The controversial Volkswagen Golf ad showed a dark-skinned man being moved around by a white woman’s hands and then he was flicked away from the yellow car and into a café.
VW has since apologized for the ad, which it called "wrong and distasteful."
The company stated that it would investigate how the advert was published.
The ad is one in a series of ads which were supposed to show a love story between a white woman and a dark-skinned man. In one of the adverts, the woman is seen placing an envelope on the car’s windscreen to make him think it was a parking ticket, when in fact it was a letter to him.
The ad series, set in Buenos Aires, promotes VW Golf 8. The ads were posted on Instagram and Facebook.
The controversial ad was meant to copy the videos that show person “controlling” another like a puppet. In the video, the man was then flicked into "Petit Colon," a café located near the Teatro Colon in Buenos Aires.
Unfortunately, when translated from both French to English and from French to German "Petit Colon" reads "Little Settler" or "Little Colonist."
Twitter users were quick to point out that when the words "Der Neue Golf" ("The New Golf") fade in, the letters fading in first spell out "neger" – the German equivalent of the n-word.
"Neger" is a highly pejorative term in German, and is commonly used as a racial slur.
The company’s initial response to the criticism was an Instagram post stating that the origin of the people in the ad was not relevant, and that VW was "surprised and shocked that our Instagram story could be so misunderstood."
However, the company quickly backtracked, and released a statement saying: "We fully understand the disgust and anger in response to the video. It is quite clear that this video is wrong and distasteful. We firmly distance ourselves from the video and apologize sincerely."
The statement added that given the company’s history - the company was founded by Nazis before World War Two - "Volkswagen has positioned itself as a company that does not tolerate any form of racism, xenophobia or discrimination."
The statement revealed that the company has set up a number of internal schemes aimed at promoting diversity and unprejudiced cooperation, and that it was "all the more frustrating that we have made this mistake."
It maintained that VW would "investigate how this could have happened - and draw the necessary consequences," including implementing more checks and balances in its marketing.