Unless you've purposely avoided the automotive industry's news headlines lately, as some Volkswagen Group (OTC:VWAGY) vehicle owners surely have, you know the automaker's diesel emissions scandal has been devastating. A quick glance at September's sales results in the U.S., which only reflect part of the damage for VW, as the emissions scandal erupted partway through September, recorded VW's sales gains at 7.3% -- less than half the industry average and a far cry from Ford's 23% gain.

It's likely that next month when the U.S. auto industry reports October sales results, Volkswagen will suffer a much more negative sales impact. Here's the kicker: It could get worse, as major automakers are lining up to specifically take advantage of Volkswagen's woes.

Opportunity knocks
The scandal is giving automakers with a presence in Europe, such as Fiat Chrysler Automobiles and Ford Motor Company, a chance to directly steal market share. FCA is offering Volkswagen owners rebates from 500 euros for Fiat minicars up to 1,500 euros, or about $1,700, for a Jeep Grand Cherokee in Italy, and that rebate is on top of any other incentives on the trade-in vehicle. Ford is throwing out a trade-in bonus across the board of 750 euros for any Volkswagen trade-in, regardless of whether the vehicle is diesel or gasoline.

"This is not normal business competition but looting a rival in difficulties," an anonymous dealer told Automotive News Europe. Personally, I mostly disagree: This is just business in a highly competitive industry. It's not an unusual tactic, per se, as the highly competitive auto industry often has major players offering incentives for consumers to switch brands. However, it is admittedly much rarer for automakers to target a specific brand as they have with Volkswagen amid its diesel emissions cheating scandal.

So far, it appears much of the rebate strategy for VW vehicle trade-ins is taking place overseas, but that could spread to other markets -- and it isn't stopping VW from being proactive in the U.S. market.

Volkswagen prepares for fight in U.S.
Volkswagen of America is offering a $2,000 "customer loyalty" incentive during October to prevent what could be a devastating month of consumers leaving the brand due to the diesel emission woes. Essentially, existing Volkswagen vehicle owners will receive $2,000 toward a purchase of any new VW-brand gasoline or hybrid model, and that's on top of any previously available incentive or program.

According to Kelley Blue Book, 53% of 1,000 respondents polled after the scandal surfaced in September acknowledged they had a "general" or "complete" mistrust of VW, and 64% of respondents were at least aware of the issue.

Not only are consumers in the U.S. more wary of the Volkswagen brand, major automakers could gain valuable market share from VW in Europe with these strategically targeted incentives. Furthermore, while all figures are currently speculation, the total cost of this emissions scandal could make General Motors' recall of more than 30 million vehicles last year, at a cost of more than $4 billion, look like chump change.

Credit Suisse estimates that the total cost for Volkswagen's diesel emissions scandal could reach as high as $87 billion in a worst-case scenario: That not only sounds insane compared to GM's recall costs last year, but it would crush the cost of BP's Deepwater Horizon oil spill by roughly 60%. 

For investors, the big takeaway is fairly obvious: This is a bad situation, and it could get much worse before it gets better for Volkswagen. What was once a compelling automaker investment is clearly one to watch from the sidelines for the time being.