Mercedes-Benz has confirmed today that it will release four new compact cars to replace the current A and B-Class models when they reach the end of their product cycles in 2010/11. The family of compact cars will be built at a new plant in Kecskemét, Hungary, and will likely include a coupe, cabriolet, MPV and soft-roader.

The new plant will cost more than €800 million ($1.24 billion) to establish and will create some 2,500 jobs. Moving to a plant in Hungary will allow Mercedes to manufacture the cars at a lower cost than if they were produced in Germany, and the fact that it’s a new plant means the build process should be efficient thanks to latest construction techniques.

"We are planning a new plant in Hungary to boost our competitiveness and to gain access to potential of the Eastern European markets," Daimler CEO Dieter Zetsche confirmed today.

Mercedes hasn’t forgotten its Rastatt plant back in Germany, and plans to invest €600 million ($928 million) to increase capacity for more small cars.

The new family of small cars is designed to help Mercedes meet tougher fuel-consumption and emissions regulations as well as providing it with a range of exciting compact models to launch in North America, although such an export program is yet to be confirmed. They will also drop the expensive 'sandwich' design of the current A and B-Class in favor of a new MFA (Mercedes Frontwheel Architecture) FWD platform. This means the new cars will sit much lower than current models, possibly even lower than the BMW 1-series and Audi A3, and will also be much sportier.

2012 Mercedes-Benz small car family