New model will compete against the upcoming Audi A2 and the Mercedes A-Class. A sporty-hatch variant is also set to go up against the new A1.

BMW is set to launch a new batch of FWD (front-wheel drive) hatchbacks in the next few years. Of those, one will be an entry-level BMW-badged vehicle, positioned beneath the 1-Series, scheduled to debut in 2013.

The new model is expected to compete against the likes of the Audi A2 and the Mercedes A-Class. It will have a body-style similar to those models - a high roof 5-door, 5-seat hatchback with a transversely mounted engine and gearbox to provide for a shorter bonnet and more cabin space. BMW will also offer a sportier variant, a different model altogether, to rival the A1. Autocar reports that BMW will also be offering the 1-Series as a front-wheel drive while still retaining the rear-wheel drive variant.

The Bavarian automaker will be launching the next generation MINI in 2014 which will share its front-wheel drive architecture with those new BMW models. We have previously reported on BMW's plans to make up to 1 million front-wheel drive vehicles - badged as both MINIs and BMWs - by 2015.

BMW is not worried about its entry-level model cannibalizing its MINI sales.

"Both brands possess a clear and individual image. Our research shows BMW and Mini appeal to different buyers," said a BMW source in the Autocar story. BMW points to the success of VW and Audi in sharing platforms but distinguishing the brands as an example.