Volkswagen has admitted that 11 million of its cars worldwide are fitted with devices that can cheat pollution tests.
The scandal over falsified U.S. vehicle emission tests affect various diesel model vehicles.
The German auto giant has announced that it is setting aside 6.5 billion euros ($10.2 billion) to cover potential costs of the scandal.
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The revelation that VW used software to deceive U.S regulators measuring toxic emissions in some of its diesel cars, sent Volkswagen shares plummeting by 23 percent on Monday.
The stock tumbled another 20 percent to a four-year low on Tuesday.
VW chief executive Martin Winterkorn issued an apology, saying he was “endlessly sorry for the manipulation”.
The U.S. Environmental Protection Agency said the auto giant could face penalties of up to $18 billion.