Volkswagen’s Newest Electric Car: Affordable, but Not in the U.S.
A new, compact electric hatchback from Volkswagen, slated for release next year, will cost approximately $27,000. Another model from the automaker, coming in 2027 and incorporating Rivian software, will start at about $21,000. However, neither of these affordable electric vehicles will be available in the United States.
The shrinking number of small cars on the American market over the past few years is a contributing factor to rising vehicle prices. The average price of a new car recently approached $50,000. In 2019, 45 models under $25,000 were available in the U.S. market, but by 2024, that number had dwindled to just 11. Further increases in car prices could result from new tariffs.
Size plays a critical role in the cost of EVs, as the battery is the most expensive component. Smaller cars can utilize smaller, less costly batteries. Offering more affordable EV options would also benefit drivers financially, as electric vehicles are cheaper to operate due to lower charging costs compared to gasoline and reduced maintenance needs.
The ID EVERY1, Volkswagen’s new €20,000 car, was designed with cost-effectiveness in mind. “The car is super minimalistic—we have no decoration,” says Lorenzo Oujeili, a Volkswagen designer who worked on the concept for the new model. “The car has been [envisioned] since day one to be a car for everyone, and really cheap to build.”
This aligns with Volkswagen’s historical focus on producing simple, affordable cars like the Beetle. Part of achieving this affordability involved making the cars smaller. There’s still clear demand for small cars in Europe, partly due to infrastructure. The tiny roads in older cities aren’t designed for large SUVs and trucks.
European consumers also value the practicality of smaller cars. The ID 2all, a hatchback set to launch in 2026, is designed as a commuter vehicle. “It’s optimized in size and usability,” says designer Stefan Wallberg. “You have a lot of space inside. When you go to work, you don’t need more than this for daily use.” Cost is another key consideration for consumers. “We want to give the maximum that they can get for their money,” he says. The design team carefully considered what drivers want, including a return to physical knobs instead of touchscreens.
Automakers suggest that American consumers have little interest in small cars. Indeed, the new VW models might be a hard sell to those accustomed to larger SUVs or trucks. (The ID Every1’s battery range is also relatively small, around 155 miles—enough for daily commutes but potentially challenging to market in the U.S.) However, sales of smaller vehicles began to rise last year as car buyers sought lower monthly payments. Compact car sales increased by 16% by the end of the year. Increased tariffs and a potential recession could further fuel demand for smaller cars.
Car companies have concentrated on large vehicles in the U.S. for decades. Ivan Drury, an automotive analyst at Edmunds, says, “It’s been very difficult for automakers because the argument to make vehicles smaller, which typically is less profitable to some degree, has never been really incentivized unless there’s some type of economic downturn.”
Drury continues, “That’s really the only time that we see people say, ‘Oh, OK, well, I’m going to compromise,’ and really get down to downsizing.”
On the other hand, greater investment by automakers in designing and marketing appealing small cars for the American market could have generated more demand. Drury notes, “It’s like chicken and egg: If we build it, will they come? Or, if we give a half-hearted attempt, as we’ve seen in some instances in the past, I guess they’re never going to come, will they?”
GM, which sells small EVs in China—like the $4,000 Wuling Hongguang Mini EV, through its joint venture SGMW—takes a different approach in global markets. Sigal Cordeiro, VP, Global Planning & Customer Research at GM, says, “Europe and South America, for example, have a history of embracing more space-efficient vehicles while China has a younger average new car buyer that places high importance in second row roominess. U.S. customers seek flexibility, including space for people and things, as well as longer range and safety and convenience features. GM is focused on meeting customer needs globally, while making EVs more affordable.” (The brand offers the Chevrolet Equinox EV at $30,000, but ended production of the smaller and cheaper Bolt EV in 2023; a new version of the Bolt is coming back this year because there was demand for it.)
Small cars offer additional advantages beyond cost. They are safer for pedestrians, require less space in cities, and have a smaller environmental footprint during manufacturing. They also weigh less, contributing less to tire pollution. However, federal and state incentives for EVs haven’t prioritized smaller sizes.
For automakers, designing small cars can be more challenging than designing larger ones. “All of the engineering design is really tricky to condense everything you need into something compact,” says Oujeili. This applies aesthetically, in terms of proportions, and functionally, in maximizing storage space in a small area.
Bringing a car designed for a market like Europe or China to the U.S. isn’t simple, according to Drury. Additional expenses include marketing, training dealers, and ensuring repair personnel have the proper tools. Tariffs are another factor, explaining the absence of $10,000 electric cars from China in the U.S. In some cases, cars may need modifications to meet American safety regulations. As a result, automakers are unlikely to introduce their small EVs to the American market unless they’re confident of strong sales. Therefore, if you want to drive one of the new VW cars, you’ll need to move to Europe.
