The Telegraph (UK) reports that Volkswagen is cancelling its long-running project to develop a super-economy car: the “1-liter” car. The name comes from the design point of consuming 1 liter of fuel per 100 kilometers.

First revealed to the public at the VW annual general meeting in 2002, the prototype then consumed just 0.89 liters of diesel per 100 kilometers (264 mpg) on a demonstration drive.

The 1-liter car uses a 0.3-liter, one-cylinder diesel engine, centrally positioned in front of the rear axle and combined with an automated direct shift gearbox. The crankcase and cylinder head of the engine are of an aluminium monoblock construction. The naturally aspirated, direct-injection diesel engine generates 6.3 kW (8.44 hp) at 4,000 rpm, with a top speed of 120 km/h (75 mph). Since the vehicle weights just 290 kg, it is “astonishingly lively”.

The prototype was a testbed for a number of different concepts that VW had hoped it could commercialize in a new family of vehicles, ranging from the ultra-economical, through the low-cost everyday touring vehicle, to the high-performance sports supercar.

But Volkswagen now says that it could not produce an ultra-economical car for less than €20,000 ($25,900)—too expensive for its target market.

The VW Lupo 3L TDI diesel, the company’s most fuel-efficient car, consumes 3 liters of fuel (“3L”) per 100 km (78.4 mpg US) and starts at €15,100 ($19,500).

With a drop in profits last year of 31%, VW is preparing to cut €4 billion ($5.2 billion) in costs by the end of 2005.