Does not report correct speed, VW wants 41500 to

Question edited for clarity.
Question moved to correct year make model category.

Don't get confused with the Vehicle Speed Sensor. That reports to your speedo via the ECM. Take a look at the video. This looks like the part, just $233!

https://parts.vw.com/p/Volkswagen_2007_Beetle/Vehicle-Speed-Sensor/48030620/09G927321B.html

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7:48 New Beetle: How To Replace Gearbox Speed Sensor (G38)
YouTube · NewBeetlePR

run the fault but all you describe is operated from the VSS sensor ( vehicle speed sensor)
it tells the cruise control the vehicle speed , tells the TCM the vehicle speed so that ratios can be changed, activates the speedo,and will report with a check engine light to report a transmission problem
run the fault codes first

Yes you have a defective speedo or the cable is dry and binding

replace the VSS as it controls the shifting and the speedo operation

Slide under the vehicle and see if the cable to the speedo gear was re-installed. It may just be hanging there. If it is not a cable make sure you plugged in the connector to the speed sensor.

Gearbox speed sensor unit has failed .

Well, as someone (in my younger days!) who put tires of sizes not recommended by the car manufacturer, I feel bad discouraging your son from the 'awesome' tires/wheels he wants on his VW. It is generally recommended that tire size (diameter) not vary by more than 3%. If I did my math correctly, there is a difference in the sizes (diameter) you state of 5 %. Go to 'tire rack' website for formula and info to verify my rusty math skills! The speedometer would be off, due to the larger diameter wheels, resulting in a speed indicated that would be too low (less revolutions per mile). So, besides risking a speeding ticket due to lower speed indicated on speedometer, My main concern, would be that our modern day computer controlled engines base their readings on engine and auto speed, and it will be working with false speedometer readings.

I I recently went to a government speed awareness workshop (naughty boy!) and asked why all the cars I have recently driven (Vaux Zafira, Vectra, Astra, Honda Accord, Peugeot 106) were indicating a higher speed than my sat-nav. The answer they gave was that car manufacturers will always do this to err on the side of caution for boot-heavy drivers or drivers who neglect to check tyre pressures, so that in a court case they have one less thing to worry about. All these cars indicated about 5-10% over.

you need a new speed sensor,very common fault for it to affect the fuel gauge,,,,,,,,,,,,,,,dont steam clean anything that involves electrics !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Mine (quest) would do this at 80 miles per hour with loaded car. Since I keep it at 72, it has not reoccurred. I suggest that the sensor is working fine. There is just a slight engineering problem with my engine that does not produce heat/vibration beyond the calibration of my sensor, as long as I keep the speed down. Fewer traffic tickets also.