The Challenger was described in a book about 1960s American cars as Dodge's "answer to the Mustang and Camaro." It was one of two Chrysler E-body cars, the other being the slightly smaller Plymouth Barracuda. "Both the Challenger and Barracuda were available in a staggering number of trim and option levels" and were intended "to compete against cars like the Chevrolet Camaro and Ford Mustang, and to do it while offering virtually every engine in Chrysler's inventory."
However, they were "a rather late response to the ponycar wave the Ford Mustang had started." In his book Hemi Muscle Cars, Robert Genat wrote that the Challenger was conceived in the late 1960s as Dodge's equivalent of the Plymouth Barracuda, and that the Barracuda was designed to compete against the Mustang and Camaro. He added that Chrysler intended the new Dodge as "the most potent ponycar ever," and positioned it "to compete against the Mercury Cougar and Pontiac Firebird."
Genat also noted that the "Barracuda was intended to compete in the marketplace with the Mustang and Camaro/Firebird, while the Dodge was to be positioned against the Cougar" and other more luxury-type musclecars.
Source: Wikipedia, 2011