I think you're misunderstanding what WiFi does (Android Auto Wireless uses WiFi). It's just the physical/data link layer that gets your data from one place to another, and while it uses compression, when the data being sent from your phone makes it to the car or any other destination, there's nothing different about it than had you used USB to send it. Think of the compression that WiFi uses as something like a zip file - you know it's compressing the data but once it's uncompressed on the other end, it's indistinguishable from had you not compressed it at all.
Compression of the audio file/content itself is a completely different thing. That's where the codecs come into play, and some do indeed result in loss of data. Bluetooth audio is generally streamed using SBC or AAC codes, both of which introduce some loss, with AAC being better than SBC but not lossless. There are a few others now too but for the point of this post, I'll concede that none of the Bluetooth codecs right now are lossless to my knowledge. While that doesn't mean most people would hear the difference, there could be differences at least from a technical perspective from plugging in via USB.
So using WiFi and specifically Android Auto Wireless routing its data over WiFi should result in the best quality, the same as USB. The benefit to the user is not having to worry about plugging in that cable or having your phone think you want to use Android Auto just because you want to plug your phone in to charge.
Well, you're not wrong. Although if I was expecting a technical discussion, I too would have started with a much longer post to further elaborate.
Without proper context, the word "compression" can mean a lot of things. The point is that in the real world, sending the audio signal over wireless does indeed result in loss of audio quality. There are many factors involved in this beyond simply being wireless, such as the codec, DAC, file type, conversion, etc. Even with wi-fi, you don't exactly have unlimited bandwidth, which is already being shared with other data functions. And then you still need to factor in how the phone and the vehicle will handle and process the signal. Not all are created equal. A USB-C connection isn't except from these factors either. But my guess is that the Wi-Fi standard, that at least CarPlay is using (and maybe Audi), is a bit more loose than with hardwired.
While I've yet to read any whitepapers on the exact specifications or requirements for WiFi-based Android/Apple, I did try it myself. And I wasn't surprised when my iPhone 8 playing Tidal via wireless CarPlay was noticeably less crisp and clear versus hard-wired connection. Will most people notice? If they're already happy with FM/SiriusXM/Bluetooth, perhaps not.
The point was for folks to try lossless music, hardwired, on a stereo that can actually benefit from it, as is the case for the Audi. Then if they
do notice the difference, it may not be so easy to go back. And the "hassle" of plugging in your phone may be a non-issue, as it is for me.