VW News: Volkswagen Still Set On Loss-Leader Phaeton

[William Maley]

Trying to figure out the logic of Volkswagen concerning the next-generation Phaeton is a very difficult task. The German automaker loses 28,000 euros (about $31,598) on every Phaeton built. Also the automaker has announced a cost-cutting plan that a plan to save 5 billion euros ($5.7 billion) annually in the coming years. Yet, Reuters is reporting that Volkswagen is going forward with the next-generation Phaeton due sometime in 2017 or 2018.

"Economically speaking, it's the most irrational project. Piech and Winterkorn simply cannot let go of their fondness for luxury products,"said Evercore ISI analyst Arndt Ellinghorst.

How irrational are we talking about? Analysts say that next-generation Phaeton using the MLB platform could cost as much as 650 million euros (about $737 million). Even some Volkswagen executives are wondering why the Phaeton is still around.

"That's a dangerous question. It's an image bearer with no relevance for volume," said Volkswagen's U.S. Head Michael Horn.

Source: Reuters

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[Drew Dowdell]

They are doing it because of Genesis, Eqqus, and K900.

[G. David Felt]

But it will come back to haunt them. This will be a money pit that will cost a few men their jobs in the long haul.

[kestas57]

I don't see the point of this car. One can just buy the Audi A8 if they want a German limo from the VAG.

[smk4565]

No point to this car, they need to let it die already.  They thin a VW can compete with an S-class?  That is a waste of $737 million.  They could make it compete with the Equus or K900, but that isn't enough sales volume, and no point to do that.  If someone wants a $75k luxury car from VW, they can buy an A8.

 

The other problem is a Passat starts at $22k and then the Phaeton is one step up at $75k?  A $50k price difference and they look the same!  I think VW could use a sedan larger than the Passat, priced in the $33-43k range, as more of an Azera, Maxima, Impala and LaCrosse competitor.  But by no means should they make a $75k sedan.  That would be like Chevy making a $75k full size luxury sedan to compete with Cadillac.

[balthazar]

If NOTHING "competed" with the S-class, there would be no A8, no 750i, no Quatroporte, no XJ... and no other sedan in the general price range.

 

Yet, there are.

[smk4565]

The Quatroporte and XJ are barely competing.  Really they should just give up.  Since the A8 platform gets used for Bentley too, they might as well take the $737 million for the Phaeton and put it into the A8, maybe they can sort of catch up to the S-class.  Because now Mercedes is coming for Bentley too with the Maybach S600.   VW should have a $30-40k sedan above the Passat as their Maxima/Avalon competitor, sort of a poor man's Audi A6 I guess.

[balthazar]

So should mercedes "give up" on super high end option trims because "no one buys them"??

 

Maybach is saddled with the stink of recent failure, I don't see it being a draw of any measurable means. Bringing it back into the 'MB' brand allows MB to hide whatever dismal take rates it manages, and cutting it's price in HALF at least gives it a fighting chance. I just hope MB isn't looking to previous well-heeled maybach buyers to forget the 3rd degree burning they took in hindsight. Mercedes should "give up" on a 'Maybach'. Again.

 

 

Fact remains; these other models in the same price tier are there because some consumers obviously don't gravitate to the 'Hello Kitty' of luxury sedans.

[Drew Dowdell]

I really like the new S-Class, but I still like the XJ-L better. 

[G. David Felt]

S-Class is OVER RATED! Being in a few I have yet to see why they charge so much as it does not register with me but then I guess not being part of the billionaire class I cannot fathom the badge snob of it either.

[smk4565]

S-Class is OVER RATED! Being in a few I have yet to see why they charge so much as it does not register with me but then I guess not being part of the billionaire class I cannot fathom the badge snob of it either.

S-class has been the best car in the world for the past 30 years.  I don't think the best in the world can be overrated.  Few cars have had that long a run at the top of their class, 3-series is probably the only other one.  The Phaeton can't even compete with the A8, there is no point in VW making it.  They should put those resources into the Jetta and Passat and get them more competitive.

[Z-06]

 

S-Class is OVER RATED! Being in a few I have yet to see why they charge so much as it does not register with me but then I guess not being part of the billionaire class I cannot fathom the badge snob of it either.

S-class has been the best car in the world for the past 30 years.  I don't think the best in the world can be overrated.  Few cars have had that long a run at the top of their class, 3-series is probably the only other one.  The Phaeton can't even compete with the A8, there is no point in VW making it.  They should put those resources into the Jetta and Passat and get them more competitive.

 

 

Says who and on what metrics?

