VW could be forced to repay billions
Volkswagen might have to pay back billions of pounds in tax credits to European governments after admitting to “irregularities” in the levels of carbon dioxide emitted by 800,000 of its cars. This comes on top of the revelation that VW rigged nitrogen oxide emissions tests. Shares in the company fell by 10 per cent in Frankfurt. 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. On Tuesday, VW indicated for the first time that petrol cars were also involved in the scandal.

Volkswagen could have to repay billions of pounds of tax credits to European governments after finding “irregularities” in the levels of carbon dioxide emitted by its cars.

Shares in the embattled carmaker slumped by 10% on Wednesday, wiping €5bn (£3.5bn) off the value of the company, as analysts warned that the consequences of rigging CO 2 and fuel consumption tests could be worse than the initial scandal around diesel emissions tests.

VW has now lost €32.4bn, or 40% of its value, since admitting in September that it installed defeat devices into 11m diesel vehicles.

The scandal is dragging down sales of new VW cars, according to industry figures due to be released in Britain on Thursday. Sales data for October from the Society of Motor Manufacturers and Traders is expected to show that VW sales fell by more than 8% year-on-year, with Seat and Škoda also down.

The latest admission about CO 2 tests dramatically widens the scandal that VW is facing.

Germany, Britain and other countries set vehicle tax rates based on their CO 2 emissions. This means that if VW artificially lowered CO 2 emissions during testing then its vehicles will have contributed far less in tax than they should have.

VW has said that at least 800,000 cars are affected by the CO 2 discovery and estimated the “economic risks” at €2bn. 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 rather than customer compensation.

Stuart Pearson, analyst at stockbroker BNP Paribas Exane, said: “VW will likely need to repay CO 2 -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.”

Alexander Dobrindt, the German transport minister, gave a clear indication that VW would be forced to repay tax. He said a quarter of the 800,000 vehicles are in Germany.

Dobrindt said: “If these vehicles emit more CO 2 , over and above the respective limit, that makes a new calculation necessary.

“I assume that a solution will be found that doesn’t burden VW customers. I think that VW clearly has a duty and a responsibility to ensure that, regarding these questions, customers face neither extra costs nor effort.



“If they want to win back trust, they must first ensure that the damage is remedied and the customers don’t get stuck with the problem.”



Dobrindt said that Germany will now retest the CO 2 levels of all VW models.

The British government said it was taking the situation “extremely seriously”. A Department for Transport spokesman said: “We are pressing VW to provide urgent clarity on the situation. The government takes the unacceptable actions of Volkswagen extremely seriously.

“This development underlines the importance of the government’s ongoing investigation to establish the extent to which defeat devices have been used.”

VW could also face compensation claims from motorists over the misstatement of their vehicle’s fuel economy. According to BNP Paribas, the cost of compensation to governments and customers could reach €4bn, on top of the estimated €12bn cost of rigging nitrogen oxide tests. UBS said the total costs of the scandal, including legal claims, could reach €35bn.

The discovery about the irregularities in CO2 data emerged from VW’s investigation into the diesel emissions scandal. This found that figures for CO 2 and fuel consumption were set too low during CO 2 tests.

VW is yet to confirm which models are involved or how the misstatement occurred. The majority of the cars have a diesel engine, but petrol vehicles have been dragged into the scandal for the first time.

The latest revelation piles extra pressure on Matthias Müller, who was made chief executive in late September after the scandal erupted.



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?”

Greenpeace accused VW of a “litany of lies”. Daniel Moser, mobility campaigner for Greenpeace, said: “Volkswagen is not only risking public health by cheating on NOx emissions standards, the ‘irregularities’ in the CO 2 emissions also show how the company is complicit in and profiting from climate change. This is the final straw for a company that can no longer be trusted.”

In the US, VW has ordered dealers to stop selling a collection of 2015 and 2016 luxury models with its three-litre diesel engine after the Environmental Protection Agency accused the company of fitting them with defeat devices. The cars involved include the VW Touareg and the Audi A6, A7, A8, Q5 and Q7.