The Audi Q7 TDI is one of the numerous Audi, Porsche and VW models affected by the stop-sale.

Volkswagen and its Audi and Porsche brands have ordered a stop-sale on a wide range of high-end diesel vehicles accused by the Environmental Protection Agency of using hidden software to cheat on emissions tests.

But the German maker contends the code identified by the EPA was not intended to hide pollution problems with the company’s 3.0-liter turbodiesel but actually to further reduce emissions in real-world conditions.

“It’s an auxiliary emissions control device, not the defeat device used in the 2.0-liter diesel,” said Audi spokesman Brad Stertz, referring to the smaller diesel engine used in 11 million vehicles sold worldwide, including 482,000 sold in the U.S. over a seven-year period.

(Click Here for more on the EPA’s latest allegations against VW.)

Volkswagen has acknowledged that it did use a so-called defeat device in those vehicles, subterfuge revealed by the EPA on September 18th. That led to a major shake-up at the automaker, including the ouster of its CEO and a number of other senior executives. The company has now been targeted by hundreds of lawsuits, is under investigation by prosecutors in the U.S. and Germany, and could face billions of dollars in fines.

VW has also put a stop-sale on vehicles like the Passat TDI using the smaller engine. It plans to begin a worldwide recall campaign in January, though repairs for vehicles using the EA-189 engine sold in the U.S. are expected to take longer, as the EPA has not yet approved a proposed fix.

The Porsche Cayenne Diesel accounts for 25% of the SUV's sales in the U.S.

What will happen with vehicles using the larger Gen II 3.0-liter Volkswagen turbodiesel is even less certain, as the carmaker has said it did not violate the law, though it apparently did not provide clear details to regulators on the software strategy it is using to hold down smog-causing oxides of nitrogen.

“We hope to get in front of the EPA,” said Stertz, as well as the California Air Resources Board and Environment Canada, “and explain why the system behaves this way.

VW claims the technology in question is used to heat various parts of the engine, including the system that injects urea, an ammonia-like chemical, into the exhaust to reduce NOx levels. The argument is that it can help hold down emissions when the engine is cold.

Observers say it is not a surprise that regulators would be skeptical considering VW attempted to conceal pollution problems with its smaller diesel for at least seven years. And the maker this week revealed that an internal audit has uncovered “irregularities” in the emissions of 800,000 other vehicles sold around the world in recent years. For the first time, that includes some gas-powered models, as well as diesels.

(VW finds irregularities with 800,000 more cars. For more, Click Here.)

But diesels are a particular headache for automotive engineers because they naturally produce higher levels of NOx and sooty particulates than gas engines.

For the time being, VW has told dealers to stop selling a wide range of used and new vehicles equipped with its 3.0-liter diesel. That list includes:

  • Volkswagen Touareg TDI SUVs, both new and certified pre-owned, from the 2013 to 2016 model-years;
  • New and certified pre-owned Audi Q7 TDI SUVs from the 2013 to 2015 model-years;
  • New and certified pre-owned Audi A6, A7, A8, and Q5 TDI models from the 2014 to 2016 model-years;
  • New and certified pre-owned Porsche Cayenne TDI SUVs from the 2014 to 2016 model-years.

The impact of the latest stop-sale could be significant. The Cayenne is Porsche’s best-selling product line and the diesel version accounts for 30% of the SUV’s U.S. sales. Diesels make up a growing share of the sales of the other models the move covers. Overall, diesels account for about 25% of Volkswagen’s U.S. volume. It is the nation’s biggest seller of diesels.

But the latest controversy could further hurt the image of the automaker and impact sales of gasoline-powered vehicles. VW brand sales were virtually flat in October despite the double-digit increase in the overall American market.

(VW sales starting to feel the pinch. Click Here for more.)

Audi actually outpaced the industry, with sales up 16.8%, but it was only marginally impacted by the original diesel cheating scandal. That involved one slow-selling model, the compact A3 TDI. The latest EPA allegations could have a broader impact on Audi, according to several industry observers.

If VW cannot convince the EPA that it was using a legitimate software strategy, the company could face another $375 million in penalties for violating the U.S. Clean Air Act. It already is liable for penalties of $18 billion for the problems with the 2.0-liter diesel. And that doesn’t include possible fines that could be levied by the U.S. Justice Department. Meanwhile, VW is facing more than 300 lawsuits linked to the initial diesel scam.

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