Mercedes is launching its E300 diesel hybrid in the UK with the lowest fuel consumption and CO2 figures ever seen in the executive segment.

The saloon version offers 65.7 mpg on the combined cycle and emits 109g/km of CO2 (when fitted with 16-inch wheels, rather than the standard 17-inch rims). However, these economy figures are not sacrificed by reducing performance, with zero to 62 mph in 7.5 seconds and a maximum speed of 150 mph.

Mechanically, the E300 hybrid has a 27 bhp electric motor working with the 201 bhp diesel engine, giving a total power output of 228 bhp and 500 NM of torque. The interesting thing about Mercedes' approach is that is using a very small, but powerful lithium-ion battery pack to boost performance and economy. The whole hybrid installation, including battery, motor and control system adds only 100 kg to the weight of the car and takes up no interior or luggage space. The motor is integrated within the transmission, which makes the gearbox just 6.5 cm longer, while the extra battery fits under the bonnet.

The small battery of just 0.8 Kw/hr gives an electric-only range of 1 km (0.6 miles), but does allow the car to "sail" when the driver backs off the accelerator when cruising. It is like an automatic coasting function, but with the battery pack giving full control of the car's systems.

The price of all this technology is £39,645 for the Saloon and £41,435 for the Estate. That is approximately the same as both the E350 diesel and E350 petrol. That seems a reasonable position: the E350 models have smoother six-cylinder engines, but higher fuel consumption. For business drivers (which means most E Class buyers), the lower Benefit-in-Kind taxes will make the E300 hybrid a tempting proposition.