BMW is set to introduce a new front-wheel-drive entry-level model, positioned and priced beneath the existing 1-series and using shared Mini hardware, according to the firm's chairman Norbert Reithofe.

The new model is being developed as part of plans to help increase parts sharing and bolster the potential for production savings between the BMW and Mini brands, thus bringing an end to the era of rear and four-wheel drive-only BMW models.

Speaking to Autocar at the last week's Geneva motor show, Reithofer said internal BMW studies revealed that, despite the downturn in the world’s economy, there is continued demand for what he described as "premium vehicles" in the small car class.

He then officially acknowledged plans that will see BMW producing a rival to the recently unveiled Audi A1 and a new Smart Forfour presently under development at rival Mercedes-Benz.

"We will be extending the BMW and Mini brands into the small car segment with new models and variants," said Reithofer.

Being careful to separate the new price-leading front-wheel-drive model from BMW's upcoming city car - a totally different project as part of its Mega City Vehicle electric car initiative - Reithofer added, "For these new vehicles [the new BMW and Mini] we are developing a common architecture for both front and four-wheel drive."

While exact details remain shrouded in secrecy, Autocar can confirm the new entry-level BMW has been conceived to run the same front-wheel-drive underpinnings as the next-generation Mini Cooper.

The new Mini Cooper is not due out until 2014, but the small BMW could be on UK roads as early as 2013 as part of a major thrust by the company to become the undisputed sales leader in the premium small car class.

Plans to base the new entry-level BMW on the same platform as the Mini Cooper also raise the question of where the new car would be built. Although BMW is being vague, Autocar understands the new car could be built alongside the Mini Cooper in Oxford, using a new generation of petrol and diesel engines sourced from BMW's engine plant in Hams Hall.

Studies are also under way that could result in the new platform structure referred to by Reithofer being used for future generations of the 1-series - although BMW is still undecided on whether the third-generation model, due in 2018, will be front-wheel drive or rear-wheel drive.

"We are looking at alternatives," a Munich insider told Autocar. "With the new platform set to support four-wheel drive, it wouldn't be that hard to use the transmission tunnel for a rear-wheel-drive application."