WOLFSBURG • German auto giant Volkswagen raced back into the black ilast year as car sales hit an all-time high, in the latest sign of its "dieselgate" scandal fading into the rearview mirror.

But the costly fallout from the emissions cheating crisis prompted Volkswagen to announce a cap on executive earnings, in a major departure from its notoriously generous pay packages. Payouts will now be more closely linked to the group's financial performance, with the CEO's annual remuneration limited to €10 million (S$14.8 million).

Other board members will see their annual pay capped at €5.5 million, VW said after a meeting of the supervisory board at its Wolfsburg headquarters on Friday.

VW admitted 18 months ago to having installed software in 11 million diesel engines worldwide that could dupe emissions tests.

It reported a net profit of €5.1 billion for 2016, recovering from a stinging €1.6 billion loss after the cheating revelations in 2015.

"While the past fiscal year posed major challenges for us, despite the crisis the group's operating business gave its best-ever performance," CEO Matthias Mueller said.

The VW group - which includes Porsche, Audi and Skoda - beat analyst expectations with record revenues of €217.3 billion in 2016, up nearly 2 per cent on the year before. Underlying or operating profit rose to €7.1 billion, from a loss of €4.06 billion in 2015, it said.

Despite the damage to its reputation from dieselgate, the group delivered a record 10.3 million vehicles in 2016, driven by strong demand in Europe and the Asia-Pacific region. The result meant VW overtook rival Toyota to become the world's top-selling carmaker.

But Volkswagen is not out of the woods yet. The group on Friday said it added a further €4.4 billion to provide for the costs of the crisis in the last quarter of 2016, bringing the total amount set aside to €22.6 billion.

AGENCE FRANCE-PRESSE