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Volkswagen Reports Emissions Inconsistency in 800K Cars

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Volkswagen AG VLKAY , after an internal investigation, revealed that 800,000 vehicles have unexplained inconsistencies related to carbon dioxide emissions. The company had understated the fuel consumption of these vehicles that are sold in Europe. The German automaker believes that these irregularities may lead to costs of 2 billion euros ($2.2 billion).

Volkswagen identified this discrepancy while investigating the vehicles covered under the software scam to which it admitted in Sep 2015. The emission of carbon dioxide is a measure of fuel efficiency and an important component of emission standards in Europe. These inconsistencies in carbon dioxide emissions will add fuel to the fire Volkswagen is already facing by widening the impact of the software scandal.

The vehicles affected by the inconsistencies in carbon dioxide emissions include the diesel variants of Volkswagen's Polo, Golf and Passat models, as well as the subcompact A1 and the A3 hatchbacks of the Audi premium brand, Skoda Octavia, Seat Ibiza and Seat Leon.

This scandal also involves a few 1.4-liter gasoline engines of Volkswagen. However, the number of gasoline vehicles affected by the problem is marginal and these are all from Europe.

Volkswagen has been much in the news after the Environmental Protection Agency (EPA) revealed that the company had developed a software algorithm to deceive U.S. emission tests in Sep 2015. The company admitted that its diesel vehicles are installed with software which makes the engines appear to have low emission levels during tests.

According to the EPA, Volkswagen vehicles emit nitrogen oxides, or NOx, at almost 40 times the standard amount. Nitrogen oxide emissions lead to smog, acid rain as well as serious health concerns like lung cancer.

Almost 11 million vehicles around the world - including Jetta, Beetle, Audi A3 and Golf from model years 2009-2015 and Passat of model years 2014 and 2015 - are fitted with this software. Out of the total, 5 million vehicles have been manufactured under the Volkswagen brand and 2.1 million under the Audi brand. The company may incur a cost of 6.7 billion euros ($7.4 billion) for recalling these vehicles.

On Monday, U.S. environmental regulators revealed that the software is also installed in 3.0 liter engines featured in luxury sport utility vehicles from Porsche and Audi, including Porsche Cayenne and VW Touareg sport utility vehicles as well as larger sedans and the Q5 SUV from Audi. However, Volkswagen rejected the claims. Porsche's North American unit announced that it will be halting the sales of Porsche Cayenne diesel sport utility vehicles due to the allegations.

Zacks Rank

Volkswagen currently carries a Zacks Rank #5 (Strong Sell). Better-ranked automobile stocks include General Motors Company GM , American Axle & Manufacturing Holdings Inc. AXL and Lithia Motors Inc. LAD . All these stocks carry a Zacks Rank #2 (Buy).

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VOLKSWAGEN-ADR (VLKAY): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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