VW Risks its $31 billion Brand and Germany’s National Reputation

VW brand valued earlier this year at US$31 billion Estimated to have lost US$10 billion in brand value since emissions scandal emerged Further revelations threaten VW's future existence German nation brand tarnished, set to lose position as World's strongest   Recent revelations that, at the time of writing, as many as 11 million diesel vehicles may have been fitted with software designed to deceive emissions testers, have dealt a hammer blow not just to Volkswagen's reputation but potentially to the entire German nation brand. David Haigh, CEO of brand valuation and strategy consultancy Brand Finance, gives his view on the scandal that has sent shockwaves around the world.   "At Brand Finance's last calculation VW's brand value stood at just over US$31 billion, making it the world's 3rd most valuable auto brand. It appeared to be motoring ahead, brand value having increased from just over US$27 billion in 2014. The developments of the last few days will undoubtedly send this trend into reverse, resulting in $10 billion in lost brand value. The apparent ease with which the company's activities were uncovered makes it all the more astonishing that VW was willing to endanger its most valuable asset. Rather than 'Das Auto', VW's motto might be more appropriate if changed to 'Crass Auto'.   The Scandal in Front is a Toyota   "Toyota, the world's most valuable auto brand, suffered significant reputational and brand damage following a series of recalls over mechanical issues from 2009 to 2011. This was reflected in its brand value. After reaching a peak of US$27.3 billion in 2010, it dropped to US$26.2 in 2011 and further to $24.5 in 2012. It did not exceed the previous peak until 2014, when brand value was US$34.9 billion, increasing slightly to US$35 billion this year.   "On first assessment it appeared that Volkswagen might escape such severe brand damage. Toyota's errors led directly and visibly to fatal accidents while Volkswagen's alleged activity may also pose a threat to life, but in a less immediate way. However as the scale of the deception has emerged over the last few days it is beginning to look as though VW may face a crisis on an unprecedented scale.   "The cost of recalls and fines could be far more significant than those Toyota faced, whilst the apparently deliberate nature of VW's actions compounds the impact on its credibility. Its sins of emission are sins of commission. This sits particularly badly with Volkswagen's brand identity which is founded on reliability, honesty, efficiency (both efficiency of production and fuel economy) and more recently for environmental friendliness via models such as the Polo Bluemotion and XL1. Brand Finance therefore estimates that as much as $10 billion has already been wiped off the value of the brand.   VW Brand for the Scrapheap?   "The very future of the VW brand is in doubt. To have any chance of recovery, VW must investigate the source of the supposedly nefarious activity and if it is confined to a particular division or series of 'bad apples' then to clearly communicate that fact to avoid contagion. It must ensure that this type of activity cannot take place again and through multiple communication channels, from official statements to advertising campaigns, continue to emphasise the brand's green credentials and commitment to mitigating the effect of the industry on the environment.       The Automotive Industry's Most Valuable Brand Portfolios     Parent Company Brand Brand Value 2015 (USDm) Brand Value 2014 (USDm) Volkswagen AG Volkswagen 31025 27062   Audi 9591 7082   Porsche 3839 11370   MAN 3257 NA   Scania 2302 2453   Bentley 1852 2075   Skoda 1265 1965   Lamborghini 920 677   Seat 691 884   Ducati 152 NA   Portfolio Total 54893 53568 Toyota Motor Corporation Toyota 35017 34903   Lexus 4217 4169   Scion 615 916   Portfolio Total 39849 39988 BMW AG BMW 33079 28962   MINI 4672 4238   Rolls- Royce 776 819   Portfolio Total 38527 34018 Daimler AG Mercedes-Benz 27328 24171   Daimler 2773 NA   Smart 1285 1565   Portfolio Total 31385 25737 Honda Motor Co Ltd Honda 22424 22152   Acura 1924 2158   Portfolio Total 24347 24310 Fiat SPA Fiat 6060 5179   Ferrari 4747 4036   Dodge 3013 2312   Jeep 2731 2508   Chrysler 2080 1952   RAM Trucks 2034 1878   Maserati 942 693   Alfa Romeo 533 474   Lancia 350 326   Magneti Marelli 197 253   Teksid 150 NA   Comau 140 153   Portfolio Total 22977 19765 General Motors Chevrolet 7150 6426   GMC 3492 4310   Opel 2364 2587   General Motors 2277 4842   Buick 1636 1821   Cadillac 1355 1499   Pontiac 1243 1269   Vauxhall 909 926   Holden 489 558   Saturn 361 395   Saab 358 428   Portfolio Total 21728 25062 Ford Motor Co Ford 20315 20236   Lincoln 1263 2398   Portfolio Total 21578 22634 Nissan Motor Co Nissan 18085 21194   Infiniti 1472 1619   Portfolio Total 19557 22813 Tata Motors Land Rover 6521 4339   Tata Motors 2374 2294   Jaguar 1435 1246   Portfolio Total 10331 7879 Peugeot SA Peugeot 6210 7123   Citreon 3703 4260   Portfolio Total 9913 11384     From People's Car to People's Shame   "It may already be too late to stop the corrosive effect VW is having on the reputation of its home country, in particular its business culture. German industry is lauded for its efficiency and reliability while Germans as a whole are seen as hard-working, honest and law abiding. This perception has only been intensified by the Merkel government's firm, litigious approach to the Greek debt crisis.   "That such an iconic German brand, the 'people's car', could behave in this way threatens to undo decades of accumulated goodwill and cast aspersions over the practices of German industry, making the Siemens bribery scandal appear less a one-off than evidence of a broader malaise. With reports that BMW has been implicated too, the damage to Germany's nation brand could become critical. Nevertheless, Germany's status as the world's most powerful nation brand (revealed in the 2014 edition of the Brand Finance Nation Brands report) is under threat, and nation brand value could be set to fall when the results of our 2015 study are revealed next month."   About Brand Finance   Brand Finance is the world's leading brand valuation and strategy consultancy, with offices in over 20 countries. We provide clarity to marketers, brand owners and investors by quantifying the financial value of brands. Drawing on expertise in strategy, branding, market research, visual identity, finance, tax and intellectual property, Brand Finance helps clients make the right decisions to maximise brand and business value and bridges the gap between marketing and finance.