Exhale and breathe. Fresh air for Volkswagen investors arrived on Thursday in the form of better than expected first-quarter earnings. The shares jumped 5 per cent. The lingering whiff of the diesel emissions scandal was present by way of a €1bn charge. While the worst of that episode has passed, the German carmaker has plenty else to worry about.

Investors will hope the €30bn taken so far in charges relating to emissions test cheating will cover any penalties and lawsuits. Bears might point to BP, which is still paying off costs related to the 2010 Deepwater Horizon disaster. Recent US and German legal actions against former chief executive Martin Winterkorn will not calm jangled nerves at Volkswagen.

But Volkswagen has more immediate problems. EU competition authorities have accused German carmakers of colluding to limit advances in clean emissions technology between 2006 and 2014. BMW registered an initial €1bn related charge in the first quarter. Whistleblower Daimler may get off with a slapped wrist. Volkswagen, which also co-operated, could still be subject to fines. A €2.4bn charge would be equivalent to that taken by BMW say analysts at Citigroup.

Equally important are the carmaker’s operational issues. Car sales are slowing. Free cash flow at the automotive unit was €2bn in the first quarter, weighed down by higher working capital. Inventories increased by €3.7bn to €45bn. Stricter emissions standards are also contributing. New tests take twice as long, which means stock sits on the balance sheet for longer. Its German peers have reported similar problems.

That said, analysts still expect about €8.8bn of group free cash flow this year. Shares look cheap at just 5.5 times forward earnings, a quarter below European peers. Volkswagen has a free cash flow yield of almost 11 per cent, well above that of BMW and Daimler at about 4 per cent. Yet none of this is new.

Further spluttering about emissions can only widen that valuation gap.

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