Back in late 2010, it was reported that Daimler and Renault-Nissan had signed an agreement to share drivetrains, with the agreement seeming to benefit the French-Japanese alliance more, as they would have had access to AMG’s engines. But other reports then came to light that Daimler’s smart division would be using Renaults miserly turbodiesel for the replacement fortwo.

This is not to be, however, as a British magazine says that Renault has reportedly backed out of the deal. That the French car industry is in the doldrums is not news anymore, and so it’s not surprising to learn that the reason Renault is giving is a more restrictive R&D budget. Said budget will be focused toward the French company’s electric car development. As of this writing, Renault is reportedly continuing its cooperative venture with Daimler in developing the smart fourfour, expected to make its debut in 2014

So now, the only confirmed engine for the replacement fortwo is a sub-1000 cc gasoline 3-banger. It will be recalled that before the Renault-Nissan fortwo deal, Daimler had been in talks with BMW for its smart division. These talks also led nowhere, and BMW subsequently launched its i division, which will be producing electric cars.