Volkswagen will hold a special supervisory board meeting on Wednesday to discuss allegations that German carmakers operated a wide-ranging cartel, a source familiar with the matter has said.

The European Commission said on Saturday competition regulators were investigating a possible German car industry cartel following a tip-off.

At stake is whether carmakers VW, Audi, Porsche, Mercedes and BMW used German car industry committees to discuss pricing of components and technologies, and whether such talks constituted anti-competitive behaviour.

A VW spokesman confirmed an extraordinary supervisory board meeting would be held on Wednesday but declined to give details.

German car stocks took a hit in early trading today, weighed down by uncertainty over possible competition fines after European regulators said they were probing cartel allegations.

At 10.048am Irish time, VW shares were down 2.8%, with Daimler and BMW down 3.4% and 2.5% respectively, lagging the blue-chip DAX index, which was 0.7% lower.

Exane BNP Paribas automotive analyst Stuart Pearson said little was known about the allegations, but no signs had emerged about fixing prices charged to consumers.

"More ugly details could yet emerge, leaving German manufacturers - and the EU auto sector - still firmly in the sin bin for now," he added.

The car industry has been hit with billion-euro fines on both sides of the Atlantic in recent years for cartels related to various parts such as lighting systems, engine coolers and bearings.

The industry's record on exhaust emissions is also under close scrutiny after VW admitted in September 2015 to cheating US diesel emissions tests and investigations have shown many vehicles exceeding pollution limits outside of testing labs.

On Friday, German magazine Der Spiegel said VW, its Audi and Porsche brands, Mercedes-owner Daimler and BMW may have colluded to fix prices on components, including of diesel emissions treatment systems, using industry committees.

Spiegel said the talks also led to the use of smaller tanks containing AdBlue, a urea-based liquid needed to help filter nitrogen oxides (NOx) from diesel emissions.

Larger tanks would have been more expensive, the magazine said.

Car industry experts, however, have said the effectiveness of exhaust filtering systems does not depend on the size of an AdBlue Tank.

BMW, for example, has equipped its cars with urea injection as well as a NOx-storage catalytic converter. The two systems combined ensure vehicles fulfil emissions requirements.

BMW yesterday said emissions filtering systems in its cars were adequate and that discussions with other manufacturers about AdBlue fluid were held with a view toward building a pan-European network of AdBlue refilling stations.

Daimler said it had a substantial compliance programme which was "constantly improved and adapted".

Daimler's works council chief Michael Brecht demanded an immediate investigations into the allegations.