Phil - I don't believe that VW have actually gained a market advantage. How many people go to the great lengths of looking up the emissions outputs for all the cars they are considering and then compare them with the legal standards.
In the UK people in general look at the road fund license annual cost and not the emissions figures. Stop a thousand drivers and ask them what the emissions figures are for their car and you just might find , if you are lucky, someone wearing an anorak who knows. Now ask them what they pay each year in road fund tax and most will know. We all know the license cost is related to emissions but few are able to attach figures to it or how it fits with legislation.
So far as California is concerned the situation would be similar - only a tiny few would have a clue about emission levels, some would have some inkling about emissions being important to the ecology and the rest would be off their trolley. They didn't buy a VW because it had low emissions, they bought it for its grunt, looks, comfort, quality and low fuel consumption.
Moving now to Australia - I have no idea what your emission regs are - but they are clearly not strict enough to make DPF's a necessity.