POAHY Porsche Automobile Holding SE (PK)

By Ulrike Dauer and Friedrich Geiger 

FRANKFURT--Shares in Volkswagen AG and the group's financial holding Porsche Automobil SE tumbled by more than 8% in early trade Wednesday, dragging shares of other car makers lower on fears that more companies could be affected by the emissions scandal after Volkswagen admitted late Tuesday it understated the level of carbon-dioxide in additional cars, including gasoline-powered cars.

"One doesn't believe any more that this is a mere Volkswagen problem, but the perception is that this will become a burden for all car manufacturers," said a trader in Frankfurt. That is why the entire sector is now collectively punished, the trader said.

Shares slightly recovered from earlier lows and at 0906 GMT VW was down 7.9% while Porsche SE was 7.7% lower. Both had repeatedly dipped to 9% down. Daimler shares, down more than 5% shortly after trading started, were now down 2.2%. BMW was 1.9% lower. Europe's Stoxx 600 Automobiles & Parts was down 1.9% after a 3.1% decline earlier. This was the only European sector index in the red.

The reaction follows Volkswagen's admission late Tuesday that its emissions-testing scandal had widened beyond what was previously disclosed, now encompassing a broader set of infractions that could affect about 800,000 more cars and cost it at least an extra $2 billion. The violations go beyond the company's diesel range for the first time.

The latest news is a fresh blow after VW's admission in September that up to 11 million diesel-powered vehicles world-wide could have so-called defeat devices that lowered tailpipe emissions of nitrogen oxides during laboratory testing.

Analysts pointed to the clear risk that there is more to come.

"As this is a first indication, we clearly see the risk that additional cars or other misbehavior may emerge, which would raise potential costs even further," says Commerzbank analyst Sascha Gommel, who has ratings and price targets for Volkswagen and Porsche SE under review. "In addition, we also believe that a negative sector reaction is likely as a discussion will start if other original equipment manufacturers have also had irregularities in their CO2 classifications," the analyst said.

Other analysts also said it has now become even more difficult to assess the impact of the scandal, but the latest disclosure will likely further damp demand for Volkswagen cars and depress the company's earnings.

"As irregularities are mounting we now see a higher risk than before that unit volumes and pricing of the offered cars will come under pressure with a detrimental effect on future margin development," said Equinet Bank in a note to clients and lowered its rating for the shares to 'Neutral' from 'Accumulate'. But analyst Holger Schmidt still thinks that Volkswagen has enough money to withstand the storm.

LBBW downgraded Volkswagen's bonds to hold from buy and put Volkswagen credit default swaps on buy protection from sell protection. The material damage is bearable but "worse is the new setback amid the planned clearing up and damage remedy, and the related uncertainty," said the analysts.

The new announcement will step up pressure on Volkswagen's management and supervisory board "as the wrongdoings inside VW seem to get bigger every day," said Commerzbank's Mr. Gommel.

Michael Denzin contributed to this article

Write to Ulrike Dauer at ulrike.dauer@wsj.com

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(END) Dow Jones Newswires

November 04, 2015 05:17 ET (10:17 GMT)

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