Fiat’s powertrain division FPT will be introducing its two-cylinder engine at Geneva early next month. At first I thought FPT was the first to bring back the two-cylinder engine back to cars in this modern times but then I remembered that Tata did it first with the 35 horsepower Bosch-powered 2-cylinder 624cc engine in the Nano.

The TWIN-AIR 2-cylinder engine will produce 85 horsepower via turbocharging, and it is part of a new range of small engines producing from 65 horsepower to 105 horsepower. The engine’s CO2 emissions are rated at 95g/km. At Geneva, it will be installed in a Fiat 500, and a production 500 with this engine will be launched in ‘next July’ (does this mean July 2010 or 2011?). It consumes 15% less fuel and has 25% more power than an 8 valve 1.2 litre, while comparisons with a 16 valve 1.4 litre shows a savings of 30% and the same performance.

In terms of installation space, the engine is 23% shorter and 10% lighter. Fiat says because of its small size, the engine is very suitable to be coupled with a motor-assist or mild hybrid type of electric motor positioned between the engine and the transmission. This way the motor will be able to further improve economy via harvesting wasted energy through brake energy regeneration and using the same energy to help the TWIN-AIR engine through electric motor assist.

Look after the jump for Fiat’s full press release and more pix.

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