DaimlerChrysler reportedly is considering launching its small Smart ForFour hatchback in China despite local buyer tastes that tend to prefer large saloons.

Reurters said DC will - by the end of the year - conclude a feasibility study over whether to roll out the company's struggling compact brand in what has been until recently the world's fastest-growing car market.

"There simply will have to be a trend to smaller cars," Daimler's research and technology chief Thomas Weber told Reuters.

Weber reportedly added that from a technical standpoint the Mercedes A-class should also enjoy "tremendous potential" in China as well, but said there were no plans to commission a feasibility study for the smallest model within Daimler's luxury brand.

Reuters noted that a Smart launch would come as a surprise, particularly since Volkswagen chief Bernd Pischetsrieder criticised the decision to sell its Polo subcompact in China as "completely wrong".

Significant losses at the Smart brand, most famous for its ForTwo microcar, shocked investors by dragging profitability at the Mercedes Car Group below that of its US sister Chrysler in the third quarter, the report added.

While Daimler finance chief Manfred Gentz said all options would be considered when deciding on the future of the brand, the company later denied that it would shut Smart down, Reuters said.

Weber also reportedly said the company would invest heavily to improve the quality of its vehicles.

"We've reached the level where the number of mistakes per hundred cars due to electronics has matched that of the mechanics," he told Reuters, adding the mistake quota in electronics had previously been much higher.

Weber reportedly denied the brand's quality ratings were suffering due to poor engineering, though.

"US customers aren't complaining about the motors, but rather about the number of cup holders in the car," he said, according to Reuters.

Speaking about the chances for success for diesel-powered cars in the United States, Weber reportedly said he was convinced of it due to the advantages of higher torque and better fuel efficiency.

"A 20% market share is definitely reachable in the next 10 years," Weber told Reuters, adding that diesel drivers will get a huge boost by the commitment of oil companies to build up a US tanking station network that spreads across the country.

"If diesel enjoyed the same market share in the US as it does in Europe, then the US wouldn't have to import oil," Weber told the news agency, confident that the new diesel technology would fulfil even California's stringent emissions requirements.

Asked about the impact of the weaker dollar, Weber told Reuters he didn't believe there would be a short-term change in trend but added that the company was positioned better than German rivals due to its US unit Chrysler, whose US cost base provides a natural currency hedge.