The company expects diesel engines to become less prominent as emissions regulations tighten.
Volkswagen appears to have found a limit to its engine downsizing strategy, finding no tangible benefits below a liter of displacement.
Speaking at a recent launch event for the revised Golf, brand chief Herbert Diess reported that emissions actually "tend to go up" as engines get smaller, according to quotes published by The Telegraph.
The grim forecast does not signal any intention to move away from the company's popular 1.0-liter three-cylinder mill. In fact, the comments could be interpreted as a sign that the diminutive straight-three will become increasingly important.
The 1.0-liter family has expanded in recent years, evolving from a naturally-aspirated mill with 60-75 horsepower to a turbocharged powerplant with up to 114 horses in the Up! GTI. Engineers in 2015 previewed another leap for the EA211 architecture, combining an exhaust-driven turbocharger and an electric compressor to deliver an impressive 268 ponies.
Diess suggests the outlook for its current 1.6-liter diesel engine is not quite as rosy, as small oil burners are expected to increase in cost disproportionately as emissions regulations continue to tighten.
"Small diesels are just not economic," he said, arguing that decades of strong sales in Europe have been driven by "favorable tax regimes" rather than pure consumer preference.
Four major cities ranging from Mexico City to Paris have decided to ban diesel engines by 2025. By that time, VW expects to be far into its EV push with sales of electric vehicles potentially reaching the million mark annually.