Sounds like the key barrel has failed. Pretty common problem. A quick
google on this group will pick up a ton of stuff on it. Happened in my
97 A3. Dealer replaced it so don't know if its user serviceable.
In mine the engine would start, the immobiliser light would start
flashing and the engine would die. A temporary measure was to remove
the key and re-insert it which would make it work again. The fault
didn't happen all the time.
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