VW scandal widens to fuel consumption figures

FRANKFURT (Reuters) -- Investors wiped another 3 billion euros ($3.3 billion) off Volkswagen Group's market value today after the automaker said it had understated the fuel consumption of some cars, opening a new front in a scandal that initially centered on rigging emissions tests.

VW said on Tuesday it had understated the fuel usage and CO2 emissions of up to 800,000 cars in Europe, meaning those vehicles affected are more costly to drive than their buyers had been led to believe.

It wasn't immediately clear if any cars in the U.S. would be involved in the latest revelations.

The disclosures added a new dimension to a crisis that had previously focused on harmful NOx emissions and are the first to threaten to make a serious dent in VW's car sales since the scandal erupted, analysts said.

The latest developments also could potentially deter cost-conscious consumers who have so far taken VW's manipulation of smog-causing emission tests in stride.

Cars that emit more CO2 than they are supposed to could have a bigger effect on consumers than dirty diesels, Arndt Ellinghorst, a London-based analyst for Evercore ISI, said. That’s because higher CO2 emissions equal worse mileage.

In Europe, where authorities have cracked down on greenhouse gas emissions, the falsification will probably affect customers’ tax rates, he said. "In colloquial language, VW has been lying to the consumer" as well as registration authorities, Ellinghorst said. "There are no technical issues with the cars. They simply emit more CO2 than VW has declared.”

Vehicle taxes are pegged to CO2 emissions in the UK, France, Germany and Sweden.

Fines and compensation

VW can’t fix the situation by repairing the vehicles, Ellinghorst said. Instead, the company will face fines and probably need to compensate buyers who will face higher-than-expected tax bills.

Germany’s motor transport authority said it is taking the CO2 inconsistencies “very seriously” and investigating them within an ongoing review of vehicle emissions.

"The worst-case scenario is that they ban those cars from the streets,” and there is a risk of more vehicles being affected, said Sascha Gommel, a Frankfurt-based analyst with Commerzbank. For consumers, this is “absolutely a bigger problem” than smog-inducing nitrogen oxides because it means more taxes and fuel expenses than anticipated.

Shares in Volkswagen were down 8.9 percent by 1309 GMT, wiping about 3 billion euros ($3.3 billion) off its market value.

"Another week, another shock in the VW story," Exane BNP Paribas analyst Stuart Pearson wrote in a note. "We add another 4 billion euros in recall costs and fear a harsher commercial impact."

VW, Audi, Skoda, Seat models affected

The models affected by the CO2 emissions deviations are VW, Seat and Skoda vehicles that use 1.4-, 1.6- and 2.0-liter diesels built in 2012 and later. These so far include VW Golf, Polo, Passat, Audi A1 and A3, Seat Ibiza and Skoda Octavia models. VW's 1.4-liter ACT gasoline engine in the Polo that has cylinder on demand technology is also affected.

The CO2 and fuel efficiency deviations were in some cases between 10 percent to 15 percent, a VW spokesman told Automotive News Europe.

VW said on Tuesday it would immediately start talking to "responsible authorities" about what to do about the latest findings on fuel consumption and CO2 emissions.

U.S. troubles

The VW scandal erupted in September when U.S. authorities exposed VW's use of "defeat devices" to cheat tests for pollutants such as NOx.

VW admitted such software was installed in up to 11 million diesel vehicles worldwide. The company's latest admission came after U.S. environmental regulators said the carmaker had failed to inform it that similar devices were installed on larger 3.0-liter engines used in luxury SUVs from Porsche and Audi.

The crisis has wiped almost 24 billion euros -- nearly a third -- off VW's stock market value, forced out long-time CEO Martin Winterkorn and rocked the auto industry, an important employer and source of export income in Germany.

The CO2 emissions discrepancies could cost Volkswagen at least 2 billion euros ($2.2 billion), the automaker said in a statement.

Bloomberg and Automotive News Europe contributed to this report