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Volkswagen's $1 billion buy-back deal 'sends the right signals', says analyst

Shwetha Surender, Frost & Sullivan

An agreement which will see Volkswagen buy back around 600,000 vehicles from their US owners as part of a $1 billion settlement “sends out the right signals to the consumers”, according to industry analyst.

Customers will have the option of having the vehicles – rigged to cheat emissions tests – fixed or bought back by Volkswagen as part of the deal agreed yesterday, senior US district judge Charles Breyer revealed.

The agreement between Volkswagen, the US government and private lawyers will also include “substantial compensation”.

Breyer had threatened a trial if Volkswagen and US officials did not reach an agreement on timing of the repairs by Thursday.

US officials and VW now have until June 21st to file preliminary proposals on the settlement and affected customers will have the chance to participate in public consultation on the plans before Breyer signs off on the final settlement.

Volkswagen has set aside just over $1 billion to meet the demands of the agreement and Shwetha Surender, programme manager for industry analyst Frost and Sullivan, told AM that the deal “sends out the right signals to the consumers”.

She added: “While this is a step in the right direction to mitigate the damages from the emission scandal, sales in the US have taken a hit, falling around 5.7% in the first quarter of the year.

“However, US sales as a whole account for only 10% of the Group's sales. In contrast, China, Volkswagen's largest market accounts for close to 40% of sales and Q1 2016 saw sales rise by 6.4% in the Chinese market.

“The wider outlook is more positive as global sales seem to have stabilised. The Q1 figures revealed a minor increase of around 1% compared to the same period last year.”

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  • PA Broon - 22/04/2016 13:54

    Yep it sends out the right signal if you live in the US. If you live in Europe you get squat...

    • walker - 23/04/2016 10:30

      In Europe, testing has not been focused on NOX emissions, and owners aren't fined for cars which fail regular tests for NOX & HC emissions. You can't compare the markets (or consumers) and what is the driving force for buyer decisions, hence the focus on US resolution of the issue that the VW Group have had to address. Obviously PA Broon must be looking for "compo" when he hasn't actually been affected by the "scandal".

  • Robert Stephens - 25/04/2016 01:20

    I find it disappointing the hysteria surrounding the emissions 'scandal'. Manufacturers may or may not have manipulated outdated and ineffective tests, however it must be remembered that ultimately it was the consumers that benefitted from reduced road tax charges, certainly in the UK where VED is based on Co2 calculations. By hitting manufacturers with big fines, who may have to increase prices of vehicles in order to pay the fines, consumers will have to pay the price. Does anyone actually gain anything from this?