Key to VW’s affordable ID.1 is ‘where to build it’

At the annual media call 2024, Volkswagen brand CEO Thomas Schäfer unveiled more details on the upcoming €20,000 ID.1. The most affordable EV in the lineup will arrive in 2027. However, the biggest challenge will be deciding on the location of production.

All mainstream automakers focus on affordable EVs, which is critical to realizing the success of electrification, scaling up operations, and fencing off the Chinese competition. China hasn’t offered any models in the European city car segment yet, and neither has Tesla.

Schäfer told the media during the call that work on the codenamed ID.1 is “well underway.” “We’re already in the middle of it; we know what the car should look like,” he added while confirming the timeline of launching it in 2027.

Compensating for losses

So, ID.1 will follow the Polo-sized EV one year after ID.2, for which Volkswagen has formally denied rumors of delayed production. The latter is a rival to the Renault 5 E-Tech and Citroën ë-C3, benefitting from a headstart in the market launch. Both ID.1 and ID.2 must significantly boost the output of Volkswagen’s ID family. As EVs are eating away the profit margins in Wolfsburg, increased overall volume must compensate for these losses. For small cars, high volumes are always a condition of profitability.

To ensure the ID.1 hits the targeted retail price of €20,000, the place of production rather than the price of the battery pack will prove decisive. “This is extremely economically challenging,” Schäfer continued, calling this the “biggest challenge.” Volkswagen is expected to make a decision soon based on four scenarios.

Will Renault decide?

The French car makers illustrate how the regionality of production plays into the advantage of cheap EVs. The Renault Group can offer the updated version of the Dacia Spring at the same price point of €20,000 since it was built and imported from China. The backside of that strategy is that it’s not eligible for the French EV incentive, favoring EU production. Citroën was ahead of that game and makes the € 23,300 ë-C3, slated for €19,990 as of 2025 with a smaller battery pack, in Stellantis’ Trnava factory in Slovakia.

VW might eventually decide to build the ID.1 in Paris. Renault has confirmed that it’s pursuing negotiations with Volkswagen to collaborate on a budget EV, meaning the ID.1 might get a twin model under the badge Twingo. Joint production would be a logical solution to cut costs.

Schäfer also mentioned that the brand’s model strategy remains intact—despite the company navigating muddy waters and seeking savings worth €4 billion for 2024 as part of its restructuring program. By 2027, VW will launch 11 new EV models.