As discussed last week, lost in the hub-bub about Volkswagen’s deception in fooling regulators about the emissions of its “clean” diesel engines is the very real economic damages of used car dealers who purchased VWs for resale. Those small businesses are now left holding the bag because of VW’s deception. The same is true for branded VW dealers who have hundreds of thousands of dollars — if not millions — in inventory that now can’t be sold.
Having to hold that inventory causes serious economic harm to dealers. That is because there is a daily cost for holding pre-owned inventory on a used car lot and used cars lose their value while sitting on a used car lot for an extended period of time. Profit margins for used cars begin to dramatically decline after the vehicles are on a lot for more than 30 days. Further, there are costs incurred in holding vehicles in inventory. The same is true for new vehicles, sitting on branded VW dealers’ lots.
Those small business owners might need to buckle in for a long ride. This morning, Volkswagen announced that it will launch a massive recall in January of the VW cars that have been affected by this scandal. Evidently, a software update might be sufficient for most cars, but other vehicles might require new fuel injection equipment and catalytic converters.
VW said that the recall won’t begin until at least the new year and only after German authorities have approved the company’s plans to fix the cars. And even when it starts, VW does not believe that it will be completed until the end of 2016.
So small business owners — used car dealers and VW branded dealers — are looking at several more months — if not a year — until a real fix is instituted and the economic pain caused by VW’s deception can begin to subside.