The dilemma most car firms face when deciding to make a small city car is that while they might make perfect sense in large urban conurbations, the sales figures rarely justify the development and production costs, and profit is very hard to find in this most price-sensitive market.
While development and production costs are similar to larger cars, buyers still expect a certain level of quality that pushes cost up, but also demand prices well below larger offerings. In the end, the market remains rather limited, as people like the space and range offered by slightly larger hatchbacks. In Ireland, sales of small cars such as the Fiat Panda and Toyota Aygo represent just 1.2 per cent of the new car market.
However, proposals by the European Commission to require an average CO2 emissions level of just 130g/km from the car industry suddenly makes such models economically viable - if they lower a manufacturer's average CO2 level across its range. That's the driving force behind the arrival of several new small cars.
Two that caught the media limelight at Frankfurt this week were the Toyota iQ microcar and the VW Up! While they are just concepts for now, it's likely that both will enter production in the next three years, just in time to lower CO2 averages at the brands before the new EU levels come into force.
The Toyota is similar in size to the Smart ForTwo, but offers a 3+1 seating format rather than the Smart's two-seater layout. Created at Toyota's European design centre in Nice, the little car features distinctively sharp design features on the exterior, like the sweeping lines that break up the front nose. However, it's inside that hosts the most innovative design. By sweeping the dashboard away from the passenger, the idea is that the front seat passenger sits slightly more forward than the driver, thereby allowing extra legroom for the rear-seat passenger directly behind. The other rear seat - behind the driver - is really only for a child: hence the 3+1 format. The Japanese brand aren't saying how this car would be powered, but it represents a serious step towards production and all indications are that this will be added to the model range.
Over at Volkswagen, the slightly larger Up! concept is almost certainly set to enter production. More traditional in format, its softer lines keep it firmly in the VW family image. Roughly the same size as the current Toyota Aygo, the most innovative feature is a rear engine format that may not make it into the final production version.
Given that VW also has brands like Bentley and Audi in its stable, a new small car that could have a CO2 emissions figure of 109g/km would greatly help lower the average emissions of the firm's model range. Small cars are starting to make sense, regardless of the limited market appeal.