Volkswagen could be about to do a U-turn with its new city car based on its Up! concepts, first seen at the Frankfurt motor show last year.
The three concepts cars, smaller than a Polo, were rear-engined, rear-wheel-drive vehicles.
However, the production car could be front-engined and front-wheel drive, following concerns about cross-wind stability and the amount of space taken up by the pipework needed for a car with a radiator in the front and an engine in the back.
A VW insider said: 'It's more expensive to have the engine in the front, but we might have to do it to make it work. However, the finished product will still look like the show car.'
The company is also pressing ahead with a so-called one-litre car capable of 283 miles per gallon - or 100km for every litre of fuel.
Volkswagen chief Friedrich Piech first talked about the car - a small, black, cigar-shaped vehicle with two seats, arranged one behind the other, and powered by a 9.5bhp diesel engine - in a board meeting in 2002.
Little had been openly discussed since then, but our source said: 'We're doing it.'