Volkswagen aims to become the global leader in plug-in electrified vehicle (PEV) sales, with China providing the marketplace for the German automaker to become Tesla-competitive.

VW’s brand chief Herbert Diess says he’s confident it will reach its target of selling one million PEVs per year in 2025 and that the I.D. family of vehicles will position the VW brand to take the mantle away from Tesla.

Volkswagen I.D. cars will be able to match what Tesla models can do and “in some cases more,” Diess said.

The German automaker is ready to offer them at a price lower than the upcoming Tesla Model 3.

VW and other global automakers are carefully watching what Tesla will be able to do with Model 3 production and sales. CEO Elon Musk has targeted hitting one million total sales of all its models by 2020.

China is a vital market for Tesla’s future, with the company making $1 billion there in revenue last year. Musk has said that China will someday become the electric automaker’s top market.

“Naturally Tesla comes from a high price positioning originally, but it’s moving downmarket and we have the clear goal with our new architecture to put a stop to Tesla,” Diess said.

Along with its new modular electric drive (MEB) architecture, manufacturing locally could be a real differential for VW.

One important way that VW will lower its prices is through its existing role in China through its joint venture (JV) relationships. The German automaker now leads the world in passenger car sales with many of these vehicles built in China. JVs with First Auto Works and SAIC Motor were able to build three million vehicles in China last year in nine production plants.

Diess said that the JVs offer the scale needed to bring down the sales price and beat the Model 3.

“We will enter with models that are below even 30,000 euros or dollars, as well as some that certainly are positioned far higher, and clearly want to be market leader,” Diess said at the brand’s annual press conference on Friday.

The ID Crozz is expected to lead the way for VW in China starting in 2020.

The German automaker released details on the I.D. Crozz crossover concept during Auto Shanghai 2017 in April. VW is selling the I.D. Crozz as having the latest in EV technology combined with the interior space and convenience of a crossover built on the modular electric drive (MEB) platform.

The I.D. Crozz followed the I.D. sedan and I.D. Buzz microbus as the first three concepts in the EV lineup.

Tesla has no Chinese manufacturing partner or local plant. China tech giant Tencent recently acquired a 5 percent stake in Tesla, which may help the automaker’s influence in the country.

Musk had a meeting last week with Chinese vice premier Wang Yang, an indication Tesla is looking into options such as forming a government-backed JV with a Chinese automaker. However, the company did release a statement denying it will be going into business with the Chinese government.

“Tesla is deeply committed to the Chinese market, however these rumors are not true,” the company said.

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Committing to the China market doesn’t guarantee profitable growth for these automakers.

The Chinese plug-in electrified vehicle market has seen some softening this year with government subsidies being reduced. MIT Technology Review reported that BYD, the world’s leading seller of battery electric and plug-in hybrid vehicles last year, saw its sales drop 34% during the last quarter.

BYD had seen double-digit sales growth in recent years, helping China to take the global lead in EV sales. The company is now looking at how to cut costs in producing cars without cutting into profits.

Automotive News