The Phaeton failed miserably, with only a few thousand sold.

Many of us thought that VW had simply overstepped, and that the VW brand could not stretch that far up market.  Not unreasonable considering that many of the baby boomers still remember the original beetle and VW’s positioning as an inexpensive, small alternative to the behemoths Detroit was producing in the 50′s and 60′s.  In fact the “inexpensive” portion of the brand’s original positioning haunted VW for years as the cars became more expensive than consumers expected Volkswagens to be.  The Phaeton stretched everyones’ perception of what a Volkswagen could or should be. Most importantly the brand lacked the cachet, the prestige necessary to compete successfully in the Import High Group.  Luxury segment consumers were not interested in sporting the VW badge.

Within the last few months the trades have been reporting that Volkswagen AG and Volkswagen of America are more than likely going to bring the Phaeton back to the US market in MY2010.  Already industry pundits are incredulous that VW would try the Phaeton again.

I think the pundits are wrong.  I think the return of Phaeton will be a success.

The recession has altered Americans’ perception of luxury.  The Wall Street Journal reporter Matthew Dolan was interviewed and commented that Americans have moved from “conspicuous to careful consumption.”  He went on to say that “the luxury of the past is not the luxury of the future.”  Americans are behaving differently after the market tumbled and the recession changed our sensibilities. Everyone has a friend who traded in his BMW or Mercedes-Benz and bought a Jetta diesel or a Prius instead.  This new sensibility, the desire to be “responsible” not ostentatious creates an obvious opportunity for VW’s Phaeton.  Last time around Phaeton didn’t have the “prestige” to compete in the luxury segment…what was a weakness is now a strength.

Add to this new sensibility the fact that we are on the cusp of a new generation of luxury segment participants.   Young men and women who grew up with “Drivers Wanted,” people for whom VW has never been known as inexpensive.  Matt Dolan spoke about this group when he said that the “under 35 crowd’s definition of luxury experience is changing.”  I think it is likely that this generation of luxury segment participants will look beyond the luxury brands of their parents and give different brands a chance.   This group will look at Phaeton and see it as the flagship of a brand that they know well and think is very cool.

There’s going to be  a changing of the guard in the luxury segment as more “careful” boomers buy their last couple of cars  and a new generation enters their high earning years.

I think the new Volkswagen Phaeton with its diesel motor could become emblematic of ”new luxury.”