Volkswagen brand value erodes $10 billion

For years, German automobile maker Volkswagen wooed consumers with a simple advertising slogan - Das Auto. In English, it means 'The Car', implying this is the car you should have. In the wake of the diesel emission scandal, it now seems Volkswagen, which in German means the 'people's car', might have to take back its words.

UK-based Brand Finance's latest report suggests that Volkswagen, the world's largest passenger car maker, has slipped in brand rankings. According to the international brand valuation firm, the German car maker lost nearly $10 billion in brand value following the shocking developments in the past few days, resulting in global chief executive officer (CEO) Martin Winterkorn quitting.

According to Brand Finance's CEO David Haigh, Volkswagen was the third largest automotive brand after Toyota and BMW in a 2015 listing of the world's top auto brands. However, the developments of the past few days have seen the German automaker tumble down that list to fifth position, after Toyota, BMW, Mercedes-Benz and Honda.

Volkswagen's brand value is now $21 billion, by Brand Finance's latest assessment. In the earlier list, Volkswagen's brand value was $31 billion. Since none of the other auto brands has been touched yet by the diesel scandal, their 2015 brand values haven't changed (see chart).

While BMW saw its stock price tank nearly 10 per cent on Thursday, following talk of the probe into the diesel emission scandal being widened by the German government, there have been no developments on the front.

However, without a doubt, Volkswagen's 'dieselgate' has left a trail of destruction in its wake. Haigh of Brand Finance is scathing in his review. He says: "On first look, it appeared Volkswagen might escape such severe brand damage. But, as the scale of the deception has emerged over the past few days, it is beginning to look as though VW would face a crisis on an unprecedented scale."

This point is endorsed by Santosh Desai, managing director and CEO, Future Brands, who says Volkswagen is having to deal with an unprecedented loss of credibility, something that rivals such as Toyota, Honda and Nissan did not have to. This, despite facing the challenge of having to contend with faulty air bags fitted by Japanese supplier Takata, resulting in one of the biggest products recalls in the US and other markets by these firms recently.

Haigh says Toyota's product recalls in the past, notably between 2009 and 2011, impacted brand value. "After reaching a peak of $27.3 billion in 2010, it dropped to $26.2 billion in 2011 and further to $24.5 billion in 2012. It did not exceed the previous peak until 2014, when brand value was $34.9 billion, increasing slightly to $35 billion this year," he says of Toyota's performance over the years on the brand list.

While Toyota's errors led "directly and visibly" to fatal accidents resulting in a brand-value erosion, Volkswagen's actions appear to be deliberate, sitting badly with its brand identity founded on reliability, honesty and efficiency, Haigh says. This has a damning impact on brand value, he adds.