Segment: Executive Price: £43,000-£46,000 (TBC) Fuel: 67.3mpg CO2: 109g/km

The executive segment will become crowded with hybrids over the next 12 months. It’s an area traditionally dominated by Lexus and, more recently in the UK, Infiniti. But now the German luxury brands are coming in with new models there’s plenty of choice entering the UK market.

Traditionally, though, the business case for hybrids has been harder to understand. Lexus and Infiniti set out their stalls based on global demands, particularly for regions such as the United States and Japan where a focus on air quality has made hybrids the vehicles of choice. In Europe, where CO2 is the tax yardstick, big petrol engines with expensive hybrids will usually come second best to an efficient diesel engine, as the latter makes financial sense in this class.

Mercedes-Benz may have been the last to announce its entry into the hybrid arena, but it’s taken the cleverest approach to doing so. Under the bonnet of the E-Class is a compact, modular hybrid system which requires no body modifications to fit, can be scaled up to give more power, is adaptable to work with plug-in hybrid technology and most importantly fits both diesel and petrol engines.

As a result, the E-Class Hybrid is available as a saloon and estate, and comes with two different powertrains. The E400 Hybrid is powered by a petrol engine and aimed at traditional hybrid-loving markets. But Europe will get the E300 BlueTEC Hybrid, with  a 202bhp 2.2-litre diesel engine, a unique proposition in its class and making this the most efficient executive car on sale, at 67.3mpg with CO2 emissions of 109g/km.

The tax advantages go even further in the UK. Not only does it offer the lowest emissions in its segment, for now, but until April 2016 it avoids the 3% diesel BiK surcharge applied to most low-CO2 models, which should cover up some of the additional price.

Keeping the battery small and reducing the need for body modifications means it’s also reasonably cost-effective to produce. UK prices haven’t been announced yet, but in Germany the hybrid system adds around £3,000 to the price compared to an equivalent E-Class. In theory, this should place it between an E300 CDI and E350 CDI when it goes on sale later this year.

Hybrid technology fits the executive class perfectly. At startup, the E-Class whispers along using the compact motor sandwiched into a 65mm space between the engine and transmission, and it can undertake most low-speed manoeuvring and low-load acceleration on electricity. In heavy traffic, it works a little like a stop/start system, albeit one which shuts the engine off more regularly and before the car has come to a full stop.

The system comes into its own at high speeds, offering smooth, brisk acceleration assisted by the electric motor. It’s also surprisingly easy to put the car into its ”sailing” mode by lifting off the throttle slightly, deactivating and decoupling the engine for silent electric-powered motorway cruising at up to 100mph. The only thing that’s noticeable from behind the wheel is the increase in resistance as the motor switches to become a generator, which feels like someone brushing the brake pedal very lightly.

So from a position where BMW and Audi have been able to offer lower-carbon alternatives to Mercedes-Benz’s luxurious executive carrier, the three-pointed star has come back to steal a lead over its rivals with this impeccably well-thought out hybrid. If UK pricing is as well considered, this could be the first hybrid executive car to make real financial sense for fleets.

Verdict:

Mercedes-Benz has engineered its modular hybrid system so well that it’s surprising none of its rivals offer something similar. This will offer considerably lower ownership costs compared to its closest hybrid rivals, but the carmaker needs to ensure pricing doesn’t offset its tax advantages too heavily.