VW will fit the two-cylinder plug-in hybrid drivetrain of the radical XL1 into the Up city car.

The XL1 is powered by a two-cylinder, 47bhp, TDI engine backed up by a 27bhp electric motor and 5.5kWh battery pack. Volkswagen sources say that the super-frugal Up may get an official EU economy rating of nearly 1-litre/100km — a likely 250mpg on the NEDC test cycle.

With the standard Up weighing just 925kg - only 130kg heavier than the carbonfibre bodied XL1 - the Up hybrid is likely to come in under 1000kg. This and the new drivetrain should ensure that the Up Hybrid has the best real-world economy of any conventional car. Rough estimates suggest that over 90mpg should be possible in ideal conditions.

This new hybrid system has an electric motor and a dedicated clutch that are fitted between the 800cc two-cylinder diesel engine and the 7-speed DSG gearbox. The lithium-ion battery will be mounted in the rear of the Up and can be recharged when the car is braking and coasting.

In pure electric mode - which should offer a range of around 30 miles - the engine’s clutch disengages and the motor shuts down. The engine is re-started by ‘pulse starting’ where the electric motor spins up to high speed, accelerating the idled engine to the revolving speed required for smooth starting.

The Up hybrid is still at the engineering stage and is not expected to go on sale for another 18 months. VW sources have given no clues as to the likely pricing of the Up Hybrid.