VW targets the rich

VW aims to sell 20,000 Phaetons a year by 2004

By Jorn Madslien BBC News Online business reporter in Geneva

Volkswagen's new luxury car, the Phaeton, will be on show for the general public for the first time when the International Motor Show in Geneva opens on Thursday.

The key issue for this car, first and foremost, is to enhance the Volkswagen brand.

Dr Bernd Pischetsrieder, incoming VW chairman

The model is regarded within the car industry as a revolutionary and risky push by the VW group, which is already represented in the luxury market through the Audi, Bentley, Bugatti and Lamborghini brands.

Observers question whether the launch make sense, as a commercial flop could damage the group's other key brands.

And VW itself has admitted that sales of the Phaeton, due to be built at a custom-built 180m euro (£110m) factory in Dresden, are expected to be relatively low for several years.

Enhanced image

The incoming chairman of the Volkswagen group, Dr Bernd Pischetsrieder, insisted that success would not be measured by sales volumes.

Launching the Phaeton made commercial sense because "the key issue for this car, first and foremost, is to enhance the Volkswagen brand", he told BBC News Online.

VW's "problem" was that its higher-range Golf and Passat models, at the 25,000 to 30,000 euro price range, were competing with products from premium brands.

The Phaeton would allow VW extra options for exploiting this market, he said.

But, competing against sedans from marques better established in the luxury market, who is going to buy the Phaeton after it is launched on Europe's main markets this summer?

Raising standards

That question was on everybody's lips when Dr Pischetsrieder attended a press dinner in Geneva.

Dr Pischetsrieder: The Phaeton will 'lift the standard' for everyone in VW

And rather than waiting to be asked, the former BMW boss raised it himself in his pre-dinner speech.

Dr Pischetsrieder was confident of the market.

One of his press officers insisted that car buyers in this segment would go for the car simply because it would come with an optional engine size larger than its peers.

"It's a Porsche with four doors," he said.

New customers

Dr Pischetsrieder forecast that Volkswagen would sell 20,000 Phaetons per year by 2004.

The Phaeton, he said, would not only "lift the standard for everyone in the company", but also "add even more emotion to the Volkswagen brand".

The car would not merely be sold to existing VW drivers.

Trained dealers would seek out wealthy buyers in a bid to expand the Volkswagen appeal.

Volkswagen has succeeded in attracted new groups of customers before.

When it was first launched, its Golf GTI neatly pushed the then successful BMW 2002 model onto the sidelines and redefined the VW brand as a sporty player Mr Pischetsrieder admitted, despite his past as a BMW man.

Disgruntled dealers

But the introduction of the Phaeton has rattled many, both inside and outside the VW group.

Many dealers selling the group's existing luxury sedan, the eight-year-old Audi A8, are said to be unhappy.

Critics claim that Phaeton's introduction has suffered delays, and so pushed back the launch of the A8's replacement, due for launch next year.

By then, the A8 replacement will not only have to compete with top models from Mercedes, BMW, Lexus and Jaguar, but also a car from within the group.

Phaeton: Not a threat

"That's not true," Dr Pischetsrieder told BBC News Online.

For starters, he explained, "the Audi [A8] was not delayed because of the Phaeton".

"The Audi always had this timing and it would be nonsense to delay it.

"You see, in this whole market, when you take the price range, Audi has less than a 5% market share, so why should the Phaeton particularly conquest from those 5% and not from the remaining 95%?"

Making a difference

With the regards to the Audi dealers who have objected to having to face competition from its own kind, Dr Pischetsrieder displayed little sympathy.

"Possibly, the dealers learn to be a bit quicker and not to find the competitor in-house but out-house, and this will help our business, won't it?"

This leaves Audi - if not its dealers then at least its engineers and marketers - with a serious challenge.

They have to make sure the A8 replacement is sufficiently different from the Phaeton to dodge claims that the two models are merely differently badged versions of the same car.

Product is key

The Volkswagen group has been pushing a similar strategy for a few years now with its VW models which are sold at a discount carrying Seat and Skoda badges, disguised, according to critics, as more sporty or more thrifty.

Dr Pischetsrieder said: "Marketing without product never works.

"If, in terms of marketing, your product doesn't deliver what your marketing guys tell the customers, the customers will immediately discover it."