WOLFSBURG, Germany—Most electric vehicles produced so far have been high-end models that cost more than $50,000. However, for EVs to really take off and appeal to consumers, the auto industry needs to mass-produce cars that cost half that much. When that happens, it will be similar to the watershed moment when Ford Motor Co. launched the Model T back in 1908.

Volkswagen AG hopes history repeats itself with its just-announced ID.2all. The compact hatchback will cost approximately $27,000 when it debuts in 2025. It will be similar in size to a VW Golf, but priced like a Polo, VW’s entry-level car sold in Europe.

“The ID. 2all will be the first MEB (modular electric drive) vehicle with front-wheel drive,” says Kai Grünitz, member of the VW brand board of management responsible for development. “We are exploiting the great flexibility offered by our MEB platform and will set new standards in terms of technology and everyday usability with the [new vehicle].”