Germany's government and carmakers are moving closer to a deal on measures to tackle pollution from older diesel vehicles, sources familiar with the matter told Reuters, ahead of a government summit on the issue on Friday.
Volkswagen, Daimler and BMW could offer owners of older vehicles that meet the Euro 4 emissions standard, as well as owners of some Euro 5 standard models, to trade in their cars for new ones, the sources said.
The companies may also pay part of the costs for hardware retrofits, they said.
"The matter is not yet completely sorted out, but this is where it is going," one of the sources said.
Daimler, Volkswagen and BMW declined to comment.
German Chancellor Angela Merkel has set an end-September deadline to find a way to tackle pollution from diesel vehicles, and avert more driving bans in cities that are being forced by courts to take action to improve air quality.
Merkel and the ministers of transport, environment, economy and finance are due to discuss the matter on Friday, ahead of a coalition committee meeting on Monday that is to sign off on any deal.
An agreement has been delayed as ministers argue over the details, such as whether the plan should include costly hardware retrofits, incentives to trade in older cars for cleaner ones, or whether automakers should be forced to buy back older cars.
Any solution is likely to cost several billion euros, and Transport Minister Andreas Scheuer said this week that car owners and taxpayers should not foot the bill.
Concessions by carmakers could make a deal more likely.
"We have made certain assurances about things that we can go along with", a source at Volkswagen told Reuters.
Earlier on Friday, the FAZ daily newspaper reported that carmakers may offer owners of vehicles affected by driving bans vouchers for hardware upgrades by suppliers such as Baumot or HJS, without citing sources.
FAZ said the scheme would apply to some Euro 5 diesel vehicles and would cover 80 percent of the cost of upgrades, up to a maximum level of 3,000 euros ($3,500) per vehicle.
Older vehicles meeting the Euro 4 standard would not be covered, but their owners would be offered incentives to swap their vehicles for new ones, it said.
