BERLIN - Germany's top administrative court will decide on Tuesday whether cities in Europe's biggest auto market can ban diesel cars, potentially wiping hundreds of millions of euros off the value of up to 12 million vehicles.
Since Volkswagen was found in 2015 to be cheating on emissions tests in the United States, diesel emissions containing toxic nitrogen oxide (NOx) which causes respiratory disease, have come under close scrutiny.
The environmental lobby DUH sued Stuttgart and Duesseldorf to force them to implement driving bans, after about 70 German cities were found to exceed European Union NOx limits.
"Once it is clear there will be driving bans the car industry will end its resistance against technical upgrades," DUH managing director Juergen Resch told public broadcaster Bayern 2.
The states of Baden-Wuerttemberg and North Rhine-Westphalia have appealed against the bans, leaving the federal administrative court in Leipzig to rule on their legality.
The Leipzig tribunal was expected to announce its decision at 1100 GMT after Judge Andreas Korbmacher delayed a verdict on Thursday amid speculation that the European Court of Justice could be consulted over the matter.
German auto safety group ADAC advised potential buyers of diesel cars to wait for the verdict, adding that how the government handled its consequences could influence decisions.
ADAC said carmakers should bear any costs of upgrading old diesel models.
Fiat Chrysler plans to cut diesel from its passenger cars by 2022, the Financial Times reported on Monday and Barclays forecast the share of diesel cars in overall vehicle production in Europe by 2025 could be cut to 27 percent from 52 percent in 2015.
Germany's government and the auto industry have been seeking to avert driving bans. Carmakers have pledged to overhaul software on 5.3 million diesel cars and are offering trade-in incentives for older models to help improve air quality.
But environmental groups have lobbied for cars with Euro-6 and Euro-5 emissions standards to get hardware updates.
The government has begun work on legal changes to permit driving bans on certain routes on an emergency basis, transport ministry documents seen by Reuters showed.
It is also considering making public transport free in cities suffering from poor air quality. This is backed by the opposition Green Party which wants 8 billion euros (R114-billion) of annual public diesel subsidies used to pay for it.
Annalena Baerbock, co-leader of the Greens, said she could foresee driving bans on some roads. "If that has to be the final step to ensure the right to clean air, we will, of course, help to implement it," she told public broadcaster Deutschlandfunk.
If diesel bans are allowed, cities will probably target models with older emission controls. Of the 15 million diesel cars on Germany's roads, only 2.7 million have the latest Euro-6 technology, data by the KBA motor vehicle watchdog showed.
Retrofits would be costly and an outright ban could slash resale prices, which are used to price leasing and finance contracts.
"Driving bans are antisocial and should be avoided," Matthias Wissmann, the outgoing head of Germany's VDA auto industry lobby told the Stuttgarter Zeitung on Monday.