Volkswagen could have to pay back billions of pounds to European governments in tax credits after admitting it had found “irregularities” in the levels of carbon dioxide emitted by 800,000 of its cars.
Shares in the embattled carmaker fell by as much as 10% in Frankfurt as investors responded to the latest admission from the company, which is already reeling from revelations that it rigged nitrogen oxide emissions tests.
An internal investigation into VW’s diesel emissions scandal found that figures for CO2 and fuel consumption were set too low during CO2 tests, the company said on Tuesday night. Around 800,000 cars are involved.
VW estimated the “economic risks” of the latest discovery at €2bn (£1.4bn). This works out at €2,500 per car, far more than the €609 per car put aside for the cost of the 11m cars involved in the diesel emissions scandal, which was €6.7bn in total.
Analysts said these costs were likely to relate to repaying tax credits in Europe. Germany, Britain and other countries set car vehicle tax rates based on CO2 emissions, suggesting VW and its drivers may have benefited from unduly low tax rates.
Stuart Pearson, analyst at stockbroker BNP Paribas Exane, said: “This [the cost] is equivalent to circa €2,500 per vehicle, and likely covers the cost of repaying tax credits or similar that vehicles earned due to lower CO2 test statistics than should have been awarded.
“It is not yet clear whether VW’s €2bn estimate covers any customer compensation or residual value impact, but we believe this is not included given it was also not a part of the €6.7bn provision booked for the original nitrogen oxide emissions issues.”
Pearson added that VW would probably not be forced to recall and fix vehicles because there is no blanket CO2 limit per car, unlike with NOx.
Pearson added that governments would be able to claim money back from VW without affecting motorists. “VW will likely need to repay CO2-related tax breaks etc to various national governments that its vehicles artificially ‘earned’. This gives governments a simple mechanism by which to ‘fine’ VW, without penalising the customer.”
However, Pearson warned that VW could also face compensation claims due to misstatements about the fuel economy of its vehicles and the difference in actual fuel consumption compared to what was claimed.
The latest revelation piles extra pressure on Matthias Müller, who was made chief executive in late September after the scandal erupted.
VW said on Tuesday the majority of cars involved had a diesel engine, which suggested that petrol cars vehicles had also been dragged into the scandal for the first time.
David Bailey, professor of industrial strategy at Aston University in the UK, said the money set aside in the latest VW statement might not be enough and that doubts about fuel efficiency risked harming VW’s reputation with motorists.
He said: “The scope for brand damage is greater now. I don’t think most European consumers are particularly bothered about emissions but when it starts to affect fuel economy people start to take notice.
“This was a company that was going for growth and seems to have been willing to cheat to do it. How much more bad news is there going to be?”
Analysts at the investment bank Credit Suisse said the announcement “could concern those who believe that the economic impact is manageable and more than priced in post the drop in share price”.
The German company has already admitted fitting a defeat device to 11m vehicles worldwide to cheat tests for emissions and nitrogen oxide. It has set aside €6.7bn to meet the cost of recalling those vehicles but estimates for the total cost, once fines and legal settlements are included, are much higher.
This article was written by Sean Farrell and Graham Ruddick, for theguardian.com on Wednesday 4th November 2015 13.07 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010