(Reuters) - Sweden's Volvo <VOLVb.ST> is setting aside 7 billion Swedish crowns (616 million pounds) to cover costs related to its admission in October that its truck and bus engines could be exceeding limits for nitrogen oxide emissions.
The company, which makes trucks, construction equipment and buses, said on Thursday the estimated costs were based on factors including vehicle testing and statistical analysis, and were made in dialogue with relevant authorities.
Volvo said in October its truck and bus engines might be exceeding limits for toxic nitrogen oxides because an emissions control component it uses was degrading.
"The Volvo Group will continuously assess the size of the provision as the matter develops," it said in a statement.
Volvo said the provision would impact operating income in the fourth quarter of 2018, while the negative cash flow effect would start in 2019 and gradually ramp up in the coming years.
(Reporting by Johan Ahlander; Editing by Mark Potter)