The objective of this work is to develop a numerical simulation model of spark ignited (SI) engine combustion and thereby to investigate the possibility of reducing heat losses and improving thermal efficiency by applying a low thermal conductivity and specific heat material, so-called heat insulation coating, to the combustion chamber wall surface. A reduction in heat loss is very important for improving SI engine thermal efficiency. However, reducing heat losses tends to increase combustion chamber wall temperatures, resulting in the onset of knock in SI engines. Thus, the numerical model made it possible to investigate the interaction of the heat losses and knock occurrence and to optimize spark ignition timing to achieve higher efficiency. Part 2 of this work deals with the investigations on the effects of heat insulation coatings applied to the combustion chamber wall surfaces on heat losses, knock occurrence and thermal efficiency.To reduce engine heat losses and improve the thermal efficiency, the heat insulation coating was applied to the combustion chamber wall surfaces. Specifically, wall surface temperatures, heat losses and thermal efficiency corresponding to the thickness of the material and the compression ratios were investigated by using the numerical model described in Part 1. In case of the combustion chamber wall surface entirely coated with the material at low load, applying the heat insulation material can make the MBT (Minimum advance for best torque) earlier, resulting in highly-increased thermal efficiency. The results imply that low thermal conductivity and low specific heat materials should be coated at proper locations with an optimized thickness to improve overall thermal efficiency.