When Volkswagen announced its trio of up! concepts in 2007 even the smallest model was considerably larger than the diminutive Smart ForTwo. The first up! concept was (nominally, at least) a four seater, while the Smart is strictly for two. AutoCar is reporting that VW has decided to green light the development of a shorter two-seat variant to directly compete with the Smart. Unlike the upright ForTwo, the VW is expected to be lower and narrower, resulting in better aerodynamics than the Smart. The most efficient version of the VW should handily beat its competitor with a rating of 117 mpg (US) and CO2 emissions of just 60 g/km. The actual fuel savings going from the Smart's 72 mpg to 117 mpg are almost inconsequential. At this level its like acceleration numbers or Nurburgring lap times; more about bragging rights than real benefits. Power is expected to come from a direct injected 1.2L four cylinder with a deactivation that allows it to shut down two cylinders at light load.