Mercedes-Benz is spending €6 billion (S$9.2 billion) to make its combustion engines cleaner, yet that still will not be enough to meet ever-tightening emission standards.
Daimler AG's luxury unit, facing a deadline to cut carbon dioxide emissions by 2021 or face fines, will introduce new gasoline motors in the facelifted version of the top-of- the-line S-class sedan next year, after bringing revamped E-class diesel engines to market earlier this year, the Stuttgart, Germany-based company said in a statement.
While the overhaul reduces emissions and cuts fuel consumption, the improvements are only one step towards reaching the European Union's target.
Carmakers have little choice but to simultaneously invest in combustion engines and new electric car technology to lower carbon emissions. The EU is seeking efficiency improvements in the next five years that would be roughly double the gains made since 2010.
Mercedes needs to achieve a reduction in CO2 emissions in Europe across its model range, which includes Smart city cars, of another 19 per cent by 2021 compared with last year's 124 g/km.
These targets must be met even as diesel, which European carmakers turned to in an effort to decrease CO2 emissions, loses popularity in the wake of Volkswagen AG's cheating scandal. That puts pressure on carmakers to sell more battery-powered and hybrid vehicles.
Last month, Mercedes outlined plans for at least 10 all-electric cars by 2025. "We are deliberately not committing ourselves to one solitary form of drive system," Mr Thomas Weber, who heads development at Daimler, said.
Instead, the company is betting on the "coexistence of efficient and clean petrol engines, diesels, plug-in hybrids, battery and hydrogen drive systems."
However, buyers have been slow to warm up to electric models, with a dearth of charging stations and short battery lives hindering mass adoption.
Carmakers, including Mercedes, concede they will have to accept the uncertain payoff for the billions they are investing in cleaner technologies until the market matures, even as they foot the bill for overhauling their conventional engines.
It cost €1.9 billion to develop the upcoming generation of gasoline motors, comprising four-, six- and eight-cylinder versions, and about €1.5 billion to update the facilities where they are produced, Mr Bernhard Heil, Daimler's head of powertrain development said.
Overhauling the new series of diesel engines costs €2.6 billion, Daimler said in February.