Deja vu all over again, here comes the VW Phaeton.

Just yesterday Automotive News had an article that reported that amidst a cost cutting drive, Volkswagen has decided to re-introduce the uber expensive Phaeton model:

“…the “people’s car” maker plans to spend millions of euros upgrading a money-losing luxury sedan.”–Automotive News 1/28/15

The blogosphere has erupted with any number of industry observers pointing out the illogic of re-introducing an Mercedes-Benz S-Class competitor when you have announced that you’re cutting costs and, oh by the way, the Phaeton has been a huge money losing proposition ever since it was introduced at the 2002 Geneva auto show:

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I acknowledge the inconsistency of an austerity plan side by side with a re-jiggered luxo-barge but I admit to being a bit fascinated with the idea of the Phaeton.  The last time we went through the “we’re bringing the Phaeton back” phase was in 2009, right after the end of the great recession. At the time I wrote a post (“Has the VW Phaeton’s time come?“) and offered up the possibility that the Phaeton could be the luxury car for a new post recession sensibility.

I still think that possibility still exists, but the surging millennial generation adds a different twist to the idea.  After all, so many millennials grew up driving Volkswagens and we know for a fact that VW holds a special emotional place in American culture.  In five years millennials as a generation will be driving luxury segment sales. I think about a new generation of luxury car buyers, who are emotionally attached to the VW brand, who want to naturally separate themselves a bit from their parents and their parents’ luxury car choices (Mercedes-Benz, BMW, Lexus) and I say to myself that’s an opportunity!

Boomers were never going to drop $65 large on a VW, they remember the original beetle, and VW as an economy brand.  The millennials don’t have that institutional memory, for them VW is Jettas, Golfs, and Passats that were actually premium priced relative to their competitive set. Is it really such a stretch to think that this new generation of luxury car buyers might consider and buy a large luxury entry from VW?

I bet they would if the car and the pricing were right.

Unfortunately, this is where the leadership at VW will go wrong. The German management is obsessed with demonstrating that they can take the Phaeton up against the Mercedes-Benz S-Class:

“Unfazed by the losses, VW aims to pit the next-generation model against the Mercedes’ 80,920 euro S-class flagship”–Automotive News 8/28/15

The current S-Class buyer will not consider the Phaeton, don’t bother trying.

Instead introduce the Phaeton as a $60,000 luxury car aimed specifically at the millennial generation.  Make it sporty and add all the technologies that this generation thinks are critical, make the driver interface work like an iPhone. Don’t make it excessive, make it make sense as a value proposition to millennials and perhaps they will aspire to owning one. Perhaps the Phaeton can be the next generation’s large luxury car of choice because it fits their sensibilities.

When first introduced in 2004, VW hoped top sell 20,000 Phaetons globally and never got close.  I bet if positioned against the next generation luxury car buyer, designed to meet their requirements and priced appropriately, I bet VW could sell 20,000 Phaetons.

Trying to break into the established Tier 1 “D-segment” where sales are dominated by the boomer generation is a fool’s errand, particularly after working so hard to make corporate brethren, the Audi A8 a genuine participant.

Change the frame of reference and perhaps the Phaeton can succeed. Allow hubris to drive the Phaeton up against the S-Class, 7 Series and the A8 and its deja vu, all over again.

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One Response to “Deja vu all over again, here comes the VW Phaeton.”

  1. David-Anthony Powell says:

    Cameron great observations of VW’s previous missteps. Albeit consumers have seen this movie — unfortunately VW doesn’t share brand perception to scale up. Luxury buyers are not looking to shell out $65-$85 in the same showroom where the iconic Bug is being sold.

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