Audi is a striking challenger in the German (Luxury) Big 3 these days, but here's the biggest secret about this brand that VW-AG doesn't want you to know: it wasn't originally a direct competitor to BMW and Mercedes.
Audi's "flagship" sedan was a barely larger midsize. It could compete with the Acura Legend and Lexus GS/LS, but certainly not with the BMW 7 Series or Jaguar XJ, and ESPECIALLY NOT the Mercedes S-Class. Audi didn't start crashing into the Bimmer-Jag-Benzo party 'til the late 1990s and early 2000s.
Audi was originally a Peugeot rival, which in turn rivals Alpine, Citroën, Renault, Saab, and Volvo. They have the TT (which I would only call a sporty car, due to its transverse and standard front-wheel-drive layout with an extremely feminine pun to its basic trims... in politically correct terms, a really glorified Beetle) for a reason. They were more into rally cars and premium economy cars, kind of like today's Acura or Subaru.
Porsche, too, didn't really compete with BMW or Mercedes, but more with Ferrari, Maserati, Lamborghini... the pre-996 variants of the 911 were really expensive and competitive with fellow exotic cars.