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The incentive is that, in states that have mandatory smog checking, you will not be able to renew the registration on your car until you get it fixed, rendering it illegal to drive

Unless you find one of the many, many shonky smog-check places, which surely can't be that hard.

Except that it might be hard to get shonky with a VW and keep it under the radar.

I believe VW have promised to replace everyones entire engines. I'm stupefied over how much this will cost, i've seen numbers around to 100B mark. Their market cap is somewhere near half of that. Presumably they think it's better than the brand damage otherwise. I think it's fair to assume they'll go bankrupt over this.

I seriously doubt Germany would let VW go bankrupt, the government owns twenty percent of the company and they are too big too fail.

Do you have a link for this? Replacing even 500k engines in the US is indeed stupefying.

Also given that this effects the quality of the product they bought significantly, wouldnt they be entitled to a refund?