Volkswagen is planning to upgrade the Phaeton luxury model and embark on a second generation to be in the market by 2017.
The decision has baffled many analysts and observers as the first model lost VW millions of Euros and failed to meet its sales targets.
Also, the company is in the middle of a five-billion-euro cost cutting operation which will see less profitable models axed.
Analysts calculated that VW has lost 28,000 Euros on each Phaeton sold between 2002 and 2012.
A London-based researcher said that a decision to update the Phaeton is “irrational” from an economic point of view.
Stefan Bratzel, head of the Center of Automotive Management think tank near Cologne, said “It doesn’t make much sense strategically,” and added “The business case is equally questionable.”
The new model is aimed at the Mercedes S Class and sells for 4,000 Euros less than the 80,000 -Euros luxury Daimler.
VW predicted sales of 20,000 Phaetons a year but production for 2013 was less than 6,000 vehicles. Even if the new model achieved higher sales, it will struggle against S Class models now selling at 85,000 cars per year and BMW 7 Series selling at 64,000 vehicles annually.
The new Phaeton may also impact on sales of Audi’s A8 luxury sedan.
Audi as part of the VW groups has its own struggle to match the sales of its rival premium sedans.
It seems that VW needs to learn the “Maybach lesson” and stop the Phaeton project draining its resources.
The company should know that there is an inherent weakness of a brand made by the manufacturer of the “people’s car.”
The Phaeton looks like a big Passat and can hardly command the premium price it needs to cover costs.
A halo car for the company may be the main motive for re-inventing the Phaeton.
However, sedans hardy make a statement about a company. And a loss-making sedan lacking an image-boosting status is the last thing VW needs.
-------------------
— Adel Murad is a senior motoring and business journalist, based in London.
— [email protected]
