Audi unveils e-tron, the latest model to challenge Tesla's luxury EV dominance

In a city where Teslas are a common sight — and just a short drive from the Fremont factory where Elon Musk's company is cranking out a record number of electric vehicles — Audi (NSU-DE) rolled out an all-electric SUV it hopes will cut into Tesla's dominance of the luxury EV market.

Audi's new e-tron, which hits the market next spring, has been heralded as a game changer by leaders of the German automaker. The carmaker chose to unveil it in Richmond, California, at the site of an old Ford plant, that is across the bay from San Francisco.

Audi is not disclosing the e-tron's range, since it has not been certified by the Environmental Protection Agency, but it's expected to be competitive with Tesla's vehicles, which all get more than 295 miles when fully charged. Add in styling that has helped Audi attract a growing percentage of upscale buyers in the U.S., and it's clear the e-tron is taking full aim at Tesla (TSLA).

While the vehicle's range is expected to be a bit less than that of the Tesla Model X, which is a comparably priced electric SUV, Audi of America President Scott Keogh said the difference won't matter to most customers.

"I think there's a big focus on range, range, range," Keogh told CNBC Tuesday. "We have a 95 kilowatt battery. That is a very large battery. The key thing for me is not how far is the range ... It's do you enjoy it from the first mile."

The SUV, which will go from 0 to 60 mph in 5.5 seconds, will carry a base price of $74,800, with the highest trim level starting at $86,700. For $1,000, buyers can reserve one, and be among the first to get it when deliveries start in the second quarter of next year.

Drivers of the e-tron will be able to get an 80 percent charge in about a half hour at public high-speed charging stations. Audi is partnering with Amazon (AMZN) to offer in-home EV charging installations.

Still, the question for many is whether the E-tron will successfully challenge Tesla's dominance of the luxury EV market. The vehicle kicks off a wave of new challengers into the market.

Tesla CEO Musk has long said he welcomes the arrival of more electric vehicles because it will grow the EV market and ultimately spur more people to stop driving gasoline- or diesel-powered vehicles.

Audi expects the premium EV segment will expand over the next few years, and that Audi will be able to compete, Keogh said.

"Frankly to me it's simple," he said. "Launch a really cool car. That's what they want in the luxury market. This a super cool car. I'm convinced we're going to see the growth there."

But the e-tron, Mercedes' upcoming EQ models and other luxury electric vehicles will add a level of competition Tesla has not yet seen. Established luxury auto brands with strong dealer networks and scores of loyal customers could make it tougher for Tesla to attract wealthy buyers who want to go all-electric.

"The e-tron is certainly a threat to Tesla," said Jeff Schuster, an analyst at LMC Automotive. Schuster said the e-tron will compete with Tesla's Model X for high-end customers who want an all-electric crossover utility vehicle.

"The Model X is a little bit larger, more seat configurations, with a third-row seat option, so the e-tron doesn't have all of that," Schuster told CNBC. "But if you look at charging, fast charging, and the range, you are going to see a range that is at or better than the Model X with the e-tron."

Last year, Tesla sold 94 percent of the luxury electric vehicles in the U.S., according to LMC Automotive. The firm is forecasting Tesla's market share will drop to 86 percent next year as the e-tron, Jaguar's I-Pace and Porsche's first electric car, the Taycan, start attracting buyers. By 2021, LMC Automotive estimates Tesla's share of the luxury EV market will fall to 63 percent as even more high-end electric vehicles roll into showrooms.

"There is an array of vehicles and opportunities for those European brands to really go after Tesla," said Schuster.