Volkswagen has suspended development of the electric version of the Golf model at the company's headquarters in Wolfsburg, Germany.
The pressure to cut costs at the German automotive giant has also affected one of the company's most important future models, the electric Golf.
"I know what the Golf represents for Volkswagen and Wolfsburg. Therefore, this decision was not at all easy for us. We simply cannot afford this project financially at this moment," said Thomas Schafer, head of Volkswagen Group brands.
This decision comes at a time when Europe's largest car manufacturer is facing severe financial pressure and is continuing plans to cut 100 jobs and close up to four factories in Germany.
Volkswagen has reported its biggest quarterly loss in more than a decade and has again called on stakeholders, including powerful unions, to support the company's restructuring program.
The Wolfsburg plant, which symbolizes the tradition of the German automotive industry, is facing a 300 million euro shortfall in meeting cost-cutting targets. It is not among the plants at risk of closure, but Volkswagen's operations in Germany are facing increasing pressure to save.