The concept is quite old. It was first presented to the public in '02 when Ferdinand Piech drove it to the stockholders meeting.

The model they are now considering to build is based on a variation of the concept, that they showed in 2011. If I remember right the first concept was not a hybrid but only powered by a diesel.

The car is said to go into production in a small series and to sell for about 50k€. I guess it has been pushed by Piech himself who is famous for pushing out complex engineering concepts to production even tough the company will loose money on every sold product. (See also Bugatti Veyron)

It's the third iteration of a prototype, though IIRC it was always billed as a prototype that could actually be produced or at least be very close: "Seriennahes Konzeptstudie".

http://en.wikipedia.org/wiki/Volkswagen_1-litre_car

http://de.wikipedia.org/wiki/Ein-Liter-Auto_von_VW

It says that they're planning a small production run of 100-1000, price expected in the € 30-50K range (not the $600 rumored), components are quite expensive, for example a carbon fibre body. My guess would be that they're limiting the production run because they're losing money even at those prices.

http://www.zeit.de/auto/2012-03/volkswagen-ein-liter-auto

On the other hand girlfriend's several year old Polo regularly gets 3L/100km, so around 78mpg. Every time we actually have to fuel up is a bit of a shock :-)

I found this clicking through their slideshow: "Another thing that has changed from past prototypes is that Volkswagen has confirmed that the XL1 will be produced and sold, though only in limited quantities. Sadly, there is no information on price yet, but the limited production probably means that it will be expensive."