The Mail Merge Add-on uses the new Gmail API to create and save draft messages Gmail programmatically, something which cannot be done using the standard GmailApp or MailApp service of Google Apps Script. The Gmail API can create draft messages in rich-text which you can generate using the HTML Mail app.

You’ll have to enable the Gmail API under the Google Services console for this code to work.

// Credit: https://gist.github.com/oshliaer/8db2131bf7357247bc2b

function createHTMLDraftInGmail() {
  var forScope = GmailApp.getInboxUnreadCount(); // needed for auth scope
  var htmlBody = '<p>Hello, I am an HTML message</p><hr>';

  var raw =
    'From: Me <amit@labnol.org>\r\n' +
    'To: You <hello@example.com.com>\r\n' +
    'Subject: Save Draft Message\r\n' +
    'Content-Type: text/html; charset=UTF-8\r\n' +
    '\r\n' +
    htmlBody;

  var draftBody = Utilities.base64Encode(raw, Utilities.Charset.UTF_8).replace(/\//g, '_').replace(/\+/g, '-');

  var params = {
    method: 'post',
    contentType: 'application/json',
    headers: { Authorization: 'Bearer ' + ScriptApp.getOAuthToken() },
    muteHttpExceptions: true,
    payload: JSON.stringify({
      message: {
        raw: draftBody,
      },
    }),
  };

  var resp = UrlFetchApp.fetch('https://www.googleapis.com/gmail/v1/users/me/drafts', params);
  Logger.log(resp.getContentText());
}