Mercedes Considering Model Below A-Class; May Be Based on Clio

MercedesMercedes-BenzGermany, 1924 > present197 models
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sees a burgeoning trend towards smaller, premium cars. Buyers still want luxury, but they want it in an even smaller car. That is why that it is considering building an even smaller premium car than the new A-ClassMercedes-Benz A-Class Gen.3 [W 176]Germany, 2012 > present33 versions
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. This new car would use Mercedes' connection with Renault to build the car on the ClioRenault Clio Gen.4France, 2012 > present92 versions
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platform.

The new, little Mercedes would be roughly the size of an Audi A1Audi A1Germany, 2010 > present167 versions
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or BMW'sBMWGermany, 1918 > present87 models
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upcoming front-wheel drive models.  Mercedes still has time to figure out what to do in this niche. It does not plan to have the car on sale before 2018.

The smaller Mercedes would almost surely use the new, small engines that Mercedes and Renault are co-developing.

Cars like this have a careful balance to maintain. They come from luxury automakers and buyers expect style outside and luxury appointments inside. However, they also have to be cheaper than the automakers' larger cars. When building cars, a smaller size does not always translate to cheaper to build. 

The one advantage in Mercedes favor is that luxury technologies are actually falling in price. Because of their ubiquity, LCD screens are getting cheaper. Electronic assistance systems are the same way; they are in so many cars that their price is falling. 

Source: Autobild