In February, Audi's China sales rose 25 percent to 18,926 units, allowing it to maintain a small lead over its archrival. Earlier this month, Mercedes-Benz announced February sales jumped 67 percent to 12,200 units.

Each of the German luxury brands are continuing to exploit China's fast-growing demand for luxury cars -- seemingly immune to the market forces that have triggered an industrywide slowdown.

In February, industry sales of passenger cars rose only 2.6 percent to 967,200 units. Sales slowed after the government raised the sales tax on small cars and sharply limited car sales within Beijing's city limits.

To fuel further growth, all three German brands have aggressively expanded their product lineups. This month, for example, Mercedes introduced a stretched version of its E200 sedan (See story in this newsletter).

Likewise, Audi recently began selling a stretched version of its A8 flagship sedan. The A8L ius the third long-wheelbase model in Audi's Chinese lineup, following the A6L and A4L.