What is it?

Volkswagen has admitted to cheating official emissions tests in the United States. The Environmental Protection Agency found that certain diesel engines made by Volkswagen were fitted with a so-called defeat device. The piece of computer software senses when a vehicle is undergoing an emission test in a lab and then automatically limits its performance to reduce the amount of harmful nitrogen oxide it pumps out. Once it’s passed the test and gets back on the road, the defeat device deactivates and the engine reverts to its normal calibration.

Why did they do it?

The New York Times reported that Volkswagen first began fitting the defeat device to its diesel engines back in 2008 when they realized they wouldn’t be able to meet strict pollution standards in the United States, a hugely important car market that the company has been desperate to crack for years to achieve its ambition of becoming the world’s biggest car maker. Rather than expending the time and money needed to create a new engine, someone within the company decided to cheat the system.

What happens next?

Volkswagen has set aside $7.3 billion to deal with the fallout in terms of fixing the 11 million vehicles affected, and it will likely be hit with huge fines. The scandal also raises questions about consumer demand for diesel engines over the long-term, and if Volkswagen will be able to invest in the research and development needed to produce the next generation of electric and hybrid vehicles.