European automakers are in catch 22 situation: whether to go for future technology or focus on immediate market.
The continent's carmakers have invested heavily in the technology but the sales of the diesel-powered cars have declined in Europe.
Electric cars, often seen as the future of the industry, are not the solution as their demand remained too small.
European auto manufacturers polled by The Wall Street Journal said demand for electric vehicles remained too small for them to replace diesel cars anytime soon.
While all the companies are investing in electric mobility, their immediate focus is on building more gasoline-powered cars and making diesel engines cleaner.
Since Volkswagen AG , the world's biggest auto maker by sales, was caught rigging diesel engines to dupe emissions tests two years ago, sales of diesel cars have declined rapidly.
"In diesel-country Germany, for example, threats by politicians to ban the cars from cities have scared off customers, and sales of new models plunged 14% in August from a year ago, according to Germany's federal motor vehicle agency. Sales of gasoline-powered cars rose 15%," said The Wall Street Journal report.
Research group LMC Automotive says diesel's market share in Europe, always the biggest market for the technology, could decline to around 45 percent this year from 53 percent before the scandal.
By comparison, electric cars or hybrids are expected to grab 4 percent of the European market this year, up from 2.3 percent before dieselgate.
The high price tag on electric cars, the scarcity and inconvenience of charging stations and the vehicles' inability to travel long distances have put off drivers, said The Wall Street Journal report.
Car makers, who dragged their feet for years on electric cars, also have few models in the market to lure consumers away from diesel.
"In many segments that are of interest to families, the products just aren't available," Steve Armstrong, CEO of Ford of Europe, told The Wall Street Journal on the sidelines of the Frankfurt Motor Show.
BMW has committed to offering 25 new electric cars and hybrids by 2025, and Daimler plans to offer an electric version of every model it makes by 2022.
While Peugeot is planning to launch seven plug-in hybrid vehicles and five fully electric cars between 2019 and 2021, it is scrambling now to double production in France of some gasoline engines "to meet growing demand," a spokesman said.
The bigger problem is shouldering the costs of developing electric car technology as regulators around the world continue to attack the conventional internal combustion engine.
France and the United Kingdom have announced plans to ban all gasoline and diesel powered vehicles after 2040. They would possibly exclude hybrids, but the aim is to promote all-electric vehicles.
In Germany, Volkswagen, BMW AG and Daimler AG's Mercedes-Benz are engaged in a frantic battle to defend diesel, which they say is necessary to meet the European Union's ambitious climate goals.
Diesel produces fewer greenhouse gas emissions than gasoline. The downside is that it produces toxic nitrogen oxide, which is linked to deaths and respiratory diseases.
The German manufacturers are spending millions on a voluntary recall to update the core engine software on some of the newest diesels to make them cleaner.
BMW expects to sell 1,00,000 electric cars and hybrids this year-out of a total of 2.4 million vehicles. By 2025, it plans to offer at least 12 pure electric vehicles and 13 hybrids, compared with nine electric cars and hybrids in 2017. (ANI)