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VW diesel scandal: local car buyers unfazed

They focus mainly on lower price and emission standard

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The Volkswagen emissions scandal does not seem to have affected Singaporeans' interest in or demand for diesel cars so far, as purchases here are based mainly on financial considerations and because of the lower emission standard here, say dealers.

Singapore

THE Volkswagen emissions scandal does not seem to have affected Singaporeans' interest in or demand for diesel cars so far, as purchases here are based mainly on financial considerations and because of the lower emission standard here, say dealers.

Earlier this week, Volkswagen admitted circumventing US emission regulations with a "defeat device" in its diesel cars to suppress pollution during laboratory testing, but allowing full-blown emissions - up to 40 times the legal limit - when driven on the road by its owners.

So far, some 11 million VW cars worldwide are involved, including half a million in the US, but all are Euro 6-compliant.

In Singapore, the current diesel standard is Euro 5, which does not employ urea to "scrub" nitrogen oxide from the exhaust. The majority of diesel passenger cars are made by European marques, which (in addition to VW) include BMW, Mercedes-Benz, Jaguar, Land Rover, Volvo and Renault.

"As of right now, there are no concerns or impact on sales for any of the brands," said Andre Roy, CEO of Wearnes Automotive, whose group offers the most diesel models here.

But one senior manager of another European dealership said he was feeling "nervous".

"We are a bit jittery right now because we don't know if they are going to find out something about our brand," he said, requesting not to be named. "But we are lucky the Singapore and European markets are different."

He explained that in Europe, where half of a major brand's car sales can be diesel-powered, taxes on exhaust emissions are significant, and so is the cost of fuel because of the long distances covered. Diesel cars are popular for lower emissions and higher mileage than petrol-engined ones.

But in Singapore, diesel sales rose in recent years because of the CEVS (carbon emissions-based vehicle scheme) and COE (certificate of entitlement). The popularity of diesel cars grew after CEVS was introduced in January 2013 and provided rebates for lower emissions. Then in February 2014, COE Category A for cars under 1,600 cc was reclassified to include an engine output limit of 130 hp. Diesel cars aced both policy initiatives.

"For Singaporeans, buying a diesel car is all about financial considerations. Diesel fuel is cheaper than petrol, a Cat A COE is also cheaper, and there is a CEVS rebate," said the director of a luxury dealership. "They don't care about emissions; they only want a car that costs less."

But for now, the worry is that the scandal could widen for VW, the world's biggest automaker after overtaking Toyota in the first half of 2015. The models implicated are the Golf, Jetta and Passat with 2.0 TDI engines, as well as some Audi cars (Audi belongs to the Volkswagen Group). But a recent report is claiming the 1.6 TDI engine may be connected too.

Apart from brand image, there is the financial fallout from fines (the group faces a US$18 billion penalty in the US) and recalls (the millions of cars that need to be rectified or refunded).

Volkswagen Group Singapore declined to comment when contacted and referred to its global statement issued instead. In it, it said: "Volkswagen is working at full speed to clarify irregularities concerning a particular software used in diesel engines. New vehicles from the Volkswagen Group with EU 6 diesel engines currently available in the European Union comply with legal requirements and environmental standards."

It added that it plans to set aside a provision of some 6.5 billion euros (S$10.4 billion) in the third quarter of the current fiscal year. "Due to the ongoing investigations, the amounts estimated may be subject to revaluation. Earnings targets for the group for 2015 will be adjusted accordingly," the statement said.