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Mercedes will show off an electric SUV concept car at the Paris motor show in SeptemberReuters

Mercedes is to produce a new range of electric cars. Entirely separate to the current lineup and appearing under a different brand name, the initial range will include two sports utility vehicles and two saloon cars.

The four-car lineup is set to compete directly with Tesla, which currently offers a saloon and SUV, with plans to introduce one more of each by the end of the decade.

Mercedes chief executive Dieter Zetsche has previously said the company will reveal an electric car at the Paris motor show in September.

Similar to BMW's i range, Mercedes will offer its new cars under a separate sub-brand, an unnamed insider revealed to Bloomberg. A name for the sub-brand has not been chosen yet, the person said.

Mercedes is no stranger to electric cars. It produced a very small number of the SLS Electric Drive in 2014, but with a range of just 155 miles and a price of over £300,000, it represented a proof of concept rather than a viable business model.

The new electric sub-brand is expected to stick closely to Mercedes' luxury roots, but will put the technology within reach of the company's current customers, rather than act as a technological showpiece for the super-rich.

The vehicles will be all-new and built from the ground up to be electric, not regular cars fitted with batteries and a motor, as is the case with the poor-selling electric versions of the Smart and B-Class. A person familiar with the plans said Mercedes will build the electric cars at its Bremen, Germany factory, where from 2017 a hydrogen-electric hybrid version of the GLC sports utility vehicle will also be manufactured.

Entering the electric car market is no mean feat, even for a company as large as Mercedes. It must talk its native German market around widespread skepticism towards the long charge times, limited range and high price of current electric cars.