Mercedes-Benz, which used to be far behind Audi and BMW in China's luxury market, is rapidly closing the gap.
Last year, Mercedes sales soared 33 percent, while Audi deliveries dipped 1.4 percent and BMW sales edged up 1.7 percent. This year, Mercedes seems certain to catch BMW, while Audi -- still China's top luxury brand -- nervously eyes its rivals.
Mercedes has enjoyed strong demand for the GLA and GLC models in China's red-hot crossover market. But that alone does not explain Mercedes' dizzying growth. After all, BMW and Audi sell crossovers, too.
So how is Mercedes outperforming Audi and BMW?
At a news briefing in Beijing last month, Audi China President Joachim Wedler said he was not surprised to see Mercedes winning market share.
Wedler says it's part of a larger trend in which the three German brands are attaining parity in the world's biggest markets. And sales data back him up.
In Europe, the three brands have roughly the same share, while Audi is catching up to its rivals in the United States. Meanwhile, Audi's commanding lead in China is starting to erode.
Wedler's theory is based on the key assumption that Audi, BMW and Mercedes are closely matched in production, product development and managerial expertise.
One company will sometimes gain a temporary advantage from short-term factors such as market timing or a rival's management missteps. But the others inevitably respond, fix their problems and catch up.
That's exactly the case in China. Audi gained an early edge in China after it started building vehicles locally in 1988, 15 years earlier than BMW and 17 years ahead of Mercedes.
In China, local production allows a carmaker to avoid paying a 25 percent tariff on imports. It also makes it easier for automakers to design products that cater to Chinese tastes.
So Audi's rivals got to work. BMW launched production in China in 2003, followed by Mercedes two years later.
BMW sales picked up, but Mercedes was slowed by serious problems.
For many years, the company burdened itself with two separate distribution networks, one for imported vehicles and the other for locally built C- and E-class models. The two networks often clashed.
Moreover, Mercedes lagged far behind BMW and Audi in opening new stores, so it had no presence in some of China's fast-growing markets.
In 2012, Mercedes dispatched management board member Hubertus Troska to shake up its China operations. Troska quickly merged the two dealership channels and expanded Mercedes' dealership network. Sales rebounded.
In 2015, Troska got another boost when he launched sales of the locally built GLA and GLC. The two crossovers have enabled the German brand to further narrow the sales gap with its two competitors.
In the first four months of this year, Mercedes sales have jumped 35 percent to 142,266 vehicles. By contrast, Audi deliveries sales rose just 5.9 percent year on year to 189,611 vehicles, while BMW's deliveries increased 6 percent to 162,221.
Needless to say, Audi and BMW are preparing countermeasures. At his news briefing, Audi's Wedler said his team is working hard to defend the company's market share in China.
But if Wedler believes his own theory, Audi will lose more ground to Mercedes before the three German brands reach parity. Wedler can resist that trend -- but not reverse it.