Jaguar engineers are working on an all-new front-drive baby saloon that will spearhead sales in India and China, as well becoming one of the company’s leading new models in the all-important US market. It should be launched by 2015 and is likely to built in the UK and India.

According to sources in India, the new model is thought to be about 4.5 metres long and will be powered by Jaguar Land Rover’s all-new three-cylinder, 1.5-litre engine and four-cylinder, 1.8 and 2.0-litre turbocharged petrol and diesels. Sophisticated new-generation eight and nine-speed automatic gearboxes are also thought to be on the menu.

The car’s closest conceptual rivals in the showroom are expected to be the upcoming Audi A3 and Mercedes-Benz CLC small saloons, both of which have been previewed as concepts.

The baby Jaguar, however, won’t be a budget model. Some estimates say it will cost from £22,000.There will be a number of variations on the mainstay four-door, including a coupé and possibly a small roadster, but there’s no news on whether Jaguar will build a hatchback rival for the future Mercedes A-class. However, the British company has already created a hatchback concept called the RD-6 back in 2003.

Despite the reputation of the unloved X-Type, Jaguar’s decision to build a range of front-drive cars is being partly forced on the company by the stringent new CAFE fuel economy regulations due in the US from 2016.

According to the CAFE rules, by the time the 2016 model year arrives, Jaguar needs to be selling significant numbers of petrol-engined vehicles capable of more than 50mpg, as a result of the US market’s lack of interest in diesel. These fuel economy demands will then become progressively more stringent by 2025.

Jaguar will be in good company downsizing into a range of frugal baby saloons. Audi has already shown its 4.4m-long A3 saloon concept and Mercedes its A-class-style F800 concept. Both are based on new front-drive platforms and aimed primarily at China, India and the US.

Some product planners think these compact saloons will also appeal to female buyers, who are less keen on the traditional large executive cars sold by premium manufacturers.

Last year, now-departed JLR boss Carl-Peter Forster said Jaguar needed a “successor to the X-type… and we need [it] in several variations.” However, it has become clear in recent months that this model will not be a direct rear-drive rival for the BMW 3-series, but a more modern interpretation of a compact, eco-friendly, executive car.

Adrian Hallmark, Jaguar’s global brand director, told Autocar earlier this year that he was behind the concept of a small saloon. “We’ve got to be careful, and not be too British and think that just because we didn’t hit the bull’s-eye first time [with the X-type], we can’t hit it a second time,” he said.

There’s no indication of the new car’s styling direction, but it’s thought it won’t build on the avant-garde look of the latest XJ. Aerodynamic efficiency will be a necessity, though, as will a premium look to justify the price. The interior will be more modern than anything Jaguar has done so far, putting the emphasis on large-screen displays and connectivity, as well as Audi-matching finish.

The baby Jaguar could be based on a variation of the new LR-MS platform that underpins the new Range Rover Evoque. Even though Jaguar is increasingly making play of its use of lightweight aluminium construction, an all-aluminium platform would be too expensive for a car of this price.

However, last year, Mark White, Jaguar’s chief technical specialist for body engineering, said that if he designed a ‘mixed-materials’ structure for a potential small model, he would use steel box sections and aluminium sheets for the floorpans, roof panels and doors to “achieve maximum weight saving for minimum cost.”

Jaguar engineers are said to have particularly ambitious fuel economy targets for the new model. Last year Ron Lee, Jaguar’s chief powertrain engineer, revealed that the company was aiming to build an XF-sized car that could emit just 100g/km CO2 by 2020.

Much of this work — including a 1.8-litre, four-cylinder petrol motor with a very high power density of as much as 170bhp per litre and a diesel engine good for 133bhp per litre — will also be applied to the baby saloon.