I'm not sure VW will react - they'll either come out fighting from day 1 of the GTI with high spec, low RRP or they'll be wondering why even a £2k deposit contribution doesn't place them in contention.
Remember this is going to be a harsh market 2020/2021 - they can't loss lead, there just isn't the money there, they are bleeding already with covid, id3 problems and desielgate...
The hot hatch might be a small part of their business, but i think they are going to get spanked - partly their own fault due to a superiority complex from the Mk7 years.