Click above for a high-res gallery of the Volkswagen up! concept

European manufacturers seem to have been taken aback by the recent success of their microcars. Now that consumers have gotten a taste of what life is like when you're choosing between filling your tank or your stomach, industry insiders are predicting that the microcar category will only pick up steam. Daimler is sitting pretty with its smart brand, BMW is working on a city-spec Isetta revival, Toyota has responded with its diminutive iQ and VW went small with its Up! concept cars. But VeeDub's got even smaller ideas on its corporate mind, working on an smaller city car to slot below its already dinky Up! model.

Power for the city car will come from either a 1.2L four cylinder or an oil-burning three-pot. That gasoline engine is expected to feature cylinder cutoff technology so it can operate on just half of its allotment of pistons when full power isn't necessary. All of that adds up to an estimatged 117 miles per gallon. And naturally, an electric drivetrain is also in the works.

Current rumors indicate that the German automaker has given this new model priority status, working to get the car on UK roads by 2011. It all sounds good so far, minus the name: Chico. We're confident that they can think of something better.

[Source: Autocar]