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I had the same problem and replaced the coolant temperature sensor (about $30 if you can do it yourself) and it went away. No problems since. Worth it to try it, although it could be something more expensive. I read about this on other blogs.

VW told me i had to change the whole engine. HA on them.

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Q: 2003 vw beetle Why your oil light and temp flashing at the same time?
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