The scandal around Volkswagen cars with diesel engines programmed to emit lower levels of harmful emissions in official tests than on the road will have wide ranging consequences. The exact number of vehicles affected is still unclear - initial estimates range from 500,000 to 11 million - and it remains to be seen if it was just Volkswagen or also other car makers manipulating software. One game changing outcome of this situation is that the reputation of Diesel engines in passenger cars will take a heavy blow and the winner will be electric cars.

Being a Silicon Valley electric car entrepreneur must be interesting these days. Think Elon Musk. Despite lacking any automotive experience, his second car, the Model S, sent shockwaves through the automotive industry. Everybody expected it to perform poorly in crash tests and in handling, but the opposite happened. With no engine under the hood threatening to penetrate the passenger compartment in a frontal crash, a couple of aluminum tubes actually performed better than complicated crash boxes in comparably large Audis, BMWs, and Mercedes. And the more than 7,000 lithium-ion battery cells in the Tesla’s sandwich floor give it a reach of more than 400 kilometers and provide an improbably low center of gravity that allows it to behave more like a Ferrari than a four-door sedan. Then a combination of shale oil, overproduction by OPEC countries and a sluggish world economy driving oil prices from more than $100 per barrel down to $50 per barrel spelled bad news as it makes the business case for electric cars unattractive. In addition, his European competitors squeezed more and more mileage out of Diesel cars and even American customers warmed to the idea of rubbing shoulders with truck drivers when filling up their tanks. And now this.

Millions of potential buyers of diesel cars are out there for grabs. Concerned about the resale value of their vehicles, they will turn to other options. Some will go for conventional gasoline cars but the more environmentally conscious among them will go electric. This is great news for Toyota and Lexus with their wide range of hybrids and even better news for Tesla who now urgently need to launch a smaller and more affordable model and for whatever Google and Apple may have in their pipeline.

As for Volkswagen and its European competitors, they will follow suit. We can expect a major rebalancing of engineering efforts and factory investments from diesel to electric. Most of their vehicle architectures are ready for this. But are their marketing departments up to the task of turning this nightmare into something positive?