VW also said it will be revamping its diesel vehicles to include traditional emissions control systems.
The U.S. Environmental Protection Agency and other European environmental agencies charged VW with using embedded software to thwart emissions standards by turning on emission control systems during tests and turning them off after.
More than 11 million vehicles worldwide had the emissions test "defeat device" installed. It allowed the vehicles to produce up to 40 times the allowable nitrogen oxide (NOx) levels in every day use.
One analysis pegged the additional NOx pollution that VW diesels spewed out at nearly one million tons, or the equivalent of adding another 437 million cars to the world's roadways
Volkswagen's CEO stepped down in the aftermath of the emissions scandal.
The company this week announced a number changes it's making to its line of vehicles. But first, executives said they'll be revamping their flagship Phaeton sedan as an all-electric vehicle.
"The future generation of the Phaeton will once again be the flagship for the brand's profile over the next decade," the company said. "The specification features a pure electric drive with long-distance capability, connectivity and next-generation assistance systems as well as an emotional design."
VW will also focus on plug-in hybrids that it said will have an even greater range than today's cars with a radius of up to 180 miles using a 48-volt power supply system (mild hybrid) as well as ever more efficient diesel, petrol and CNG concepts.
VW also said it'll be installing "top-of-the-line" environmental protection systems in new diesel cars, which will affect vehicle prices significantly.
VW's new CEO, Herbert Diess, said the carmaker is repositioning itself "for the future."
"We are becoming more efficient, we are giving our product range and our core technologies a new focus, and we are creating room for forward-looking technologies by speeding up the efficiency program," Diess stated in a statement.
Around 2009, the U.S. National Low Emission Vehicle program set in place more strict requirements on NOx emissions. To meet the new standards, diesel manufacturers created a system to inject a special urea fluid known as AdBlue in the exhaust stream that catalyzes the NOx fumes. While the fluid injection system worked to reduce NOx emissions, it also added weight and cost, and pushes up the ownership costs as drivers have to keep refilling the fluid.
"VW claimed to have figured out how to meet the standards without needing AdBlue," said Kirk Wennerstrom, marketing director of the Greenwich Concours d'Elegance, a vintage and classic car show in Greenwich, Conn. "Everyone else must've been scratching their heads trying to figure out how. I'm certain more than a few competitors have reverse-engineered VW cars to figure it out."
While VW did initially pursue an "AdBlue" solution, it soon figured out it would've cost about $300 more per vehicle to add it, Wennerstrom said. "I suspect the truth about that cost is a bit more nuanced. The cost to VW may have been $300, but the cost to the consumer would've been a few thousand dollars," he added.
What VW wasn't telling anyone is that it hadn't really figured out a way to reduce NOx without AdBlue, but instead embedded software to turn on emissions control systems only when a vehicle was being tested.
The company said this week it is now going to switch all diesels over to "Selective Catalytic Reduction" systems that use AdBlue technology in Europe and North America "as soon as possible.
"Diesel vehicles will only be equipped with exhaust emissions systems that use the best environmental technology," VW said.