Volkswagen R&D chief Ulrich Hackenberg confirmed to the press at the Sao Paulo Motor Show that they are going to launch a new two-cylinder version of the up! city car next year. They waited to see how the market reacts to the two-cylinder Fiat Panda Twin-Air and the made up their mind.

VW’s two-cylinder is a diesel though, a modified version of the same unit used in the ultra-frugal XL1 concept. The XL1’s engine is designed to be compatible with VW’s Small Family platform and will be used in a whole range of cars in the future.

With the up! going for two-cylinder engines, the Golf will be getting its current three-cylinder unit. That engine is compatible with VW’s MQB platform, so it would easily go into the new Golf or any other car based on that platform.

But that is not the end of Volkswagen’s downsizing and fuel saving strategies. The XL1 itself is set for production in 2013.

via Autocar