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The arguments are given for the application of a 1.3 litre turbocharged spark ignition engine, as a substitute for a 2 litre normally aspirated engine as the power plant for a compact-sized car in the late 80’s. Three stages of the project leading to an optimised engine-turbocharger package are outlined. Achievement of Stage 1, leading to evaluation of a non-optimised configuration, will be reported. Description includes the use of a separately driven supercharger to define operating limits in the experimental variable matrix comprising compression ratio, boost pressure, EGR rate and spark retard at the knock limit. Computer programs for the optimising stages of the project are outlined. The current status of the project is reported, where, even at this early stage, fuel consumption reductions of 11-22% have been achieved under simulated urban driving conditions.