Why Volkswagen Phaeton was a massive failure - Especially in the US
As it turns out, bang-for-the-buck is not all that consumers are looking for.
Does hard work always pay off? Volkswagen proved it otherwise ten years ago with the Phaeton. It’s VW’s flagship model and, ironically, the least VW vehicle to ever wear the VW badge. So why did VW decide that building an ultimate luxury cruiser would be a good idea? Surprisingly, it all started with a move from Mercedes.
In the 1997 Frankfurt Autoshow, Mercedes Debuted its then-new A-Class to compete lower down in the food chain. This apparently infuriated Ferdinand Piëch, the Chairman of the Board of Management at VW at the time. He immediately decided that VW should retaliate by making an up-market model to compete with the big boys. But doesn’t Audi already have the A8, which is a VW-group product? As it turned out, the relationship between the A8 and Phaeton is like that between the 7-Series and the S-Class: the A8 is more sport-oriented, while the Phaeton focuses almost solely on luxury.
So Exactly How Luxurious, You Ask?
Determined to send all the competitors in this segment back to the drawing board, Piëch set ten parameters for the engineering team to follow. Clarkson mentioned on Top Gear in 2003,
“I tried to get Volkswagen to tell me what these parameters are, but they said they’re a secret. They only gave me one just to give me a flavor. And apparently, Piëch insisted that you should be able to drive the Phaeton all day at 186 miles an hour when it’s 122 degrees outside and the air conditioning must be able to maintain the temperature in the car of 71.6 degrees.”
Just where on earth can you find such a place where you can go that fast for an entire day under such extreme conditions? Those aside, I still don’t think Volkswagen has invented an infinite gas tank to date. It’s clear how determined and desperately Piëch wants to take down the big boys.
In 1999 International Motor Show Germany, Volkswagen debuted a concept vehicle named “Concept D”, which is essentially a 5-door liftback version of the Phaeton that eventually made into production. The concept D isn’t just close to the finished product in terms of looks: it’s fitted with a 5.0L twin-turbo V10, 4Motion AWD, adaptive air suspension, and a host of other high-tech gizmos.
Finally, VW debuted the Phaeton at the Geneva Auto Show in 2002. Only gasoline engines were available at launch: the 3.2L VR6, 4.2L V8, and 6.0L W12. To expand the lineup, VW added the 5.0L V10 found on the Concept D, a 3.0L single-turbo diesel, a 3.6L VR6, many of which were also updated throughout Phaeton’s lifespan.
What If I Wish To Feel More Special? Like, Have It Hand-built Like A Rolls
Phaeton was indeed built in a meticulous fashion to challenge the luxury car aristocracy. To achieve a level of attention to detail practically unheard of in the company, VW built a separate factory just for the Phaeton. And it’s not just any factory. Located in Dresden, an 800-year-old baroque city known for its art and craftsmanship, the factory is named “Gläserne Manufaktur”, or “The Glass Factory”. It is quite literally almost covered with glass. Owners and visitors can behold the artisans working their magic. VW put in all these efforts just to show that Phaeton is not a “People’s Car”; rather, it is the distillation of what Volkswagen is capable of.
So Far, So Good Then. Surely VW had Merc and BMW In The Bag, Right?
"Volkswagen Phaeton Factory Dresden" (CC BY-ND 2.0) by adamnsinger via Flickr
Not quite. In fact, quite the opposite. VW initially planned to move 5,000 units per year. Yet in Phaeton’s best year 2004, VW only managed to find owners for 1939 of them. Throughout its last year of production run, only 6 were made each month.
So what caused such a carnage? It still all comes down to the badge. As WIRED Magazine so eloquently put it,
“In America, buyers are very brand conscious. Most car shoppers looking to spend $70,000 are going to want it with some cachet, regardless of how wonderful the car itself is.”
In the US, VW only managed to deliver 3354 Phaetons in the 44 months it was on sale there. Yet in South Korea, VW managed to sell 2615 Phaetons over the same period. As VW pulled Phaeton out of North America in 2006, South Korea became Phaeton’s biggest market. However, China surpassed South Korea eventually to become Phaeton’s biggest sales market and remained in 1st place until the end of Phaeton production.
"1987 Volkswagen Jetta" (CC BY 2.0) by NielsdeWit via Flickr
Why did Chinese consumers become fans of such a subdued, understated luxury cruiser? It’s also down to the badge. In the late 80s and early 90s, Volkswagen had huge success in China with its Santana and Jetta. They were known for their cutting-edge technology (for China at that time), performance (same here), and reliability (still true to date). The VW brand literally symbolized everything great about German engineering. Such fond memories of VW lived on in the hearts of generations, which eventually propelled the sales of Phaeton.
Yet no matter how well it sold in certain Asian markets, make no mistake that Phaeton was still a massive sales failure for VW. Thus, VW pulled the plug in March 2016 and Phaeton was finally consigned to the history book.