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.