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Volkswagen crisis hits India, Govt likely to issue show-cause notice over failed emission test

05-November-2015
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Volkswagen crisis hits India, Govt likely to issue show-cause notice over failed emission test

Volkswagen which was hit by the emission scandal in Europe and the US now looks to be in trouble in India too. The central government is expected to issue a show-cause notice to the company after a report by testing agency Automotive Research Association of India (ARAI) stated that three of their diesel models had failed the emission tests, say media reports.

The ARAI is said to have found significant variation in emission level in on-road vehicles of 3 Volkswagen models compared to laboratory measurements. The models include the Volkswagen Jetta, Audi A4 and Volkswagen Vento. Ambuj Sharma, Additional Secretary, Heavy Industries Ministry is reported to have said that the government will issue a show-cause notice to Volkswagen Group of companies. He further added that there were significant variations in the emission levels by ARAI in on-road vehicles of the 3 models of the automaker from the laboratory measurements.

The automaker is likely to recall 100,000 cars in India according to media reports. On October 9, it had made a recall of 389 units of Volkswagen Polo in India. However, the company had said that this recall had nothing to do with the emission scandal but was to rectify a faulty handbrake.

This has seen an impact on recent sales figures for the month of October reveal a 30.2% drop in sales from the same month last year. Volkswagen sold 3,255 units in October 2015 in comparison to 4,663 units during the same period last year. The reason for this drop in sales is expected to be due to the uncertainty in the fate of the company’s cars in India and the reports of recalls expected by the company.

Earlier, Volkswagen had has accepted that some of the India-made diesel models were affected by the emission cheating scandal. The company had also reached out to the Indian officials to accept a plan similar to that which was accepted by European authorities in testing and fixing the diesel engines affected by the scandal. A task force had been set up in India for this too. However, at that point in time the ARAI had not yet filed its report on the findings.

Volkswagen has taken a major hit in revenues due to this crisis which looks to be snowballing with each passing day. It had recently also revealed that 800,000 petrol and diesel-powered cars have their CO2 and mpg ratings wrongly certified. The company posted a $1.83 billion quarterly loss in its third quarter results which it announced and is its first loss in more than 15 years. The revelations have also impacted their value by more than Euros 4 billion and is said to cost the company up to Euro 35 billion in its value according to media reports. The company had set aside Euro 2 billion to cover the cost of the scandal.

Closer to home the latest development with regards to the government sending a show-cause notice to Volkswagen is expected to have a significant impact on its sales and revenues in the country. The sandal hits the company at the festive period which is the highest sales periods for automobiles in the country. 

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