Volkswagen's (VLKAY) emissions scandal could wind up costing the automaker a total of nearly $36 billion by 2017, or roughly two-thirds of its market value, according to a new estimate of the potential financial fallout for the company.
After admitting that it gamed pollution tests, Volkswagen could face a range of expenses including recall costs, vehicle buybacks, regulatory fines and class-action settlements.
"While it is not yet possible to determine the full extent of costs due to uncertainty about whether there will be any more revelations and about legal settlements and the reaction from regulators, our equity analysts put the costs to VW at 32 billion euros [$36 billion] over the coming two years," Societe Generale said in a research note.
Marc-Rene Tonn, an analyst at Warburg Research, estimated the hit to VW could run 35 billion euros ($39 billion), according to the Associated Press. Tonn slashed his forecast for the automaker's earnings this year by half, to $7.1 billion.
The U.S. Environmental Protection Agency said in September that VW could face fines of up to $18 billion for equipping nearly 500,000 diesel vehicles sold in the U.S. with software designed to bypass pollution controls.
To date, VW has set aside $7.3 billion to cover the costs related to the scandal.
New Volkswagen CEO Matthias Mueller on Tuesday told workers gathered at the car giant's plant in Wolfsburg, Germany, that he expects the manufacturer to move past the crisis. But that "would not happen without pain," he said, suggesting that the affair could have an impact on future investments.
VW on Sept. 25 named Mueller, previously the head of its Porsche brand, to replace former chief executive Martin Winterkorn.
The controversy could also have wider repercussions for other European automakers.
"For Germany and the euro-area car industry," Societe Generale said, "the risk of consumers reassessing diesel technology should be a wake-up call for the industry and policymakers alike to renew policy reform and investment efforts."