Volkswagen AG's U.S. subsidiary on Wednesday revealed its electric sport utility vehicle ID.4, which it aims to begin selling in the first quarter of 2021, and said the compact EV will have an estimated driving range of 250 miles.

ID.4's driving range is less than rival Tesla Inc's electric vehicles, which offer more than 300 miles between charges, and startup Lucid Motors' upcoming sedan, which is set to achieve a 500-mile driving range.

Volkswagen is offering the ID.4 at a lower price than Tesla's Model Y and customers can further benefit from federal and state electric vehicle subsidies.

The ID.4 will initially come at a price of $39,995 and will be cheaper by about $5,000 once the company begins building it in the United States.

By comparison, Tesla's Model Y is priced at $49,990, the Model X SUV comes at a price of $79,990 and its lowest-priced Model 3 sedan is $37,990.

The ID family is an integral part of the Volkswagen brand's ambitious plan to build 1.5 million electric vehicles a year by 2025.

The broader Volkswagen Group has said it will spend nearly $40 billion by 2024 to ramp up electric vehicle production in Europe, China and the United States.

The automaker said ID.4 is currently being made in Zwickau, Germany, and it eventually plans to produce the electric SUV at its Chattanooga Assembly Plant in Tennessee, beginning 2022.

Volkswagen also plans to invest an additional $800 million in the Chattanooga factory for the production of electric vehicles.

The German company on Monday said it will provide owners of ID.4 SUVs with three years of unlimited charging in the United States at no additional cost to the vehicle's price.