2015 Smart ForTwo introduced

The newest version of the world's smallest car has been unveiled in Germany overnight as Mercedes-Benz aims to fight city traffic with a tiny two-seat hatchback that's as long as most cars are wide.

In a dramatic show, the company smashed a new Smart car head-on into a 2.2-ton limousine to prove it could take a hit from a car more than twice its size, and passengers could walk away from the crash.

The all-new Smart "ForTwo" is also known to have the smallest turning circle of any car sold today - incredibly, it is able to turn around in a space not much larger than the width of a single lane.

The diminutive car, known for its tall and lean appearance, is now equipped with technology that prevents it from being blown from side to side by strong crosswinds or a passing truck.

The original Smart ForTwo, introduced in 1998, was jointly developed by Swiss watchmaker Swatch and German car manufacturer Mercedes-Benz and built in a factory in France.

But since then, Mercedes-Benz has taken the Smart car and equipped it with many of its luxury vehicle technologies.

The company claims that the new third generation model will have the highest level of passenger safety ever fitted to a car of this size.

To illustrate this, Mercedes-Benz had a head-on collision at 50 km/h with one of its $200,000 limousines and a new Smart car that weighs less than half of its much larger sibling.

Mercedes-Benz didn't speculate on the Smart Vehicle Safety Assessment expected later this year, but confirmed it would set a new bar for a car of this size through extensive use of lightweight but ultra-high-strength steels and better occupant safety systems. .

To that end, the new Smart has more airbags than seats. There are five airbags: two in front, two on the sides and one for the driver's knees.

Mercedes safety engineers told News Corp Australia that internal testing showed the car exceeded five-star requirements in a frontal offset crash test conducted by independent body ANCAP.

Australian owners of existing Smart cars may also be pleased to know that the new generation model has a much smoother dual-clutch automatic transmission that eliminates the rocking effect of the old version's robotic manual transmission when changing gears.

As before, the Smart car is equipped with an ultra-efficient three-cylinder engine, which is installed between the rear wheels.

The new model will go on sale in Europe later this year, starting at €11,000.

In Australia, the current Smart ForTwo starts at $18,990, but Mercedes-Benz has yet to confirm the new model for the Down Under introduction.

Europeans are willing to pay more for a car that can fit in a space normally reserved for scooters - more than 1.5 million Smart cars have been sold worldwide - but Australians have yet to embrace the premium price with the same enthusiasm.

In Australia, you can buy a tiny five-door hatchback - it's not much bigger than a Smart - for just $12,990.

Most discounted city cars come from countries with which Australia has a free trade agreement. The Smart car comes from France and is subject to a 5 percent import duty, which puts it at a disadvantage in the most price-sensitive market segment.

Only 3500 Smart cars have been sold in Australia in the past 12 years, and over the past five years, while an overdue new model was being developed, sales have plummeted.

Mercedes-Benz is hoping the new Smart will become more attractive as our cities and suburbs become more congested and parking spaces become harder to come by.

The new model also has more luxurious features, such as a forward collision warning system and an iPad-style cockpit control screen, to help justify the premium price.

"We love the car, we want it, but we need to make sure the price is right for the Australian market and these negotiations are starting now," Mercedes-Benz Australia said.

Mercedes also introduced a slightly longer four-door, four-seat version to be sold alongside the ForTwo. Figuratively speaking, it is called ForFour.

Fast Facts: 2015 Smart ForTwo

Cost: $18,990 (estimated)

For sale: End 2015 - if confirmed for Australia

Engine: Three-cylinder turbocharged engine (898 cc)

Power: 66kW / 135 Nm

Economy: Not yet announced

Transmission: Six-speed dual-clutch automatic transmission

Turning circle: 6.95 meters (1.5 meters less than the old model)

Length: 2.69 meters (same as before)

Width: 1.66m (100m wider than before)

Wheelbase: 1873mm (63mm more than before)

The weight: 880 kg (150 kg more than before)