The smaller, boosted engine would reportedly be based off the tried-and-true 2.0-liter turbo that we've come to know and respect. The 1.8 is already part of VW's European engine lineup, and it pumps out a middling 158 horsepower and 185 pound-feet of torque. Fuel economy should be improved compared to the 2.5, which returns a respectable 33 miles per gallon on the highway in a manual-equipped Jetta, but nothing like the 40 mpg numbers achieved by competitors like the Hyundai Elantra and Ford Focus.
C/D claims that the move to the 1.8 could also have something to do with manufacturing efficiencies. Since the 1.8 and 2.0 are from the same engine factory, VW could build both models at the same facility.