Volkswagen is about to do what Tesla did not during its recent investor day: show off an affordable electric vehicle for the masses.

The German vehicle manufacturer plans to preview a model with a start price below €25,000 ($26,600). EV blogs and enthusiast publications are expecting to get a first glimpse of a compact hatchback that will start selling within a few years.

VW urgently needs a people’s car for the electric age. It has struggled to keep pace with Tesla’s EVs and needs to halt sales declines in China, where domestic manufacturers led by BYD have stepped up their game. An electric model that comes even remotely close to the success of the Golf — VW has produced more than 35 million units — would do wonders for the brand.

The event adds to what has been a busy week for Europe’s biggest carmaker. On Monday, VW unveiled plans for its first battery plant away from home. While the precise amount the company will plough into the factory in St Thomas, Ontario, is still unclear, Canada’s industry minister said it will be the largest single automotive investment in the country’s history.

On Tuesday, VW increased its rolling five-year spending plan by 13 per cent to €180 billion, with more than two thirds going to software and EVs.

This “will be a decisive year for executing strategic goals and accelerating progress across the group,” chief executive Oliver Blume said.

For all of Tesla’s dominance in the early days of EVs, Elon Musk has left open a window of opportunity for incumbents looking to catch up. The company last launched a new passenger vehicle — the Model Y — in 2020, and it has made only minor cosmetic changes to the Model 3 since it went into production almost six years ago. The sedan only briefly sold at the $35,000 price point its chief executive promised, and he’s suggested Tesla has been working on and off towards a $25,000 model first teased in 2020.

Building an electric car for the masses sounds like a no-brainer, but it has thus far been the industry’s white whale. With batteries stubbornly expensive and EV production numbers still relatively small, manufacturers have yet to find a way to field affordable electric models aside from short-range mini models in China that are unlikely to catch on in other markets.

VW has sat out the mini segment in China and paid the price with respect to market share. While the low and high ends of the world’s largest auto market are increasingly electrified, China’s middle class is still mostly driving gas-guzzlers. VW has excelled in these segments with its combustion models and can’t afford to lose these customers when they come around to plug-in cars.

VW became a global behemoth by way of the Beetle, the two-door that sold more than 23 million units and epitomised Germany’s post-war economic renaissance. The company’s diesel-emissions scandal left it with little choice but to aggressively switch to batteries, but its ID family of EVs have not caught on as quickly as hoped.

The vehicles initially struggled because of buggy software and remain priced well above the €31,000 Golf. The most comparable model, the compact ID.3, starts at €43,995. Shipments for VW’s most popular EV in Europe last year — the €46,335 ID.4 compact SUV — were less than half the Model Y and even further behind the Golf.

Unfortunately for VW, the age of the hatchback appears to be ending right along with the era of combustion. The Golf’s 14-year reign as Europe’s best-selling car ceased in 2022, when shipments slid 14 per cent. The pressure is on for VW to come up with a worthy electric successor.

Updated: March 17, 2023, 4:00 AM