We expect that Volkswagen will be debuting its up! subcompact car sometime in 2011, but we're now hearing that it's not the smallest car that the German automaker has on its mind. VW would use a shortened version of its up! microcar platform for the diminutive new city car. Being smaller than the already mini NSF platform of the up! would make this machine a two-seater like the fortwo from German rival Daimler. VW would like its small 1.0-liter three cylinder diesel engine to make about 50 horses and use just 2-liters of fuel every 100 kilometers, which is more than 100 miles per gallon. 117.6 to be exact.

Unlike the smart forwo, which has its engine in the back driving the rear wheels, the competitor from VW would use a front engine and front-wheel drive platform. Earlier in the year, we heard that Volkswagen was still working on its tandem-seat 1L car as well. If that's true, this new smaller up! variant would slot somewhere between that 235 mpg wonder-machine and its larger (to use the term in the technical sense) NSF-based brother. BMW is also hard at work on a city car that could revive the old Isetta brand.

[Source: Auto Motor und Sport via The German Car Blog]

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