Hello! Hope you’re having a great Saturday.

Today, we explore one of the most infamous scandals in automotive history. This one is so expensive, that the fines equal a small country’s GDP.

Can you guess which one it is? Here’s a hint: there’s more than one brand involved.

Listen to this episode in our podcast here!

Key Takeaways

Don’t have much time? Here’s the summary of what we’re talking about:

• VW was caught in a scandal that cost them billions, and a damaged reputation

• This isn’t the only company cheating on emissions. Other big names are involved

• GM had to pay a massive fine in July 2024, but it’s a fraction of what VW paid.

• The reason for this is GM’s approach to the problem

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Is everyone cheating on diesel emissions? 

One scandal shook the entire automotive industry, but VW wasn't the only one cheating on emissions standards. 

In July 2024, GM paid around $490 million in fines. This was one of the final financial punishments from 11 years ago, but we don't think of GM as the main culprit.

Instead, another company's name pops up. 

It all started in 2013 when three graduate engineering students worked on their doctorates. 

The trio bolted a testing device to a sheet of plywood. 

Then, they jammed their improvised contraction in the back of a station wagon. 

They used a noisy gasoline generator to power the testing device. It seemed improvised, almost amateurish, but their discovery shook the automotive world. 

The three students from West Virginia University were Hemanth Kappanna, Arvin Thiruvengadam from India, and Marc Besch from Switzerland. 

Their testing device collected data, and the three were baffled. Their vehicle was a Volkswagen Jetta with a turbodiesel engine. With it, they had uncovered one of the largest automotive scandals in history. 

It's a matter of magnitude.

Imagine that you're a country's president, and your country has a GDP of $31 billion. That would set it right around El Salvador and Honduras, above Papua New Guinea, and just below Estonia. Here's how it would stack up. 

$31 billion is a lot of money, and that's how much Volkswagen for Dieselgate. 

If you keep up with the automotive news, you may have heard of it. Volkswagen tricked authorities globally. Millions of vehicles were found to produce much more emissions than they should have. It was all a years-long effort from Volkswagen to cheat on regulations. 

The plan was cunning—we have to give them that. The company's lengths to achieve it make us wonder, "Why not invest that in cleaner tech?" 

However, while the VW scandal is impressive, due to its size and financial consequence, it wasn't the only one. So, is everyone cheating on emissions? 

What was the Volkswagen diesel emissions scandal?

Here's a quick refresher on the Volkswagen diesel scandal, which is not "in case you've been living under a rock." No, the total opposite.

Many car people remember the scandal, but we likely forget how big and controversial it was. 

Those three students, Kappanna, Thiruvengadam, and Besch, had performed an emissions test using a different approach than most standard tests. 

If you want to learn more about the crucial difference hinting at the scandal and how Kappanna ended up back in India, read this article. 

Most standard tests are done statically. These three creative individuals did it differently. 

So, what exactly did Volkswagen do to cheat on emissions? The answer goes back longer than anyone expected. 

Here's how the defeat device worked. 

Here's a great example if you want a step-by-step timeline for the VW emissions scandal. 

In 2005, Volkswagen was working on its new EA189 engine, which was exactly when new US emission standards were introduced. 

It was a critical time for VW because they wanted to create an engine that could revive its US presence. 

That's where several engineers come into play. They noticed that the EA189 engine would be unable to meet emissions standards with the current technology. 

VW would've had to spend up to $3,000 per car to upgrade to the newer standards. This would've killed any chance to compete, so they created a defeat device. 

Here's the list of everyone involved in the scandal. 

But VW's problem was how it reacted once the truth got out. Those three engineering students notified authorities, and the case quickly escalated. 

In 2014, after the California Air Resources Board (CARB) received the results, it demanded a response from VW. I didn't get one. 

Instead, VW avoided responsibilities for months. 

CARB sent the first memo to VW in May of 2014. VW replied in November, only after repeated efforts. 

In December of that year, VW offered to recalibrate the engines, but the damage was done. 

By mid-2015, conversations in VW's halls were becoming much more frequent. The truth was about to come out. 

Internally, the company was hurrying to create some form of action to present to authorities. However, the truth was about to come out. 

In September 2015, the EPA notified the world that VW had violated the Clean Air Act. 

The vehicles implicated in the crisis were VW and Audi diesel cars from 2009 to 2015. 

However, the public notice of violation wasn't the most dramatic effect. It was that VW claimed to be surprised as it wanted to solve things "amicably" behind closed doors. 

11 million vehicles were affected worldwide, and the consequences were vast. 

VW's stock dropped nearly 40%, and the company's CEO, Martin Winterkorn, quit immediately after the notice. 

Then, a carousel of CEOs and executives tried to reign the chaos, but it's been hard. By 2020, Volkswagen stated that the scandal had cost them $31 billion, and some question whether the company will ever recover. 

The problem is that VW wasn't the only one. 

Emissions standards have become ever more stringent as decades have passed, and the pressure is on automakers to comply.

Interestingly, this article by Vanderbilt University highlights one thing: the more stringent the standards, the more non-compliance there is, and much of it is reactive. 

Such was the case of GM. 

How GM was caught in the scandal

The diesel emissions scandal continued to gain momentum, so authorities began probing other companies.

The problem was that, as they uncovered more and more, the truth came out. Most of the major players were cheating on emissions tests. 

What are the other brands involved?

These are the other brands involved:

• Daimer (with Mercedes-Benz)

• BMW

• GM (with Opel/Vauxhall, and a big asterisk here)* 

• Fiat Chrysler (with Jeep and Ram)

• Renault

• Nissan 

• Toyota

• Mitsubishi 

• Bosch (a fuel injection system manufacturer)

• Cummins (an engine manufacturer) 

The problem was that emissions far outscored the limits. The following chart shows how much these engines exceeded them. 

Our * is that GM saw consequences for its European cars, at first. Then, American cars were also involved.

In July 2024, General Motors received penalties exceeding $146 million because millions of its vehicles had failed emissions standards. 5.9 million vehicles produced from 2012 to 2018 emitted 10% more than GM's original claims. 

The affected vehicles included 40 GM variations, such as the Cadillac Escalade, the Chevy Tahoe and Silverado, and 1.3 million midsize SUVs. 

The consequences for GM also include giving up credits that ensure GM's emissions are below the EPA standards. These credits and the fine will cost GM $490 million. 

But, VW had to pay 67 times that amount. So, why was the impact different? 

There are several reasons why GM didn't have such a tough time with fines. First of all, there's the magnitude. VW installed defeat devices in 11 million vehicles worldwide. GM's fault was not meeting targets, but according to this article, it wasn't because of defeat devices. 

GM also acted swiftly. It responded to authorities and their questions with little hesitation, while VW did the opposite. 

Then, there's the marketing. While GM's Duramax engines were promoted as clean, their marketing involved only some of the discourse around clean diesel technology. VW, on the other hand, was creating an entire brand around clean diesel. 

In the end, GM's financial impact is much less, and it likely will not speed up the company's recovery. 

However, this isn't GM's first emissions scandal.

Check out this article to read more about how GM tricked emissions in the 1990s and how it wasn't at fault. 

After the VW debacle, many companies highlighted that these new emissions standards would make diesel cars prohibitively expensive. Renault is a vocal critic. 

But this isn't new. As long as emissions standards exist, automakers will try to stick to them, but only sometimes. Regulations are a back-and-forth that  inevitably brings out creativity.

"Creativity for what?" You might ask. Sometimes, rules are meant to be broken.  

The great question that lies ahead is, "What  will happen with EVs?" "Where are we going to measure emissions, and what will we regulate?" 

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