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Volkswagen's forthcoming city-car seems to be Up! and ready for production as it begins roaming around in public. The mule - with shortened front and rear overhangs was caught in the Austrian Alps undergoing chassis testing in its very early stages of development, using a previous Polo supermini to hide the newcomer. Judging by the wheelbase of the mule, the new Up! will provide a very spacious interior in a short body.

VW has suggested the production car will keep much of the styling from the concept that debuted at the 2007 Frankfurt motorshow, so expect Golf-inspired headlights and a compact but practical design. Unlike the rear-engined, rear-wheel- drive concept, the final Up! will use a front-engined, front-wheel-drive layout.

Inside, the 4 seat arrangement will allow buyers to fold the 3 passenger seats flat or remove them. The dash will be revolutionary, incorporating digital touchscreens. The hi-tech feel continues under the skin as VW engineers are developing a choice of ecological two cylinder petrol and diesel engines for the car. Both will be turbocharged, with a capacity of around 600cc. They promise remarkable fuel economy of 94mpg combined and CO2 emissions of less than 100g/km. A more powerful 1.2 litre petrol engine may also be offered.

Volkswagen announced back in 2007 that it is very serious about producing the Up! in India, in order to cut back on costs, however, manufacturing in Bratislava, Slovakia hasn't been ruled out. If the Up! was built in India, it could only cost VW a mere €900 to produce.

Western Europeans will receive plusher models as it will be marketed as a must-have accessory, similar to that of the Toyota iQ and Smart ForTwo, while Eastern Europeans will see it as a cheap, reliable runabout. The Up! is likely to masure at 3.45 metres with the Space Up! measuring at 3.6 metres. The E-Up! measures at 3.2 metres.

Although the official name hasn’t been decided, Lupo could be used instead of Up!. Prices are expected to start from £7,500 when the city-car goes on sale sometime in Spring 2011. Aside the E-Up!, which is expected to go on sale in 2013, a 5dr and the "Space Up!" mini-MPV variants should also be in the pipeline.