Volkswagen is bleeding tens of billions of dollars in brand value
Experts are estimating that Volkswagen has already lost around US$10 billion in brand value since the scandal involving emissions reporting was uncovered.
The CEO has already fallen on his sword – could the VW brand itself have to do the same?
That’s the suggestion from brand valuation and strategy consulting firm Brand Finance, which says that the very future of the VW brand is in doubt following revelations that tens of millions of diesel vehicles may have been fitted with software designed to deceive emissions testers.
Brand Finance’s last calculations are shown in the table below. VW’s brand value stands at just over US$31 billion, making it the world’s third most valuable auto brand (before the scandal hit), increasing from US$27 billion in 2014.
The news created shockwaves around the business world and has since spread to other brands in the Volkswagen Group, which is the largest portfolio of auto brands by brand value in the world, according to Brand Finance.
Brand Finance’s CEO David Haigh says the developments of the last weeks will undoubtedly send VW’s upward valuation trend into reverse, resulting in US$10 billion in lost brand value. “The apparent ease with which the company’s activities were uncovered makes it all the more astonishing that VW was willing to endanger its most valuable asset,” Haigh says.
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“The very future of the VW brand is in doubt,” Haigh says. “To have any chance of recovery, VW must investigate the source of the supposedly nefarious activity and if it is confined to a particular division or series of ‘bad apples’ then to clearly communicate that fact to avoid contagion.
“It must ensure that this type of activity cannot take place again and through multiple communication channels, from official statements to advertising campaigns, continue to emphasise the brand’s green credentials and commitment to mitigating the effect of the industry on the environment.
That such an iconic German brand, the ‘people’s car’, could behave in this way threatens to undo decades of accumulated goodwill, Haigh says.
The full ramifications of the scandal are yet to be seen, and time will tell how it compares to the significant reputational and brand damage suffered by Toyota, the world’s most valuable auto brand, following a series of recalls over mechanical issues from 2009 to 2011.
After reaching a peak of US$27.3 billion in 2010, Toyota’s brand value dropped to US$26.2 in 2011 and further to $24.5 in 2012. It did not exceed the previous peak until 2014, when brand value was US$34.9 billion, increasing slightly to US$35 billion this year.
“On first assessment it appeared that Volkswagen might escape such severe brand damage,” Haigh says. “Toyota’s errors led directly and visibly to fatal accidents while Volkswagen’s alleged activity may also pose a threat to life, but in a less immediate way. However, as the scale of the deception has emerged over the last few days it is beginning to look as though VW may face a crisis on an unprecedented scale.
“The cost of recalls and fines could be far more significant than those Toyota faced, while the apparently deliberate nature of VW’s actions compounds the impact on its credibility.
“This sits particularly badly with Volkswagen’s brand identity which is founded on reliability, honesty, efficiency (both efficiency of production and fuel economy) and more recently for environmental friendliness via models such as the Polo Bluemotion and XL1,” says Haigh. “Brand Finance therefore estimates that as much as $10 billion has already been wiped off the value of the brand.”