With competition in Korea’s limited luxury car market heating up, German luxury carmakers are turning their eyes to the country’s younger generation for further growth, introducing their compact car models, armed with a new look and cheaper price.

In the latest move, Audi, the fourth-largest foreign car brand in Korea, debuted two A1 cars ― the A1 30 TDI and A1 Sportback 30 TDI ― on Thursday, hoping that its smallest diesel-powered product line will appeal to the 20- and 30-somethings here.

The base prices of the two A1 models start from 32.7 million won and 33.7 million won, respectively. 

In a press briefing, Audi Korea CEO Johannes Thammer forecast that the premium small car market, whose main customer base is drivers in their 30s, will continue to grow in Korea, reaching 10,000 units in annual demand between 2018 and 2020.

“In the new segment, we aim to secure 15 to 18 percent of market share,” he said.

A week earlier, BMW, the biggest foreign car brand in sales last year, launched the new BMW 1-Series hatchback, badged the 118d, to reach out to the younger drivers.

The new BMW 118d Sport vehicle has various premium features seen in bigger luxury sedans. The company’s cheapest diesel-powered car is priced at 39.8 million won, including tax. 

BMW also introduced the facelifted 1-Series car for further growth in the premium small-car market.

The company’s compact car business is growing. It sold 2,700 1-Series cars last year, accounting for 7 percent of the firm’s total sales of 40,000 units, according to the company data.

Amid rising competition in the premium small car market, market watchers said Mercedes-Benz will bring more compact cars to Korea in the latter part of this year to compete with its German rivals.

The company has continued to introduce its compact A Class cars over the past few years in its efforts to fend off its “old” premium image, but it put a focus on high-performing small cars with a higher price tag compared to German rivals.

For instance, Mercedes-Benz debuted its A45 AMG 4Matic high-performance compact, priced at 65 million won.

To lower the price tag and lure the younger generation, the company said it would debut facelifted B-Class cars in the second half of this year. 

“Heated competition among German luxury carmakers in the compact car market reflects growing demand for new markets beyond the luxury market,” an industry insider said.

German luxury carmakers have grown at a fast pace for the past few years, she noted.

“But the luxury car market, whose annual sales hover around 200,000 units, has a limit for continued growth. Growing pressure for new markets spurs German luxury carmakers to tap the compact car market in Korea,” she said.

By Seo Jee-yeon (jyseo@heraldcorp.com)