To be honest I do not really care how hard VW is punished on a US justice scale since deals will be done at many levels; I am though highly interested in how this event might impact the future of diesel vehicles, within the mix of choices available to consumers. Diesels are both: 1. firmly established as the gold standard for efficiency, across almost all vehicle sectors, costing barely more to buy but much less to operate (eg. EU including UK, Japan, in part Australia), and 2. barely getting a foothold and seen as a quirky choice that costs only slightly less to run and more to buy (USA, slightly less so Canada).
One possibility is that the nascent rise in diesel sales in the US will largely stop - diesel fuel is mostly more expensive due to refinery choices and the lack of EU subsidies, and normal petrol is still cheap by world or historic standards. As an example, Land Rover has just (literally within the past month or so) started to bring their TdV6 engines to North America.... they use urea so presumably meet all standards, but we will see how well they sell now - awful timing through no fault of JLR. Mercedes have had perhaps the biggest inroads to diesel sales over here - again we will see how this impacts customer choices as gasoline options are always available for similar costs.
In the EU, as others have pointed out here, it will be much more difficult to turn around the diesel juggernaut - there would need to be significant changes to tax and fuel subsidy policy, coordinated across all EU, and there would need to be sudden new capacity for alternative engines (which does not exist without rapid capital spending, and time). This seems unlikely to happen, which suggests a different outcome in EU, where policy goes to make "super-clean" diesel, mandated to use urea for all cars (and possibly other technologies), and new testing protocols to try to regain consumer trust in the results. Motorists now driving the mainstream diesel cars presumably care about emissions, but will they want to throw away 25-35% of operating cost efficiency in moving away from diesels? My guess is no.
--
2011 Range Rover Sport S/C, 2009 Porsche 911S