Volkswagen's Tesla fighter to cost just $30K

Volkswagen Group is developing an entry-level pure-electric rival for the Tesla Model 3 that will costs less than €20,000 ($A31,000), a source close to the German car-making giant has revealed.

According to the insider, speaking to Automotive News, the low-priced Tesla competitor is being secretly developed under the codename "MEB Entry" and has been slated for a 200,000-unit annual production run.

The AN source said the ambitious EV plan, set to be discussed at the VW Group's upcoming supervisory board meeting in November 16, could include teaming up with battery manufacturer SK Innovation and forming a potential alliance with Ford.

The aim of the high-level discussions are to transform the Volkswagen Group's standing as Europe's biggest mass producer of combustion-engine vehicles to the largest maker of electric cars.

Volkswagen and Ford have already stated their intention to team up to produce a range of light commercial vehicles, which could lead to the VW Amarok and Ford Ranger being co-developed.

Initially, instead of co-developing the MEB Entry electric car with Ford, Volkswagen hopes the Blue Oval will build the current T6 Transporter van in its Turkish factory to free up production capacity in VW's native Germany.

Shifting the T6 van production line will make room for the new I.D. Buzz van on Volkswagen’s Hanover production line.

Meanwhile, Volkswagen's Emden and Zwickau facilities are also planned to be converted into specialist pure-electric vehicle production plants.

Keeping electric car making in Germany will help safeguard around 600,000 German industrial jobs at manufacturing facilities and suppliers.

As well as sharing production facilities, if the deal is approved by the board meeting later this week VW and Ford could form a technical alliance to develop a driverless pure-electric vehicle.

This week's VW Group board meeting will also address how the German car-maker’s brands plan to realise the EU's mandate for a 35 per cent vehicle emissions cut by 2030.

Currently Volkswagen says it's outlined plans for a 30 per cent reduction. Rapidly ramping up the number of battery-powered vehicles it produces is seen as the quickest and easiest way to meet the strict targets.

Despite the switch to electric cars, 14,000 jobs at Volkswagen are expected to go, in part because cars like the MEB Entry will be quicker and easier to build than a traditional internal combustion vehicle.

As well as the cheap Tesla-fighter, the insider said that Volkswagen is also readying another pure-electric car called the I.D. Aero — a Passat-sized medium sedan to sit above the planned I.D. hatch that has been confirmed to go on sale in Europe in November 2019.

If that proves correct, the new electric sedan will join the battery-powered I.D. hatch, Crozz SUV, Buzz (people-mover) and the Buzz Cargo delivery van.

All are expected to be on sale by 2022.

Locally, Volkswagen has confirmed it will launch its first battery-electric vehicle in the Australian market in 2021.