Audi Plans Electric Crossover to Take on Tesla in U.S.

Audi AG plans to roll out an electric-powered crossover in 2017 to challenge Tesla Motors Inc. for wealthy, environmentally conscious consumers.

The new model will mark Audi’s first mainstream all-electric vehicle and is part of a push to roll out greener cars. Next year, Audi will introduce a battery-powered variant of the $115,900 R8 sports car, which will follow the start of deliveries of the plug-in hybrid A3 E-Tron hatchback this year.

“Our engineers are working” on an electric car that will meet U.S. regulations for a zero-emission vehicle, Chief Executive Officer Rupert Stadler said to Bloomberg at a meeting in Berlin. “It’s probably going to be a crossover, but development work is still ongoing.”

Tesla has emerged as a viable competitor to German auto manufacturers in the luxury-car space. The electric-vehicle maker, led by billionaire Elon Musk, plans to start deliveries of the Model X sport-utility vehicle in 2015. The brand had the top score in this year’s Consumer Reports owner-satisfaction survey. Audi ranked third after Porsche, while Mercedes-Benz was fourth.

Audi’s parent, Volkswagen AG, rose 0.4 percent to 184.50 euros in Frankfurt at the close. The stock has slumped 9.6 percent this year, valuing the company at about 86.8 billion euros ($106.9 billion). Tesla fell 0.9 percent to $229.30, for a market value of about $28.8 billion.

Growth Goals

Audi, the world’s second-largest maker of luxury vehicles, expects to sell more than 1.7 million cars this year for the first time. The Ingolstadt-based unit aims to surpass No. 1 BMW in sales by the end of the decade and expanding in the U.S. is a key part of that.

Deliveries to American buyers have climbed 15 percent so far in 2014 and have already beat the record of 158,061 cars sold last year. Audi is targeting further expansion as it seeks to catch up to BMW and Mercedes in the country.

“Our growth in the U.S. is bound to continue,” said Stadler. “We’re setting our sights on the 200,000 mark and once we’ve reached that we’ll look at the 300,000 mark at some point, whether we get there in 2020, 2022 or 2023, I don’t really mind.”

Cleaner running cars are important to Audi’s strategy as fuel efficiency has become a sign of cutting-edge technology. That image is critical for luxury brands to justify higher prices than mass-market competitors, even if demand for electric cars are tepid. After starting deliveries of the 37,900-euro ($46,700) A3 E-Tron earlier this year, Audi will add one new plug-in hybrid vehicle every year.

Audi Spending

The new crossover -- a body style that typically combines elements of cars and SUVs -- marks a change of tack by Audi, which had balked at introducing dedicated electric vehicles unlike BMW, which makes the battery-powerd i3 city car. Audi instead focused largely on developing electric versions of existing models to keep a lid on costs.

The Volkswagen unit is spending 22 billion euros by 2018 on expanding manufacturing capacity and developing new vehicles. It plans to expand its lineup to more than 60 vehicles from about 50 now.

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