The Volkswagen Up! will spawn a new Audi city car to rival the higher-end versions of the Ford Ka and the Fiat 500. Th car will feature a bolder departure in styling for Audi, somewhat of a requirement in order to compete in this segment.

Audi will be tapping into Volkswagen's lineup for its new city car. The Volkswagen up! will get the full Audi upgrade and put the premium brand back into the city car segment.

Audi has been looking to re-enter the compact car segment for a while now, ever since they discontinued the A2. It seemed likely that Audi would break back into this segment with a car based on the A1 Concept that debuted at the Geneva Motor Show last March. But according to an Audi source quoted in the story, Audi is looking to fill both the A1 and the A2 gaps, with possibly another compact in the works in addition to the up! adaptation.

The new Audi will feature all the underpinnings from the up!. Volkswagen is developing both a gasoline and diesel 2 cylinder 600cc turbocharged engine for the car. The up! will also come with the 1.2 liter, 3 cylinder in VW's current engine line.