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Volkswagen goes luxury with the Phideon: does it make sense?

When Volkswagen launched its Phideon flagship sedan on October 21, many thought it was too expensive.  

The Phideon, named after the Roman Goddess Fides (the Chinese name “Huiang” meaning noble brightness), is an exclusive model for the Chinese market produced by SAIC-Volkswagen. It measures 5.074m in length, 1.893m in width and 1.463m in height with a wheelbase of 3.090m. Many new tech features have been built into this model for the first time, including adaptive air suspension and a camera-based night vision system. Its second row is equipped with seats featuring electric heating, ventilation and massage functions. The Phideon’s least expensive version is the 380 TSI priced at ¥349,000 ($53,692). It is powered by a 2.0 TSI engine with maximum 224 hp and peak torque of 350 Nm mated with an 8-speed DCT. The top of the line version – the 480 V6 3.0TSI – sells for ¥659,000.

“The Volkswagen Phideon is an all-new high-end saloon in the premium segment in China, positioned above the Passat and the Magotan, which is available in China, and the Phideon will pave the way for the future design of Volkswagen’s top-of-the-range sedans. The interior is tailored perfectly to the needs of the driver, with the Phideon’s luxurious rear passenger compartment also making it an ideal chauffeur-driven limousine.” This was the statement from Volkswagen when the model had its global debut at this year’s Geneva Motor Show. Many in the industry call it the “little Phaeton.”

It is positioned above the Passat and below the phased-out Phaeton. But its pricing does not fit the B+ league, rather putting it in competition with models such as the Mercedes-Benz E-Class L, BMW 5 Series or the new Volvo S90L. The E-Class L starts at ¥436,800 while the 5 Series starts at ¥435,600. The Phideon is slightly cheaper but lacks the brand equity.

The Phaeton, named after the son of the Greek God Helios, went on sale in 2002. But it never met an annual sales target of 20,000 deliveries, and sales last year fell 27 percent. After sales flopped in the U.S., Volkswagen pulled it out of that market in 2006.

“The VW brand simply doesn’t appeal to rich buyers,” said Willi Diez, head of the Institute for Automobile Industry in Nuertingen, Germany. “Technologically speaking, the Phaeton is a great car, but it doesn’t undercut rivals’ prices enough to attract sophisticated shoppers.”

So it’s very hard to understand why the price of the Phideon has been set so high. Some speculate that Volkswagen wants to position it as an Audi. In another word, Phideon is an Audi A6 but with a VW badge. But is it?

It is a fact that Phideon stands on the same stretched variant of the Volkswagen MLB 2 platform as the China-made Audi A6L, the luxurious long-wheelbase version of the Audi A6 sedan. The Audi A6L is made by Volkswagen’s other car making joint venture in China FAW-Volkswagen. People familiar with the VW joint venture story between SAIC and FAW all know that SAIC-Volkswagen has long been begging for its own luxury brand name, and had once fought for Audi. And now it finally has the Phideon.

But it won’t be easy for Phideon to compete with Audi. The Audi A6L is priced from ¥415,300 to ¥757,600 with four engine options, whereas the Phideon has only two.

Furthermore, Audi has fitted with high-tech digital instrument panels and large touch screens, and just signed an agreement with Baidu, Alibaba and Tencent (BAT) to provide connectivity, a feature hugely important in tech-crazy China, while a lot of functions of Phideon’s screen are still controlled by buttons, not modern and behind industry trends.

Though today Audi still leads the luxury segment in China, it stands under huge pressures as BMW and Mercedes-Benz aggressively catch up. Now it has another inside competitor: the China-only Phideon.

With a typical Volkswagen front end and a Passat like rear end, Phideon is not really a strikingly handsome sedan. Will it appeal to China’s rich? Who’s going to pass up a similarly priced BMW, Mercedes-Benz or Audi for a Phideon? 

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