When Mercedes decided to aim for the entry-level luxury market in the U.S., the best they could come up with was the C230 Sport, which, because of an anemic powertrain and a high cost of ownership, never quite made it into primetime. In Europe, the A-class subcompact pseudo-minivan hasn't caught favor with as big a chunk of the populace as expected either, so with both those lessons learned, Merc is going back to the drawing board.
According to AutoZeitung, the M.B. boys are developing a compact hatch to rival the Audi A3 and BMW 1-series in the burgeoning compact-luxury class. The rendering, which can be viewed in full by clicking here, may be a close resemblance to what may make it to market at the turn of the decade. Drawing cues from the recently redesigned C-class, the A-class hatch has several distinctly Audi design elements, partnered with the new Mercedes grille. If coupled to the right combination of diesel- and petrol-powered engines, this could be a real success both in the U.S. and abroad.

An argument can be made that Mercedes shouldn't set its sights so low, again. But, if such a vehicle comes to fruition, we'll keep such judgments to ourselves – until we get to drive one.

[Source: AutoZeitung (Google-Translated)]

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