Audi Moves Ambitiously to Challenge Tesla Motors

<b class="credit">Audi</b>Audi's new R8 sports car will have an all-electric version with about 280 miles of range. More electric Audis with a similar range will follow over the next couple of years.
AudiAudi's new R8 sports car will have an all-electric version with about 280 miles of range. More electric Audis with a similar range will follow over the next couple of years.

Upstart Silicon Valley automaker Tesla Motors (TSLA) hasn't disrupted the global auto business -- at least, not yet -- but it has gotten the attention of the German luxury-car giants in a big way.

With an average transaction price close to $100,000, Tesla's Model S sedan competes squarely with big gas-powered sedans from Audi and the other German luxury brands. And with over 30,000 Teslas sold in 2014, it's stealing quite a few sales that might have otherwise gone to the Germans. But recently, it has become clear that Audi plans to fight back -- in a big way.

Audi's Electric R8 Will Lead to Much Bigger Things

Rival BMW (BAMXF) has already made moves in Tesla's direction. Its i8 sports car, which features a plug-in hybrid drivetrain in a lightweight carbon-fiber chassis, has already sold far beyond expectations -- despite a price tag of almost $140,000. And Mercedes-Benz has launched a range of plug-in hybrids, along with a limited self-driving system that beat Tesla's vaunted "autopilot" to market.

%VIRTUAL-WSSCourseInline-947%But more than the others, it's Audi and its parent company Volkswagen Group (VLKAY) that are gearing up to take on Tesla Motors at its own game.

The latest version of Audi's R8 sports car will be offered in a fully electric "e-tron" version. It'll have a Tesla-like range of about 280 miles, Audi says, and Tesla-like acceleration, too: 0-62 mph in just 3.9 seconds. And Audi says that its Combined Charging System, which uses both direct and alternating current, can fully recharge the R8 e-tron in "significantly less than two hours."

While some R8 e-trons will be sold to customers (likely at a very steep price), Audi says that it's mainly meant for testing: The company has much bigger plans for its electric-drive system.

An Audi SUV to Take on Tesla's Model X

The details aren't yet clear, but this much is: Audi plans to release an all-electric model for 2017 that will have similar range to the R8 e-tron -- designed as a mass-market product.

As Audi said in its news release announcing the R8 e-tron, "Audi uses the electrical high-performance sports car primarily as a mobile high-tech laboratory. Accordingly, the findings from the R8 e-tron help in creating a vehicle with a sedan character."

So what is a "vehicle with a sedan character"? At various times over the last few years, Audi has hinted at both a sedan and a crossover SUV powered by this system. Back in December, Audi CEO Rupert Stadler told Bloomberg that the vehicle is "probably going to be a crossover," presumably aimed at Tesla's upcoming Model X SUV.

But it's possible that Audi will decide to build both a crossover and a sedan. It's also possible that Audi's corporate sibling Porsche will get an electric sedan: A report in Germany's "Auto Motor und Sport" suggested that a long-planned Porsche midsize sedan will arrive in electric-only form in 2018 or 2019.

A Lot of New Choices Will Arrive at Dealers Soon

These new Audis are unlikely to put Tesla out of business. But they will give Audi dealers a way to retain loyal customers tempted by the Teslas -- and they'll give Audi some breathing space as fuel-economy and pollution regulations in the U.S., Europe and China continue to tighten.

For customers, they'll also expand the range of choices. Right now, the options for a buyer wanting a battery electric car are limited. That limited choice, plus the limited number of recharging stations around the U.S., have kept electric cars from escaping "niche product" status.

But now, with more automakers jumping into the battery-electric market, that could start to change. If Audi's new electrics turn out to sell well, then more automakers will follow -- and consumers intrigued by electric-car technology will have more choices than ever.

Motley Fool contributor John Rosevear has no position in any stocks mentioned. The Motley Fool recommends Tesla Motors. The Motley Fool owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days.