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Volkswagen admits to 'screwing up' and says it will repay any fines handed down to it Reuters

As Volkswagen deals with the fallout over news that it had rigged emissions tests of diesel vehicles in the US, the share price of the world's biggest carmaker plunged 23%. And over the past two days, the company's shares suffered a drop of 38% (by mid-afternoon trading on Tuesday 22 September), wiping out some €25bn (£18bn, $27.9bn) in market value. The events have spurred calls for a broader investigation into the sector.

Volkswagen's board members are set to meet tomorrow (23 September), with the company facing a hefty €16bn fine from US regulators for manufacturing vehicles designed to avoid government pollution controls. The US Environmental Protection Agency (EPA) and the California Air Resources Board (Carb) say the company fitted "defeat devices" that used software to enable its diesel vehicles to limit polluting gases during emissions testing.

The German car manufacturer has said 11 million cars are affected globally and the head of the company's US business, Michael Horn, conceded it "totally screwed up" by manipulating the emissions tests. On Friday (18 September), Volkswagen was ordered to recall almost half a million cars in the US.

How European car makers' share prices have been affected since 18 September

Volkswagen: -38%
BMW: -3.75%
Renault: -3.81%
Peugeot: -5.26%

The scandal is also sending ripples throughout the European automotive sector as shares in Daimler, BMW, Renault and PSA Peugeot Citroen plunged, with investor sentiment taking hold over the costs facing Volkswagen.

Analysts believe it is unlikely that Volkswagen was the only company to have cheated the system. Speaking to the Financial Times, Stuart Pearson, an analyst at Exane BNP Paribas, said: "The artificial gaming of emissions tests threatens to become the car industry's Libor moment".

As the fallout continues, Asian car manufacturers have reaped the benefits with shares in South Korean manufacturers Hyundai Motor and Kia Motors rising more than 3% earlier on 22 September. The carmakers compete with Volkswagen in the sedan segment.

In its latest statement, the company said: "Volkswagen does not tolerate any kind of violation of laws whatsoever." Meanwhile, Germany has called for an investigation into whether Volkswagen has rigged emissions tests in the country, with Vice-Chancellor Sigmar Gabriel calling it "a bad episode" for the automotive industry.

Gabriel said: "You will understand that we are worried that the justifiably excellent reputation of the German car industry and in particular that of Volkswagen suffers."