Smart, the German-born automaker that revived the stagnant microcar market in the first place, has seen itself fall behind in the city car wars with Toyota's oh-so-clever iQ taking the top spot with its extra space for passengers and packages via its brilliant layout. What's more, new machines are on the way from BMW (the long-rumored Isetta revival) and the Audi (the A1, which will be debuted at the next Geneva Motor Show).

As such, we're not surprised to see Smart engineers out and about testing what appears to be the next generation of the diminutive Fortwo. Judging from the fender flares, we might make and educated guess that the new model will be slightly wider than the current car, which makes sense as the same platform is rumored to gain an extended-wheelbase variant called the Fortwo+2.

Unlike the previous Forfour, the Fortwo+2 would share the expected rear-engine, rear-wheel drive architecture with the base car and would come equipped with what would surely be a mini set of rear doors. According to Auto Express, we should see the next Fortwo in dealerships late next year with the +2 showing up in 2012. Electric and hybrid versions are reportedly in the works – and here's hoping they finally fix that horribly awkward transmission.

[Source: Auto Express]