Here's what Volkswagen did and how they got caught

“We had no cause for suspicion,” John German, from the ICCT, said in an interview with Bloomberg. “We thought the vehicles would be clean.”

The study tests three cars in real-world conditions — a 2012 VW Jetta, a 2013 VW Passat and a BMW X5 SUV, under both laboratory and road conditions, finding huge differences in the amount of harmful emissions.

The group tests one on nearly 4,000 kilometres of highway driving between California and Washington State.

The tests find that the Volkswagen Jetta exceeds nitrous oxide caps by 15 to 35 times, with the Passat exceeding emissions caps by 5 to 20 times.

Meanwhile the BMW met all the standards under normal driving conditions.

The EPA and CARB put the findings to Volkswagen.

The company disputes the test results "citing various technical issues" but implement a voluntary recall of nearly 500,000 cars in December 2014 to put in a software patch they claim will fix the issue.

It doesn't and CARB and the EPA keep pushing to find out why the cars' own diagnostics systems don't register the high emissions under test conditions.

Volkswagen dispute the test results but implement a voluntary recall of nearly 500,000 TDI cars in December 2014 to put in a software patch they claim will fix the issue.

It doesn't and CARB and the EPA keep pushing to find out why the cars' own diagnostics systems don't register the high emissions under test conditions.

The switch is clever. It tracks the position of the steering wheel, vehicle speed, how long the engine is on and barometric pressure. If these inputs match the ones commonly found in vehicle testing, the software cut harmful emissions to pass the exam.

If it sensed that the car was being driven on a road rather than in a lab, it switched to a separate callibration which turned off the exhaust controls.

People have speculated this was done to keep the cost of the cars down, tricking the testers into thinking they were fine without the AdBlue systems used by other manufacturers.

The company was confronted by the authorities with evidence of the software scam. Running out of excuses, the company admits to gaming the tests.

"Using a defeat device in cars to evade clean air standards is illegal and a threat to public health," says assistant administrator for the Office of Enforcement and Compliance Assurance Cynthia Giles.

The fine could be as high as $37,500 per vehicle for the violations, a total of more than $18 billion ((£11.8 billion). The U.S. Justice Department and German authorities also begin investigations.

Volkswagen experiences its biggest one-day drop in six years as the potentially huge fine spooks investors.

CEO Martin Winterkorn releases an apology, saying "I personally am deeply sorry that we have broken the trust of our customers and the public."

Once again, the shares go into meltdown and another 20% is wiped off the value of the company.

Volkswagen issued a profit warning setting aside €6.5 billion (£4.7 billion) to "cover the necessary service measures and other efforts to win back the trust of our customers." They add: "discrepancies relate to vehicles with Type EA 189 engines, involving some eleven million vehicles worldwide."

The statement comes after Tagesspiegel reports that Winterkorn was going, and to be replaced by Porsche CEO Matthias Muller.

The Tagesspiegel report cites sources close to the company's 20-person supervisory board, which is having crunch talks this week on how to respond to the scandal.