The Volkswagen group has set aside €6.5bn (£4.2bn) to deal with the costs it may face as a result of fitting 11m diesel vehicles worldwide with a device to cheat emissions tests.
In the past two days, about €25bn has been wiped off the company’s market value.
Volkswagen was forced by the US Environmental Protection Agency (EPA) on Tuesday to recall 482,000 Volkswagen and Audi cars that had the device installed. The news that millions of vehicles were affected prompted the German transport ministry to send a delegation to investigate what happened.
The Volkswagen group produced 9.9m vehicles worldwide last year, which is about 1 million fewer than the number of diesel vehicles affected by the crisis. The group includes other brands such as Porsche, Audi, Skoda and Seat.
The German manufacturer is the second largest automotive company in the world. Only Toyota, which produced 10.5m vehicles in 2014, is bigger, according to the International Organisation of Motor Vehicle Manufacturers.
The number of vehicles involved is such that City firm Bernstein has predicted that the era of diesel cars in Europe is over.
The scandal is likely to make it even more difficult for the Volkswagen group to get cut-through in the US market. In August 2015, the German firm had only a 2% market share stateside, putting it far behind market leader General Motors (17.1%) and closest worldwide rival Toyota (14.2%).
Strong sales in China and Europe have maintained the Volkswagen group’s status as one of the world’s two leading carmakers. In the first six months of 2015, the company was selling more vehicles than Toyota, putting it on course to be the world’s biggest carmaker (it is already Europe’s).
The EPA said that the Volkswagen and Audi cars that have been recalled were emitting somewhere between 10 and 40 times the legal limit of nitrogen oxide allowed.
Not only is the revelation going to damage Volkswagen’s reputation and image across the Atlantic, but the company also faces fines to the tune of $18bn – about $1bn more than the company’s entire worldwide operating profit in 2014.
Shares fell in other major European carmakers including Peugeot, Renault and BMW in the wake of this week’s revelations.