LEIPZIG: A top German court on Tuesday ruled that cities can impose diesel driving bans to combat air pollution, a landmark decision that plunges millions of car owners into uncertainty.

The Federal Administrative Court in Leipzig found that local authorities can legally ban older, dirty diesels from certain zones as part of their efforts to improve air quality -- a drastic move that could reshape inner-city travel and upend the auto industry.

The court did not impose any bans itself, leaving that up to city and municipal authorities.

The judges did however urge them to "exercise proportionality" and said any curbs should be introduced gradually and allow for certain exemptions.

While the legal battle centred around the smog-clogged cities of Stuttgart and Duesseldorf, it could have far-reaching repercussions in Europe's biggest economy.

The ruling is a major blow to the government and the nation's mighty automakers who have long opposed driving bans, fearing outrage from diesel owners whose vehicles could plummet in value.

Eager to reassure them, the government was at pains to stress nothing would change right away and that bans were not inevitable.

"Driving bans can be avoided, and my goal is and will remain that they do not come into force," said Environment Minister Barbara Hendricks.

Chancelor Angela Merkel also weighed in, saying the ruling concerned only "individual cities".

"It's really not about the entire country and all car owners," she said.

But the outcome marks a huge victory for the environmentalist group Deutsche Umwelthilfe (DUH), which sued Stuttgart and Duesseldorf to force them to take action against the toxic nitrogen oxides and fine particles emitted by older diesel engines.

- 'Great day for clean air' -

Lower-level judges had already backed their demand for driving bans, but the states of Baden-Wuerttemberg and North Rhine-Westphalia appealed, arguing such curbs should be decided at the federal level.

Judges at the nation's top administrative court again sided with the environmental campaigners.

"It's a great day for clean air in Germany," said DUH chief Juergen Resch.

Almost immediately after the verdict, the port city of Hamburg became the first to announce plans for a diesel driving ban on two busy roads from late April, with exceptions for residents, ambulances, city services and delivery vehicles.

The head of Germany's VDA auto industry federation warned however against "a patchwork" of local measures that would confuse drivers and urged the government to take the lead in drawing up uniform regulations.

Analysts at EY consultancy said only the latest diesel models that adhere to the strictest Euro 6 standards would escape the potential driving restrictions, leaving some 10 million older diesels eligible for bans.

- Mounting pressure -

Concerns over the harmful effects of diesel have soared since Volkswagen admitted in 2015 to installing cheating devices in millions of cars that allowed them to secretly spew far more nitrogen oxide (NOx) than legally allowed, and other carmakers soon came under suspicion too.

The poisonous gases have been linked to respiratory illnesses and heart problems, leading to thousands of premature deaths each year.

Some 70 German cities including Munich, Stuttgart and Cologne recorded average nitrogen dioxide levels above EU thresholds in 2017, according to the Federal Environment Agency.

Industry giants such as Volkswagen, BMW and Daimler have responded to "dieselgate" by offering software upgrades and trade-ins for newer and cleaner models, but have resisted costly hardware fixes.

DUH chief Resch however said Tuesday's ruling could finally put real pressure on automakers to retrofit older engines with properly functioning emissions controls.

"I now expect the auto industry to deliver," he said.

Markus Lewe, president of the Association of German Cities, urged Berlin to do more to push the auto industry to clean up its act.

"Cities don't want driving bans," he said.

The government, long accused of going too easy on an industry that employs some 800,000 people, last year offered to create a billion-euro fund, partly paid for by industry, to improve public transport and upgrade fleets to electric buses.

Such measures are intended at least as much to placate local officials as well as those in Brussels -- where Germany and a slew of other EU member states risk legal action after sailing past a deadline to reduce air pollution.