STUTTGART — The star of Daimler shines bright over Stuttgart, literally. The giant illuminated emblem of its most famous car, the Mercedes, towers above the main train station, greeting visitors. It is visible for miles.

“As soon as you arrive,” said Manfred Niess, a retired teacher and local environmental activist, “you know who rules here.”

Now, though, Daimler and other automakers in Stuttgart are facing a startling new reality: It may soon be illegal for some to drive a Mercedes in this city, where the local soccer club plays in the Mercedes-Benz stadium.

Late last month, a German court ruled that Stuttgart, one of the country’s most polluted cities, can ban diesel cars from driving in downtown areas to improve air quality.

The ruling could ultimately lead to bans in a host of cities in Germany, a country with millions of diesel cars on the streets. Unlike in the United States, where diesel cars are the exception, in Germany roughly one in three passenger vehicles runs on diesel.

“It is the latest wake-up call for the German auto industry and German politicians,” said Christoph Bals, policy director of Germanwatch, an advocacy and research group for clean energy. “And this time it might actually force them to change their ways.”

The ruling highlights a strange bipolar quality of Germany when it comes to the environment: Famous for its meticulous recycling, its decision to abandon nuclear power and its subsidies for wind and solar energy, Germany has long had a reputation for being a green powerhouse, and it now draws roughly a third of its electricity production from renewable sources.

Chancellor Angela Merkel has been nicknamed the “climate chancellor.”

But Mrs Merkel also has lobbied in Brussels for softer emissions targets and has so far refused to set a date for exiting coal production. Germany’s carbon emissions have not declined in about a decade. Having reiterated a target to cut carbon emissions by 40 per cent by 2020 as recently as last summer, Mrs Merkel recently admitted it will in fact be missed by a wide margin.

On the question of diesel bans, she has long taken the side of the industry. “We will use all our power to prevent such bans,” she told Parliament before elections last September.

“She is the No. 1 lobbyist for the car industry,” said Jurgen Resch of Deutsche Umwelthilfe, the nonprofit environmental organisation that won the court ruling on Tuesday.

“In other countries the commerce minister might lobby for the car industry; in Germany it is the chancellor.”

The ruling came as the German car industry is still struggling to emerge from an ongoing global emissions scandal that forced Volkswagen to pay more than US$26 billion (S$34.4 billion) in fines and plead guilty to federal fraud and conspiracy charges in the United States.

The company admitted to manipulating pollution controls on vehicles so they could pass laboratory emissions tests, even as the cars continued to far exceed pollution standards on the road.

In few cities is the country’s environmental schizophrenia more stark than Stuttgart, capital of the wealthy state of Baden-Wrttemberg.

The Daimler star was visible on Tuesday, but so were brightly lit electronic signs across the city that declared a “particulate-matter alarm” and urged residents to leave their cars at home.

On days like this, a yellowish cloud hangs over Stuttgart. Regional courts here and in Dusseldorf, two of 19 cities where the environmental organisation is suing, had ruled that diesel bans were a viable way to bring down harmful and illegal levels of air pollution.

Diesel engines emit small particles and nitrogen dioxide that have been linked to cancer and more than 12,000 of premature deaths in Germany, experts say.

Local authorities appealed the rulings, but on Tuesday the Federal Administrative Court rejected those appeals.

Industry leaders were stunned. Daimler declined to comment, but other carmakers expressed bewilderment.

Volkswagen “is unable to comprehend” the ruling, a company statement said. “It threatens to produce a regulatory hodgepodge in Germany, which is unsettling for millions of motorists.”

The Mechanical Engineering Industry Association, whose members include car-parts makers and other companies in the automotive supply chain, said in a statement that “driving bans for diesel vehicles are the wrong way to solve a problem that arises in very particular locations under very particular conditions.”

This week, on the eve of the diesel ruling, as air pollution measurements reached twice the level permitted under European standards, the 406th protest took place.

Braving subzero temperatures, Mr Resch, the man who filed the driving ban lawsuit, addressed a small but noisy crowd.

“In Baden-Wrttemberg it’s not the people who decide,” he shouted to loud cheers, “it’s the car industry!”

The state’s transport minister, Winfried Hermann of the Greens, says he sympathises.

Whenever politicians demand action on automobile emissions, he said, a familiar pattern is repeated. “We say, clean up your technology, they say it is impossible,” he said.

Mr Hermann has been increasing suburban train services and bus lines to fight pollution and also wants to create a 7,000-km network of bike paths. But he knows it is an uphill battle.

“The people who make cars want to drive them, too,” he said. “It’s professional pride. To a certain extent, it is identity.”

Mr Niess, the retired teacher and environmental activist, has won three court cases against the city for not upholding air quality standards.

Once, he owned a diesel-powered car, having bought it after being told it had lower carbon emissions than a regular gas-powered car. “I bought it because they told me it was good for climate change,” he recalled.

“We have all been fooled by the car industry,” he said.

These days, Mr Niess only bikes in the city. He lives around the corner from Neckartor, long one of the most polluted areas in the country. Stuttgart exceeded safe pollution levels 45 days last year, down from 63 days the year before. But the European Union ceiling is 35 days.

More than a century ago, Daimler predicted that there would never be more than one million cars in the world. These days, that number passes Neckartor roughly every two weeks.

The mayor of Stuttgart, Fritz Kuhn, says the only way to reconcile the dependence on the car industry for jobs and export revenues is to build clean cars.

“Economic history is littered with examples where protecting today’s jobs destroys tomorrow’s,” he said. Stuttgart knows this first hand: A once-thriving and highly skilled watchmaking industry failed to keep up with modernization and largely died out. The only thing left are the handcrafted cuckoo clocks.

“If Germany wants to continue to dominate the car industry, it needs to become a champion of electric cars and sustainable mobility and autonomous cars,” Mr Kuhn said.

He drives an electric Smart. Made by Daimler. THE NEW YORK TIMES