General Motors brand Opel is to launch a small car below its current Corsa supermini, the company confirmed September 23.
The vehicle, which Opel described as "stylish and fuel-efficient," will be the company's smallest model and will compete with the Ford Ka, Ford's three-door European city car.
The vehicle is set to enter production in Germany in 2013, Opel said, also hinting that an electric version could be introduced for driving in urban environments.
"This new product will be an important element in our growth strategy," said Opel/Vauxhall boss Nick Reilly.
"Along with other new vehicles, such as the upcoming electric Ampera, a sporty coupe and a small SUV, we will significantly expand our product lineup in the future and offer customer choices in several more segments."
Opel lacks a competitor to smaller, design-led city cars such as the three-door Ford Ka, Fiat 500 and Smart Fortwo, which have proved popular with urban consumers.
Its five-door Agila, a rebadged version of the Suzuki SX4, failed to impress many critics, with UK car show Top Gear saying, "it looks like a car for people who lost their agility a very long time ago".
The Ka, which was launched in 1996 and refreshed in 2008, led its class with a 14 percent market share in 2009.