BMW Korea and Mercedes-Benz Korea are steering toward Korea's expanding ultra-luxury vehicle segment to defend against the rapid advance of Tesla and Chinese electric vehicle manufacturers, industry officials said Friday.

Rather than competing head-on in the increasingly crowded premium market, the German automakers are expanding their highest-end offerings, betting that their longstanding brand heritage and premium positioning will remain difficult for newer rivals to replicate. The pivot is particularly significant in Korea, where domestic giants Hyundai, Kia, and their luxury arm Genesis have long commanded the bulk of passenger-car sales, making any shift in foreign brand share a notable barometer for the broader market.

The strategic shift comes as Tesla and Chinese brands such as BYD continue to gain traction in Korea, eroding the dominance long enjoyed by established premium automakers. Tesla's price-competitive Model Y was the nation's top-selling vehicle in the first half of 2026, accounting for more than 30 percent of all newly registered vehicles in the country.

While German brands remain strong in the luxury segment, competition in mainstream premium models is becoming increasingly intense, prompting them to focus on higher-margin vehicles where pricing power and brand equity remain their greatest advantages.

BMW Group recently announced plans to launch its standalone ultra-luxury marque, BMW ALPINA, in Korea in 2027. BMW acquired the German manufacturer ALPINA in 2022, integrating the storied tuning house as an official sub-brand within its portfolio. Under the initiative, BMW Korea is scheduled to establish seven dedicated ALPINA retail spaces nationwide by the second half of next year, ahead of the brand's debut.

The BMW 7 Series sold 3,077 units in the first half of 2026, making it the top-selling model in its segment.

Mercedes-Benz Korea is making similar moves by strengthening its ultra-luxury presence with the upcoming launch of its new S-Class model. Korea became Maybach's third-largest market globally last year, behind only China and the United States. Maybach is the ultra-luxury brand of Mercedes-Benz.

The shifts from BMW and Mercedes-Benz reflect robust growth in Korea's ultra-luxury vehicle market. According to BMW Korea, domestic sales of flagship premium sedans priced between 100 million won and 200 million won — including the BMW 7 Series and Mercedes-Benz S-Class — rose from approximately 12,000 units in 2014 to about 34,000 units last year.

Sales of vehicles priced above 300 million won, including Maybach, Bentley, and Ferrari models, climbed even faster, increasing nearly sixfold from 452 units to 2,605 units during the same period.

Industry officials said German premium brands increasingly view the ultra-luxury segment as a defensive stronghold against the influx of lower-priced EV competitors. Despite steep sales growth by Chinese price-competitive models, Chinese luxury cars still struggle to appeal to Korean customers, according to the officials.

"German automakers recognize that competing solely on price or technology against Chinese EV makers will become increasingly difficult," an industry official said. "Instead, they are concentrating on the ultra-luxury market, where brand prestige, craftsmanship, and heritage remain key competitive advantages that are difficult to replicate from Chinese rivals."

While the strategy is unlikely to halt the expansion of Tesla and Chinese EV brands in the broader market, the official said it could help BMW and Mercedes-Benz preserve profitability by strengthening their presence in a segment where competition remains limited.

Others noted that the auto industry's transition to EVs has forced the German vehicle powerhouses to revamp their strategy in the face of unavoidably fierce rivalry with Chinese counterparts.

"With Chinese EV makers rapidly closing the performance gap in the electrified era, German premium automakers have little choice but to double down on the ultra-luxury segment," an auto industry official said. "The ultra-luxury segment remains one competitive arena that Chinese brands are unlikely to match anytime soon."