A new M1 might be on its way after all, but it's expected to be in a new format.

BMW wants to add new owners o its customer base by creating an M car to slot in below the M3, sources from the Munich-based brand have said. This development of this baby M is favoured by BMW over a supercar.

If the plans do come to fruition, it would compete with Audi's S3 and is expected to hit European markets first.

A source form the M division says that its existing customers tend towards the brand's bigger vehicles, such the X5 and X6 M, and that this baby M car would be useful to attract a more diverse customer base.

BMW M division's new boss, Kay Segler, has had experience in introducing small performance cars into the market. As the former head of brand management at Mini, he was instrumental in the introduction of the Mini Cooper S and Mini JCW.

According to the M division source, a project to rival the Audi R8 and Porsche 911 Turbo would fit into the division's operations nicely, but the current priority is "a more affordable model underneath the M3."

Based on the next 135i, the baby M is likely to make use of the same three-litre biturbo powerplant tweaked to churn out about 245kW. In line with BMW's current naming system, baby M may just become the new M1.

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