What's the point of putting a VW drivetrain under the thing. H*ll, any design school kid out of CA could have done what KTM did with this. Not impressed at all. They would be better off developing the Polaris/KTM sport quad ideas....
There's two big points to using a VW/Audi (or Honda, Toyota, Ford, what-have-you) motor in something like this: emissions compliance and availability. The major maufacturers would have already done all the heavy lifting in terms of development and government certification, and it's far more practical to buy a motor off the shelf than to spend what would be needed for an in-house creation, especially for such a limited production run (too limited, IMHO).
Best example: the Toyota motor in the Lotus Elise. It wouldn't be over here otherwise.
The DOT gave the green light on the Elise even though it's not in compliance with the "bumper" rules. The motor in this case wasn't the reason it's sold in the US.
As for the KTM- They are in the motorcycle business. They have R&D guys. They have engineers. Why not build it all in house? They are only building a few hundred a year. Well, if I were the R&D guys I would have sourced the KR v-4 KTM motor and dropped it in the car and see what happens. The KTM GP motor was worth about 230hp and if you super charge it you could easily break the 300hp mark.