Toyota is putting the finishing touches on its all-new 2014 Corolla compact, and we have the spy shots to prove it! Our spy photographers have just sent us the first-ever pictures of the twelfth-generation Toyota Corolla testing on U.S. soil.

Although still covered in camouflage, a front end reminiscent of Toyota’s latest Avalon sedan is clearly visible, including a large lower air inlet. The 2014 Corolla looks to be going upscale, as indicated by this prototype’s xenon headlights, chrome accents and projector fog lights.

Our spy photographers only managed a quick shot of the car’s interior, but the image reveals a multi-function steering wheel and chrome-ringed gauges.

Overall the new Corolla looks slightly longer than the current car. Notable styling cues include a more steeply sloping hood and a shorter decklid. Tires on the prototype measured 195/65R/15.

Underhood we are expecting a revised version of Toyota’s 1.8L four-cylinder that should be good for about 150 horsepower. Toyota will mate the updated four-cylinder to either a six-speed manual or a CVT – the latter replacing the current Corolla’s antiquated four-speed automatic.

Those powertrain updates should have a dramatic impact on the Corolla’s fuel economy figures. The current car manages just 34mpg on the highway – among the worst in the compact segment – but the 2014 model should land around the 40mpg mark.

The 2014 Corolla sedan will begin production during the second quarter of 2013. A hatchback model will follow in during the second half of 2014, which will replace the Matrix in Toyota’s lineup.