German Nation Brand Devalued by US$191 Billion Following VW Scandal

The revelation that as many as 11 million diesel vehicles have been fitted with software designed to deceive emissions testers, has dealt a hammer blow not just to Volkswagen’s reputation but to the entire German nation brand.

Germany has lost its position as the most powerful nation brand according to Brand Finance.  The firm, which specialises in brand valuation and strategy, evaluates the financial impact of the image and reputation of the top 100 countries, publishing the results in an annual study, the Brand Finance Nation Brands report. The report shows measurable damage to the long-term financial potential of ‘brand Germany’. Its value has dropped by US$191 billion to US$4.2 trillion, down 4% on 2014.

“German industry is lauded for its efficiency and reliability while Germans as a whole are seen as hard-working, honest and law abiding. That such an iconic German brand, the ‘people’s car’, could behave in this way is beginning to undo decades of accumulated goodwill and cast aspersions over the practices of German industry, making the Siemens bribery scandal appear less a one-off than evidence of a broader malaise” said Brand Finance’s CEO, David Haigh.

Until this episode, 2015 had actually been a fairly positive year for Germany’s international reputation and the prospects of its nation brand. Germany has garnered worldwide admiration for its receptivity to Syrian migrants. This influx of generally young people and families will provide a fillip for Germany’s labour force, though the goodwill generated by sympathetic stance has been overshadowed by VW’s deception.

Replacing Germany as the world’s most powerful nation brand is Singapore. As the city-state celebrates its 50th anniversary its citizens can be rightly proud of the nation they have created. The chief architect was of course Lee Kwan You. The vision, pragmatism, longevity, intolerance of corruption and relative benevolence of the country’s first prime minister and elder statesman are widely seen as the key reasons for its success.

Haigh continues, “Though the passing of Lee Kuan Yew in March this year is a sad loss, he leaves a legacy that few can hope to better. Singapore is now seen as modern, innovative, industrious, welcoming to outsiders and increasingly culturally rich and has left its neighbours, including Malaysia (from which Singapore was ejected 50 years ago) far behind it.”

Though some way off the top spot, the fastest growing nation brand this year is Iran. Its brand value is up 59% to US$159 billion as Hassan Rouhani’s moderate approach slowly shifts international perceptions of the country’s potential and eases restrictive sanctions.  A fractious relationship with Sunni states will remain an impediment to trade and investment locally but with a market of 77 million people, vast hydrocarbon reserves and a highly educated population, Iran certainly has a receptive audience globally.

David Haigh comments, “Iran will need to assiduously manage its communications with its newfound suitors making a carefully assessed nation branding strategy almost as important as traditional diplomacy. Managed correctly, Iran’s ancient treasures, sophisticated population, strategic location and natural assets could be used to transform its reputation.”

Though Singapore is the most powerful brand, being closer to its full potential than any other nation, in sheer value terms The US remains dominant. It is the most valuable nation brand, with a national brand value of US$19.7 trillion.

The USA is undoubtedly a powerful brand with an inviting business climate, however its value comes in large part from the country’s sheer economic scale. Not only is there a large, wealthy market predisposed to ‘buy American’ but also an unrivalled group of established companies and organisations exporting worldwide whose American heritage forms (to a lesser or greater extent) part of their appeal.

The US’ world-leading higher education system and the soft power arising from its dominance of the music and entertainment industries are significant contributors too. This soft power will help the US to retain the most valuable nation brand for some time after China’s seemingly imminent rise to become the world’s biggest economy.

*2014 Value Restated