Audi confirmed at Spa on Friday morning that it will enter F1 in 2026 with its own brand new power unit.
The manufacturer is close to finalising a deal to take over Sauber, which is currently competing under the Alfa Romeo name.
Porsche meanwhile had yet to formally reveal its plan to join forces with Red Bull Racing and the new Red Bull Powertrains organisation.
Wolff made it clear that Mercedes welcomes the competition from the two German brands, having recently raced against them in Formula E.
"It's great," said Wolff when asked by Motorsport.com about Audi's arrival. "I think when you see who has joined F1 in terms of automotive companies, and the very best brands in their sector outside of automotive, it shows the strength of the sport.
"And it's great for the sport, great for us to have some of the best auto companies in the world as competitors.
"F1 is the toughest sports competition for any automobile company in the world. It has been, and it's just going to get tougher with these guys coming."
Wolff said he understood why Audi and Porsche are taking different approaches with their projects.
"I think you're just hedging your bets, because one is your fully integrated works team in Switzerland, and the other one is joining in with one of the best F1 teams in the world. It's a dual track strategy which make sense to me."
Williams team principal Jost Capito, who previously ran the VW WRC programme, agreed that Audi's arrival in F1 demonstrated the strength of the sport.
"I think it's really important for F1 if an auto manufacturer like VW Group confirms to enter," he told Motorsport.com. "It's a sign for all other manufacturers as well, and it shows the importance and the step F1 has done in recent years.
"A couple of years ago, it was out of the question, and now it's even two manufacturers, two brands out of the VW Group with Audi confirmed and Porsche most likely to confirm. So I think that it's brilliant for F1.
"I think Audi has succeeded wherever they went. And I'm absolutely convinced if they do the programme, they do it seriously, and they will get there sooner or later. I don't have any doubts on this."
