One manufacturer has announced plans to increase the average fuel efficiency of its sport utility vehicles by 25 percent over the next five years, amounting to roughly five miles per gallon, and representing the first significant change in the fuel efficiency of any class of passenger vehicle in almost two decades.

(a) amounting to roughly five miles per gallon, and representing
(b) amounting to roughly five miles per gallon, and it would represent
(c) an increase that would amount to roughly five miles per gallon and it would represent
(d) an increase that would amount to roughly five miles per gallon and would represent
(e) which is an increase amounting to roughly five miles per gallon, representing

Was able to eliminate A and B because "amounting" is present tense while the company has only announced to increase fuel efficiency.
Eliminated E because "which" refers to years

Could not decide between C and D. Please explain

Actually, "amounting" is not a tensed verb at all. It's a present participle -- a grammatical object formed from a verb but that can take on a number of grammatical functions. Here, it's being used to start a modifying phrase. The essential question: what is it modifying?

In A and B, a comma followed by a present participle "...years, amounting to..." suggests one of two scenarios: either the phrase is an adverbial modifier that modifies the preceding verb "has announced" OR it's an adverbial modifier that modifies the entire preceding clause, "One manufacturer... five years". The trouble with A and B, therefore, is that neither possibility makes any sense. "amounting to..." doesn't modify "has announced" and it also doesn't modify the entire clause.

E uses the relative pronoun "which." As written, its antecedent would be "years" and that makes no sense in the sentence.

C and D fix the problem by introducing "an increase." Now, "amounting to..." is a noun modifier that modifies "an increase." Eliminate A, B, and E.

Between C and D, eliminate C because it introduces an ambiguous pronoun "it." I'd go for D.