"We are spending the money on engine development and production capacities," Bernhard Heil, vice president of product group powertrain at Daimler AG said.

Part of the 2.6 billion euros has already been invested. Daimler will introduce selective catalytic reduction (SCR) on its smaller front wheel drive cars by 2019, replacing current nitrous oxide trap exhaust systems, the company said.

Currently only large Mercedes-Benz cars use SCR systems, which require adblue injection systems.

(Reporting by Edward Taylor; Editing by Arno Schuetze)