The warning came even before last week's plans for updates to 9 million European diesel cars by German luxury makers Audi and Mercedes-Benz were announced.
In a letter sent to the transport ministers of European Union countries, EU industry commissioner Elzbieta Bienkowska warned that proposed bans on diesel cars in European cities could backfire.
The focus in the short term should be on the plans to bring diesels' emissions of nitrogen oxides within EU regulatory limits, she recommended.
DON'T MISS: Audi, Mercedes now updating European diesels for emissions; more to come?
Banning diesel cars within the boundaries of cities, she warned, could bring about a rapid collapse in the countries' markets for vehicles with diesel engines.
That, in turn, would deprive carmakers of the funds needed to invest in development of zero-emission vehicles. The letter, dated July 17, was first reported on by Reuters, whose reporter was shown a copy of it.
Even Munich, hometown of BMW, is considering such a ban, following actions by mayors and local authorities in various European cities.
2015 Mercedes-Benz GLK Class (GLK250 BlueTEC)
"While I am convinced that we should rapidly head for zero-emission vehicles in Europe," Bienkowska wrote, "policymakers and industry cannot have an interest in a rapid collapse of the diesel market in Europe as a result of local driving bans."
It should be noted that the work by the German makers to modify their diesel models is intended to bring them into actual compliance with NOx limits they had supposedly met when they were first certified.
In the letter, Bienkowska expressed particular concern that the most recent violations by VW Group brands Audi and Porsche were not discovered by the German transport ministry.
READ THIS: EU investigating diesel collusion among Audi, BMW, Mercedes, Porsche, VW: report
Instead, they were uncovered by prosecutors in a long and continuing investigation into violations of German civil and criminal law by VW Group engineers and executives participating in rigging emissions tests for the company's diesel vehicles.
While emissions compliance is now monitored by each country individually, Bienkowska raised the possibility of an EU-wide testing authority if individual transport ministries were not able to enforce EU emission limits.
She also advocated for diesel cars with the highest NOx emissions to be taken off the road, but said that process should be conducted by the automakers themselves on a voluntary basis.
2014 BMW 328d xDrive Sports Wagon
The letter was widely seen as a win for Europe's auto-industry lobbyists.
As Reuters wrote, "Experts who have seen the letter to ministers say the commissioner appeared to be bowing to carmakers' demands."
CHECK OUT: Audi traded diesel-emission gear for profitable high-end audio systems: report
The powerful German auto industry has "likely argued that castigating or banning diesel would harm the industry's earnings and employees, harm efforts to reduce carbon dioxide and harm owners of current vehicles," wrote analyst Max Warburton from Sanford C. Bernstein.
Every major European auto company now plans to introduce multiple long-range battery-electric vehicles, with the first arriving from Audi and Jaguar next year.
[hat tip: John C. Briggs]