Volkswagen halts sales of most vehicles in South Korea ahead of ministry review

SEOUL/FRANKFURT (Reuters) - German carmaker Volkswagen VOWG_p.DE will suspend sales of most of its models in South Korea from July 25 as pressure builds on the company over its falsified emissions tests.

Logos of Volkswagen (R) and Audi are seen on a wheel of a car at a used car dealership in Seoul, South Korea, October 2, 2015. REUTERS/Kim Hong-Ji

South Korea is the latest country forcing Volkswagen to take drastic measures to repair its image since the carmaker admitted to cheating U.S. diesel emissions tests and said that up to 11 million vehicles worldwide could be fitted with illegal software.

“We have decided to suspend sales of the affected models to reduce confusion among dealers and customers,” a spokesman for Volkswagen’s South Korean business said.

The move comes ahead of an environment ministry review this month or in early August on whether to revoke certification of the 32 vehicle types offered for sale by Volkswagen and its Audi brand, which would lead to a sales ban. Volkswagen is due to present its case on July 25.

South Korean prosecutors last month issued the first warrant for the arrest of a VW executive in connection with the emissions scandal.

Globally, the company has already set aside about 16.2 billion euros ($17.85 billion) to cover the cost of the scandal and this week said that it had set aside a further 2.2 billion euros.

“The latest costs show that the dieselgate scandal is far from dealt with,” NordLB analyst Frank Schwope said.

Schwope raised his estimate for the cost of the scandal to between 25 billion euros and 35 billion euros, up from a range of 20 billion euros to 30 billion euros.

Volkswagen has been struggling with a sales slump in South Korea, Asia’s second-biggest diesel car market. Sales of VW-branded cars in South Korea slumped 33 percent to 12,463 vehicles in the first half of this year, industry association data shows.

The group’s top-selling vehicles in Korea last year were the Volkswagen Tiguan 2.0 TDI BlueMotion, with 9,467 vehicles, and the Audi A6 TDI, with 7,049 vehicles, according to the Korea Automobile Importers and Distributors Association.

German car sales in South Korea have soared since a 2011 free-trade deal eliminated duty on vehicles imported from Europe.

Reporting by Hyunjoo Jin and Edward Taylor; Editing by Muralikumar Anantharaman and David Goodman