VW’s newest electric car will only cost $21,000. But you can’t buy it in the U.S.

[ResidentialBusiness]

A cute new electric hatchback from Volkswagen, out next year, will cost €25,000, or around $27,000. Another tiny VW model coming in 2027, with Rivian software inside, will start at only €20,000. But neither will be available in the U.S.

The number of small cars on the American market shrank significantly over the past several years—and that’s one reason that cars are also more expensive, with the average price jumping to nearly $50,000 last month. In 2019, there were 45 models on the U.S. market that cost less than $25,000. By 2024, there were only 11. Trump’s new tariffs could add another $12,000 to new car prices.

ID Every1 [Image: Volkswagen]

Size is especially relevant to the cost of EVs, since the battery is the most expensive part of the vehicle, and smaller cars can use smaller batteries. If more options existed for cheap EVs, making them accessible to more people, the drivers who bought them would get another financial benefit: EVs are also cheaper to operate, both because it’s cheaper to charge with electricity than fuel with gas and because EVs have fewer parts, so they need less maintenance.

The ID EVERY1, VW’s new €20,000 car, was designed to cost as little as possible to make. “The car is super minimalistic—we have no decoration,” says Lorenzo Oujeili, a designer at Volkswagen 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.”

ID Every1 [Image: Volkswagen]

For Volkswagen, it’s a return to the company’s roots of making simple, affordable cars like the Beetle. And part of achieving affordability meant making cars tinier. In Europe, there’s still clear demand for small cars. One obvious reason is the infrastructure: Tiny roads in centuries-old cities aren’t designed for massive SUVs and trucks.

European consumers also appreciate the practicality of smaller cars. The ID 2all, VW’s hatchback that will come out in 2026, is meant as a commuter car. “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.” The cost also matters to consumers. “We want to give the maximum that they can get for their money,” he says. (The low cost doesn’t mean that designers didn’t carefully consider what drivers really want, including a return to physical knobs instead of touchscreens.)

ID 2all [Image: Volkswagen]

Automakers say American consumers don’t want small cars—and it’s true that the new VW models would probably be a harder sell to people who are used to much larger SUVs or trucks. (The battery range of the new ID Every1 is also small, at only around 155 miles—again, more than enough for a daily commute, but a challenge to sell to Americans.) Still, sales of smaller vehicles started to grow in the U.S. last year, as car buyers aimed for smaller monthly payments. By the end of the year, compact car sales had jumped up 16%. If tariffs push car prices higher and possibly trigger a recession, it’s likely that demand for smaller cars could grow more.

ID 2all [Image: Volkswagen]

Car companies have focused on large cars in the U.S. for decades. “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,” says Ivan Drury, an automotive analyst at Edmunds. “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.”

ID 2all [Image: Volkswagen]

On the other hand, if automakers had put effort into designing and marketing desirable small cars for the American market, there might have been more demand. “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?” says Drury.

GM, which sells small EVs in China—like the adorable $4,000 Wuling Hongguang Mini EV, through its joint venture SGMW—says it approaches global markets differently. “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,” says Sigal Cordeiro, VP, Global Planning & Customer Research at GM. “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.)

Beyond cost, there are other advantages to small cars. They’re safer for pedestrians. They take up less room in cities. The environmental impact of manufacturing them is smaller. Because they weigh less, they create less tire pollution when they drive. But federal and state incentives for EVs haven’t given any priority to smaller sizes.

For automakers, small cars are actually harder to design than larger ones. “All of the engineering design is really tricky to condense everything you need into something compact,” says Oujeili. That’s true both aesthetically—how to handle the proportions, for example—and in terms of function, including how to squeeze the maximum amount of storage space into a tiny footprint.

Even after companies invest in a new car design for one market, like Europe or China, it’s not simple to bring the same car to the U.S., says Drury. Setting up everything else—from marketing and training dealers to making sure that repair people have the right tools—is another major expense. Tariffs—both those that existed before Trump’s current term, and those that are being added now—are another factor (and why Americans can’t buy $10,000 electric cars from China). In some cases, cars designed for another market might also need to make changes to meet American safety regulations. All of this means that automakers aren’t likely to bring their small EVs to the American market unless they’re certain that they’ll sell well—and if you want to drive one of the new VW cars, you’ll have to move to Europe.

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