The Genesis of Phaetons – Some History and Opinion

By Ian Grasso

02.19.2008

When I was much younger, my favorite cousin celebrated his graduation from law school and subsequent offers of employment by purchasing a nice little car from Mazda called the 929. At the time it was Mazda’s luxury sedan, and it was attainable for a twenty-something newly-minted attorney with $100,000 dollars in student loan debt. As some of you may know, in his industry, image is everything and the car fit the bill with its nice leather, smooth 90’s lines, and a nice 200HP engine.


The 929 was eventually sold alongside and later replaced by the Millenia, another fine car that got good reviews and sold with a semblance of volume – about 20,000 cars a year in the U.S. until its demise in 2003, when it only sold 1700 units.

Well, my cousin isn’t a lawyer anymore, but volume manufacturers are still trying their hand at undercutting the big-car luxury market on price. The grapevine is ripe with news about Volkswagen trying to resurrect its Phaeton here in the United States – all part of its quixotic quest to sell 800,000 cars here by 2018.

The original car from La Mancha Phaeton, introduced in 2003, was in all ways an incredible flop. According to Automotive News, the $70,000 to $100,000 Phaeton sold a total of 3,354 cars during its four and a half year run here. Most of the time, these cars were being sold with well over $10,000 dollars of incentives – in other words, they were not at all profitable and had to be wished off the lot by desperate dealers.


Hyundai is getting a lot of press for its Genesis sedan – much of it very autoshow-season-like in its adoration. Can we all put away the complimentary punch and cookies for a second here?
Like the 929, the Millenia, and the Phaeton, the Genesis is by all accounts both a good-looking and fine-performing car. But it has a few things working against it – namely that it is a (relatively) expensive Hyundai and that people shopping at Hyundai dealerships are not looking for a luxury automobile.

The last swan song for volume brand luxury was around the time of the Millenia’s demise – 2002-03(strangely enough when the Phaeton was released).

Mazda quickly realized that their version of luxury was great as long as their core group of buyers could not afford BMW, Mercedes, or Lexus luxury. When interest rates plummeted in 2002 and the 60 month loan became in-vogue, all of the sudden those customers who would have considered a Mazda or a VW luxury automobile for cost reasons were lured to the real deal over at a Mercedes or BMW dealership encased in their usual haughtiness, glass, and brushed aluminum.

I understand the concept of a flagship vehicle. It is a technology leader that turns heads and helps the sales of the cheaper volume units while allowing the engineers to work on technology that will someday inhabit cheaper cars.

But heads-up, Hyundai: there is a reason why Toyota sells the LS as a Lexus at a Lexus dealership and the Avalon at a Toyota dealership. If Hyundai wants to sell luxury here, they have to establish a luxury brand. Mazda actually planned for the Millenia to be the flagship of its own luxury brand, Amati, before finances and lack of volume doomed that nameplate to the limbo where Merkur XR4TIs and Hudsons still ask for forgiveness.

Please note that I am speaking about the U.S. market – in their home market of Korea, where they sell about 50% of all new cars, Hyundai will likely move a lot of Genesis sedans.

But I cannot conceive why Volkswagen continues to even mention Phaeton here when they have something Hyundai does not – a perfectly good luxury brand in Audi. The brass at Volkswagen is going to be dropping the price from $70,000 base to $55,000 with the new model – but people historically have not and most likely never will buy Volkswagens at that cost in the United States.

If people don’t buy VWs at that price, there is no way that Hyundai can expect to lure higher income clients into its dealerships, which are, according to Automotive News, already suffering from much lower margins this year.

COPYRIGHT Autosavant.net – All Rights Reserved

Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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3 Comments

  1. The price point for Hyundai regarding the Genesis and the Sonata is going to be a lot closer than it was for the Passat and the Phaeton for VW. Also, my personal opinion is that the Hyundai Genesis is going to register as a much better value for potential customers than the Phaeton ever did.

  2. The Millenia was supposed to be the Amait base model, not the top model.

  3. don’t forget, Hyundai also has the azterra beyond the sonata…
    from what i can see, the azterra is a ‘worthy’ competitor to the avalon…

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