The ultra-efficient Volkswagen Golf Bluemotion Twindrive plug-in hybrid will go on sale in 2014 just after the identically powered Audi E-tron is released.
VW Group engineering boss Ulrich Hackenberg confirmed that the car will be capable of 188mpg and have CO2 emissions of around 35g/km identical figures to the E-tron.
Despite the impressive economy figures, it will accelerate from 0-62mph in just 7.5 seconds and have a top speed of 81mph on electric power alone.
The engine is a modified version of the 148bhp 1.4-litre TSI petrol, which is combined with an electric motor to produce a total output of 201bhp. The power is sent to the wheels through a six-speed dual-clutch semi-automatic gearbox.
It will be able to run on pure electric, petrol power, or a combination of both.
Hackenberg also confirmed that the two-cylinder diesel engine in the 314mpg Volkswagen XL1 could be used in the Up city car. However, the company has yet to decide whether it would be a financially viable proposition.
By Tom Webster