VW diesel cars in emissions scandal in demand – MarketWatch

Posted: Friday, May 05, 2017

Volkswagen AG is suddenly experiencing a run on diesels.

The auto maker’s TDI diesel cars are back on sale after being yanked from the U.S. market 18 months ago, sparking a race among buyers still interested in the niche technology but faced with an extremely limited supply.

VW dealerships were barred from selling their signature diesel cars after regulators found software the company designed to sidestep diesel emissions tests. Dealers recently received the green light from regulators to fix and sell the 12,000 new vehicles sidelined by the emissions scandal.

Amir Mahmoud, a 36-year-old sales manager at Caterpillar Inc. near Milwaukee, contacted about 30 stores nationally before finding a gray 2015 Passat TDI sedan at a dealership close to home. “I think it’s my last chance to get my hands on an unused one,” said Mr. Mahmoud, who has owned several Volkswagen diesel models.

Dealers sold about 3,100 new diesel cars in April–the first month in which they were being sold — leaving fewer than 9,000 in stock, a Volkswagen of America spokeswoman said. A flood of used TDI cars should begin popping up in coming months as VW processes hundreds of thousands of buybacks that are offered under a $10 billion civil settlement.

The German auto giant has indicated it may not return to the U.S. with diesel passenger cars, which are largely unpopular among American drivers but still beloved in Europe. General Motors Co. and Volkswagen’s German rivals are among companies still offering diesel passenger-car options in their lineups.

Volkswagen was the leader in the segment until it admitted in 2015 that it equipped about 480,000 TDI Golfs, Jettas, Beetles and other cars dating back to the 2009 model year with so-called defeat devices that misrepresented the level of pollutants being spewed by the cars. VW pegged its U.S. expansion strategy to the TDI engines for more than a decade.

Diesel engines account for less than 1% of total car sales in the U.S.

Volkswagen is turning to electric cars as a diesel alternative. The decision satisfies regulators, but leaves behind a loyal following of TDI enthusiasts who are hooked on the combination of fuel economy, durability and peppy torque produced by a diesel engine in a small car.

Matt Enders typically gets 50 miles per gallon in his 2011 diesel Jetta commuting to his job in operations for a ski-apparel company in Seattle. Because TDI sales were frozen, he considered replacing the Jetta with a gas-powered VW before reading in late March about the 2015 TDIs being cleared for sale.

“We were bummed about the idea of getting into a ‘gasser’ and filling up the tank every 300 miles, instead of every 600,” Mr. Enders said. He drove five hours to a dealership in Spokane last week to pick up a new 2015 TDI Golf Sportwagen.

Most of VW’s 650 U.S. dealerships have been storing dozens of the 2015 cars in off-site lots. Some of the cars Mr. Enders looked at showed signs of long exposure to the elements, including traces of moss on rubber sections and water spots on the paint finish.

At one VW dealership, varmints chewed through the belly pans of dozens of TDI cars that have been stored off-site, requiring repairs or replacement, according to a service manager.

VW has been compensating dealers for taking care of the stranded cars. Dealers were instructed to start them monthly and check fluid levels and battery charge. Preparing them for sale is a several-hour process that includes detailing and routine maintenance along with the software fix.

“We’ve been sure to feed and care for them every month,” said Matthew Welch, general manager of Auburn Volkswagen outside Seattle. He has sold nearly all of the store’s 20 remaining TDIs in the short time they went on sale.

VW is offering significant discounts on the cars, some of which are now more than two years old. Buyers are offered $5,000 off the sticker price. Leases come with $8,500 in cash.

The scandal “hasn’t deterred me at all,” said Brian Stickney from Portland, Maine, who recently bought a loaded 2015 Golf TDI for about $6,000 less than the sticker price. “It’s just a windfall for me.”

Write to Mike Colias at Mike.Colias@wsj.com


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