The European Court of Justice (ECJ) ruled on that Volkswagen remains liable for using unlawful defeat devices, such as temperature-sensitive emissions software, in its diesel vehicles, even if they met EU standards.
The ruling stemmed from two German lawsuits involving cars fitted with these devices, which reduced exhaust gas recirculation at temperatures below 10°C, increasing nitrogen oxide emissions beyond legal limits. The ECJ rejected Volkswagen’s argument that the devices were permissible or would have been approved by national authorities.
Compensation to buyers can be reduced based on vehicle use or capped at 15% of the purchase price but must reflect the damage caused. Volkswagen stated the ruling’s impact would be limited, as few related lawsuits remain in German courts. The decision is part of the ongoing Dieselgate scandal, which has cost Volkswagen billions in fines, refits, and settlements since 2015.
The ECJ’s decision confirms Volkswagen’s liability for compensating affected customers, though compensation can be reduced based on vehicle use or capped at 15% of the purchase price. While Volkswagen stated that the ruling’s impact would be limited due to the low number of remaining lawsuits in Germany, any additional payouts could still add to the €30 billion+ already spent on fines, settlements, and vehicle refits globally since the scandal broke in 2015.
Although Volkswagen claims few lawsuits remain in Germany, the ruling could encourage new claims in other EU countries where litigation is ongoing or dormant. This could lead to additional legal and financial burdens, particularly in markets with large numbers of affected vehicles. Ongoing legal costs and potential new claims may pressure Volkswagen’s profit margins, especially as the company invests heavily in electric vehicle.
The ruling reinforces negative perceptions of Volkswagen tied to the Dieselgate scandal, potentially affecting consumer trust and brand loyalty. This could impact sales, particularly in environmentally conscious markets like the EU, where scrutiny of emissions compliance is high. The decision underscores the need for stricter adherence to emissions regulations.
To align with EU regulations and avoid similar issues, Volkswagen may need to further refine its production processes, particularly for internal combustion engine (ICE) vehicles still in production. This could involve retrofitting existing models or accelerating the phase-out of diesel vehicles in favor of EVs.
The ruling adds pressure to Volkswagen’s transition to electric vehicles, as diesel technology continues to face legal and regulatory challenges. The company’s €180 billion investment plan through 2027, with a significant portion allocated to EVs and battery production, may need to be expedited to mitigate risks associated with ICE vehicles.
The reputational hit and financial strain could weaken Volkswagen’s competitive position against rivals like Tesla, Stellantis, or Chinese EV manufacturers, particularly in the EU, where demand for sustainable mobility is growing. The ruling may lead to heightened regulatory oversight of Volkswagen’s emissions compliance across the EU, potentially slowing down vehicle approvals or requiring costly modifications to existing models.
The ECJ’s rejection of Volkswagen’s defense sets a precedent for other automakers, signaling that defeat devices, even if allegedly permissible at the time, will face strict liability. This could prompt Volkswagen and competitors to overhaul compliance strategies. The ruling clarifies that EU law applies uniformly, meaning Volkswagen could face similar challenges in other EU member states.
Affected customers may receive compensation, though limited by usage or caps, which could influence their perception of Volkswagen’s accountability and willingness to purchase its vehicles in the future. Ongoing legal and financial risks may lead to volatility in Volkswagen’s stock price, as investors weigh the costs of Dieselgate against the company’s EV transition progress.
While Volkswagen has already absorbed significant costs from Dieselgate, the ECJ ruling introduces ongoing financial and reputational risks, particularly in the EU. The company’s operations will likely face increased compliance costs, heightened regulatory scrutiny, and pressure to accelerate its EV strategy. However, Volkswagen’s claim that the ruling’s impact is limited suggests confidence in managing remaining liabilities.
