The state government of lower Saxony (the state where VW is based) owns 25% of VW. I don't think that's a coincidence. Edit: looks like it's 20%

how can a company be both owned by, but also regulated by "the same" entity? that is a conflict of interest aint it?

This would hold true for any government owned entity...

In practice, the 'same entity' are very different people in government with different mandates.

But they all know how "important the car industry for germany is". And if they don't know, they will find out.

Heck, even the german car newspapers apparently would not really attack german cars on a serious level. At lest I head of a case, where a reporter from Auto Bild was on a test drive for a shiny new car model - and some shiny new feature did not work. What they did, was not report it, but secretly worked out, how to conceal that in the reporting. (no sources avaiable, heard it from people in the industry)

I would have thought the federal government should be taking the lead in regulating a car manufacturer. It's not like their cars will be limited to use in one state.

Employment.

The big corps can accumulate more slack that would otherwise need money from the state.

This keeps unemployment rates down, at the cost of giving out tax cuts.

It's always important to keep the powerful people happy.

There are lots of examples of state own enterprises. If correct legal barriers are erected,it can work,but obviously it's not always the case.

Considering how influential the car industry, including the companies owned by the state, is, it doesn't make a difference.

It isn't the same entity

So, we should forbid all politicians to own stock.

No, but it should be in a blind trust.

https://www.investopedia.com/terms/b/blindtrust.asp

Politicians holding stock and the government itself holding stock are two very different things.

Please correct me if I'm wrong, but from what I understand the fraud was aimed at US [particularly Californian] emissions regulations but not German/EU emissions regulations, which differed in such a way that cheating wasn't necessary for those engines to pass. The American emissions regulations were more concerned with nitrogen oxides than the EU regulations which emphasized fuel efficiency; Volkswagen found they couldn't satisfy both at the same time (or would make less money if they did?) so they chose to make efficient engines that produced a lot of nitrogen oxides, then use cheat software to evade the nitrogen oxide regulations in America.

If my understanding of that is correct, it doesn't surprise me that German authorities weren't very proactive about a German company defrauding the American government. It obviously disappoints me, but it doesn't surprise me.