* Cities considering diesel bans after court cases
* Sales of diesel cars fell 9 percent in June - KBA
* VDA hopes deal will help stop falling sales of diesel cars
* VDA says diesel needed to cut CO2 emissions
* Industry offers software update for 3 mln diesels (Releads following news conference)
BERLIN, July 4 (Reuters) - German carmakers hope a plan under discussion with the government to reduce pollution from older diesel-powered vehicles will avert planned bans in German cities that are deterring consumers from buying diesel cars.
"I believe that when there is a clear political signal and willingness to act by manufacturers, I believe we can avoid bans," VDA head Matthias Wissmann told a news conference on Tuesday.
The German government, which has defended the car industry since the Volkswagen emissions scandal, is facing mounting pressure ahead of national elections on Sept. 24 to reduce pollution from diesel cars or see courts force cities to impose driving bans.
The government last week announced plans to work with vehicle makers and regional governments to find ways to reduce emissions, set to culminate in a meeting on Aug. 2.
Wissmann said he expected the meeting would help lift the uncertainty that has been weighing on diesel sales in Germany due to the threat of driving bans, noting that more than 40 percent of cars sold in Germany are still diesels.
Last month new car sales in Germany fell 3.5 percent to 327,693 vehicles, the KBA federal vehicle transport authority reported on Tuesday, dragged down by a 9 percent drop in sales of diesel cars while sales of gasoline-powered vehicles rose almost 12 percent.
Wissmann said he was worried about diesel's market share falling because modern diesel engines emit 15 percent less carbon dioxide than gasoline-powered cars and can therefore help to reduce carbon emissions. "We will need diesel for a long time to reach our CO2 goals," he said.
Wissmann said a deal struck last week by the regional government in Bavaria to cut pollution corresponded with the common position of the VDA, which represents suppliers and carmakers including Volkswagen, Daimler and BMW, suggesting it will form a basis for a national deal with the whole industry.
Under the Bavarian deal, BMW and Audi agreed to engine management software updates to cut nitrogen oxide emissions (NOx) for at least half of their diesel car fleets which only meet older Euro-5 emission standards.
Wissmann said all German auto makers would offer updates for about half of the 6 million Euro-5 diesel cars on the roads that should cut their NOx emissions by about 25 percent.
He said the industry would take on the development costs for the software and said an agreement on who should cover servicing costs should be reached by Aug. 2.
The industry association said it expected German domestic car production and exports to fall 2 percent each this year to 5.6 million and 4.3 million autos respectively.
Year-to-date registrations in Europe's largest auto market were still up 3 percent on year-earlier levels at 1.79 million vehicles, VDA said, confirming a Reuters story. (Reporting by Emma Thomasson and Andreas Cremer; Editing by Greg Mahlich)