The announcement - which will be formally made at this month's ILA show in Berlin - comes just three weeks after Thielert Aircraft Engines filed for insolvency, but Diamond had been working on the project long before the German engine builder's financial troubles became widely known and hinted at its plans during the past year.
Diamond hopes the 170hp (125kW) Austro engine will be certificated by July and aims to introduce it on all new-build DA42s and diesel-powered DA40s, as well as its new, larger DA50, from September or October.
From the first quarter of next year, it will offer a retrofit package on the around 500 DA42s and 360 diesel-powered DA40s in service (roughly 1,300 DA40s have been produced with Lycoming gasoline engines).
The engine will be offered to other aircraft manufacturers, according to Diamond owner and chief executive Christian Dries. "We have already had a lot of interest," he says. One candidate could be Cessna, which had planned to offer a Thielert engine on its 172 Skyhawk from the middle of this year. TAE also supplies the engines for the US Army's General Atomics Warrior unmanned air vehicles.
TAE's insolvency is the result of a cashflow crisis following an investigation into its financial accounts that led to the sacking of founder Frank Thielert as chief executive three weeks ago.
According to the insolvency administrator, the company, based in Lichtenstein, eastern Germany, is continuing to manufacture engines as negotiations with suppliers and potential investors take place, with its 300 staff guaranteed pay until the end of June.