Shares in Renault plunged Thursday after fraud investigators accused the carmaker of having cheated on pollution tests for diesel and petrol engines for over 25 years with the knowledge of top management.
"The entire chain of management" up to the French firm's chief executive Carlos Ghosn was implicated in the "fraudulent strategies", according to a report by anti-fraud agents which was seen by AFP Wednesday.
Renault shares were down 4.1 percent in late morning Paris stock exchange dealings, at 78.87 euros. This added to the previous day's 3.7 percent drop.
"This is huge for the carmaker," said one Paris-based analyst.
Shares in fellow French manufacturer Peugeot were also down, by a much more modest 0.7 percent, in an overall firmer market.
Renault categorically denied the accusations.
"Renault doesn't cheat," Thierry Bollore, the French company's second-in-command told AFP by telephone late Wednesday, saying all its cars complied with legal standards.
In a separate statement released Thursday, Renault said "none of its services has breached European or national regulations related to vehicle homologations" and that it would fully cooperate with an ongoing official investigation launched in January.
"Renault vehicles are not equipped with cheating software affecting anti-pollution systems," it said in a statement.
The fraud squad report said there was no evidence of Ghosn having charged anybody else with approving the company's emissions control decisions, which therefore ultimately came under "his responsibility".
"Many vehicles" were fitted with the device which allowed cars under testing to appear cleaner than they were on the road, the report said.
The accusations against Renault come after Europe's biggest carmaker, Volkswagen, admitted to fitting 11 million cars with devices allowing them to fool emission tests.
In January, Volkswagen agreed to plead guilty and pay $4.3 billion in criminal and civil fines to settle charges that it defrauded the United States and conspired to violate the Clean Air Act.
This added to the $17.5 billion that the company already agreed to pay in settlements with car owners and dealers for environmental cleanup.
On Wednesday, state prosecutors in southern Germany said they had searched offices belonging to carmaker Audi over parent company Volkswagen's cheating scandal.
Investigators from Bavaria, Baden-Wuerttemberg and Lower Saxony states searched "sites belonging to Audi AG and seven other locations" on suspicion of "fraud and illegal advertising", Munich prosecutors said in a statement.
In January, Fiat Chrysler also came under fire when US authorities accused it of cheating emissions tests on diesel trucks and SUVs.