Lexus may roll out a competitor soon for such popular entry-level luxury models as the BMW 1 series and Audi A3.
Toyota's luxury brand has released the sketch of a concept it will unveil next month at the Frankfurt auto show.
Lexus said the concept will raise the bar in the premium compact segment, but offered no details. Toyota sources say Lexus will develop the new compact for Europe and could sell it in the United States by 2012.
Lexus does not have a model to go up against the 1 series, A3, and a rear-drive compact car Cadillac plans to slot below the CTS in 2011.
Lincoln is developing a compact car for 2012 or 2013. Infiniti's plans for a compact car have been dropped because of cost cutting.
"You are going to see more products start coming under models like the Lexus IS," said Erich Merkle, president at Autoconomy.com, an online auto newsletter.
Merkle said some people are buying smaller cars because they have become empty-nesters. He said other prestige-car buyers now are on fixed incomes and may want to spend less for their vehicles.
(Source: Automotive News)