Volkswagen is pushing ahead with plans to boost the performance of its two-seat XL1 with a highly strung two-cylinder petrol engine sourced from the Ducati 1199 Panigale superbike, high-ranking insiders at the German car maker have confirmed.

Speaking on the sidelines of the unveiling of the new e-Golf in Wolfsburg this week, Volkswagen’s head of R&D, Hans-Jakob Neusser, revealed engineering, development and testing of the Ducati-engined XL1 is well underway. “Yes, we are working on it internally. It is a very special project,” he told Autocar.

Neusser declined to confirm when the new car would be revealed, although Volkswagen sources suggest the XLR, as the powered-up XL1 is expected to be named, could make an appearance at the 2014 Geneva motor show prior to being placed in to limited production.

In standard guise, the XL1 runs a rear-mounted plug-in diesel-electric hybrid driveline developing a combined system output of 68bhp and 103lb ft of torque.

Plans are to supplant it with the Panigale’s 1.2-litre two-cylinder petrol engine, which delivers 187bhp at 10,750rpm and 91lb ft of torque at 9000rpm.

The XLR had been previously revealed by Volkswagen board chairman Ferdinand Piech, during a lecture at the Vienna University of Technology at the end of September.