One of the newest European players into China's luxury market is Volvo, which was bought by China's biggest private car company, Geely, last year.

Geely chairman Li Shufu believes Volvo must expand aggressively into luxury cars to compete with BMW, Mercedes and Audi.

At the Shanghai show, Volvo launched its edgier looking Concept Universe luxury car, which departs from the staid and safe style that has been so long been linked with the Swedish carmaker's conservative tradition.

The upscale sedan has a sleeker body shape and features pale purple LEDs in its grille pushing the brand more firmly into the luxury segment.

However, the push by Li to move Volvo to a more upmarket class, had caused tension in the executive offices of Goteborg, Sweden.

By changing its product line-up to compete with Mercedes-Benz and BMW in the booming luxury market, some senior management believed Volvo risked diluting its reputation for building safe, family-friendly vehicles.

President and CEO of Volvo Cars Stefan Jacoby wanted the company to focus on safety and fuel-efficiency with smaller cars,

But new owner Li insisted that Volvo change some of its models in order to tap into China's overflowing millionaire market. The Concept Universe luxury car seems to be the compromise.

"Volvo and Jacoby can take the moral high ground and stick with the company's tradition of understated, more modest style," Li told the Wall Street Journal earlier this year, but said the brand has no future in China unless it catered to flashier tastes.

Despite the attention focused on the top-end, luxury cars represented only 3.8 percent of the total auto market last year. This percentage is growing and researchers Fourin say that by 2015 the luxury car segment will clock a growth rate of over 4.7 percent.

Boesch from Audi says the Chinese car market is far from saturated.

"We still have a lot of market potential but everybody can see we are facing fierce competition from other luxury cars," Boesch says. "We will focus more on the niche market and try to maintain the No.1 position."