It has given the electric version of the entry-level Up minicar a top-to-bottom makeover to give it a more upmarket look. The same technology will find its way into similar models from SEAT and Skoda.
When asked about the future of the petrol Up, VW boss Herbert Diess starts to frown. In his view, making petrol engines to comply with future ultra-stringent emission regulations is so expensive that no maker will be able to be able to produce a small car cheaply enough.
The high-tech components needed will add around a third to the price of an Up, which currently costs a little over US$10,000 (around RM42,000). "That will effectively kill off that car," says the VW executive. A question mark also hangs over the slightly larger Polo.
For the same reason, the entry-level Ford Ka is no longer with us and the future of the Toyota Aygo, Peugeot 107 and Citroen C1 is also uncertain.
The threat to small cars with combustion engines comes from EU plans to force carmakers to reduce carbon dioxide emissions in new cars by 37.5 per cent by 2030 compared to 2021 levels.
Peugeot 107.
For every gram of CO2 over the prescribed limit manufacturers will be obliged to pay a fine of 95 Euro cents per car produced.
A sign of the times to come are both the upcoming Peugeot 208 and Opel Corsa. Both enter the fray as electrics only. It is also no coincidence that Daimler-owned Smart has just dropped petrol-engined variants from its range to offer just battery-electric versions of the Fortwo and Forfour.
Carmakers are keen to green their products in order to bring down fleet emissions of potentially harmful gases but there is another side to this too. It is expensive to split shop-floor production in order to make both models, especially when so many of the components needed for a petrol variant are redundant for the electric.
Electric cars do not need multi-speed gearboxes, radiators or exhaust systems, to name just a few differences. Experts say this will lead to a shift in manufacturing.
Take the Renault K-ZE for instance. It is poised to launch in China as an electric-only city car with a maximum range of 300km between charges. The more compact configuration using an electric motor with direct drive means there is much more space inside the 3.74-metre car than in a comparable Twingo, although it is only a few centimetres larger.
Renault K-ZE.
The space gain is vital for city runabouts and other makers are keen prove the mettle of new compact electrics in the Chinese marketplace before being sold elsewhere. MINI is currently developing an electric car in China and Daimler has handed over the reins of its Chinese electric minicar project to major shareholder and fellow carmaker Geely.
German car industry guru Ferdinand Dudenhoeffer believes that regular compacts with petrol engines are in for a hard time, but he stops short of writing them off.
"Electrification means small city cars are going to be a key part of the mobility mix," said the professor who teaches at the University of Duisburg-Essen.
Dudenhoeffer believes the low weight of small cars and the relatively modest performance expected of them will ensure their future. Buyers do not expect the same from an electric compact as they do from a premium sports utility.
A range of between 350 and 400 km between charges is practicable using batteries of up to 40 kW, said the expert. He believes small cars can actually spearhead the next wave of electrification.
It seems some carmakers think differently. Hyundai's latest new i10 model unveiled at the recent Frankfurt Car Show is the smallest-ever from the South Korean brand.
The engine line-up has been carried over from the previous model virtually unchanged which means buyers get a choice of two small units. There is no electric version in the pipeline.
