Das Auto meiner Tante fährt mit Diesel, unseres aber mit Benzin.

Because meiner Tante shows possession: my aunt’s car / the car of my aunt.

Here meiner Tante is in the genitive. With feminine nouns, the form meiner can look the same in both dative and genitive, but here its job is genitive because it answers whose car?

• das Auto meiner Tante = my aunt’s car
• not das Auto meine Tante, which would be ungrammatical

Yes. Das Auto von meiner Tante is perfectly understandable and very common in everyday speech.

The difference is mostly style:

• das Auto meiner Tante = more compact, a bit more formal or written
• das Auto von meiner Tante = more conversational

Both are correct.

Unseres means ours or more literally our one / our car.

It stands in for the full noun phrase unser Auto. German often uses a possessive pronoun by itself when the noun is already clear from context.

So:

• Das Auto meiner Tante ...
• unseres ...

means:

• my aunt’s car ...
• ours / our car ...

Because the missing noun is Auto, and Auto is neuter: das Auto.

When a possessive word like unser- stands alone, it has to show the gender, number, and case of the omitted noun.

Here the omitted noun is:

• Auto
• neuter
• singular
• the subject of the clause

So the correct form is unseres.

Compare:

• das Auto → unseres
• der Wagen → unserer
• die Tasche → unsere

It is nominative, because it is the subject of the understood verb fährt.

The full sentence would be:

Das Auto meiner Tante fährt mit Diesel, unseres aber fährt mit Benzin.

In that second clause, unseres is the thing doing the fährt, so it is the subject.

A small complication: for a neuter singular form like unseres, nominative and accusative look the same. But in this sentence, the function is nominative.

Because German often leaves out repeated words when they are obvious from context. This is called ellipsis.

The full version would be:

Das Auto meiner Tante fährt mit Diesel, unseres aber fährt mit Benzin.

But repeating fährt is unnecessary, so German naturally shortens it to:

Das Auto meiner Tante fährt mit Diesel, unseres aber mit Benzin.

English does this too in some cases, as in:

• My aunt’s car runs on diesel, ours on gasoline.

Aber means but / however / by contrast.

Here it highlights the contrast:

• my aunt’s car uses diesel
• ours, by contrast, uses gasoline

Its position may feel unusual to an English speaker. In German, words like aber can appear after the first element of the clause for emphasis or contrast:

• Unseres aber fährt mit Benzin.

That is why the shortened version becomes:

• unseres aber mit Benzin

You could also say:

• ..., aber unseres fährt mit Benzin.

That version puts aber at the start of the second clause. Both are possible; the original version gives unseres a little more contrastive emphasis.

The comma separates the two contrasting parts of the sentence.

The sentence really contains two clauses:

• Das Auto meiner Tante fährt mit Diesel
• unseres aber [fährt] mit Benzin

Since the second clause is shortened, the comma helps mark the break clearly.

Because Diesel and Benzin are being used as fuel names in a general sense, like mass nouns.

German often leaves out the article with materials and substances in this kind of expression:

• mit Diesel
• mit Benzin
• mit Wasser
• aus Holz

Also, mit normally takes the dative, but when there is no article, you often do not see any visible case ending on the noun itself.

So mit Diesel and mit Benzin are normal and idiomatic.

Yes, this is natural German.

In German, fahren can be used with a vehicle as the subject. So a car can fahren in the sense of go / run / operate.

That means:

• Das Auto fährt mit Diesel = The car runs on diesel
• Das Auto fährt mit Benzin = The car runs on gasoline

So even though English would usually say runs on, German can use fährt mit here.

Because they are nouns, and all nouns are capitalized in German.

So:

• Diesel
• Benzin
• Auto
• Tante

are all capitalized.

But das is only capitalized here because it is the first word of the sentence. In the middle of a sentence, the article would be lowercase:

• Ich sehe das Auto.