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Volkswagen Is Coming for Tesla's Throne

Volkswagen is slated to debut the pre-production concept of its ID. AERO electric limousine.
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The fight for the future begins on Monday.

Volkswagen  (VWAGY)  is launching a new weapon in its war with Tesla  (TSLA)  for world electric vehicle domination.

The German automaker is slated to digitally debut the pre-production concept of its ID. AERO, its first fully-electric limousine for the Chinese automobile market, on June 27.

The four-door vehicle, which Volkswagen described as "the future model for the upper-middle class in China," is expected to go on sale in the world's largest automotive market in the second half of 2023.

The corresponding production model for the North American and European market will be presented in 2023. 

'I Like it Very Much'

The model was initially scheduled to debut in China in April, but those plans were shelved after a flare-up of covid-19 cases sparked the postponement of the Beijing Auto Show.

"The sketch looks absolutely COOL! I like it very much. Hope the real thing is not a disappointment such as the real was! The sketches of the were great but the real thing..... not so much," read one tweet, referring to the company's electric van.

"VW sketches always look better than the reality, but this does look good," one person tweeted

Volkswagen will begin production of the series version of the ID. AERO for the European and North American automobile market at the plant in Emden, Germany. 

The ID. series is Volkswagen's family of battery electric cars built on the modular electric-drive toolkit, or MEB, platform. 

'By 2025 We Are First'

CEO Herbert Diess has made no secret of his desire to beat out Tesla as the top electric vehicle company, declaring in May that "I would still see a chance that by 2025 we are first. At least second.”

Both companies have a lot at stake in China.

As of last year, electric vehicles accounted for almost 13.3% of that market and EV sales in China nearly tripled to 3.4 million in 2021.

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In other minutes, more electric cars were sold in 2021 in China alone than were sold in the entire world in 2020.

China is also Volkswagen’s biggest customer, accounting for roughly 40% of sales.

Last year, Volkswagen Group China, together with its Chinese joint ventures, delivered 3.3 million vehicles in Mainland China and Hong Kong. It is the largest brand in China by sales.

Tesla sold around 320,000 vehicles in China in 2021.

Both companies have had setbacks in China.

Lockdowns and More 

Tesla had to close its Shanghai factory earlier this year due to strict covid-19 lockdown rules. 

Bloomberg reported that the company is preparing to shut down the facility again for a few weeks in order to upgrade the factory to a production capacity of 21,000 electric vehicles per week.

Tesla has been also contending with suspicion from some Chinese officials who are concerned the company's vehicles could be used for spying.

Reuters reported that Tesla cars will be prohibited from entering the Chinese coastal district of Beidaihe, site of a secretive annual summer party leadership conclave, for at least two months starting on July 1.

Tesla drivers were also stopped from using certain roads in Chengdu earlier this month when President Xi Jinping was visiting the metropolis in southwestern China.

On the Ground

Meanwhile, the Germany government recently declined Volkswagen's request to renew risk insurance for the car maker’s operations in China due to the country's treatment of the Muslim Uyghur minority.

The company did not immediately have a statement about the decision, but Diess defended Volkswagen's presence in the region, telling CBS’s 60 Minutes in April he’s “absolutely sure” there’s no forced labor at VW’s plant, and that locals “are much better off” if the company stays put. 

And then there are always other companies looking for their piece of the action.

German auto manufacturer BMW undefined recently opened a new $2.2 billion factory in in the northeastern city of Shenyang, its third plant in China.