What: Shares of Volkswagen Group (OTC:VWAGY) dropped another 17% on Tuesday, after VW admitted to selling cars around the world that were equipped with software that cheats on emissions tests.

VW shares closed at €161.17 on Friday, before the news broke. They closed at €109.71 in Frankfurt on Tuesday -- a drop of 32% in two trading days.

So what: Late on Friday, the EPA said that VW models with the 2.0 liter TDI diesel engine have software that changes the emissions-control settings when it detects that the car is having its emissions tested. During regular operation, the cars' exhaust is much dirtier than allowed by law.

That's a violation of the Clean Air Act. The EPA can fine VW up to $37,500 for each car sold with the software -- about 482,000 since 2009. VW shares fell about 18% on Monday on that news.

On Tuesday morning, VW admitted that the software was included in cars sold around the world, about 11 million in all. It said it would take a charge of €6.5 billion ($7.3 billion) in the third quarter to cover the costs of fixing all of the affected vehicles. That news drove share prices down another 17%.

Now what: Regulators around the world are demanding answers. The U.S. Justice Department has begun a criminal investigation. CEO Martin Winterkorn has apologized, and commissioned an outside investigation -- but reports are suggesting that he could be out of a job by the end of the week. 

The potential exposure to VW is immense. Theoretically, the EPA could fine VW over $18 billion -- and the U.S. is just one of the countries likely to hit the company with a stiff penalty. Meanwhile, customers around the world are up in arms, putting VW's future sales at risk. It's too early to calculate the likely cost of this mess, but it's already clear that it could go much higher than the €6.5 billion that VW set aside on Tuesday.