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The BMW 1-Series and Audi A3 better look out as Infiniti is reportedly working on a new entry-level model as a direct competitor to the aforementioned premium compacts. Lexus, too, is working on such a car, which we’ll get to see in production trim at next week’s 2010 Geneva Motor Show, however, there will be one distinguishing factor that could see the baby Infiniti form its own niche–an all-electric powertrain.

We first heard about an Infiniti compact late last year but now we have confirmation that the company is at least investigating the idea.

“We are aware of the downsizing trend and the smaller car category is a subject for us to study,” Infiniti boss Toru Saito revealed to What Car? during a recent interview.

If given the green light, the new Infiniti compact will most likely share its underpinnings with the Nissan LEAF and be available with conventional gasoline and diesel engines as well as an all-electric option. Infiniti’s first diesel models have just gone on sale in Europe.

Such a car from Infiniti would be ideal in strengthening the brand’s presence in Europe, where compact cars like the BMW 1-Series and Audi A3 sell in substantial numbers. The move reflects the growing demand for cars that are smaller and more fuel and CO2 efficient, a trend Infiniti hopes to capitalize on.