Volkswagen’s new small car, codenamed Up, will be sold as the Lupo. It will also extend across four different brands, including Audi, Seat and Skoda, by the middle of the decade as part of the German car maker’s ambitious target to assume global market leadership by 2018.

Planned to replace the slow-selling Brazilian-built Fox as the entry point to the Volkswagen line-up when it reaches the UK in 2012, the Slovakian-produced Lupo is the first model in an extended range of contemporary small cars Wolfsburg officials call the New Small Family (NSF).

Originally conceived with a space saving rear-engined/rear-wheel drive layout, the new car has been extensively reworked during its three-year development process. Cost concerns have forced a switch to more a traditional front-engined, front-wheel drive design that VW says will allow it to use existing engine and gearbox combinations without any significant penalty in overall packaging.

The new VW is said to stretch to 3445mm in length, 1628mm in width and 1495mm in height, some 525mm shorter, 54mm narrower but 33mm higher than the three-door Polo.

The Lupo will be positioned above cheap offerings like the Dacia Logan but beneath the existing Polo in a bid to attract both first-time buyers and those seeking a second car.

The latest indications are that base versions of the Lupo will be pitched below £8200 in Britain. That price would mean it will compete head on with the likes of the Citroën C1, Peugeot 107 and Toyota Aygo.

In keeping with the Lupo’s back to basics theme, it is planned to be sold with a limited range of engines during the initial sales phase. Autocar understands the car will be launched across Europe next summer with a 65bhp, naturally aspirated, 1.0-litre three-cylinder petrol unit and a 75bhp, 1.2-litre, four-cylinder common-rail diesel. The oil-burner will offer fuel economy of more than 80mpg and CO2 emissions of less than 80g/km in Bluemotion guise.

The five-door Lupo will launch in spring 2012, when a new 85bhp turbocharged 1.0-litre, four-cylinder direct-injection engine will be added to the line-up. Other driveline options are being investigated, including a pure electric version that is being developed in partnership with Audi.

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