Volkswagen Undertakes Major Recall

Volkswagen will recall nearly 18,000 cars in Taiwan affected by the company’s diesel emissions scandal from January 1, the German automaker’s Taiwan branch announced in November.

News of the scandal broke in September when the U.S. Environmental Protection Agency (EPA) revealed that diesel-powered Volkswagen cars sold in the United States were equipped with illegal software able to circumvent emissions tests. Europe’s top automaker later admitted that 11 million of its diesel vehicles had cheated emissions tests globally. The revelation prompted the resignation of CEO Martin Winterkorn, who had set an ambitious goal for Volkswagen to surpass Toyota and General Motors to become the No. 1 automaker by global sales.

Volkswagen said it will provide the Taiwan government with a list of affected car models and car owners and set up a dedicated website for owner feedback.

Meanwhile, the EPA intends to suspend the emission licenses of the affected vehicles. It issued those licenses without testing the vehicles itself, because Volkswagen Taiwan had applied for the licenses using European Union-issued certificates recognized by the Taiwanese government, the EPA said in a statement. Since the affected cars are not a safety threat, they will be allowed to remain on the road for the time being, according to the statement.

Champion Chen, publisher of the Reve Motor auto magazine, says the scandal is unlikely to have a lasting effect on Volkswagen’s Taiwan sales. “You can argue it will affect Taiwanese consumers’ trust in the brand, but Volkswagen has a very good reputation here,” he says. “Taiwanese consumers will give Volkswagen another chance.”

Analysts do not expect the emissions scandal to seriously impact Taiwan’s suppliers of auto parts to Volkswagen. In an October research note, KGI Securities said that Tong Yang Industry Co. and Macauto Industrial Co. may be the most affected, but even then not very seriously. Tong Yang’s sales of automotive metal sheets and bumpers to Volkswagen for its diesel models comprise 9.5% of Tong Yang’s overall revenue and Macauto’s supply of sunshades to VW account for 7% of its revenue.

The KGI research note said that Taipei-based Tong Yang works with the German automaker primarily in China, where diesel cars have just a 1% market share. Macauto’s products are used in numerous Volkswagen models, but it has a broad client portfolio, including General Motors, BMW, and Nissan, which will help the Tainan-based supplier overcome any temporary drop in business with VW, according to KGI.