Volvo’s entry-level C30 has been in production since 2006 and will soon be in need of renewal. Though the Swedish automaker has just unveiled a five-door version dubbed the V40, this model essentially relies on the same technology as the older C30 and is currently not offered in the U.S. Volvo is keen to replace the C30 but will need a new small car platform, something it can ill afford on its own since most of its resources have been spent developing its new SPA platform for mid-size and large cars, as well as a new generation of downsized engines.

To gain access to a new small car platform, we previously reported that Volvo was in the process of talks with rival firms to jointly develop one. However, with such collaboration, Volvo may be able to expand its small car offensive beyond just a replacement for the C30, something its CEO Stefan Jacoby considers crucial going into the future.

Speaking with Automotive News Europe (subscription required), Jacoby revealed that a possible new small car from Volvo could be positioned below the C30 and rival the likes of the MINI Cooper and Audi A1. There remain few competitors in the premium compact segment, previously because there was not much demand, but things are starting to change due to increased congestion in urban areas, greater environmental awareness among new car buyers, and rising fuel costs.

"Premium customers no longer define luxury based on the size of the car or number of cylinders, there are other attributes which will come into play," Jacoby explained.

Jacoby also pointed out that Volvo would need a smaller engine, one even smaller than its latest four-cylinder lineup, for a MINI rival. The engine, which would likely be a three-cylinder unit, could be developed with Volvo’s Chinese parent company Zhejiang Geely. However, another possibility is linking up with BMW, which not only has a three-cylinder engine in the works, but a new platform for its third-generation MINI as well.

Of course, Volvo is no rush to launch such a model as it has several more important updates in the pipeline. The automaker over the coming years will be replacing virtually every model in its lineup with new versions riding on its SPA platform. The first of these will be the long-overdue replacement for the XC90 SUV, which will be followed by an S80 replacement and then renewed versions of the V70/XC70. On top of this, the automaker is also working on launching more plug-in hybrid and all-electric cars.

Before its demise, fellow Swedish automaker Saab had considered a similar plan and even unveiled a concept version of its own MINI rival, the striking 2008 Saab 9-X. Like Volvo, Saab was also seeking a partner to share costs of developing a new small car platform, with BMW previously tipped to be a potential candidate.