There were past rumors that Jaguar would eventually jump into the fray with a small city car of its own, although nothing has ever seemed to have come from them. We've only heard about Jag's upcoming BMW 3 Series fighter and crossover. But today those old rumors have been revived. A new report is claiming that due to the increasingly stringent EU C02 regulations, the UK automaker is reexamining the idea of a new range of compact front-wheel-drive models.

But it may not sound quite as bad as it seems. For example, BMW and Mini are just about ready to launch a new range of FWD models, such as the new Mini Cooper. The automaker has made clear that performance is still a key component for those cars. Point being, Jaguar could effectively build a FWD model(s) that's still fun to drive and have solid performance without going the way of the Aston Martin Cygnet. The main obstacle to such a lineup is the investment required. Jaguar is uncertain it can make a profit, but its design chief Ian Callum would love the chance and challenge to style a small car. A final decision will be made by 2016 when the crossover is due to arrive.