Securing the objectives for future high-efficiency low-carbon-dioxide vehicles is a key target for automotive manufacturers. This paper considers a high-durability two-stroke cycle engine in terms of performance and computational modelling of the emissions characteristics for automotive range-extender or hybrid electric vehicle power plant application. The engine uses novel segregated pump charging via the application of stepped pistons, and a comparison of the engine characteristics is made with those of a comparable four-stroke cycle engine of similar expected power output (more than 60 kW/l). In the interests of cost minimisation, both engines are limited to parallel two-cylinder in-line configurations with the intention of still being able to achieve acceptably low noise, vibration and harshness characteristics. In order to achieve low engine exhaust emissions, computational modelling of direct injection is considered for the stepped-piston engine. A significant reduction in the nitrogen oxide emissions of between 31% and 55% is observed.