23/09/2015 8:45 AM AEST | Updated 15/07/2016 12:51 PM AEST

Volkswagen Emissions Scandal Widens

Getty Images/Sean Gallup
WOLFSBURG, GERMANY - MARCH 13, 2014: In this file photo Volkswagen CEO Martin Winterkorn attends the company's annual press conference on March 13, 2014 in Wolfsburg, Germany. Winterkorn announced on September 22, 2015 that he will not step down following the diesel emissions scandal that Volkswagen has admitted could affect up to 11 million VW cars. (Photo by Sean Gallup/Getty Images)

Thousands of Australians may be driving cars less environmentally friendly than they were led to believe, as Volkswagen investigates whether local cars were caught up in an emissions testing scandal.

German auto giant Volkswagen has revealed 11 million of its diesel cars worldwide are fitted with devices that can cheat pollution tests, in an announcement that has seen its shares plunge by 20 per cent.

The Australian arm of Volkswagen is checking with head office in Germany to see if it any vehicles sold in country have been affected, while investigations are being launched in France, South Korea and the United States.

Sales figures to June showed the auto giant sold 32,000 cars domestically, up 12 per cent on the previous year.

This was on the strength of sales for Amarok, Golf, Polo, Touareg and Jetta models -- all of which feature diesel options.

Volkswagen has announced it is setting aside 6.5 billion euros to cover the potential costs of the scandal, which has so far seen the carmaker halt US sales of diesel cars as an investigation into the software gets underway.

"Further internal investigations have shown that the software concerned is also installed in other diesel vehicles," VW said in a statement.

"Anomalies have shown up in around 11 million cars worldwide that are equipped with a specific engine type.

The company's shares plunged 17 per cent on Monday and slid a further 20 per cent on Wednesday as news of the scandal broke.

On Friday, US regulators ordered Volkswagen to fix the defect and said they were launching a probe before the German firm halted all diesel vehicle sales in the United States for the investigation.

VW global CEO Dr Martin Winterkorn said he was "deeply sorry that we have broken the trust of our customers and the public.”

"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," he said.

Volkswagen had ordered an external investigation of the issue, he said.

German chancellor Angela Merkel has called for full transparency from Volkswagen.

German Transport minister Alexander Dobrindt said that he had asked Germany's Federal Motor Transport Authority "to immediately have specific and extensive tests conducted on all Volkswagen diesel models by independent experts".

UK Transport Secretary, Patrick McLoughlin, has also confirmed that he’s calling for an EU-wide investigation.