The real battle for world dominance will be in China where VW is firmly entrenched.

VW's scandal comes at a time when the maker is struggling to regain momentum in the U.S.

The U.S. Department has reportedly launched a probe into allegations Volkswagen intentionally rigged emissions tests of a number of diesel-powered vehicles sold in the U.S. market.

The latest development comes three days after the Environmental Protection Agency ordered the recall of nearly 500,000 VW and Audi models because they used a so-called “defeat device” to help pass emissions tests, but automatically deactivating some of the onboard pollution control equipment after the tests were complete.

The automaker has acknowledged it acted improperly, CEO Martin Winterkorn issuing a statement Sunday in which he said he was “personally…deeply sorry that we have broken the trust of our customers and the public.”

The EPA had indicated that the recall was just the “opening salvo,” following its discovery that VW had cheated on emissions tests, indicating it would work with other agencies within the federal government, as well as the California Air Resources Board, which sets separate emissions standards of its own.

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An investigation by the Justice Dept. was reported by the Bloomberg news service citing two federal officials close to the inquiry.

The department has been taking an increasingly aggressive position on white collar crime, in general, and it has acted on a number of cases involving the auto industry in recent years. Just last week, General Motors agreed to a $900 million settlement and three years of probation to settle a Justice probe of its handling of a deadly ignition switch recall.

In March 2014, Toyota paid a $1.2 billion fine stemming from its delayed recalls of vehicles due to problems with unintended acceleration. A number of Japanese auto parts makers have been fined, while some executives have been jailed, in a price-fixing scheme.

VW said it has also launched its own investigation into the diesel emissions scandal, CEO Winterkorn declaring, “we will not tolerate violations of any kind of our internal rules or of the law.”

The recall itself is expected to cost VW millions of dollars, but the EPA could levy fines of $37,500 for each of the 482,000 vehicles, for a total of more than $18 billion. The maker also could face additional penalties from the States of California which has some of the toughest auto emissions rules in the world.

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Several law firms specializing in major consumer class action suits have also weighed in and could seek substantial damages on behalf of VW owners.

“The tinkering that Volkswagen will have to do by law to fix these vehicles will almost certainly degrade the performance to less than what Volkswagen claimed when it originally sold these cars,” said Steve Berman, a managing partner at Seattle law firm Hagens Berman. He said that the use of a defeat device “blindsided” consumers who “went to great lengths” to find vehicles that were both clean and sporty.

The news sent VW shareholders into a panic on Monday, the maker’s shares tumbling almost 20%, to close at their lowest level in about three years.

(For more on the VW scandal, Click Here.)

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