German carmakers and politicians are meeting in Berlin at an "emergency diesel summit" this week to try to shore up eroding market share amid concerns over pollution in Europe's major cities.
They also hope to put to rest a major scandal over the manipulation of emissions testing data.
NPR's Soraya Sarhaddi Nelson reports that the two sides are expected on Wednesday to agree to lower emissions of smog-causing nitrogen oxides in Germany's 15 million diesel vehicles.
Soraya says that in the lead-up to the summit, manufacturers and the German government haggled over reducing emissions by improving auto software, something that would cost several hundred million euros. Alternately, hardware fixes would be far more expensive – estimated at around 5 billion euros ($5.9 billion). In either case, much of the cost would be absorbed by the companies.
Germany is Europe's leading car manufacturer, and Volkswagen — the company at the heart of the faked emissions testing data — is among the world's largest carmakers.
As NPR's Bill Chappell reported in 2015, Volkswagen had installed "test-cheating software on 11 million vehicles worldwide" that misreported the emissions data. In the U.S., the software was installed on more than 480,000 diesel VW and Audi vehicles.
It has led to a crisis of confidence in Germany's vaunted auto industry, which employs one out of five workers in the country. Die Welt newspaper published an opinion poll Wednesday showing that 73 percent of Germans want politicians to crack down on the industry to improve emissions standards.
In recent weeks, VW, BMW and Daimler have also been hit by lawsuits claiming they acted as a cartel to illegally drive up car prices.
Increasingly, German carmakers are facing a market dilemma. While in the U.S., the market share for diesels is minuscule – about 1 percent — in Europe, half of all new vehicles sold have a diesel under the hood.
Europe incentivized diesels for their fuel efficiency, but the trade-off was more polluting vehicles. The problem of smog from diesel exhaust has reached a critical stage in Europe and three major cities there; Paris, Madrid and Athens have said they will ban diesel vehicles by 2025. They were joined by Mexico City.
Last month, France announced plans to ban all vehicles powered by internal combustion engines — both gasoline and diesel — followed a few months later by a similar pledge from the British government.
Pollution concerns and small, but growing sales of hybrid-electric and chargeable electric vehicles are already having a negative impact on market share for diesels in Europe. Some analysts think the percentage of diesels sold in Europe could plummet to just 30 percent by 2020. Meanwhile, UBS Group estimates the worldwide share of diesels will fall to 4 percent by 2025 from 13.5 percent today.
"We still need a strong auto industry. We want our carmakers to continue to be successful in the world and to carry on building the best cars," Armin Laschet, the premier of the North-Rhine Westphalia region, was quoted by Reuters as saying.
"We need to save diesel ... but there must also be a new push into the electric era," he said.
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