Wolfsburg, Germany (dpa) – Germany’s Volkswagen is designing a petrol-electric hybrid as Europe’s answer to Toyota’s best-selling Prius, the Autobild car gazette of Germany is reporting.

The move is urgent after VW admitted last year to cheating on diesel emissions tests, giving the lie to its claims of environmental virtue. A successful hybrid might salvage the company’s battered reputation.

Like the Prius, the XL3 is being designed from the outset as a hybrid, with a body shape quite different from its non-hybrid relatives.

The company’s previous plug-ins were adaptations of VW’s popular Golf five-door hatchback, the smaller Up runabout and the Passat family saloon.

The new hybrid would symbolize a fresh start for the beleaguered manufacturer, said the report.

Sources said the XL3 takes styling cues from the front end of the attention-grabbing XL1 prototype. This cigar-shaped two-seater with a tiny diesel engine was billed by VW on introduction in 2011 as the world’s most fuel-efficient car.

The XL1 was aimed at a different market, with production limited to 250 cars. Each XL1 costs 100,000 euros (around 110,000 dollars).

The XL3 will be much more down to earth and like the Prius it will only manage short distances on battery juice before the combustion engine kicks in to provide a power boost.

The Prius rival is likely to be powered by VW’s 1.4-litre turbocharged petrol engine with cylinder deactivation and 140 horsepower on demand. The electric motor adds another 45 horses.