Volkswagen Group's (NASDAQOTH:VWAGY) Audi brand said last week it would unveil a "revolutionary concept car" at next month's Los Angeles Auto Show that would open "new perspectives in automotive design."
Audi released the teaser photo you see above, along with a statement noting that this is the first concept car created under Audi's new design chief, Marc Lichte, Officially, we don't know much more than that.
Unofficially, industry sources say this concept car could be a thinly veiled preview of an all new Audi super-sedan, the A9, which could arrive in showrooms in 2017.
Why would Audi want an A9?
Audi already has a big, opulent sedan: the A8, which in fully loaded top-of-the-line trim is priced close to $160,000 in the U.S. Why does it need an even bigger and more expensive sedan?
Here's the short answer: Because super-sized luxury sedans are shaping up to be the next global luxury-car battleground, and Audi wants its share of the action.
Luxury makers are battling for a growing group of well-heeled customers all over the world, but particularly in fast-growing markets such as China. That battle has been raging up and down the price spectrum: Sales of compact luxury crossovers have boomed recently, for instance, thanks in large part to affluent young professionals in China (and elsewhere).
Now the luxury-auto makers are giving more attention to the very top of their markets, where buyers can be exceptionally demanding but the profits can be big, and the prestige of a successful entry can pay big benefits for the brands.
Buyers who want something more than an S-Class, but not a Rolls
For years, the biggest and most expensive mainstream luxury cars have been the Mercedes-Benz S-Class, the BMW (NASDAQOTH:BAMXF) 7 Series, and the Audi A8 -- a market segment of three. Buyers wanting something more were invited to look at brands including Rolls-Royce (owned by BMW) or Bentley (owned by VW Group).
But even the "entry-level" Rolls-Royce sedan, the Ghost, starts at over $250,000. Clearly there's some room between a loaded A8 and a "bargain" Rolls -- and with an increasing number of wealthy buyers around the world looking for something "more," Audi isn't the only luxury maker looking to fill that gap.
In April, BMW showed off its "Future Vision Luxury" concept car, a huge high-tech sedan thought to be a preview of a future 9 Series. Significantly, BMW's concept was shown in Beijing, where sales of luxury vehicles have boomed over the last few years.
Mercedes -- which, unlike its German rivals, doesn't currently have a separate ultra-expensive sedan brand -- is also believed to be planning a super-sized, super-opulent version of its hot-selling (by six-figure sedan standards, anyway) S-Class sedan, to be called the S600 Pullman. Price? About $1 million.
And it's not just the German automakers who are thinking along these lines.
The U.S. and Japan are jumping in as well
General Motors' (NYSE:GM) Cadillac brand has confirmed that it will unveil its long-awaited "flagship" sedan, the CT6, sometime early next year. The CT6 is expected to be a big, expensive rear-wheel-drive sedan loaded with high-tech features -- a direct rival, in other words, to cars like Mercedes' S-Class.
But it might not be Cadillac's "flagship" for long. In an interview with Reuters published earlier this month, new Cadillac President Johan de Nysschen confirmed that an even bigger and more expensive Cadillac sedan is in the works. It will be called the CT8 or CT9 and will compete with the biggest and longest Mercedes and BMW sedans, he said.
Meanwhile, Nissan's (NASDAQOTH:NSANY) Infiniti brand -- which de Nysschen led until leaving to join Cadillac in August -- is also planning a "flagship" sedan. At the Paris Motor Show earlier this month, Infiniti showed a concept called the Q80 Inspiration, which is a big, high-tech sedan.
Given that Infiniti's current top-line sedan is called the Q70, the Q80's name makes its intentions pretty clear. Officially, it's a concept car, but Infiniti officials hinted strongly that something like it will come to market before long.
A global battle for well-heeled buyers
This battle will be about profits, of course. By auto-industry standards, the margins on these kinds of cars are huge. But it will also be about prestige: Who will build the best, most desired luxury sedan in the world?
Right now, if you ask many people globally, they'll tell you Mercedes' S-Class holds that title. The S-Class, specifically the way it is perceived, brings tremendous prestige to the Mercedes-Benz brand, and that makes its other products seem more desirable.
And that, in turn, means Mercedes can ask (and get) higher prices for its down-market products. BMW and Audi have built roughly similar prestige (and profit margins) over time.
For the German brands, building an even-more-opulent sedan is about preserving and enhancing that advantage. For Cadillac and Infiniti, it's about raising themselves to that same level of prestige -- in hopes that sales and stronger profit margins will follow. And, of course, all of these brands are jockeying for position in the fast-growing, still formative Chinese market.
For all of them, the stakes are much bigger than a few thousand super-expensive sedans a year.
So who will win this new war? We won't know that until we see the cars, and until we see how buyers respond to them. Stay tuned.
John Rosevear owns shares of Apple and General Motors. The Motley Fool recommends Apple, BMW, and General Motors. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.