Abstract The environmental regulations on vessels being strengthened by the International Maritime Organization has led to a steady growth in the eco-friendly ship market. Related research is being actively conducted, including many studies on the maintenance and predictive maintenance of propulsion systems (including electric motors and rotating bodies) in electric propulsion vessels. The present study intends to enhance the artificial intelligence (AI)-based failure-diagnosis rate for electric propulsion vessel propulsion systems. To verify the proposed AI-based failure diagnosis algorithm for electric motors, this study utilized the vibration data of mechanical equipment (electric motors) in an urban railway station. Securing and preprocessing high-quality data is crucial for improving the failure-diagnosis rate, in addition to the performance of the diagnostic algorithm. However, the conventional wavelet transform method, which is generally used for machine signal processing, has a disadvantage of data loss when the data distribution is abnormal or skewed. This study, to overcome this shortcoming, proposes an AI-based denoising auto encoder (DAE) method that can remove noise while maintaining data characteristics for signal processing of mechanical equipment. This study preprocessed vibration data by using the DAE method, and extracted significant features from the data through the feature extraction method. The extracted features were utilized to train the one-class support vector machine model and to allow the model to diagnose the failure. Finally, the F-1 score was calculated by using the failure diagnosis results, and the most meaningful feature extraction method was determined for the vibration data. In addition, this study compared and evaluated the preprocessing performance based on the DAE and the wavelet transform methods.