The arrest of the Audi CEO comes just weeks after Volkswagen tapped a new CEO to move the company past the scandal. Audi's boss has now been detained over concerns he might be tempted to suppress evidence related to the diesel emissions cheating.
Standler's home was raided last week where Munich prosecutors based the arrest warrant on concealment of evidence. Stadler has denied any involvement.
Audi admitted in November 2015 that its vehicles also contained the illegal "defeat devices" that allowed parent company Volkswagen to circumvent emissions regulations and sell vehicles that were worse for the environment than promised. Stadler himself was not immediately available for comment. The executive was arrested at his home in Ingolstadt.
"We need to find a solution for Audi's leadership for the time when he is not here", the source familiar with the talks said about Stadler's position. Winterkorn was charged with conspiracy and wire fraud in an effort to mislead US regulators about the automaker's diesel emissions cheating.More news: Meghan Markle reveals what married life with Prince Harry is like
Stadler has held onto his post mainly thanks to the backing of members of VW's controlling Porsche-Piech families.
Munich prosecutors had conducted searches at Stadler's private residence as a part of the probe concerning alleged fraud and indirect improprieties with documents. It said shortly afterward that a judge had ordered him kept in custody pending possible charges at prosecutors' request.
Prosecutors in Munich, Stuttgart and Braunschweig are continuing their investigations of the carmaker and its units.
The diesel scandal has so far cost the VW group more than €25-billion ($29-billion) in buybacks, fines and compensation, mainly in the United States where the cheating scam was first uncovered. Munich's authorities last week slapped VW with a €1B (roughly $1.2B) fine stemming from the scandal.