BERLIN (Bloomberg) -- Audi's Q3 compact SUV will go head-to-head with BMW AG's X1 as the two luxury-car makers compete to tap the growing demand for SUVs geared to urban areas.
Volkswagen AG's luxury brand, which will begin selling the Q3 in June at a starting price of 29,900 euros ($43,380), plans to produce 100,000 Q3s a year, CEO Rupert Stadler said in Shanghai, where Audi premiered the vehicle.
The Q3 is 24 centimeters (9.5 inches) shorter and nearly 7,000 euros cheaper than the mid-sized Q5. Audi aims to challenge BMW's leading position in the segment, which the world's largest luxury car-maker created with the X1's introduction in late 2009. BMW delivered nearly 100,000 X1s in 2010, accounting for 8.2 percent of overall sales.
"We're paying heed to a fast-growing segment," Michael Dick, Audi's development chief, said in an interview at the Shanghai auto show. "There's a strong appetite for mobility in expanding urban centers. The Q3 will be most appealing to that end, especially for female drivers."
High-end carmakers are expanding their lineups of small cars to attract urban drivers and meet tighter environmental regulations. Daimler AG's Mercedes-Benz is also planning a compact SUV. Mercedes will begin rolling out an expanded range of four compacts with an overhauled B class later this year. Fiat S.p.A.'s Alfa Romeo is planning a small SUV as part of its return to the U.S.
"It's a vehicle that suburban mommies will use to haul their kids around," said Christoph Stuermer, a Frankfurt-based analyst with IHS Automotive. "It's a niche alternative for big urban areas in Europe, China and Japan." BMW sells the X1, the company's second-best selling SUV after the X5, in all markets outside North America.
The carmaker, which installed cleaner engines in the top-of- the-line X1 this year, intends to defend its position. "We are aware that the Q3 is coming," said Andreas Lampka, a BMW spokesman. "The X1 is the leader in its segment, and we intend to keep it that way."
Audi's Q3, based on the same technology platform as the VW Tiguan, starts at 2,300 euros more than the X1. VW announced plans yesterday to expand daily production of the Tiguan to 1,000 SUVs from the current 700 to keep up with rising demand.
The Q3 will initially be available with three four-cylinder engines delivering as much as 211 horsepower. The top engine model has a maximum speed of 230 kilometers (143 miles) per hour and accelerates to 100 kilometers per hour in 6.9 seconds. The Q3, Audi's third SUV, will be built at a plant in Martorell near Barcelona, helping VW's struggling Seat unit fill assembly lines.
Production of the Q3 may be expanded to China, the world's biggest car market. BMW is currently building a new plant at Tiexi, China, which will produce the X1 starting next year.
"We used to think that China is no real market for SUVs, but the success of the Q5 and Q7 have been proving us wrong," Dietmar Voggenreiter, head of Audi's China operations, said in Shanghai. "The Q3 will be our entry model to that segment, a city-urban car."