BMW could launch an all-new environmental brand within the next seven years.

It has set up a new unit called 'Project i' which is working on a completely new car specifically for driving in cities.

BMW chairman Norbert Reithofer said the project is fully independent and "free to act beyond BMW structures if necessary".

The i stands for innovation and he added: "The task of the 'Project i' team is to present specific solutions in the first half of the next decade. Whether this will require a fourth brand or not, will be decided at a later date."

Reithofer added that it was not yet clear which alternative drive system or technology the new vehicle would use. "This is why we have decided to focus on a wide range of technological options.

"An electric motor is an option we are looking into. It does not only work at zero-emission level. The technology is now sophisticated enough to offer driving pleasure.

"This is one of the reasons why we are evaluating the option of launching a battery-powered car."

He said that a decision will be taken this year on the drive system and before a decision on a new brand could be taken a design would also have to be completed.

"We will look at all these things before we decide whether this might be a sub-brand for BMW or Mini or whether it is a stand-alone brand."

The Project i team is also looking at mobility projects in the future considering to what extend people will be able to get around individually given traffic and emissions restrictions in big cities.