Research and development spending by the 81-year-old brand, which is the profit engine of parent Volkswagen (VW), last year amounted to less than three-quarters of arch-rival BMW's outlay and a smaller fraction of Mercedes owner Daimler's.
While BMW trumpets its new "i" series of electric cars and Mercedes wins rave reviews for its new CLA and GLA ranges of sporty compact models, Audi risks looking like a laggard in an industry where innovation is a major draw for customers.
"I've grown tired of that single-frame grille," said Stefan Reimann, a 47-year-old public relations manager looking at the front of the new Audi A3 compact at a Berlin showroom.
"BMW and Mercedes seem to be so much more progressive now. It's about time for Audi to live up to their promise," he added.
The stakes are high. Audi contributed over 40 percent of VW's (>> Volkswagen AG) nine-months profit of 8.6 billion euros (7.2 billion pounds) and it is critical to funding the expansion of Europe's biggest carmaker as it strives to overtake General Motors (>> General Motors Company) and Toyota (>> TOYOTA MOTOR CORPORATION) and become world number one by 2018.
Any weakening at Audi could also add to doubts about VW's broader strategy, with some analysts questioning whether a new manufacturing platform aimed at sharing costs among its brands will deliver the projected benefits, and whether it has cut prices too much to win market share in Europe.
On the surface, everything looks fine.
Audi, which has doubled model lines and deliveries over the past decade, is shrinking BMW's (>> Bayerische Motoren Werke AG) sales lead, with deliveries in the first ten months of 2013 at a record 1.31 million cars versus 1.35 million at BMW.
The brand, which pioneered all-aluminum bodyworks and "Quattro" four-wheel drives in the 1980s, is also rapidly expanding in fast-growing emerging markets, with new production facilities in China, Mexico and Brazil.
But there are signs that all is not well.
Audi is on its third R&D chief in 16 months and a VW source told Reuters the parent was concerned the brand is resting on its laurels just as rivals push new technologies and designs.
TROUBLE DOWN THE LINE
The gap is barely apparent under the bonnets in car showrooms - though industry-watchers point out that Audi's flagship A8 lacks the rival Mercedes S-Class sedan's plug-in hybrid powertrain option or its semi-autonomous driving function for traffic jams.
For now, Audi's drift is most visible among the more innovative vehicles that are too easily dismissed as niche models or far-fetched prototypes.
Audi has little to show, for example, opposite BMW's i3 and i8 electric cars - which also pioneered carbon-fibre manufacturing techniques tipped to see wider use - or Daimler's investment in hydrogen fuel cells and self-driving cars.
Even when it doesn't lead to mass sales, such risk-taking can pay dividends for a brand's "halo". BMW has received 100,000 test-drive applications for the futuristic i3 mini.
"Constant innovation is absolutely crucial for high-end carmakers," said Boston Consulting Group senior partner Andreas Maurer. "If a customer feels that a premium manufacturer has nothing new in the pipeline, that company is in trouble."
But battery-powered versions of the Audi R8 sports car and A1 subcompact were shelved last year as VW focused on plug-in hybrids as a more conservative approach to meeting European Union carbon emissions targets.
"Audi lacks a vision of the future as well as core competence on technology," said Arndt Ellinghorst, London-based head of automotive research at ISI.
"They have little to offer nowadays in terms of a clear corporate message and mainly live off their past success."
The loss of momentum is also showing up in projections.
IHS Automotive, among the most authoritative forecasters, expects Audi to be outsold once more by Mercedes next year, after three years in the industry's No. 2 slot. Neither will overtake BMW's global sales by 2020, it predicts.
A 16 percent rise in Audi's R&D budget to 2.9 billion euros last year from 2010 was dwarfed by BMW's 43 percent surge to 4 billion, according to company data. Mercedes parent Daimler (>> Daimler AG) posted a 14 percent rise to 5.6 billion euros.
The figures do not necessarily compare like with like, however, as Audi also benefits from R&D spending in other parts of the VW group.
Audi rejects the idea it is losing its technology mojo, pointing to its plug-in hybrids - which avoid the range limitations of pure-electric cars - and its own use of aluminium and composites to cut weight.
Yet senior executives seem to think there are problems.
Audi's latest R&D boss, Ulrich Hackenberg, unexpectedly pulled a concept car from September's Frankfurt car show line-up and ordered engineers to install an alternative hybrid powertrain, a source with direct knowledge of the matter said.
Christoph Stuermer, Frankfurt-based analyst with IHS, says Audi is suffering the effects of a brain drain that saw the division's CEO, R&D chief and top designer all leave for the VW brand in 2007. They were followed two years later by the transfer of its engine development chief to Porsche.
The addition of luxury sports car brand Porsche to VW's stable in 2012 is also causing problems at Audi, according to another source familiar with the matter.
"There's a certain amount of jealousy at play," the source said, requesting anonymity.
In a bid to fight back, Audi plans to refresh design and create a more distinctive face for high-end models and sportier vehicles, boost lightweight construction and plug gaps in SUV offerings while expanding to 60 models from 46, the source said.
But it may face an uphill struggle. IHS is forecasting that sales of the A1, Audi's smallest model, will drop to 101,700 cars in 2018, down 16 percent from 2012, while sales of BMW's rival Mini hatchback rise 3.1 percent to 140,300.
At the top end, sales of the A8 sedan are expected to rise 19 percent to 44,900 cars, compared with gains of 22 percent to 81,900 for the revamped Mercedes S-Class and 30 percent for BMW's 7-Series, to 85,300 cars.
($1 = 0.7421 euros)
(Additional reporting by Irene Preisinger; Editing by Laurence Frost and Mark Potter)
By Andreas Cremer