Volkswagen shares rose in early trading yesterday as investors welcomed news the carmaker is on the cusp of a criminal and civil settlement with the US Justice Department over its emissions test cheating scandal.

VW said after the market close on Tuesday that it was in advanced talks over a $4.3 billion settlement, and it planned to plead guilty to criminal misconduct.

VW shares were up 2.1 per cent at €149.10 by 0840 GMT.

Carmaker in advanced talks over settlement

“The good news is that VW makes another important step to solve the dieselgate issue in the US but the financial impact seems higher than so far expected by capital markets,” DZ Bank analyst Michael Punzet wrote in a note published yesterday.

The German group said the financial implications of the US deal exceed the €18.2 billion it has set aside to cover the costs of its wrongdoing, adding it has yet to quantify the impact of the deal on 2016 group results.

Most analysts had expected the US deal, which VW had raced to conclude before the Obama administration bows out on January 20, to cost the carmaker around €3 billion.

VW admitted in September 2015 to installing secret software in hundreds of thousands of US diesel cars to cheat exhaust emissions tests and make them appear cleaner than they were on the road, and that as many as 11 million vehicles could have similar software installed worldwide.

The carmaker’s supervisory board was set to meet yesterday to approve the deal.