In the early 1970s, European demand from consumers for superminis was rising. Even Ford's smallest model, the Escort, was a conventional front-engined, rear wheel drive car; yet competitors were launching smaller, front wheel drive cars, like the Fiat 127 and the Renault 5. The effects of the 1973 energy crisis was also increasing demand for smaller cars. BMC (which had since merged into British Leyland) had entered the mini-car market with its Mini in 1959, while the Rootes Group had launched the ultimately less successful Hillman Imp in 1963, but times had moved on and people looking for small cars now wanted practical hatchbacks instead of conventional saloons. Vauxhall had entered the modern supermini market with its conventional Chevette three-door hatchback early in 1975.
Ford needed an advanced small car to compete in this emerging market. After research and many mock-ups, a prototype and project known as "Bobcat" was created, which would be the basis of Ford's new car. The original plans for the "Bobcat" specified a desire that the new car cost US$100 less to produce than the Ford Escort.