Germany is to retest all Volkswagen car models to gauge their genuine emissions levels after new revelations from the carmaker six weeks into its biggest-ever corporate scandal pushed the government to act.
Expressing his "irritation" with one of Germany's biggest employers, Transport Minister Alexander Dobrindt said on Wednesday that all current models sold under the VW, Audi, Skoda and Seat brands - with both diesel and petrol engines - would be tested for carbon dioxide and nitrogen dioxide emissions.
As the crisis deepened, VW said it had told U.S. and Canadian dealers to stop selling recent models equipped with its 3.0 V6 TDI diesel engine, while the Moody's agency downgraded the firm's credit rating.
The German government's announcement followed a VW statement on Tuesday that it had understated the level of carbon dioxide emissions in around 800,000 cars sold mainly in Europe, and consequently their fuel usage. This means affected vehicles are more expensive to drive than their buyers had been led to believe.
The revelations added a new dimension to a crisis that had previously focused on how Europe's biggest carmaker cheated in U.S. tests on diesel cars for emissions of nitrogen oxide, which cause smog.
Previously the government had said it would review only nitrogen dioxide emissions from VW diesel cars.
"We all have an interest that everything at VW is turned over and reviewed," Dobrindt said, adding that the government wanted to force the company to pay the extra car taxes which would be incurred by the higher CO2 emissions levels.
VW is Europe's biggest motor manufacturer, employing over 750,000 people in Germany, and has been a symbol of the nation's engineering prowess.
However, Dobrindt said the firm had caused "irritation in my ministry and with me", while Chancellor Angela Merkel's spokesman said it had to take steps to prevent such a case happening again, adding: "VW has a duty to clear this up transparently and comprehensively."
The admission about fuel consumption is the first that threatens to make a serious dent in VW's sales since the scandal erupted as it could deter cost-conscious consumers, analysts said.