For the Volkswagen group, I would list Bentley, Lamborghini or Bugatti as their luxury offerings. Audi is more middle class and sold in large numbers, at least in Europe.
In the US, Audi, BMW and similar European brands are intentionally marketed as a mid to high luxury vehicles to preserve their brand mystique. None of these companies sell mass-market cars in the US in the same tier as mass-market cars by Toyota, GM, etc. Most of these brands do sell mass-market cars in Europe, though.
It's also worth noting that in the US, most families have had multiple cars due to the lack of alternative transit options, and so families of modest means buy lower cost vehicles as a result.
Only recently are multi-car households are seeing a big uptick in places like the UK [1], and in many developed urban areas of Europe, the car is used by families as a "weekend getaway" vehicle, not a daily commuter. When you only have to buy one car, you might be able to afford more luxury.
It took me a long time (really seeing an awesome Audi with a V-10 motor) to perceive Audi as a luxury brand. For me it was mostly notable for self-driving accidents back in the 1980s. Yet another outpost of European Mediocrity like Renault, Fiat, Trabant, Lucus, etc.
Over time I learned more about the inline 5 cylinder engines that are common in Audis and many special characteristics but before I overcome my ignorance I had a wrong idea of the brand.
And that is the difficulty of branding luxury cars. Few of us experience a wide variety of luxury cars, so our brand image consists of some old news stories, word of mouth, seeing them on the road, etc.