The Volkswagen Taigun sub-compact SUV is set to enter production, according to the latest reports.

Volkswagen Taigun Concept - 1

Volkswagen sources revealed to Autoweek that the German manufacturer planned to produce the all-new front-wheel-drive model based on the platform of the Up! city car, albeit with a wheelbase stretched by around 50mm.

First seen at the 2012 Sao Paulo international motor show, the five-door, circa-1000kg Taigun is slightly shorter and narrower than a Mini Countryman and would sit below the compact Tiguan to challenge the likes of the Ford EcoSport, Holden Trax, Opel Mokka, Renault Captur and Peugeot 2008.

Volkswagen Taigun Concept - 2

Volkswagen is yet to confirm production details, however, the car has reportedly progressed past the concept phase and moved into the early development stage with both left- and right-hand-drive variants planned.

Power is expected to come from a range of three-cylinder petrol and diesel engines with standard manual transmissions and optional dual-clutch gearboxes likely. A natural gas-powered unit is also being considered.

Volkswagen Taigun Concept - 3

While the report suggests the Taigun is unlikely for the North American market due to its compact size and small capacity engines that typically don't appeal to American tastes, Australia’s response to the genre has been hugely positive.

The Taigun should go on sale by 2016, coinciding with the launch of a larger seven-seater previewed by the CrossBlue concept that was unveiled at this year’s Detroit auto show - a vehicle that Volkswagen Australia has previously said it is committed to bringing to our shores.