Business In Gear

Dieselgate's silver lining? A surge in car sales.

There could be a silver lining to Dieselgate's dark clouds, some say: A small surge in car sales, similar to the one spawned by the government's Cash-for-Clunkers program.

A VW Golf VII car, right and a VW Passat are loaded in a delivery tower at a Volkswagen plant in Wolfsburg, Germany in March 2015.
Fabian Bimmer/Reuters/File | Caption

For nearly a year and a half, the Volkswagen Dieselgate scandal has been making headlines. While the headaches might not be over for Volkswagen executives, they could be coming to an end for US owners of Audi, Porsche, and VW vehicles illegally designed to cheat on emissions tests.

In fact, some believe that there could be a silver lining to Dieselgate's dark clouds: a small surge in car sales, similar to the one spawned by the US government's Cash-for-Clunkers program in the wake of the Great Recession.

Unexpected uptick

As we discussed yesterday, auto sales in America are going strong, but the rate of growth has tumbled in recent years. In 2016, for example, new-car dealers moved about 17,550,351 vehicles. That's an impressive number, to be sure, but it's only about 75,000 vehicles higher than 2015's tally--a growth rate of just 0.4 percent.

Many believe this year's gains will be even slimmer, closer to 50,000 vehicles. However, what those analysts haven't taken into account is the hundreds of thousands of Volkswagen diesel owners who'll be asking the automaker to buy back their vehicles, meaning that they'll be in the market for new ones. 

Since there are roughly 562,000 vehicles affected by Dieselgate in the US, and since most owners of those vehicles are expected to opt for buybacks, that could push 2017's sales much, much closer to the 18,000,000 mark.

In reality, however, the figures aren't expected to be quite that high. LMC Automotive thinks that buybacks from owners who wouldn't ordinarily have been in the market for a new vehicle will account for 60,000 sales this year and 150,000 in 2018. 

Of course, the question on everyone's mind is what those shoppers will buy. One VW dealer reports that roughly 20 percent of folks who've sold back their diesels to Volkswagen have bought another VW. That alone could boost VW's lackluster US sales, which ended 2016 at 322,948, or 7.6 percent below 2015. 

Note: for purposes of clarity, "Volkswagen" has been used to refer to the Volkswagen Group parent company, while "VW" has been used to refer to the company's popular mass-market brand of automobiles.

This story originally appeared on The Car Connection.

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