German car maker Volkswagen has admitted that an estimated 11 million of its diesel cars worldwide were engineered to covertly emit more pollutants when driving on the road.

On Wednesday morning (AEST), CEO Martin Winkerton said he was “infinitely sorry” for the growing scandal, which slashed the VW share price and could cost billions to rectify.

“I am infinitely sorry that we have disappointed people’s trust. I offer my deepest apologies to our customers, the authorities and to the public at large for our misconduct,” Mr Winkerton said in a video statement.

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Software was installed in the affected diesel vehicles to reduce the output of nitrogen oxide (NOx) when the cars were being tested.

When on the road, the software switched mode, causing the vehicles to emit up to 40 times more NOx, the US environmental agency claimed.

VW boss Martin Winkerton, who may lose his job, says he is “infinitely sorry”. Photo: Getty

NOx emissions have been linked to respiratory ailments such as asthma. It is also believed to be a greenhouse gas that contributes to climate change.

US, French and South Korean officials have launched investigations into the scandal, with billion-dollar fines at risk.

German Chancellor Angela Merkel called on the company to show “full transparency” to clear up the matter.

“I hope the facts will come to light as soon as possible,” she said in Berlin.

Volkswagen said it was setting aside 6.5 billion euros ($A10.20 billion) for the third quarter to prepare for the worst.

Its share price dove 17 per cent on Monday and 19.8 per cent on Tuesday.

Volkswagen’s parent company also owns the Audi, Skoda and Lamborghini brands. It was not confirmed if these brands were affected.

It is as yet unknown if any Australian vehicles had the software installed.

The United Nations described the scandal as “extremely troubling”.

“The auto industry has to be a partner in all efforts in the private sector in terms of combating climate change,” UN spokesman Stephane Dujarric said.

“I hope the company, Volkswagen, cooperates fully and rectifies the issue.”