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Volkswagen AG’s (VLKAY - Free Report) luxury brand, Audi is being investigated for irregularities related to emission levels of carbon dioxide in some automatic-transmission vehicles. The news was first reported in a German newspaper stating that the California Air Resources Board (CARB) had found a cheating software in an older Audi model, which is not related to the device detected in Volkswagen’s diesel emissions test-cheating scandal last year.

Allegedly, the Audi vehicles have software installed that lowers emissions while being tested, by detecting whether the steering wheel is being turned as much as it would on the road. During normal use on the road, the automatic transmission increases the level of emissions. The transmission is used in a number of Audi’s sedans as well as sports-utility vehicles. The automatic transmission’s adaptive system supports “drivers by adjusting the gear-shifting points to best adapt to each driving situation” per the company. According to experts, the transmission control is intended toward fuel efficiency and lower shifting frequency that can enhance performance. The technical information about the transmission system has been provided to the Federal Motor Vehicle Authority KBA by Volkswagen.

It was earlier reported that the Environmental Protection Agency (EPA) has launched an investigation into the software detected in Audi vehicles. While the company or its parent company, Volkswagen, did not comment on the probe earlier, spokespersons have now confirmed the ongoing investigation. However, the company does not believe any laws in Europe have been violated by this transmission system, while the U.S. authorities need to determine any violations in the country. At least two lawsuits have been filed against Audi in the U.S. in relation to this issue.

This news comes just months after Volkswagen reached an agreement to settle the earlier emissions scandal for $14.7 billion. Per the agreement, the company would either buy back the affected vehicles or modify them, as per the owners’ choice, free of cost alongside paying compensation. Moreover, it had agreed to contribute to a government fund to help compensate for the environmental impact from the affected cars and spend on cleaner-vehicle projects.

Zacks Rank

Volkswagen currently carries a Zacks Rank #3 (Hold).

Some better-ranked automobile stocks include Allison Transmission Holdings, Inc. (ALSN - Free Report) , Fox Factory Holding Corp (FOXF - Free Report) and Valeo SA (VLEEY - Free Report) , all sporting a Zacks Rank #1 (Strong Buy).

Fox Factory Holding has a long-term growth rate of 15.83%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Allison Transmission has a long-term expected growth rate of 11%.

Valeo SA has a long-term growth rate of 9.88%.

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