General Motors has been proactive in expanding its customer base. From offering special packages for all its SUV models to a re-design of one of its most popular models, the Chevrolet Cruze, the manufacturer is exploring diverse ways to attract new people to its brand. Now, according to Automotive News, Chevrolet plans to expand its diesel engine offerings in hopes of enticing disenfranchised Volkswagen owners.
VW’s Emissions Scandal
Volkswagen has had its feet in the fire so to speak from its emissions scandal. This scandal emanated when the California Air Resources Board was tipped off about Volkswagen installing emissions software on many of its US diesel cars and up to as many as 10.5 million cars worldwide, Car and Driver reports. How this worked was the vehicles had two different modes of driving. The test mode ensured all diesel vehicles operated within the parameters set by federal laws. However, what researchers found was when driven regularly, these cars emitted more nitrogen-oxide emissions than allowed under federal limits—sometimes as much as 40 times higher. This resulted due to increased injection timing, fuel pressure, and other factors when the system switched from test to normal operating mode. This scandal affected many Volkswagen, Porsche and Audi’s models made from 2009-2016. You can access a complete list of the models affected here. What’s more, because of this scandal, Volkswagen, Audi, and Porsche are not permitted to sell any new diesel vehicles. It’s possible, according to Car and Driver, that due to this scandal, Volkswagen might not sell diesel models in the U.S. anymore. Considering it accounted for up to 70 percent of the U.S. passenger-car diesel market, this creates a significant void. This is a void General Motors wants to fill. GM to Offer Diesel Offerings in Its Cruze, Equinox Models Because Volkswagen won’t be offering diesel models for the immediate future, General Motors hopes to attract former Volkswagen customers by offering diesel engines in some of its most popular models. To fulfill this need, GM is installing diesel engines in its Chevy Equinox model beginning in 2017. This marks the first time a customer can find a model in this segment that possesses a diesel engine. The 1.6-liter diesel engine has earned the moniker, “whisper diesel,†from engineers due to its quiet operation. The performance projections for this engine on the Equinox are interesting. While IHS estimates the Equinox will deliver 136-horsepower, fuel economy expectations for the SUV are as high as 40 highway mpg. To provide scale, the 2016 Chevrolet Spark and Sonic models currently receive the same fuel efficiency output. Therefore, having an SUV that generates as much fuel efficiency as a compact sedan would be a big boon for GM. Making this an even smarter option for the company is the fact the market exists for it to capitalize on. Diesel sales plummeted after the VW scandal rocked the market to the tune of car sales going from 62,445 last year to 3,219 models sold this year through September, WardsAuto reports. Another key indicator is the fact many Volkswagen owners are taking advantage of the buyback options offered by the manufacturer.Details of VW’s Buyback Program
For those that bought or leased a qualifying Volkswagen or Audi model that possessed the 2.0-liter diesel engine, they can receive various forms of compensation. One way they can achieve this is through the buyback program, where owners of eligible models will receive compensation based on the September 2015 NADA Used Car Guide “clean†trade-in figure after accounting for options and mileage of the model, according to Car and Driver. For those that leased a qualified model, they can terminate their lease early with no penalty and will receive up to half the financial restitution owners will receive. There’s also the option of where current Volkswagen customers can receive modifications on their models to ensure they are compliant with emission regulations. The only issue with this option is Volkswagen has yet to find a modification for the models affected. In the meantime, customers that want to keep their models can do so and still receive restitution. They also have until June 1, 2018, to take advantage of the buyback program in the event Volkswagen cannot develop and receive approval for a modification system.GM Capitalizing At The Right Moment
Now, here’s why GM’s timing of offering diesel engines is important. According to VW Bloomberg, of the 475,000 VW diesel owners eligible for the buyback program, half have registered through Volkswagen’s website to get cash. If we go by the half metric, this means there are going to be approximately 237,500 customers who will sell their diesel models. This results in a significant marketplace GM hopes to take advantage of not only in the car but also in the SUV segment. As noted previously, the 2017 Chevy Equinox will be the only SUV in its segment to offer a diesel engine. This separates the Equinox from every model in its class and gives customers a different option from the engine and hybrid offerings currently offered. So far, GM announced it will equip the 1.6-liter diesel engine in its Cruze sedan and Equinox models. There have been talks that the Cruze hatchback might receive the diesel engine as well, but at this point, it’s just speculation.Our Take
What we do know is General Motors’ timing couldn’t be better. Offering a diesel engine on one of its most popular SUVs should elevate it relative to its competition. Furthermore, by having an SUV that’s projected to offer as much fuel efficiency as a compact car, the Equinox should see a significant growth in sales. All told, Volkswagen’s losses could be GM’s gain, as it timed its offerings perfectly.