The VW brand said it would offer buyers trading in an old diesel a discount on cars meeting the latest Euro 6 emissions standard, ranging from €2,000 on its up! compact cars to €10,000 euros for a Touareg SUV.
And the carmaker proposed an additional discount of between €1,000 and €2,380 for those buying more environmentally friendly hybrid, all-electric or natural-gas-powered vehicles.
VW was “acknowledging its share of responsibility for climate- and health-friendly mobility on German streets,” it said in a statement.
The move by the world's biggest automaker is the first such step by a German manufacturer since a government-industry summit last week over high levels of nitrogen oxides (NOx) emitted from diesel cars.
Following the diesel summit, VW, BMW, Daimler and Opel vowed to reduce emissions with free-of-charge software updates for newer vehicles and cash-for-clunkers schemes for those more than 10 years old.
The cash offers will be valid until the end of 2017, a VW spokesman told AFP, adding that the company is considering extending them beyond Germany to cover all of Europe.
VW's Audi, Porsche, Skoda, Seat and commercial vehicles subsidiaries all presented their own versions of the scheme Tuesday, with Porsche's applying to all of Europe immediately.
Car companies have been in the spotlight over high levels of harmful NOx emissions since Volkswagen admitted to cheating regulatory emissions tests on 11 million diesel vehicles worldwide in 2015.
Since then, suspicion has spread to other groups in Germany's vaunted carmaking sector, long favoured by politicians anxious to protect jobs and nurture economic growth.
Media reports that carmakers secretly colluded on technical specifications – including exhaust treatment technology at the heart of the diesel scandal – have further blackened the industry's name.
And it is scrambling to catch up to new competitors like US-based Tesla Motors, which is gearing up for production of its first mass-market all-electric car.