Branding is important in the hyper‐competitive luxury industry because the brand is a significant factor that influences product or service loyalty (Lau and Lee, 1999). The effect of a strong brand is increasing and critical in the high-tech luxury industry. Specifically, luxury automobile brands have increased demand and market share in developing countries such as China and in South America. For instance, Mercedes-Benz, which is the fastest-growing luxury automobile brand in China, delivered 68,500 units in 2009 with a year-on-year growth of 77% (Kozicki, 2012). More recently, the luxury automobile industry in China has showed high sales. More specifically, for Audi, the unit sales increased from 227,938 units in 2010–۵۷۸,۹۳۱ units in 2014 (Smith, 2016). As a result, many luxury automobile brands developed various marketing strategies in order to improve their sales and profits in these emerging markets. In order to develop successful products and services, understanding their own brand as distinguishable from competitors is important. A number of powerful luxury brands have introduced new products over the years. Brand extension strategies provide a significant profit opportunity by capitalizing on the parent brand’s equity (Dawar and Anderson, 1994). For example, Prada and Gucci started with shoes and successfully extended to luxury handbags in different consumer segments in the luxury fashion industry. However, a luxury brand extension might not always bring success, due to various factors that influence consumer evaluation of the extended brand. Failures of the brand extension can have a negative impact on parent brand equity, particularly for prestige brands (Lye et al., 2001; Shin et al., 2017). Past studies discovered and explored the negative impact of using vertical brand extension specifically, that the extended brands’ less expensive introduction might cause cannibalization of its luxury parent brand (Reddy et al., 1994). This was found in luxury automobile brands; there was a negative impact by the vertical step-down brand extension on the parent brand. For example, when Cadillac introduced Cimarron, although there was no cannibalization, they watered down the prestige of the parent name (Kim et al., 2001). Because of the difficulty of creating and maintaining strong luxury automobile branding, implementing luxury brand extension strategies should be considered based on possible outcome (e.g., positive or negative). In order to take a prestige parent brand image and reduce the negative impact of the brand extension, some luxury brands have used horizontal brand extension instead of vertical brand extension strategies. Horizontal brand extension means using the existing brand name to introduce a new product in the same product line or to a different product category (Sheinin and Schmitt, 1994). Most recent research in brand extension has focused on product categories. However, the growth of middle-class consumers and their purchasing power has led to changes in both luxury product brands and luxury service brands. Therefore, in this study, the process of horizontal brand extension by luxury automobile brands to extended service brands was examined.