The Volkswagen Phaeton is Returning to the US. Why?

By Chris Haak

From the day the flagship Volkswagen Phaeton launched in the US, analysts and customers questioned the wisdom of a company known for selling small, sporty, efficient cars deciding to sell a V8- and V12-powered $85,000 luxury car.  The wisdom of the Phaeton seemed even more dubious when one considered the fact that the Audi showroom down the street offered a very capable A8 luxury sedan, sharing many of the Phaeton’s parts and powertrain choices, for a price not far from the big VW.  There was also the large leap in price from the next-most expensive Volkswagen model at the time, the $40,000 Passat W8, to the Phaeton.

The best the company could have hoped for was selling a few Phaetons to executives who didn’t want the glamour and glitz of a luxury-branded car.  The more likely cases were that either the Phaeton would flop, or it would cannibalize Audi A8 sales.  As it turned out, the Phaeton flopped in the US.  Just 1,433 Phaetons were sold in the initial 2004 model year, followed by 820 units for 2005.  The car was withdrawn from the US market in 2006, and several VW executives distanced themselves from the white elephant.  Notably, former VW CEO Bernd Pischetsrieder called the car’s global 20,000-unit sales goal a “pipe dream.”

A new regime took over at Volkswagen following Pischetsrieder’s ouster, with Chairman Ferdinand Piëch – the man who championed the Phaeton during his tenure as VW CEO – declaring that his pet project would live on, and would in fact spawn a second generation sometime in the next few years.  Too, the next-generation Phaeton will relaunch in the US.

Piëch’s hand-picked CEO, Martin Winterkorn, as well as several “yes men” on his management team, have publicly supported the US relaunch of the Phaeton, heralding the car an important component of restoring VW of America’s profitability and increasing the automaker’s US market share from about two percent to about six percent of the US market.

However, it’s unclear what makes Volkswagen management thinks it will see a different result from the Phaeton the second time.  What can they change about the car to make it more appealing to buyers in the US and elsewhere?  At the very least, it will still be badged as a Volkswagen (strike one).  It will still have expensive powertrains and luxury appointments, keeping the price high and maintaining the cannibalization risk with the Audi A8 (strike two).  It will still have a significant price disparity with VW’s next-most costly model, the Touareg SUV (strike three).

As Albert Einstein allegedly said, “the definition of insanity is doing the same thing over and over again and expecting different results.”  The Phaeton Mk2, though it surely will be a very good car, seems to be little more than a vanity project spearheaded by Volkswagen’s chairman.

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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  1. At first glance you could think of this car in the same vain as the Hyundai Equus. Except, Hyundai does not have a luxury brand and has progressed fairly consistently up the ladder with better/bigger/nicer cars. Will the target segment consider the Phaeton as worthy of consideration based on it being the budget buy to get the goods without the brand? At what point does price dictate the inclusion of brand image? I do not think that this price segment has the same mentality of consumer as one who is cross shopping an Avalon vs. an ES350.

  2. In addition to the problems described above, the Phaeton also lacked a premium buying and servicing experience. Buyers of Mercs, BMWs, Audis, Lexuses, etc., expect a certain level of accommodation (read: being spoiled) from the dealerships. VW dealers were ill-equipped to handle the demands of this type of buyer.

  3. Just slap a VW badge on some A8s and throw a few around in some VW showrooms. You’ll sell just as many per year (a few hundred) and save yourself the trouble of designing a separate car. Idiots.

  4. Einstein said it best: Version two of the Phaeton is insane and will flop. Those who already own VWs are the predominant buyers of new VWs, they have a very strong brand allegiance. They spend ~$20k on a Jetta, and upwards of $30k for a Passat or the attractive new CC. The ~$40,000 gap between the highest priced VW (Touraeg)and the new Phaeton will show as sales goals are not met. Find a way to drop the $85k price tag into the 50-60 range and then consider re-introducing to the U.S.

  5. If that car was badged as an Audi, Bentley or even Bugatti, things could had been different. But badged as a VW, it’s VW’s “Edsel”.

  6. The V8 powered Phaeton was in fact priced at $65,000, some 30% lower than a comparable Benz S550 or Audi A8.

    With the immense commonality of platforms across VW brands and the Knoxville, TN. plant likely able to at least assemble knock-downs a high $50K priced Phaeton for the U.S. market may well be feasible, if not immediately profitable.

    Huyndai’s target market with the Genesis and Equus sedans are certainly not current Elantra, Tuscon or even Sonata owners. Nor are Lexus LS owners typically Toyota Corolla or Camry owners “moving up”. So why should the market for prospective Phaeton owners be limited to “traditional” Jetta or Passat owners? That was the kind of thinking at VW that hurt U.S. sales of the Gen. I Phaeton.

  7. As an owner of Mercedes, a BMW 745i (grey market) and now a 2004 V8 Phaeton, I’m sold on the Phaeton and await the arrival of the 2011. Quality and ride win hands down in my book.

  8. My Phaeton is a V6 3.0TDI with 240PS and has done nearly 4000 miles from new (reg Feb 2010) and I must say that outright performance apart (blunted by its weight) it is as good to drive as my previous luxury saloon, the XJR. I do not subscribe to badge snobbery.

  9. I also had an XJR and a BMW, and I traded the BMW for the Phaeton. The car is not for everyone, but it is the first car I’ve ever purchased that lives up to the mystique. The car has its own personality. I see 12 S550’s a day and have seen 2 Phaetons in 7 years. Now you may say that this is evidence of its failure, but those who have never heard of a Phaeton say, “Wow, is that a brand new VW? They must have just come out. I didn’t know they made them this nice.” Those who know about the car are just shocked and grateful that someone is brave enough to get one. I hear about how expensive they are to maintain but the costs seem typically less than BMW parts, aside for some parts I would say are the same price. But I bought a replacement mirror blinker and mirror glass today for a total of $80 for this car. Try that with a Merc or BMW. I love the car and hope to drive it forever.

  10. Pleased to hear you like your Phaeton too, Shane! A year on and 10K miles later, the only minor gripe is its weight on the hydropneumatic suspension, making it hop out of line when it encounters a bump on some corners. But everything is so well considered, so beautifully engineered.

    Oh, I like the styling of the last of the previous model more than the 2011 model, especially that horrible grille now. Piech’s original is best!

  11. About the cost to VW to make: VW shares technology developments throughout their entire line. So, you find Phaeton chassis parts on Bentley Continental GTs (or, vice versa, if you must). You find an Audi V8 inside the Phaeton..etc.
    My Touareg and Phaeton have the very similar steering wheel (Phaeton heated, Touareg, not). With this sharing, the costs over the entire brand spectrum gets reduced, on a per brand basis.
    I hope to be able to trade in my ’04 V8 for a ’15 if VW does indeed return to USA.

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