look at electric cars. Infrastructure problems arise here as well if there were suddenly a large increase in the number of electric cars on the road. At current prices, you can charge up that Tesla for somewhere around $7.00 in most of the U.S. and get more than 200 miles from it. That sounds like a good deal compared with the cost of gasoline to drive 200 miles, even with the cost of premium currently below $3.00/gallon in most places. However, electric power generation to supply a large number of electric cars does not currently exist. Some parts of the country already suffer periodic brown-outs because there is not enough electricity generation capacity to meet even current demands. Additional capacity would be required, the costs of which would be passed along to consumers and not just to the users of electric cars, but to everyone who draws power from the grid. Since no one seems ready to sign up for nuclear power stations, we also have to consider where the fuel to power these additional electricity generating facilities would come from and the additional air pollution they would produce.

    The final issue with electric cars is that they do not pay gasoline taxes, which theoretically go to fund building and maintaining roads and bridges. These taxes are included in every gallon of gasoline we buy. Electric cars get a free ride, not paying road taxes but still using the roads. Our roads and bridges are in terrible condition. More money is needed to maintain our road infrastructure. If we had a substantial increase in the number of electric cars, significant amounts of tax money intended for maintenance of our highway infrastructure would be lost and would have to be made up somewhere else.

    Our whole automotive industry in the U.S. was built on the idea that cars burn gasoline. The infrastructure was developed to support this idea. Any sudden dramatic shift in how we power our vehicles requires an equally dramatic change in the infrastructure that supports our automotive industry. That change takes time, lots of it, and money, also lots of it. It also results in significant economic pain for all of us well beyond just the cost of owning and operating a car.

    • MikeUK

      That has got to be, without a doubt, the most comprehensive post I’ve ever read. I’d forgotten the topic half-way through and just enjoyed reading it for information value!

  • ulrichd

    It will be interesting to see how this plays out in comparison the GM ignition switch debacle. 120 deaths have been directly linked to the faulty switches and yet people are buying GM vehicles in record numbers.

  • Sub_R
  • Kevin Bartlett

    I work for a Caterpillar dealer, I have been told, and have witnessed, calls to our Truck shops asking to remove emissions equipment or replace control units with modified ones since emissions equipment has been removed. All blatantly illegal. Sadly I don’t think the general public cares about clean air if it costs them efficiency or more money to achieve it. That may help VW in the long term if people can get past their blatant dishonesty. I hate to see innocent people lose jobs over this, but we need to find a way to enforce rules that protect us and provide a good environment in which to live.

  • Eric

    Such hypocrisis… Everybody knows that cars pollute a lot less than factories, planes, even cattle herds — and why are the rules different here ? MONEY $$$$$$

    • Jim

      Never mentioned , is the amount of NO2 that was over ,I think the penalty is way more than the crime.

  • There’s news this morning that some BMW diesels emit more pollution than affected VW’s. Notably, BMWs not being accused of manipulating the ECU. BMW.DE is down sharply on the news nonetheless:

    http://finance.yahoo.com/news/bmw-shares-slip-report-high-094815297.html

  • There’s news this morning that some BMW diesels emit more pollution than affected VW’s. Notably, BMWs not being accused of manipulating the ECU. BMW.DE is down sharply on the news nonetheless:

    http://finance.yahoo.com/news/bmw-shares-slip-report-high-094815297.html

  • There’s news this morning that some BMW diesels emit more pollution than affected VW’s. Notably, BMWs not being accused of manipulating the ECU. BMW.DE is down sharply on the news nonetheless:

    http://finance.yahoo.com/news/bmw-shares-slip-report-high-094815297.html

  • There’s news this morning that some BMW diesels emit more pollution than affected VW’s. Notably, BMWs not being accused of manipulating the ECU. BMW.DE is down sharply on the news nonetheless:

    http://finance.yahoo.com/news/bmw-shares-slip-report-high-094815297.html

  • There’s news this morning that some BMW diesels emit more pollution than affected VW’s. Notably, BMWs not being accused of manipulating the ECU. BMW.DE is down sharply on the news nonetheless:

    http://finance.yahoo.com/news/bmw-shares-slip-report-high-094815297.html

  • There’s news this morning that some BMW diesels emit more pollution than affected VW’s. Notably, BMWs not being accused of manipulating the ECU. BMW.DE is down sharply on the news nonetheless:

    http://finance.yahoo.com/news/bmw-shares-slip-report-high-094815297.html

  • There’s news this morning that some BMW diesels emit more pollution than affected VW’s. Notably, BMWs not being accused of manipulating the ECU. BMW.DE is down sharply on the news nonetheless:

    http://finance.yahoo.com/news/bmw-shares-slip-report-high-094815297.html

  • There’s news this morning that some BMW diesels emit more pollution than affected VW’s. Notably, BMWs not being accused of manipulating the ECU. BMW.DE is down sharply on the news nonetheless:

    http://finance.yahoo.com/news/bmw-shares-slip-report-high-094815297.html

    • The entire industry is down right now. Never mind that the group that caught VW cheating found that the X5 35d diesel was found to actually pollute less than claimed: http://www.extremetech.com/extreme/214605-vw-caught-cheating-on-diesel-emmissions-standards-ordered-to-recall-500000-cars

      • Correct, BMW – and others- was impacted by the VW story (and generally tracks VW.DE, anyway) but this news was the catalyst for a 52-week low.

      • Don Compton

        The BMW on the test you refer to says that the BMW pollutes less. But there is another study that says that BMW diesels are worse than Audi/Volkswagons. Who the hell knows. They( Auto and Truck manufacturers) cheat, period). The thing I find interesting that this pollution problem is considered more egregious than the key problem with GM. Can you imagine driving down the road and your engine shuts off and your steering locks? How about the Pinto’s gas tank? Definition of pollution has a lot to do with emotion. Is there anything more polluting than buying a new car or iPhone every two or three years? Get a drip people.

  • The entire industry is down right now. Never mind that the group that caught VW cheating found that the X5 35d diesel was found to actually pollute less than claimed: http://www.extremetech.com/extreme/214605-vw-caught-cheating-on-diesel-emmissions-standards-ordered-to-recall-500000-cars