I think the ethics are still different. In the case of the water heater, they deceived the test to make their heater seem more efficient than it really was. However, the heater still does its job, it just costs a bit more to run (and emits some extra CO2).
What VW did was to take a clean-burning car and disable the pollution controls under normal driving conditions, for performance reasons. So while to the consumer it seems deceptive that VWs get better performance than they should, given how clean they’re supposed to be, in reality the cars are illegal and spewing toxins they were supposed to be removing from the exhaust. This makes the cars not only a pollution source but a health hazard to people living nearby.
To get on the same level of VW, the water heater would have to be doing something like emitting low levels of carbon monoxide into the home while having a feature that avoids doing that in the laboratory. In other words, reckless and willful disregard for human health and life.