VW's $75K "People's car" Forbes Magazine, October 27, 2003 by Allison Fass [somewhat edited]
Bet you didn't know that VW stands for "Very Wealthy."
VW is ramping up its image and prices. For the starting price of a basic Phaeton, car shoppers could buy 75 Beetles at the 1949 price [which the article states was $800].
As Volkswagen of America was plotting the launch of its Phaeton luxury sedan 18 months ago, 50 or so people in New York and Los Angeles received dinner party invites from good friends.
At six separate gatherings in private homes, where salmon was served along with copious glasses of fine wine, the conversation eventually turned to luxury cars.
The grape loosened tongues, but it didn't soften the almost-collective opinion: "We heard over and over again: Why buy anything but a BMW or a Mercedes?" recalls Karen Marderosian, marketing director at VW. The carmaker was revealed as the host only after dessert.
That sentiment, persistent and pervasive, poses a tough challenge for the Phaeton. VW hopes its unlikely high-end car, which begins hitting dealerships in November, is better received stateside than it was in Europe. Only 5,100 Phaetons have been sold there since May 2002, making it unlikely that the Phaeton's glamorous $200 million glass-enclosed factory in downtown Dresden will crank out the 150 Phaetons a day it is capable of producing.
"Introducing a high-end luxury car under the Volkswagen brand is a clear flop," says Himanshu Patel, European automotive analyst at J.P. Morgan in London. "Was there any financial logic to doing this? I don't think so."
There have been whispers that VW, said to be losing $69 million a year worldwide on the Phaeton, might scrap its U.S. launch. But the plucky company insists it isn't abandoning the VW brand's most expensive offering to date.
It covets the fat margins that come with luxury cars. It also hopes to expand its customer base and keep 15% of its drivers, an otherwise loyal bunch, from abandoning VW when they move on to high-end wheels.
But will car shoppers with household incomes of $250,000 and up consider the Phaeton, even if they can pronounce it? The big sedan certainly offers luxury frills. Among them: an engine of up to 12 cylinders delivering 420 horsepower, back-massaging leather seats, a high-tech navigation system and humidity control.
[...]
[VW] is inviting 56,000 consumers to take the car for a spin. The company says 7% of recipients in the first wave of mailings indicated they were interested.
Consumer interest may be piqued, but there are still doubters. "Despite all the technology and all the engineering packed into that car, it still is a Volkswagen," sniffs Marc Soukup, sales and marketing director at Town Motor Car, an Audi dealer in Englewood, N.J. "People don't want to pull up to a country club driving a $60,000 VW."