BMW, Mercedes threaten Audi's 20-year China dominance

Audi AG's two decades of dominance in China may end as Daimler AG and Bayerische Motoren Werke AG step up their challenge in the world's largest auto market.

BMW and Daimler's Mercedes-Benz this week, in a departure from their strategies elsewhere, will roll out new models at the Beijing Auto Show developed specifically for Chinese customers as they seek to steal business from Volkswagen AG's Audi.

Audi's market share has slumped more than 20 percentage points in the last six years in China, a country it is banking on to reach a goal of leapfrogging BMW and Mercedes to become the world's largest luxury carmaker by 2015. China is Audi's No. 2 market and the only country where it's the clear leader. Mercedes is the fastest-growing luxury carmaker in China.

"Mercedes and BMW have more upside than Audi in emerging markets, so it will be difficult for Audi to achieve its target," said Arndt Ellinghorst, a London-based automotive analyst with Credit Suisse, who has "outperform" ratings on the three carmakers. The BMW and Mercedes brands have stronger appeal to wealthy consumers and their new models should boost sales at the expense of Audi, he said.

Mercedes will debut a longer E-Class in Beijing this week, its first model developed only for China, while BMW will show an extended 5-Series, the only car in its line-up built for a specific market. The longer vehicles are meant to appeal to wealthy Chinese buyers, who are typically chauffeured. Audi sells extended versions of three sedans in China and will show a new longer A8, first introduced in 2000, in Beijing.