Mercedes-Benz has announced it will sell more compact vehicles in India, a move that could help the automaker take down Audi as the top selling luxury manufacturer in the country.

On Wednesday, Mercedes-Benz launched a new version of its B-Class entry-level compact vehicle in an effort to increase B-Class sales by 50 percent, according to Reuters. Compact vehicles represent a fifth of Mercedes overall sales total last year.

India's luxury market is rapidly growing with sales expected to rise to 50 percent in seven years from 25 percent currently, according Delhi-based Emerging Markets Automotive Advisors.

Mercedes, which is part of Daimler AG, has been closing the gap with Volkswagen-owned Audi the past couple of year.

In 2014, the automaker sold 10,201 cars in India, just 650 fewer than Audi did during the same timeframe.

"What has helped (Mercedes grow) is the launch of new products at the bottom of the pyramid, and that is where customers are going to enter the segment in the future," said EMMAAA director Deepesh Rathore, according to Reuters.

"This is probably the year when Mercedes would be able to overtake Audi," Rathore added.

The fast that Mercedes-Benz also plans on releasing 15 new vehicles this year doesn't hurt, the most it's ever released in India in a single year, according to Reuters. The automaker will also open 15 new dealerships as well and has 10 billion rupees ($159 million) in doubling production capacity to 20,000 a year.

Likewise, Audi wants to launch 10 new vehicles in 2015, like a refurbished Q3 SUV and TT Coupe.

Audi was the top selling luxury automaker in India last year mainly thanks to strong sales of the Q3 and A4.

Back in January, the German automaker unveiled its new CLA compact sedan, which was created to rival Audi's A3 for sales. Mercedes launched its GLA to compete against the BMW X1 and Audi's Q3 SUV last fall.

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