[G. David Felt]

 

S-Class is OVER RATED! Being in a few I have yet to see why they charge so much as it does not register with me but then I guess not being part of the billionaire class I cannot fathom the badge snob of it either.

S-class has been the best car in the world for the past 30 years.  I don't think the best in the world can be overrated.  Few cars have had that long a run at the top of their class, 3-series is probably the only other one.  The Phaeton can't even compete with the A8, there is no point in VW making it.  They should put those resources into the Jetta and Passat and get them more competitive.

 

Considering how MB whores out the S class to the Taxi Fleets of Europe and has to so heavily discount them to sell here, I would like to see metrics that show this is truly the worlds best selling luxury auto besides just pointing to sales numbers.

 

If it is such the best car you speak of, then why do you not see S class auto's past 5 to 10 years on the roads? Is it possibly due to them not being able to last? Give more than just pointing at Sales numbers please.

[Drew Dowdell]

 

S-Class is OVER RATED! Being in a few I have yet to see why they charge so much as it does not register with me but then I guess not being part of the billionaire class I cannot fathom the badge snob of it either.

S-class has been the best car in the world for the past 30 years.  I don't think the best in the world can be overrated.  Few cars have had that long a run at the top of their class, 3-series is probably the only other one.  The Phaeton can't even compete with the A8, there is no point in VW making it.  They should put those resources into the Jetta and Passat and get them more competitive.

 

 

You know who's had a car at the top of their class longer... much much longer? Chevrolet. 

The Phaeton is a Genesis/K900/Lexus LS competitor. A loaded long wheel base Phaeton is about $100k, so that gets just above base price on the S-Class. 

[Drew Dowdell]

 

 

S-Class is OVER RATED! Being in a few I have yet to see why they charge so much as it does not register with me but then I guess not being part of the billionaire class I cannot fathom the badge snob of it either.

S-class has been the best car in the world for the past 30 years.  I don't think the best in the world can be overrated.  Few cars have had that long a run at the top of their class, 3-series is probably the only other one.  The Phaeton can't even compete with the A8, there is no point in VW making it.  They should put those resources into the Jetta and Passat and get them more competitive.

 

Considering how MB whores out the S class to the Taxi Fleets of Europe and has to so heavily discount them to sell here, I would like to see metrics that show this is truly the worlds best selling luxury auto besides just pointing to sales numbers.

 

If it is such the best car you speak of, then why do you not see S class auto's past 5 to 10 years on the roads? Is it possibly due to them not being able to last? Give more than just pointing at Sales numbers please.

 

It is a major financial liability to own and operate an S-Class outside of its warranty. That's why they have such terrible depreciation. People who make the mistake of buying an S-Class rather than taking one of the MB Subsidized leases can look forward to losing an entire E-Class in depreciation in just 36 months. Sounds like a great car to me. 

[Drew Dowdell]

The problem for the current Phaeton is that it has not been updated significantly since it was first on sale here in 2004. One would find it difficult to tell the difference between a 2004 interior and a 2015 interior.

 

I'd imagine that with the next Phaeton, VW is planning some major cost cutting and parts sharing that will push the car closer to if not inside the black.   Might even see a bit of a price drop too.  Dropping the price to match the Koreans just might get some more people to buy.... yes it is a "People's" brand, but it is slightly more trusted than Kia/Hyundai.

[Z-06]

What I liked about the previous Phaeton was the principal behind its build. Pieche wanted the best without compromise to shove in face of BMW and MB and even Audi. The car did grueling testing in extreme weathers at high speeds to check reliability. Too bad badge snobs beat it down.

 

I wouldn't mind owning one of the W12s sometime as you can find a good piece for $~15k. To me it was better than the S Class then, which was full of compromises.

[G. David Felt]

Sadly for the Phaeton the interior space was just too little. A big person like me could never get comfortable in the front seat let alone sit in the back seat.

 

Plus this auto should be competing against Buick, Acura, Lincoln, etc.

[Drew Dowdell]

Sadly for the Phaeton the interior space was just too little. A big person like me could never get comfortable in the front seat let alone sit in the back seat.

 

Plus this auto should be competing against Buick, Acura, Lincoln, etc.

 

oookay... so the Phaeton is a fairly huge car as sedans go these days. The rear seat is ginormous....   You're simply going to have to start building your own car or have your legs amputated if you can't get into the back of a Phaeton....

[balthazar]

S-class has been the best car in the world for the past 30 years.

That is hilarious. 2015 – 30 = 1985. Here's the interior of an '85 s-class :

 

 

Giant black rubber steering wheel, mouse fur upholstery, horrible unpainted plastics, it just REEKS of cheapness. Mercedes interiors in the '80s were horrible, horrible, horrible; SL is in a dead heat for the barrel bottom here, too. 

