The illustrated 2.5 cc plain bearing diesel is an example of the work of Hans Drenkhahn of East Berlin (as it was during the Iron Curtain era), who established the Dremo marque in 1959. Drenkhahn had previously designed the Comet and Krämer 2.5 cc diesels which were made by others. This particular engine seems to be one of Drenkhahn's earlier productions under the Dremo name, probably dating from 1959.
The engine is very significant in that it utilizes the then-original style of bypass and transfer porting first introduced in late 1956 by Enya in their D15-I model and later imitated with some improvements by MVVS with their 25D-1958 design. It seems likely that the design of this variant of the Dremo 2.5 cc diesel was inspired by that of the MVVS 25-1958 from neighbouring Czechoslovakia (as the Czech Republic was then).
Drenkhahn was an inveterate experimenter, making many of his designs in very small numbers before identifying design improvements that required the production of an all-new variant. This appears to be such a design - the extreme rarity of surviving examples suggests that very few were made. The replacement model seems to have been created by turning the cylinder though 90 degrees to bring the exhaust to the rear.
Drenkhahn was a talented and prolific manufacturer who deserves to be far better known. A full review of this engine together with an appreciation of Drenkhahn's life and work may be found elsewhere on this website.