Three of a kind - the new French connection

The PSA Peugeot Citroen group has extended its joint-development agreement with BMW to build a fuel-efficient turbocharged 1.2-litre three-cylinder engine to power a range of new French and German small cars.

The French alliance will invest €175 million ($334 million) to build the boosted engine, which will be developed from 2012 alongside 1-litre and 1.2-litre naturally aspirated three-cylinder units.

Citroen's C3 and DS3 hatchbacks are expected to be the first to get the new engines, with replacements for the Peugeot 207 and 308 to follow. The engines could also find a place under the bonnets of BMWs, including the carmaker's first front-drive model the 0-Series hatchback, the third-generation Mini, and a potential hybrid version of the Megacity micro-car under development.

Ford's Fiesta and Focus models could also be candidates for the three-cylinder units. Ford's range of Ecoboost engines were developed in partnership with PSA and the relationship can be expected to continue into and beyond the 2012 project.

The turbocharged 1.2-litre three-cylinder petrol engine will be produced at the same French factory that now makes the naturally aspirated and turbocharged 1.6-litre petrol and diesel engines for PSA models and BMW's Mini. The new generation of engines will meet stringent EU6 emissions requirements. A three-cylinder diesel is also expected. BMW revealed such a unit in the Vision EfficientDynamics plug-in hybrid coupe concept at the 2009 Frankfurt motor show.

PSA chief Philippe Varin said: "By producing this new engine, we will be able to leverage world-class manufacturing expertise.

"And with its state-of-the-art environmental technology, the new powerplant will enable PSA Peugeot Citroen to strengthen its leadership in low-carbon vehicles."