Volkswagen shares tumble again after company admits understating fuel consumption

Investors wiped another 3 billion euros off Volkswagen's market value on Wednesday after it said it had understated the fuel consumption of some cars, opening a new front in a scandal that initially centred on rigging emissions tests.
 
The carmaker said late on Tuesday it had understated the fuel usage 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.
 
The widening scandal also prompted Moody's Investors Service to cut the rating on the Volkswagen's debt, which could make borrowing money more expensive for the company. The agency cited "mounting risks to Volkswagen's reputation and future earnings" from this week's new developments.
 
The revelations - which added a new dimension on Wednesday to a crisis that had previously focused on environmental damage - are the first to threaten to make a serious dent in VW's car sales since the scandal erupted, analysts said.

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

• Volkswagen finds new CO2 problems on 800,000 vehicles
• New Audi, Porsche, VW models found to have cheat device
• Volkswagen testing 2nd engine for emissions-cheating software
• Volkswagen 'clean diesel' ads face U.S. probe

 The effects of the scandal have so far been barely reflected in VW sales figures - although it was the only German carmaker to report a decline in car registrations in Germany in October.
 
Preferred shares in Europe's biggest carmaker were down 9.5 per cent at 100.45 euros in Europe.
 
"Another week, another shock in the VW story," Exane BNP Paribas analyst Stuart Pearson wrote in a note. "We add another 4 billion euros ($5.7 billion Cdn) in recall costs and fear a harsher commercial impact," said Pearson, who rates VW "neutral".
 
The German carmaker also revealed on Tuesday that carbon-dioxide emissions had been understated - leading it to 
underestimate the fuel consumption — and added 2 billion euros ($2.87 billion Cdn) to its expected costs of the scandal.
 
The affair erupted in September when U.S. authorities exposed VW's use of "defeat devices" to cheat tests for 
emissions of smog-causing nitrogen oxide. VW admitted such software was installed in up to 11 million diesel vehicles worldwide.
 
VW'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-litre engines used in luxury sport utility vehicles from Porsche and Audi.
 
VW has denied this, but 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.
 
"From the very start I have pushed hard for the relentless and comprehensive clarification of events," Volkswagen Chief Executive Matthias Mueller said. "We will stop at nothing and nobody. This is a painful process but it is our only 
alternative."

Scandal rocked company, industry

The biggest business crisis in VW's 78-year history has wiped almost 24 billion euros — nearly a third — off the firm'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.
 
"From an outside perspective and we are sure for the majority of VW employees, the degree and extend of cheating that has been discovered so far is beyond imagination," wrote analyst Arndt Ellinghorst of banking advisory firm Evercore ISI.
 
The latest findings on fuel consumption and CO2 emissions — areas which U.S. watchdogs have yet to address - were disclosed as VW continues a broad review of its handling of all pollution-related issues. While the findings mostly apply to smaller diesel engines, one gasoline engine is also affected.