Mercedes Bets €2.6 Billion on Diesels

Next month Daimler AG’s Mercedes-Benz Car’s unit will begin to roll out a new family of 4-cylinder diesels that are as much as 13% more fuel efficient and 80% cleaner than the units they replace. The €2.6 billion ($2.9 billion) program to develop the engines began four years ago.

Bernard Heil, who heads Daimler’s powertrain development, tells reporters the new engines will define the company’s diesel strategy for a decade—and help convince consumers of a “bright future” for such powerplants.

The first of the new diesels will debut in the redesigned E-Class midsize sedan. They will spread across the Mercedes model lineup through 2019.

But their awkwardly timed arrival faces headwinds caused by the regulatory furor over Volkswagen AG’s admission last September that it doctored 11 million of its diesel-powered cars to cheat emission regulations. The scandal has invigorated diesel opponents, who tout hybrids and electric powertrains as a cleaner option.

Heil acknowledges the ultimate appeal of electrification, which he describes as “key” to Daimler’s long-term powertrain strategy. But he says that further refining diesel technology offers a significantly better cost-benefit ratio, at least through the next 10 years.