Volkswagen, A Glutton for Punishment, To Attempt Phaeton Again

Are they “Attempting Phaeton” or “Tempting Fate?”

By Chris Haak

02.19.2008

The Volkswagen Phaeton luxury car hit the US market in November 2003 as the Volkswagen brand’s flagship and with the hope on the part of the company’s management that it could forever change the brand’s “people’s car” image in the minds of consumers and vault the brand to Tier 1 luxury car status. The car’s sales goal was 5,000 units per year.

We all know what happened next: the car hit the market and consumers stayed away in droves. It had many problems, but the top three were probably: 1) the car was too similar in price and size to an Audi A8, yet not sold at much of a discount; 2) the car’s $70,000 starting price was nearly double the price of the next-lower Volkswagen model, leaving too much daylight between the two models, and 3) the Volkswagen brand does not carry the level of prestige that a $70,000 to $100,000+ vehicle requires in order to be successful. Annual sales for the Phaeton during its time on the US market were:

2003: 343 (November and December only)
2004: 1,939
2005: 820 (down 58%)
2006: 235 (down 75%)
2007: 17 (down 92%)

The worst part of the Phaeton experience for VW was not its US sales thud, but how the development of the technically advanced car – including one of the most impressive assembly plants in automotive history – distracted resources from the development of the company’s bread and butter products – the Passat and Golf/Jetta – which forced the company to keep them on the market longer than they would have liked to and cost the company many sales as consumers stayed away from the models in need of a refresh.

Stefan Jacoby, CEO of Volkswagen of America, is toeing the company line (the one re-established by Ferdinand Piech) by stating that the Phaeton should not have been dropped from the US lineup (it’s still sold in Europe) because it’s so difficult to launch a new car in the US and the German management had sky-high expectations for the car.

However, Mr. Jacoby offered some more hints about the Phaeton returning to the US, but it’s expected to debut in Europe in 2010 and would land in the US sometime after that. To differentiate itself from its corporate cousin, the Audi A8, the next Phaeton will be far cheaper (around $55,000 to start) and shorter. Diesel power, not available in the previous US-spec models, is likely to be offered.

Building the Phaeton in the first place was the mistake, not pulling it out of the US market. I mean, is 17 units (or even 235 units) sustainable? If a car that reaches 40% of its sales objective in its BEST sales year isn’t one to withdraw from the market, I don’t know what is. With that being said, positioning the Phaeton (which will remain the name of the new car, in spite of its prior lack of sales success) as more of an E-class/5-series competitor rather than as a peer of the S-class/7-series at the same price should ensure better sales results. Volkswagen manages a large portfolio of brands worldwide (VW, Audi, Lamborghini, Skoda, Seat, Bentley, etc.), but it seems funny that they have so much trouble defining their own brand in the US. At the very least, I’m betting that the 2010 or 2011 Phaeton will sell more than 17 units.

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Author: Chris Haak

Chris is Autosavant's Managing Editor. He has a lifelong love of everything automotive, having grown up as the son of a car dealer. A married father of two sons, Chris is also in the process of indoctrinating them into the world of cars and trucks.

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5 Comments

  1. maybe it’s not a mistake bringing it back to the US, but i think they should change their market demographic and shoot lower [in price]…

    try going the route of the hyundia genesis…
    RWD, luxury, large interior… and ‘cheap'[in price only] – maybe the phateon shouldn’t be 35k cheap, but 40k [base] cheap would sell well i imagine…

    i have a funny felling that hyundai is going to be selling a lot more than 5000 genesis each year…

  2. Boy, you have to wonder just how this is being justified inside VW. Are they forecasting a lot more sales of the Phaeton or more sales of all Volkswagens as a result of the Phaeton being a halo car, or something else? It just doesn’t seem to make sense from outside.

  3. It’s obvious that this is a vanity project gone horribly awry. There is no good reason for the Phaeton to exist within the larger VW Group family. As others have pointed out, the position the Phaeton fills is already ably taken care of by Audi.

  4. The Phaeton may not find too many buyers, but I’m here to tell you it’s a great car. I’ve got a friend with one (he bought it used, thank God) so I’m familiar with it and it is a NICE car.

  5. I agree with Reuben H., I think the Genesis is going to do better than you think in terms of sales. I don’t don’t think they’ll sell a whole lot, but I believe they’ll sell a lot more than 5000 annually.

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