How 1 lie cost Volkswagen 20% in profits

How did VW trick consumers into thinking their vehicles were eco-friendly?

They installed devices that could detect when their vehicle emissions were being tested. These devices could change the emission test results, compromising their accuracy. Proper testing showed their emissions were 40x higher than the legal limit set by the EPA.

So why did this go so terribly wrong?

• They lied. They falsely advertised their “clean diesel” cars as eco-friendly.

• Lack of transparency. When they were caught, they denied all wrongdoing. Former CEO Matthias Muller said the situation was a misunderstanding. He also explained that he could not see how what he did was ethically wrong.

Who did VW hurt by lying about their products?

• Their own brand image. Not surprisingly, consumers saw VW in a negative light following the scandal. Their reputation as a trustworthy, environmentally friendly company was tarnished. This resulted in VW recording their first annual loss in April 2015 after 20+ years, with their profits dropping by 20%.

• Their customers. Loyal consumers lost their confidence in the brand as a result of the scandal. Potential customers also became wary of purchasing VW cars due to their unethical actions.

• The environment. Their most popular vehicles, the Volkswagen Golf and Audi A3, had these cheat devices in them. This caused serious environmental impacts. The higher level of nitrous oxide contributed to air pollution and other harmful health effects.

What can you learn from this disaster?

Be Honest. Being a truthful brand ensures your consumers remain loyal to you. And if you mess up, be transparent rather than trying to cover up wrongdoing.

Being a conscious brand is important. But it's not okay to pretend you are one.

-Visha, Intern