Volkswagen CEO Martin Winterkorn has publicly apologised for the German automaker's alleged use of emissions test-cheating software in nearly half a million diesel Volkswagen and Audi models sold in the USA.
In a statement issued by the company, Winterkorn promised that Volkswagen takes the allegations "very seriously".
"I personally am deeply sorry that we have broken the trust of our customers and the public," Winterkorn said.
"We will cooperate fully with the responsible agencies, with transparency and urgency, to clearly, openly, and completely establish all of the facts of this case.
"Volkswagen has ordered an external investigation of this matter.”
The United States Environmental Protection Agency claims VW knowingly equipped cars with the group's 2.0 litre turbo-diesel inline four with a "defeat device", a piece of software that detected when the car was being emissions-tested and temporarily adjusted its tune to suit.
If the allegations are found to be true, Volkswagen could be fined up to US$37,500 per vehicle - potentially resulting in a total fine of US$18 billion (AU$25 billion).
The models in question were built and sold between 2009 and 2015.
Volkswagen's share prices have plummeted almost 20 percent since the news broke, taking VW's market capitalisation down by around 14 billion euros (AU$21.9 billion).
There is big trouble here for Volkswagen if proven to have acted as alleged - and as Winterkorn's apology to customers would seem to suggest - which could run well beyond the US$18billion exposure currently flagged.
The EPA's investigation has also spurred other agencies to react, with the German Government announcing that it too will be checking if VW's "defeat device" was also fitted to European-market vehicles.
"You will understand that we are worried that the justifiably excellent reputation of the German car industry and in particular that of Volkswagen suffers," German economy minister Sigmar Gabriel said to the Reuters news agency.
If the deception does extend to Europe, the financial implications for Volkswagen could be even more tremendous.
With many European nations taxing vehicles based on their emissions output, the company could be asked to compensate for any shortfalls in tax revenue.
Meanwhile, the EPA has announced that it will be expanding its investigation to see if the use of defeat devices extends to brands outside of the Volkswagen Group, though it has not announced which manufacturers it will be targeting.