Volkswagen scam may crash its Formula 1 dreams

Volkswagen is in big trouble. About 482,000 of its "clean diesel" vehicles in the US were found to have their emissions way above the permissible level. Let me rephrase - the variance was by order of huge magnitude.

It turns out Volkswagen's engineers had installed this software, which was in turn tricking regulators into believing that its diesel models - Polo, Passat, Jetta and the Audi A3 - to name a few, were well within the prescribed limit of emissions. They were not, but in lab tests, the software ensured that it duped the regulators.

After the revelations, its CEO has resigned and now the company admits that the software is on 11 million cars around the world, including Europe. In the US, it potentially faces charges of criminal conspiracy and a fine of up to $18 billion.

This is a company, which was on a roll. It is a legendary German brand, which is known to be a people's car. It is also a company, which, till a couple of weeks ago, was contemplating entering the glamorous and expensive motorsport of Formula 1 with its brand Audi. The resignation of its CEO and the potential criminal charges could potentially crash its Formula 1 dream. 

More than this, this could also be bad news for Red Bull racing, which is in the midst of an ugly divorce with its engine provider Renault, and is currently courting Ferrari for an engine to be a major player in the motorsport. For the long term, Red Bull is looking at Audi as its engine manufacturer as Volkswagen has been contemplating entering the sport. 

In the hybrid engine era, the entry of a new engine manufacturer is no walk in the park. Mercedes dominates the sport with its engines, which it has spruced up for a couple of years. Even the mighty "Prancing Horse" struggled in 2014 and did not even win a single race.

In 2015, Ferrari has shown resurgence, but it is still not at par. Honda, which has partnered with McLaren, is seeing a nightmarish return to Formula 1. Its engine is gravely slower than those of Mercedes, Ferrari and even Renault. Basically, Red Bull had hoped that Audi would take a few years to develop an engine for the sport which would eventually take on Mercedes and Ferrari. However, the current scandal of catastrophic proportions pretty much means that Volkswagen is unlikely to invest in a hybrid engine for Formula 1 in the near future. 

A hybrid engine for the sport is a long-term commitment, but more so an extremely expensive proposition. With its market cap taking a massive hit and a potential $18 billion fine looming in the US, this certainly doesn't make for the correct timing to make a Formula 1 investment.

Remember, this is just the tip of the iceberg: investigations in Europe and other parts of the world are pending. Things will likely go from bad to worse for Volkswagen, potentially taking along with it Red Bull racing and Formula 1. In fact, the Austrian racing team is threatening to pull both its teams out from the grind in 2016 if it doesn't get a competitive engine.