“Based on present knowledge around 800,000 vehicles from the Volkswagen Group are affected.
“An initial estimate puts the economic risks at approximately two billion euros,” it added.
The latest revelation affects mostly diesel-powered vehicles, but also some petrol cars.
VW said that it noticed in an internal investigation that some models of vehicle had carbon CO2 and fuel emissions set too low during CO2 certification testing.
CEO Matthias Müller promised an “unsparing” investigation.
“We won't stop for anything or anyone. This is a painful process, but for us there is no alternative,” he said.
But Müller's words did little to stem panic among VW investors, with shares tumbling around 10 percent as markets opened on Wednesday.
Image: Reuters
Volkswagen sank into the biggest crisis in its history over its admission that 11 million of its vehicles had been fitted with devices designed to cheat official pollution tests.
The so-called defeat devices turn on pollution controls when cars are undergoing tests and off when they are back on the road, allowing them to spew out harmful levels of nitrogen oxide.
The revelations sparked global outrage and investigations in several countries including its home turf Germany.
The group has already set aside billions of euros to cover the costs of refitting the cars to disable the defeat devices and for possible litigation costs related to the scandal, pushing it deep into the red for 2015's third quarter.
Volkswagen itself has also promised to investigate how such a scam could have been perpetuated at a global level and whether there were other irregularities surrounding its vehicles.
Tuesday's admission of irregularities surrounding carbon emissions is yet another setback for the company, and comes a day after US authorities accused it of fitting the defeat devices also on its larger 3.0 litre diesel vehicles.