Chinese EV startup Li Auto‘s (NASDAQ:LI) CEO said on Tuesday that it is confident of ousting legacy German automakers like Mercedes-Benz and BMW to be the top selling luxury brand in China.

What Happened: “We’re very confident that we will be able to challenge the leadership position of Mercedes, BMW and Audi in China, meaning that we’ll exceed their sales in China and become the top-selling luxury brand in China,” CEO Xiang Li said during the company’s second-quarter earnings call on Tuesday. The CEO was answering a question on the company’s expected sales elasticity for the third quarter.

The company, considered a rival of Tesla Inc (NASDAQ:TSLA) expects vehicle deliveries to be between 100,000 and 103,000 for the third quarter. However, this delivery guidance is set around the company’s production capacity, the CEO said.

Once production capacity increases in the fourth quarter, the company will be able to reach or surpass 40,000 deliveries per month, he added. To achieve this monthly target, the company will coordinate across production, supply chain and sales, expand production capacity and enhance supply chain management, Li said.

Why It Matters: The company presently operates two production lines with a combined total capacity of 50,000 units per month. However, the company still faces component supply shortages owing to strong demand.

Though the company planned for production expansion in the second quarter, it was delayed. The new capacity will be released in due time, Li said.

“We are still confident that on an annual basis, we will be able to reach our delivery targets,” Li said.

The company is now making production and capacity plans for the growth it sees in the upcoming two years, he added.

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