While the Mini may be a sales success in nearly every way measurable, it’s causing major problems for BMW. The problem is that it’s still too expensive to produce, even though the MkII model was supposed to decrease costs. According to a report from the German Manager magazine, BMW group will therefore build a new variant of the Mini called the Colorado in co-operation with Austrian auto outsourcing company Magna Steyr. We’ve already reported this rumor before, but it seems that BMW will be building the new car in co-operation with arch-rival Mercedes, who will use the platform to build a jacked-up pseudo SUV version of the A-class.

BMW is also hard at work decreasing other costly items and processes for the next Mini update as it costs as much to produce as a 1-series at the moment. A BMW source claims that they may even be able to reduce costs by €600-700 per unit, which is huge in an industry where margins are always tight even if you’re in the luxury car biz.