The Phaeton will continue to be the VW brand's flagship model (Photo: VW)

Volkswagen brand will make big cuts in investments and change its diesel strategy, following revelations that it has for years tweaked engine software to show better diesel emissions during official tests.

The German passenger car brand said it will reduce annual investment by 1 billion euros a year. VW will, henceforth, only sell diesel drives that use SCR (selective catalytic reduction) and AdBlue technologies in Europe and North America. The emissions manipulations resulted from the company's desire to meet regulatory requirements without having to resort to these technologies.

VW also announced that it will build an electric version of its top-of-the-line Phaeton model and is planning a new modular electric toolkit for its entire  vehicle range.