Volkswagen says 11 million vehicles worldwide are involved in the scandal that has erupted over its rigging of US car emissions tests.
It said it was setting aside €6.5bn (£4.7bn) to cover costs of the scandal.
VW added this would pay for “necessary service measures and other efforts to win back the trust of our customers”.
The boss of Volkswagen’s US business, Michael Horn, has admitted it “totally screwed up” in using software to rig emissions tests.
VW shares were down more than 20% on Tuesday in Frankfurt.
Last Friday, the US Environmental Protection Agency (EPA) said VW diesel cars had much higher emissions than tests had suggested and that software in several diesel cars could deceive regulators.
“Volkswagen does not tolerate any kind of violation of laws whatsoever,” the firm said in its latest statement.
It said provision for the scandal would be made “in the profit and loss statement in the third quarter of the current fiscal year”.
It added: “Due to the ongoing investigations, the amounts estimated may be subject to revaluation.”
EU probe call
French Finance Minister Michel Sapin has called for an EU inquiry, but a UK car industry spokesman said there was “no evidence” of cheating.
Mike Hawes, who is chief executive of the UK’s Society of Motor Manufacturers and Traders, said the EU operated a “fundamentally different system” from the US, with tests performed in strict conditions and witnessed by a government-appointed independent approval agency.
“There is no evidence that manufacturers cheat the cycle,” he said. “Vehicles are removed from the production line randomly and must be standard production models, certified by the relevant authority – the UK body being the Vehicle Certification Agency, which is responsible to the Department for Transport.”
However, he also described current testing methods as “outdated” and said the car industry wanted an updated emissions test, “more representative of on-road conditions”.
France’s Mr Sapin said inquiries in Europe had to be conducted “at a European level”.
“We are a European market with European rules,” he told Europe 1 radio. “It is these that have to be respected. It is these that have been violated in the United States.”
The French carmakers’ federation backed Mr Sapin’s call, saying such an inquiry would “allow us to confirm that French carmakers respect the procedures for approval in all of the countries where they operate”.
For its part, the Italian transport ministry said it would open its own investigation, saying it wanted to know whether such cars were sold in Italy.
However, a European Commission spokeswoman said it was “premature to comment on whether any specific immediate surveillance measures are also necessary in Europe”.
Elsewhere, the South Korean government said it would test up to 5,000 Jetta and Golf cars, along with Audi A3s made in 2014 and 2015.
Its investigation will be expanded to all German diesel cars if issues are found.
The White House in Washington also reportedly said it was “quite concerned” about VW’s conduct.
Fines looming
Volkswagen was ordered to recall half a million cars in the US on Friday.
In addition to paying for the recall, VW faces fines that could add up to billions of dollars. There may also be criminal charges for VW executives.
In its latest statement, the firm said it was “working at full speed to clarify irregularities” concerning what it called “a particular software used in diesel engines”.
The EPA found the “defeat device”, the device that allowed VW cars to emit less during tests than they would while driving normally, in diesel cars including the Audi A3 and the VW Jetta, Beetle, Golf and Passat models.
VW has stopped selling the relevant diesel models in the US, where diesel cars account for about a quarter of its sales.
The EPA said that the fine for each vehicle that did not comply with federal clean air rules would be up to $37,500 (£24,000). With 482,000 cars sold since 2008 involved in the allegations, it means the fines could reach $18bn.
That would be a considerable amount, even for the company that recently overtook Toyota to be the world’s top-selling vehicle maker in the first six months of the year. Its stock market value is about €66bn ($75bn; £48bn).
VW has ordered an external investigation, although it has not revealed who will be conducting it.
