> So the fuel consumption has not changed from before update for normal driving. So you won't see any difference.

Uh, I think you've got it backwards. Won't the updates mean it drives in 'test mode' (e.g. acceptable emissions that meet the standards) all the time? Meaning that it will result in some downside (which was apparently bad enough that they cheated in the first place)

Specifically, reducing NOx (without using DEF) pretty much requires the engine to burn a richer mixture. This means more fuel injected, so less fuel efficiency and more unburnt hydrocarbons clogging up the particulate filter. Without retrofitting DEF systems onto the older cars, any fix is likely to be a significant hit to efficiency and reliability. I think maybe performance would suffer too but I forget how that would work.

But then how will they pass the test?

It will still pass, they were just pushing the emissions tests lower so that the car could fit in a lower tax bracket. I don't know about every country, but in the UK you get taxed on how polluting your car is.

I believe that various governments have made a promise not to increase the taxes on existing cars, as the consumers were unaware at the time of purchase.

Is VW paying the tax difference, or walking away with a government handout?

No it's the consumers being taxed on road vehicles every year. The lower tax makes them quite attractive in comparison to other manufacturers.

What would be the point of getting your car fixed, assuming you're describing it accurately?

Getting owners to go in for the fix is part of the problem. Some states will most likely require it to be done before renewing the license plate, or before allowing resale, etc.