Volkswagen to develop low-cost electric car to tackle Chinese rivals

By Christoph Steitz and Christina Amann

FRANKFURT/BERLIN (Reuters) - Volkswagen will develop low-cost electric vehicles in a bid to better compete with fierce Chinese rivals, Europe's largest carmaker said on Tuesday, after talks with Renault to team up on the project collapsed earlier this month.

The target is to produce electric vehicles for the European market priced at around 20,000 euros ($21,746), Volkswagen said, adding that a world premiere was planned for 2027.

"It's about entry-level electric mobility from Europe for Europe," Volkswagen Chief Executive Oliver Blume said in a statement. "In doing so, we combine a clear commitment to Europe as an industrial location, a European industrial policy and ultimately act in the interests of European customers."

The project, dubbed ID.1, comes as Chinese rivals, some of which command a 30% cost advantage over Western peers, are muscling into Europe to grab market share and attack established carmakers on their home turf.

Volkswagen said it would rely on a high degree of localisation in Europe for the project, which would also help to cut transport routes of components, thereby reducing emissions.

Last week Volkswagen said the European industry had between two and three years to prepare for the competitive threat, warning that the sector's survival was otherwise at risk.

As part of those efforts, Volkswagen is currently implementing 10 billion euros worth of savings and cost-cutting measures at its namesake brand by 2026.

Volkswagen brand boss Thomas Schaefer said that despite the low-price point, the planned entry-level model would set standards in terms of technology, design and quality, adding this had become more challenging due to higher costs for energy, raw materials and labour.

"One thing is clear: electromobility from Europe for Europe can only succeed with political support and competitive framework conditions," Schaefer said.

($1 = 0.9197 euro)

(Reporting by Christoph Steitz and Christina Amann; Editing by David Holmes and Jonathan Oatis)