Daimler is working hard on a new model strategy that will allow it to meet the EU Commission target of 130g/km average CO2 emissions for all vehicles sold by 2012.

By then it plans average emissions of 136-138g/km, according to Wirtshaftswoche. This is very ambitious given that the end-2007 average CO2 emissions of Mercedes and Smart cars were around 180g/km.

The target will be achieved by using more efficient and smaller combustion engines, and offering more hybrids. The next generation S-Class, due in 2013, is expected to be sold only in hybrid form.

The new E-Class due out at this month’s Detroit motor show will be sold as a hybrid from 2011 but a planned hybrid M-Class reportedly has been axed. That model was going to get a hybrid drive train developed with GM and BMW but Daimler has decided not to proceed because it uses an outdated nickel metal hydride battery that weighs around 200kg.

Daimler is investing heavily in lithium-ion batteries and has a set up a joint venture to manufacture and possibly sell on to other automakers.