Embattled Volkswagen's credit rating was cut by Moody's on Wednesday as the toll on the German automaker grew over its cheating on emissions.

Moody's cut the rating by one notch to A3 after the newest allegations that Volkswagen included illegal defeat devices to hide poisonous nitrogen oxide pollution on its luxury diesel cars including Porsches.

In addition, Moody's cited the company's acknowledgement Tuesday that it had under-reported CO2 emissions levels in another 800,000 vehicles, including, for the first time in the burgeoning scandal, cars with gasoline engines.

While Moody's said Volkswagen had the financial strength to survive what could cost the company many billions of dollars in fines and compensation, it said the company's reputation and earnings were at risk.

After the US Environmental Protection Agency accused the company of also including the defeat devices on its 3.0 liter diesel engines -- used by larger, more expensive VW and Audi models and the Porsche Cayenne SUV -- the company halted sales of those models in the United States.

Moody's noted that those premium cars "are top contributors to Volkswagen's profitability."

- VW shares sink 9.5 percent -

Shares in the world's second largest automaker took a fresh battering Wednesday, losing 9.5 percent to 100.45 euros ($109.13) on the Frankfurt stock exchange.

That plunge was driven by the revelation that the emissions scandal, heretofore confined to the company's diesel-engined cars, also involved some of its gasoline or petrol engines as well.

German Transport Minister Alexander Dobrindt told parliament that among the 800,000 VWs in which the carbon dioxide emissions were higher than Volkswagen had originally reported, 98,000 ran on gasoline.

VW has lost nearly 40 percent in market capitalisation since September, when the cheating revelations broke.

Until now, the scandal had centred on so-called defeat devices, sophisticated software fitted into diesel engines to skew the results of tests for emissions of nitrogen oxide, a pollutant associated with respiratory problems.

VW had admitted the devices were on 11 million smaller-sized diesel engines. So far it has contested the EPA claim that they are on the larger engines as well.

The CO2 emissions issue widened the scandal in another way. The greenhouse gas traps heat from the sun and is blamed for man-made climate change, and so cars in Europe are often taxed according to their CO2 emissions.

The new revelations outraged many. "When will this litany of lies end?" asked Greenpeace campaigner Daniel Moser.

Moser called on governments and regulators to "end this continued deception and ensure Volkswagen upholds emissions standards."

In Berlin, Chancellor Angela Merkel's spokesman said the government "believes the accusations are serious and that Volkswagen has a duty to transparently and fully clear them up. Volkswagen has made this promise."

- 'Serious governance issues' -

Chief executive Matthias Mueller, who was elevated from VW's Porsche division last month to replace fallen chief executive Martin Winterkorn and steer the company out of the current crisis, said it would "stop at nothing in clarifying the circumstances."

But the inclusion of Porsche vehicles among those alleged to contain defeat devices could trip up Mueller.

Moody's warned that the newest developments "pose additional risk to Volkswagen's reputation, future sales and cash."

"They also suggest serious internal control and governance issues, which may be more widely spread than believed initially."

For Ferdinand Dudenhoeffer, auto expert at the University of Duisburg-Essen, "any trust still left in the company has now completely evaporated."

He suggested the potential costs of the scandal would be at least 50 billion euros.

Last week, VW booked its first quarterly loss in more than 15 years as it set aside 6.7 billion euros to cover the initial costs of the scandal.

Separately, Porsche SE said Tuesday's revelations could have a "negative impact" on its own results.

VW's troubles in the US mounted further as it announced a new recall for several car models for an engine fault that could weaken braking and cause a crash.

VW said the voluntary recall covered 91,800 gasoline-engined cars from the 2015-2016 model years, including Beetle, Golf, Jetta and Passat vehicles.