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This paper describes the initial development of a 3 cylinder 1.2l technology demonstrator engine from MAHLE. The purpose of this highly turbocharged direct injection engine is to demonstrate production-ready technologies that enable low CO2 emissions via downsizing by 50%. Downsizing is one of the most proven paths to CO2 emission reduction. By using careful design, a 2.4 l engine can be replaced by a 1.2l engine that has superior torque at all speeds and on-road fuel consumption benefits of 25 - 30%. A two-stage turbocharging system has been developed for the engine to enable good transient response and the high torque levels at all engine speeds demanded by a downsizing approach. Several options were tested and the final system exceeds the 30bar peak BMEP target with stoichiometric fuelling. Indeed, lambda = 1.0 fuelling is maintained over the majority of the full-load line and the 144kW peak power requirement is fulfilled at only 6000 rpm.