The Swabians and the Bavarians duke it out

This gritty industrial town in Bavaria, about an hour's drive from the much more glamorous Munich, is headquarters of Audi, the high-volume premium brand of the Volkswagen AG group. Ingolstadt, let me tell you, looks nothing like Audi's cars.

This is a working town. There is nothing glamorous or particularly interesting about Ingolstadt, other than the fact that it is Audi City. Those people here who do not work for Audi, work at providing services for the people who do. And it is all business here. Audi plans to become the world's largest premium auto maker within half a dozen years.

To get there, Audi will have to sell more cars than BMW, whose headquarters are just down the road in Munich. Munich is a sexy Bavarian city. Back in the days when Bavaria was its own country, the king lived in Munich and today, the city reflects its rich history as capital to kings.

BMW, of course, can see Audi in its rearview mirror. For most of this decade, BMW has enjoyed being the largest premium auto maker in the world and Audi's ambitions have not gone unnoticed. The question is: Will BMW be able to hold off Audi? After all, the latter has the backing of the much larger Volkswagen Group, which itself has designs on becoming the world's largest auto maker by 2018.

Now into this mix we have to include Mercedes-Benz, the premium brand of Daimler AG. Mercedes has its headquarters up the road in Stuttgart, in the region of Germany known as Swabia. This is an area Mercedes types say was once so poor, the people could not afford to buy cheap products. And that idea, that you should only buy something once, something that will last and last, is what they say is at the heart of Mercedes-Benz vehicles.

Mercedes, too, has designs on re-claiming its crown as world's No. 1 premium auto maker. BMW took that title away in the early part of this decade and has been enjoying that status ever since.

Make no mistake, there is a fierce rivalry going on here – one not short of insults. The Mercedes types consider BMW an upstart and all will be right with the world only when Mercedes is back at its rightful place atop the luxury car brand world. BMW types like to say Mercedes makes taxicabs and that is, of course, true. Every airport in Germany is festooned with yellow Mercedes cabs.

And both like to talk about Audi as a car company that dresses up Volkswagens with nice headlights and fancy cabins, then sells them at a premium.

And those are the kinder things these companies say about one another. As the next decade unfolds, expect this rivalry to get far more heated and perhaps much nastier, too.