In 2015 VW was caught by regulators using manipulated engine management software to mask excessive pollution levels in its diesel cars, sparking a raft of prosecutions and lawsuits.

The offer comes despite a breakdown in talks with German consumer association VZBV, which had been in negotiations with VW about reaching a settlement deal .

"The failure of settlement talks with Consumer Association VZBV should not come at the expense of customers," VW said in a statement, adding that all customers who had registered for compensation with VZBV would be eligible for the settlement.

VW said it had declined to reach a settlement with VZBV, blaming excessive demands for 50 million euros in fees by lawyers representing the consumer organisations.

VZBV said talks had failed because the carmaker had not guaranteed a system of redress which was adequate for consumers, adding it would continue to press for a settlement on VZBV terms through German courts.

(Reporting by Riham Alkousaa, Ilona Wissenbach and Klaus Lauer; writing by Edward Taylor; Editing by Kirsten Donovan)