Since the news of Volkswagen skewing the results of their US emission tests, the company's shares in the stock market have tumbled (23% at the time of writing) and TDI models have been pulled out in the US, as well as Canadian markets. This latest recall has now put Volkswagen's goal of being the world's number one brand in serious jeopardy.

Volkswagen 2.0 TDI engine

So, how was Volkswagen's scheme discovered? It all started with a man named Peter Mock, Europe Managing Director for the International Council on Clean Transportation or ICCT. Mock noted the differences between emission testing in Europe and in the US. Mock contacted his counterpart in the US, John German, to conduct testing on diesels in America. Mock noted that if diesels can pass the stricter, more stringent EPA tests, then the ICCT can show that diesels are genuinely cleaner in the modern era. German and Mock then went to West Virginia University to do the study.

In May of last year, the university decided to test three diesel models sold in the US market, the Volkswagen Passat, the Volkswagen Jetta and the BMW X5 35d. In the laboratories of the university, all three passed their emission tests with flying colors. Out on the road however, it was a different story. While the BMW passed the real-world emission test, the researchers found the Nitrogen Oxide particles emitted by the two Volkswagens we significantly higher than the results done in the lab. The researchers then put the two Volkswagens back in the lab for testing where it passed the conditions set by the Environmental Protection Agency's (EPA) Clean Air Act. West Virginia University then alerted EPA and the California Air Resouces Board (CARB) with their findings.

With West Virginia University's report, the EPA said that they discovered a switch that detects whether or not a car is undergoing emission testing. Rather than deny the allegations, Volkswagen admitted that it fitted the said switch on TDI models from 2009 to this year. The 2,100 kilometer real world test revealed that the US-Spec Jetta TDI exceeded the U.S. nitrogen oxide emissions standard by 15 to 35 times while the US-Spec Passat was 5 to 20 times the standard.

Volkswagen Passat TDI NMS

Before we continue, do take note that the US-Spec Jetta and Passat are different from the ones sold for the rest of the world. The American Jetta, also known as the New Compact Sedan (NCS) within VW USA, gets a reworked ECU for both gas and diesel models to comply with the EPA regulations, along with a decontented interior. On the other hand, the Passat sold in the US is based on stretched platform of 2010-2015 model known as the B7. For the US Market, it is also called the New Midsize Sedan or the NMS. Major differences between the European and US spec models are in size, features and interior.

It's not just the Passat and Jetta that are affected in the US. The recall also covers the Golf TDI, Beetle TDI and the Audi A3 TDI. According to EPA, Volkswagen is in violation of section 203 (a) (3) (B) of the Clean Air Act. It says that car makers “are subject to a civil penalty of up to $3750 for each violation that occurred on or after 13 January 2009. In addition, any manufacturer who, on or after 13 January 2009, sold... any new motor vehicle that was not covered by an EPA-issued COC is subject, among other things, to a civil penalty of up to $37,500 for each violation”.

“Put simply, these cars contained software that turns off emissions controls when driving normally and turns them on when the car is undergoing an emissions test. We intend to hold Volkswagen responsible. VW was concealing the facts from the EPA, the state of California and from consumers. We expected better from VW. Using a defeat device in cars to evade clean air standards is illegal and a threat to public health.”, said Cynthia Giles, EPA enforcement officer.

Volkswagen Jetta NCS

Volkswagen's “defeat device” has also prompted the EPA to test more diesel cars sold in America. It has also affected the reputations of other German brands in America. Both Mercedes-Benz and BMW will also be investigated by EPA to see if their diesel engines are in compliance with the country's clean air act regulations. While the X5 35d passed the 2,100 real-world emission test, the whole line-up will be scrutinized by the agency.

At the moment, the EPA has issued a stop-sale order on Volkswagen TDI's. These include the cars sitting in showrooms, as well as cars sold through the company's Certified Pre-Owned program. Until the cars have been fixed to pass the emission standards, EPA will not issue Volkswagen a Certificate of Conformity for the German carmaker's 2016 TDI models. Diesels account for 20 to 25% of sales for Volkswagen. With the halt of TDI sales in America, Volkswagen may lose that sizable chunk of its sales in the US.

As mentioned in the law violated above, Volkswagen may also face a fine of up to $37,500 per car with the emission cheating system. If the maximum penalty will be applied, VW faces a fine as large as $18 billion since 482,000 cars are affected by the recall. To top it all off, the US Department of Justice has begun a criminal investigation to find and prosecute those involved in the scheme.