A Volkswagen sales suspension on the vast majority of its vehicle models in South Korea started July 25. The decision comes amid expanding pressure on the automaker over its tactics used to cheat emission tests. Volkswagen Group is currently battling a business drop in South Korea after the firm conceded in the U.S. to utilizing programming to undermine outflow tests on some diesel vehicles.
The announcement comes before an environment ministry audit to occur at the beginning of August or later this month. However, depending on the audit’s findings, 32 models may have their certifications revoked. In the case of revocation, the result is the ban of those models in South Korea.
Prosecutors from the country have alerted the authorities on exactly what models have falsified test results. Officials accused the company of manipulating results in both noise level and emissions tests. In June, Korean authorities jailed a Volkswagen executive as a consequence of these findings.
The Volkswagen sales suspension will leave the models banned in South Korea until it can properly re-certify the vehicles. Volkswagen Group’s South Korea unit says this re-certification process will take three months.
In the meantime, Volkswagen contemplates on whether or not to initiate court proceedings against South Korea based on the expected verdict concerning the models in question. The auto retailer’s decision regarding the possible lawsuit will come any day now. The environment ministry reviewed the presented facts on July 25th.
Looking At The Numbers
Almost $19.5 billion is being kept freely available by the company for disbursement of costs associated with the debacle. Remuneration to the United States government and vehicle refits make up a substantial portion of the expected expenditure. Possible regulatory fines and likely lawsuits may also drive the price well past the $19.5 billion figure.
Opportunity costs of the Volkswagen sales suspension only add to the woes. Three months of almost no sales in South Korea will surely put a dent in the company’s yearly earnings.