Of lying labels and irregular rebates

The VW scandal is exactly the wake-up call the opaque auto industry needs. For far too long, it has resisted change; transparency needs to be its new game.

It has been over a month since news broke that German carmaker Volkswagen misled regulators around the world about its diesel cars, and headlines continue to be dominated by the scandal.

Dubbed the great “diesel dupe”, the US Environmental Protection Agency had discovered cheating devices in VW diesel cars that detected when a car was undergoing an emission test, and changed its performance to excel at it.

But back on the road, the cars would turn off the controls, which meant the engines emitted nitrogen oxide pollutants - harmful to humans and the environment - up to 40 times above what is allowed in the United States.

In the latest development this week, US regulators said VW’s deceit extends to its diesel luxury vehicles used for its Porsche and Audi brands - a charge that VW has denied.

The fallout has been immense.

VW has lost billions - more than a third - of its stock market value, its credibility is in tatters and it is faced with lawsuits, hefty fines from the US regulator, and the cost of fixing as many as 11 million vehicles worldwide estimated to have this cheating device.

Its deception, on such a massive scale, is unprecedented in recent corporate history. VW customers have been severely bruised by the betrayal, especially as many had deliberately chosen their cars for their environmental credentials. One New York Times column was emotionally titled “How VW broke my heart”.

Many have demanded VW buy their cars back. In Seattle, one law firm has already filed a class-action suit on behalf of car owners, accusing Volkswagen of fraud, false advertising and violating consumer rights. And the story continues to unfold, with the scandal engulfing the wider car industry.

VW is not the only company under the spotlight for duping consumers. According to a study published last month by European non-profit Transport and Environment, a number of Mercedes-Benz, BMW and Peugeot vehicles - which were tested last year - guzzled as much as 50 per cent more fuel than was stated in company-run lab tests.

“The gap between official and real-world performance found in many car models has grown so wide that it cannot be explained through known factors, including test manipulations,” the group declared.

This past month, I discovered for myself that when it comes to the car industry, getting accurate information is as elusive as peace in the Middle East.

I have been on the Singapore market for an eco-friendly car to replace my existing one (which, after almost a decade, has started to fall apart) and it has led me down the rabbit hole into a world of confusing statistics, convoluted schemes and moral dilemmas.

Lying labels

For one thing, I discovered that the fuel-efficiency labels in car showrooms can be rather misleading.

While testing the Toyota Prius - arguably the world’s most recognisable eco-friendly car (for which it has also earned nicknames like The Pious) - I noticed that the fuel-efficiency figure, proudly displayed on the dashboard, did not match the 25.6km per litre it boasted on the brochures.

The salesman said it was because my spin was too short. But after test- driving a few other cars, I was told by many sales agents that “real world” efficiency is typically about 20 to 30 per cent lower than what’s declared, depending on the style of driving.

Digging deeper, I also attempted to analyse and compare the life-cycle footprint of certain cars. This refers to their impact on the environment during their entire life, from production to the period of use and end-of-life recycling. For instance, it looks at what kind of raw materials and processes went into making the car.

Some critics say electric and hybrid car batteries are more resource-intensive to make, and therefore these cars have a higher “embedded carbon footprint” than conventional cars. Recent research has shown that while this is true, environmental benefits of these cars are still higher than those of traditional cars when the overall life cycle is considered.

Some sustainability reports I downloaded from the websites of carmakers offered useful information. Cars from Swedish auto firm Volvo, for example, are made in a factory powered entirely by renewable energy. Most companies displayed group information about its environmental footprint, but it was difficult to make a decent comparison about the carbon footprint of each individual car model, largely also because the standards and method of reporting were so varied.

Disingenuous rebates

Government schemes fared no better. I discovered that Singapore’s much- touted Carbon Emissions-Based Vehicle Scheme (CEVS) - launched in 2013 by the Land Transport Authority (LTA) to offer rebates to greener cars - was not so straightforward either.

Under an enhancement this year, the rebate for the Toyota Prius, for instance, increased from S$20,000 to S$30,000. But I was told - and I doubt many are aware of this - that this rebate is clawed back by LTA when an owner sells his car.

Say the Prius and an average car have an open market value of S$35,000 each. For the latter, the additional registration fee (ARF) - a tiered fee which LTA imposes on all cars - is roughly S$41,000. But for the Prius, as it enjoys a rebate of S$30,000, its ARF is S$11,000.

When an owner wants to sell it coming up to the 10-year mark (as many do in Singapore, because of the 10-year certificate of entitlement lifespan - a document all car owners must purchase), LTA pays the owner back 50 per cent of the ARF. So a non-Prius car owner would get S$20,500, while the Prius owner would get a mere S$5,500.

This dramatically lowers the residual cost of the car.Effectively, the S$30,000 rebate is worth only S$15,000 (if you sell the car).

Some industry commentators point out that car dealers merely use the CEVS to fatten their own margins and do not pass the discount to consumers. Currently, the Prius is going for a pricey S$140,000, even after including this “rebate”.

When contacted, an LTA spokesman maintained that for lower-emission cars, “there is still a reduction in net taxes paid”.

Yes, there is a discount - but it is not the amount the CEVS claims to offer, which I find is disingenuous.

Why is the rebate tied to the ARF? Couldn’t it be just a one-off discount if LTA truly wants to incentivise car buyers? I also had to contact LTA to clarify this as it doesn’t state anywhere on its website how a CEVS car’s residual value is affected.

Weeks later, I am still no closer to finding the eco-friendly car of my dreams.

Disillusioned by dishonest numbers and convoluted schemes, I’m close to ditching the idea altogether. But the thing is, cars are still an integral part of our daily lives that offer significant convenience.

Without it, my commute to work would be over an hour instead of 10 minutes each way. I’ll also be the first to admit I’m not eco-warrior enough to deal with my two tantrumming toddlers on a 15-minute steep uphill or downhill walk home from the bus stop on a daily basis.

But perhaps the silver lining is that the VW scandal is exactly the wake-up call the industry needs.

For far too long, it has resisted change; diesel technology has been around for 100 years and this latest scam has proved that “clean diesel” continues to be a myth.

Against a backdrop of increasingly strict carbon emission controls due to climate change and pollution concerns (the transport sector accounts for roughly 23 per cent of global greenhouse gas emissions), industry watchers say the scandal might be the impetus consumers need to embrace new technologies such as Google’s autonomous vehicles and Tesla’s electric cars.

We could finally see the death of the diesel age, and the ushering in of a new, electric era.

Apart from industry reforms, what’s required is also thoughtful urban planning to reduce our reliance on cars, such as an environment for car-sharing schemes to flourish, cycling lanes to connect homes to work and amenities, and a robust public transport system that will make commuting without a car equally convenient.

Perhaps in another decade, when my kids can get around on public transport on their own, I can finally give it up. After all, the greenest car is the one that doesn’t yet exist.

A version of this column was first published in The Straits Times.

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