Mazda is looking at sharing its MX-5 sports car chassis with a new baby Sports Utility Vehicle and will unveil a new under-wraps city vehicle next year.

European boss James Muir said that he was interested in developing smaller, lighter SUVs, possibly using the iconic sports car's rear-wheel drive platform, and confirmed Mazda's response to the needs of urban drivers would be presented to the world's media at the 2008 motor show in Paris.

As sales rise, Muir also said that Mazda could build a European factory if the market and conditions were right.

Mazda, he said, was exploring the trend towards downsizing of SUVs. And added: "I do see SUVs getting smaller and being more car-like in their behaviour. Maybe we can look at rear-wheel-drive platform sharing and we have a rear-wheel-drive platform with the MX-5. That's an opportunity for us to look at how we might develop a lighter-weight product.
 
"We have done a lot of work on the technology side with high tensile steel, which is much more lightweight. We are also looking at lighter weight power trains and there is a lot of scope there particularly with diesel power trains to see how we can create lighter engine blocks using different alloys and metals."

Muir, Managing Executive Officer at Mazda Motor Corporation and its European President Muir, said that a city car project would be unveiled at next year's Paris Motor Show.

He added: "I'm interested in vehicles that deal with the restrictions that have been placed on urban drivers, parking, parking footprints and taxation on CO2 emissions. I can't tell you what it is but we are taking a project that I have initiated to the motor show in Paris next year. That will be our response to this trend."

Muir said the environmental issue was "the best thing that has happened to the automotive industry in the past 50 years," It accelerated conditions for growth benefiting smaller, and as he sees it, more nimble and responsive manufacturers.

"The order is being changed. People are worried about the new order and what it is going to look like. There had been a period of stagnation in production development. This is going to alter the balance of power. So for Mazda that's an opportunity."

He said that Mazda needs to increase production in Europe to at least 400,000 units. It could then look at building a new factory - site as yet unknown - capable of fully capitalising on maximising output against fixed costs, and lessening its vulnerability to currency value fluctuations.

"We are not ready yet, and neither will we be at 400,000 units, to mitigate the significant exchange rate risk that we have today."

Muir said greater stability would come from creating sourcing in Europe with a supply base around a plant.

"We are wholly exposed to exchange rates. For a sounder and more secure business base we need to ultimately have some of our sourcing in Europe and for that Mazda needs scale."

That, Muir added, would mean European sales of at least 200,000 vehicles off a single platform.