Stefan Kluge & Johannes Poppa
Back in 2015, the world watched in shock as Volkswagen admitted to rigging diesel emissions tests, in what quickly became known as the “Dieselgate” scandal. Beyond the immediate public outrage and regulatory backlash, the scandal raised important questions about how such a massive corporate failure might ripple through the industry. Could Volkswagen’s problems hurt the entire German automotive sector, or were the effects limited to VW alone? A new study by Johannes Poppa offers fascinating insights into this question.
Using a dataset of vehicle registrations in Germany from 2015 to 2017, Poppa examined whether the scandal affected car sales across different brands and segments. He specifically aimed to uncover whether VW’s subsidiaries, like Audi and Porsche, or even unrelated German manufacturers, such as BMW and Mercedes-Benz, experienced spillover effects from Dieselgate.
Poppa employed Difference-in-Differences (DiD) analyses to isolate the scandal’s specific impacts. This method allowed him to compare sales trends before and after Dieselgate between VW-related brands and non-German manufacturers, which served as a control group. Additionally, Before-and-After studies provided insights into trends within specific vehicle segments like compact cars, SUVs, and luxury vehicles.
One key finding was somewhat unexpected: Dieselgate significantly reduced VW’s overall vehicle registrations but did not dramatically affect diesel sales specifically. Surprisingly, VW’s gasoline car sales took a noticeable hit, suggesting consumers broadly associated the VW brand with negativity beyond just diesel-powered vehicles. Figure 1 below illustrates the stark drop in VW registrations compared to non-German brands.
Figure 1: VW vs. Non-German Registrations Over Time
Interestingly, the study found limited evidence of spillover effects on other German brands. Audi and Porsche, despite being part of the VW Group and directly involved in Dieselgate, showed a less pronounced drop in registrations, potentially due to their distinct brand identities and higher-end market positioning. On the other hand, BMW and Mercedes-Benz appeared largely unaffected, highlighting how independent branding strategies could effectively shield firms from reputational spillovers.
Another intriguing trend emerged when Poppa looked at different car segments. SUVs saw a marked increase in registrations following the scandal, indicating changing consumer preferences possibly driven by perceptions of safety and versatility. In contrast, compact diesel cars experienced a notable decline, likely due to increased skepticism toward smaller diesel engines directly implicated in emissions manipulations.
Figure 2: Segment-specific Registrations Before and After Dieselgate
Poppa’s research underscores the complexity of brand reputation management, particularly within multi-brand corporations. His findings suggest that while high-profile scandals like Dieselgate undoubtedly damage consumer trust and corporate reputation, strategic branding and targeted positioning can mitigate broader negative impacts. This study not only enriches our understanding of the automotive market’s dynamics but also offers critical insights for companies navigating crisis management and reputational recovery.