What Volkswagen Plans for China

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Volkswagen currently dominates the passenger car volume market, and now the company is turning its sights on China as part of its plan to grow sales in electric vehicles (EVs). Overall, management is confident that it can become a global leader in electric car sales, but it will still have to deal with Tesla Inc. (NASDAQ: TSLA) in the meantime.

Management plans to achieve sales of roughly 1 million battery driven vehicles annually by the year 2025. Also Volkswagen thinks its new I.D. family of vehicles can pass up Tesla in the EV market on a price-point basis.

China is currently the largest market for electric cars, and it may just give Volkswagen the push that it needs to pass Tesla, by offering mass-market battery-powered vehicles at a lower price than Tesla’s upcoming Model 3.

Tesla currently sells the Model S sedan and Model X crossover. The Model 3 will be unveiled in July, and Elon Musk expects to move into the mainstream with this model. In fact, Musk is targeting sales for the Model 3 to be 1 million by 2020.

However, Volkswagen has a plan to undercut Tesla sales. VW plans to enter China with models that are priced below $30,000 — the expected price of the Model 3 is $35,000. Also Tesla has no Chinese manufacturer, which could cause more upward pricing pressure.

VW has signed off on three battery models based on its new modular electric-vehicle architecture. The cars will come to market in 2020 and will be a Golf-sized hatchback and two sport utility vehicles (SUVs), one the size of a Tiguan and the other the size of the Tiguan Allspace. These models will be the first of I.D. family.

Shares of Tesla were trading up 4% at $319.59 on Tuesday, with a consensus analyst price target of $268.71 and a 52-week trading range of $178.19 to $327.66.