Mercedes-Benz is planning its own distinct line of electric vehicles, challenging BMW and Tesla Motors Inc. in a bet that alternative-fuel cars have the potential to become profitable.

Mercedes will add two electric sport utility vehicles and two sedans, according to two people familiar with the plan, who asked not to be named because the details haven’t been disclosed. Mercedes will create a new sub-brand for the cars, though a name hasn’t been chosen yet, one of the people said. Chief Executive Officer Dieter Zetsche said in June that the company planned to unveil an electric car at the Paris motor show in September.

Tesla’s success with the Model S sedan increased the pressure on other luxury-car makers, even as the U.S. company struggles with missed financial goals and delays in new models. Germany’s luxury-market leaders need to show they too can make electric innovations that capture the imagination of buyers, and they’re facing emissions regulations that require low-pollution vehicles. Yet customers in Mercedes’s home market of Germany, in particular, have been skeptical of limited driving range, long charging times, comparatively high prices and at times quirky designs.