A BMW.

BMW AG (BMWYY) shares pared earlier losses and rose firmly in late Wednesday trading after the automaker said it would offer cash incentives to customers trading in older diesel cars for newer clean-emissions vehicles. 

The move follows an agreement earlier Wednesday between the Germany auto industry's main lobby group, the VDA, and government officials which agreed to update the software on 5 million diesel-powered cars in an effort curb emissions and avoid an outright ban on production and sales. The VDA said all of the country's major manufactures will participate in the upgrade.

"The BMW Group supports the comprehensive measures of the "National Diesel Forum" aimed at further improving air quality in cities," the company said in a statement on its website. "In addition to these measures, the BMW Group is preparing an EU-wide fleet-renewal campaign which will have a positive impact on resources, the climate and the environment as a whole."

"Initially until 31 December 2017, owners of diesel vehicles that meet Euro 4 standards or less will be granted an environment bonus of up to €2,000 ($2,365) when they trade in their vehicle and purchase a new BMW or MINI," the statement added. The new vehicle must be "either a BMW i3, a plug-in hybrid or a Euro 6-standard vehicle with CO2 emissions of up to 130 grams per kilometer (in the NEDC)", BMW said.

BMW shares were marked 0.73% higher at €79.40 each my mid-afternoon in Frankfurt, reversing earlier losses and rising to near the top of the DAX performance index. Shares in domestic rivals Daimler AG (DDAIY) and Volkswagen AG (VLKAY) were also trading higher in the afternoon session, rising 0.7% and 0.72% respectively.

The BMW incentive offer comes as Germany automakers face increasing pressure from regulators over both diesel emissions and accusations of a decades-long program of industry collusion.

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