The ripples from Volkswagen'€™s (VW) emissions cover-up scandal are continuing to spread. VW said on Oct. 12 that it was recalling 1,950 diesel vehicles in China to change engine software, while Singapore has suspended sales of the company'€™s diesel cars.

Millions of cars are affected, lawsuits are being prepared, and the financial costs '€” as well as costs to the environment and public health - are only just beginning to be calculated.

VW was born in the 1930s to develop a '€œpeople'€™s car'€ '€” the literal translation of the firm'€™s name. Despite dubious political origins, VW emerged from the ashes of war to build a global reputation epitomising the technical excellence of '€œbrand Germany'€. Today, VW has a presence in countries across the globe, including Indonesia.  

Its diesel technology, in particular, was touted as industry-leading, and the firm was held in high regard by consumers who saw it as a solid, reliable and trustworthy manufacturer

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Little wonder then that revelations it knowingly set out to fool tests for harmful vehicle emissions have shaken the auto industry and the business world in general. The maker of the '€œpeople'€™s car'€, it seems, has been deliberately and systematically deceiving the people in a scale that is truly shocking.

In fact, VW now admits, more than 11 million cars have been fitted with a device designed to deliberately trick lab tests for emissions of toxic nitrogen oxides (NOx) '€” a pollutant implicated in up to 58,000 premature deaths annually in the United States alone.

Moreover, it was recently revealed that Audi, itself owned by VW, had a similarly configured device on more than two million of its cars. Thousands of cars from other VW-owned brands such as Seat and Skoda are also affected.

VW'€™s senior leadership have been quick to respond. The chief executive of the firm'€™s US arm admitted it had '€œtotally screwed up'€ and went against VW'€™s values. Days later, the firm'€™s powerful CEO, Martin Winterkorn, resigned.  

Whether he or any other senior VW figures were aware of the deception is unclear. That perhaps is a moot point.  

If top bosses knew about it but did nothing, they could be held criminally responsible. If they were not aware when such large scale fraud was taking place, then they were negligent in their duties.

From a crisis management perspective then, VW'€™s response so far could be seen as well-managed. It took responsibility '€” at a corporate level at least, if not individually '€” and has pledged full cooperation with investigators.

In terms of actual damage-limitation, though, it will take time before the real scale of the harm can be fully assessed.

In the days after the initial revelations, VW'€™s stock lost around a third of its value '€” US$29 billion '€” suggesting serious investor concern about the future of the company and brand value.

Add to that the cost of likely fines, penalties and lost sales, and it is a high price given the original deceit was driven by short-sighted cost-savings of around $100 per car. Even more so given VW already had the technology for engines that meet the most stringent standards.

For several years, VW senior management had set its sights on becoming the world'€™s largest car maker. Some analysts have even cited the firm'€™s single-minded focus on this mission as one of the root causes of the scandal.

That goal will now be far out of reach. But while there is little doubt that VW will survive, it faces a long and costly uphill struggle to regain customer trust.  

Reputation is hard won, but easily lost. In today'€™s world of social media-driven consumer empowerment, corporate behaviour is under unprecedented scrutiny and public trust in business at an all-time low.

 In such conditions, recalls resulting from faulty products can do significant damage to a firm'€™s standing. It is far worse when the wrongdoing is found to have been so brazen and deliberate.

In the case of VW, affected consumers had been led to believe that they were buying precision-engineered cars powered by '€œclean diesel'€ engines. The reality is, by VW'€™s own admission, rather different.  

That said, we have seen previous egregious business behaviour forgiven or forgotten by consumers, and in this case many car buyers may soon find that VW cars at reduced prices will be difficult to resist. Buyers in Asia in particular, may be more sensitive to prices than the cost to the environment or concerns over corporate cheating.   

Nonetheless, as the full scale of the cover-up emerges, so inevitably will conclusions that this was not just the act of '€œa few bad apples'€ operating in isolation.  

Whether that was the case will only be resolved by an independent investigation, but the fallout from the scandal is unlikely to be confined to diesel cars nor to VW alone. Indeed, the case has cast a broader light on the often questionable practices involved in vehicle testing itself.

VW'€™s device was able to fool US emissions tests because its software was able to recognise the very specific, controlled '€” and generally unrealistic '€” conditions in which testing is conducted.

Likewise, in vehicle mileage testing, it is widely known that test results rarely reflect on-the-road reality. This is largely because it regulators allow carmakers to conduct a range of fixes to their vehicles to reduce drag and create more favourable results.

It may be therefore that the shockwaves from the VW scandal will help push regulators towards a more realistic testing cycle, perhaps using standard vehicles picked at random from the production line or showroom.  

Certainly, those responsible for the VW deception should be held accountable. But beyond the immediate backlash, there are also broader regulatory lessons from this scandal that should be acted on as well.
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Kulwant Singh is professor of strategy and policy while Jochen Wirtz is professor of marketing at the National University of Singapore Business School, which is celebrating its 50th year.