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Volkswagen, Daimler, and BMW to Upgrade 5 Million Diesel Cars

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Volkswagen (VLKAY - Free Report) , Daimler (DDAIF - Free Report) , and BMW (BAMXF - Free Report) have agreed to upgrade 5 million diesel cars in Germany to salvage their companies from emissions scandals and save their diesel technology.

The new engine management software to be implemented will improve emission filtering systems and cut toxic nitrogen oxide levels by 25-30%, the German auto industry lobby VDA said. These upgrades to newer vehicles will entail software patches instead of costly component fixes.

The deal also includes a fund to promote sustainable transportation in cities and incentives for consumers to trade-in older diesel cars. The manufacturers agreed to absorb the costs of the upgrades. The recalls include 2.5 million vehicles already fixed by Volkswagen in the last few months.

Back in September 2015, Volkswagen admitted to installing secret software in diesel cars to cheat nitrogen oxide emissions tests. As many as 11 million vehicles worldwide, with hundreds of thousands in the U.S., had the secret software in place to make them appear cleaner than they were.

Early this year, Volkswagen agreed to a $4.3 billion settlement with U.S. regulators to resolve the 2015 scandal. The company also pleaded guilty to criminal misconduct as part of the civil and criminal settlement.

Daimler and BMW have also faced scrutiny for their vehicles’ emission levels. This past July, Daimler appeared before a commission in Germany because of accusations that the company was cheating on emissions tests. This particular commission was created in 2015 because of Volkswagen’s scandal.

Car firms make up a large part of Germany’s economy, providing more than 800,000 jobs. Consequently, Germany is unlikely to commit to ending production of combustion-engine vehicles in the near future.

However, German law has become stricter on diesel engines. A court in Stuttgart upheld a proposal to ban older diesel cars from the city last week. This is a trend across Europe, where the U.K and France have both announced in recent months plans to ban new petrol and diesel car sales by 2040.

Diesel cars have also faced competition from hybrid and electric cars, like those made by Tesla (TSLA - Free Report) . Germany has set a goal of putting one million electric cars on their roads by 2020.

As a result, these new upgrades by Volkswagen, Daimler and BMW help buy the manufacturers time as they adjust to a changing market.

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