 

It was only by benchmarking Cadillac in this era that MB was able to move ahead. You're a full decade optimistic on this claim.

[balthazar]

Phaeton did post good rear compartment numbers.

Legroom- frt: 41.7, rr: 43.1 for a total of 84.8. Not as good as my B-59 coupe, but close.

 

The product planners who green lit a car squarely in the upper audi range clearly didn't know what they were doing. 

Ego has probably had a higher cost in business than most other causes.

[Drew Dowdell]

 

S-class has been the best car in the world for the past 30 years.

That is hilarious. 2015 – 30 = 1985. Here's the interior of an '85 s-class :

 

 

Giant black rubber steering wheel, mouse fur upholstery, horrible unpainted plastics, it just REEKS of cheapness. Mercedes interiors in the '80s were horrible, horrible, horrible; SL is in a dead heat for the barrel bottom here, too. 

 

It was only by benchmarking Cadillac in this era that MB was able to move ahead. You're a full decade optimistic on this claim.

 

 

 

Oooh boy! 4-Speed dial fan control! Completely unmarked vent control (I bet it's cable operated too!) Giant toggle switches from JC Whitney and a Honda Accord gauge cluster.

 

For reference, here was what Lincoln was doing in 1985:

 

 

Technically this is an '83, but the only difference is the steering column and wheel. 

So here's a second view 

 

Fully Automatic, push button climate control. Set it and forget it... no twiddling with dials to adjust fan speed. This was standard, not optional like on the Benz and controled fan speed and temperature rather than just temperature like on the Benz.

Cruise control on the steering wheel (something Benz STILL hasn't done)

It's a full digital dash plus a rather extensive trip computer with real time fuel economy, distance to empty, Estimated time of arrival, gallons of fuel used, gallons of fuel left (yes, it actually gave you a number rather than E - F)

Automatic headlamps AND high beams.

.... and a much cleaner overall look.

This Continental had roughly the same horsepower and torque in base form as the optional upgrade 5.0 in the Benz..... in a fantastic bit of irony, the Continental was pushrod while the Benz was SOHC. 

 

Then there is the Mark VII

 

 

Bit of a sportier flare, again it is actually computerized.

 

Both Lincolns had an early form of traction control and skid control. 

 

Then there's the Eldorado and Seville.  These were less than a year from being redesigned into a new body, but here they are with digital dashboard, trip computers, automatic headlamps/high beams and fully automatic push button climate control.

 

[Drew Dowdell]

Even the '85 Thunderbird has more technology than an S-class of the day.... though admittedly the finishes aren't there.

 

[balthazar]

Cadillac debuted 'set & forget' Climate Control (in obvious addition to coining the term) in 1965!

[smk4565]

The W126 S-class is the best selling S-class ever, with over 892,000 sold.  That car really expanded the global presence of Mercedes, probably more than any other car in their history.  You could make a claim that the W116 S-class was the best car in the world, especially with the 6.9 V8.  That was mid 70s, so that puts it on a 40 year run as the top luxury car in the world.

[balthazar]

It wasn't a luxury car in the 1970s OR well into the 1980s. Look at the pic above- shameful. SL is even worse in this era. 

Mercedes had a LOT of catching up to do then and there were many critics then who doubted they could turn things around (which they did).

 

Who cares how many were sold? 

[Drew Dowdell]

It wasn't a luxury car in the 1970s OR well into the 1980s. Look at the pic above- shameful. SL is even worse in this era. 

Mercedes had a LOT of catching up to do then and there were many critics then who doubted they could turn things around (which they did).

 

Who cares how many were sold? 

 

I just spent two weeks in the NYC/NJ Metro area with a lot of driving around.  I saw lots of current body S-classes.  There must be a very successful Benz dealer in the area because every single one has his T&LC logo on the back.   He only seems to sell them in black or silver aside from the one beige one I saw on the back of a flatbed. 

[balthazar]

I've seen some of those dealer's sedans! Mostly around the airport or train station. Strange.

 

The stereotype of 'stupid Americans' is only reinforced by the widespread acceptance of european taxi cabs as luxury cars here.

Still, if mercedes hadn't benchmarked Cadillac for decades upon decades, they'd still be selling Studebaker-spartan sedans with a top speed of 82 MPH and power nothing.

[Drew Dowdell]

I've seen some of those dealer's sedans! Mostly around the airport or train station. Strange.

 

That dealer must specialize in large sedans, because I see that dealer logo on a lot of Town Cars, XTSes, and MKTs. 

[balthazar]

So in reality, the many people critiquing Cadillac's European showing are really lamenting the loss of fleet / taxi sales there ... 

[Drew Dowdell]

So in reality, the many people critiquing Cadillac's European showing are really lamenting the loss of fleet / taxi sales there ... 

 

Well,  Cadillac does need to up their game in Europe.  The dealership network there is pathetic.   At this point, I don't think it is the cars that are holding them back that much.  The lack of suitible dealers and the lack of diesels has more to do with it.   Add a 4-cylinder diesel, V6 diesel, to the ATS and sell it out of a real dealership rather than out the back of an Opel store, and I'm sure the ATS would do substantially better there.

[smk4565]

It wasn't a luxury car in the 1970s OR well into the 1980s. Look at the pic above- shameful. SL is even worse in this era. 

Mercedes had a LOT of catching up to do then and there were many critics then who doubted they could turn things around (which they did).

 

Who cares how many were sold? 

In the late 70s, Mercedes was selling the 450SEL 6.9 for over $50,000, when a top end Cadillac or Lincoln was $20,000.  I think they were selling a luxury car.  

[Drew Dowdell]

It wasn't a luxury car in the 1970s OR well into the 1980s. Look at the pic above- shameful. SL is even worse in this era. 

Mercedes had a LOT of catching up to do then and there were many critics then who doubted they could turn things around (which they did).

 

Who cares how many were sold?

In the late 70s, Mercedes was selling the 450SEL 6.9 for over $50,000, when a top end Cadillac or Lincoln was $20,000.  I think they were selling a luxury car.

No, it was just expensive and costly to repair. Just like the old BMW 3-Series wasn't a luxury car beyond the luxury price... It was no more luxury than a Jetta at the time.

[balthazar]

Pics don't lie, smk. 
I spent a good half hour looking over a mid-80s SL about 2 years ago. Interior construction & features and body hardware were on the same level as a Ford Maverick. Car is a poser, a joke.
Cost is irrelevant, product is everything.

[ocnblu]

I don't always use this smiley, but when I do.... 

[balthazar]

Tho I never inspected one in person, the Phaeton at least seemed to be a nice, fitting product. It was just insanely badged (model name, but most significantly; BRAND name). '80s s-classes & SLs are very cheaply built 'luxury' cars.

[Drew Dowdell]

Tho I never inspected one in person, the Phaeton at least seemed to be a nice, fitting product. It was just insanely badged (model name, but most significantly; BRAND name). '80s s-classes & SLs are very cheaply built 'luxury' cars.

 

The Phaeton was a beast of a car and built to withstand extremely difficult climate conditions up to and including Piëch's ego.   Very luxurious interiors for the day and based on content, could easily justify the price.   The only thing it couldn't justify was the badge.

[Cory Wolfe]

The Phaeton was a wonderful car, definitely as good as, if not better than, flagships from luxury mainstays. It just couldn't overcome brand snobbery. Anything SMK says is generally a fitting example of such... People just get sucked into believing something is always better everything else. Now, its worth noting that the Phaeton did have one major drawback: VW dealer service, or lack thereof. 

[Drew Dowdell]

The Phaeton was a wonderful car, definitely as good as, if not better than, flagships from luxury mainstays. It just couldn't overcome brand snobbery. Anything SMK says is generally a fitting example of such... People just get sucked into believing something is always better everything else. Now, its worth noting that the Phaeton did have one major drawback: VW dealer service, or lack thereof. 

 

The W12 engines were also lovely, but had very high repair costs, even compared to other 12s

[Z-06]

All this talk about Phaeton, makes me go and get a good W12. I have seen many getting shipped back across the pond due to demand.

[Drew Dowdell]

At the moment, there is only 1 in all the US on Autotrader.com

[G. David Felt]

Found 40 Phaetons on sale on Autotrader this morning of which 38 were v8 and 2 were W12 for NA.

 

One was at the dealership and one is a private sale. Both around the 100K mile range. Wonder how long that engine will last?

 

[Drew Dowdell]

One must have snuck on there in the last 24 hours.

[Drew Dowdell]

In my opinion, the only reason why VW still produces the Pheaton is because they want to have a "luxury" car in their car range. And I understand them, but what seems impossible to understand is how they lose money producing this car. I mean, how they couldn;t find a way to solve this problem. This makes me curious about their new model even more than the looks or stuff like that. 

 

The current Phaeton is a fairly unique beast in the VW lineup.... it shares a structure with the Audi A8 and more distantly, the Bentley.  The next Phaeton will share a lot more with it's more plebeian brethren I suppose.