How A Tiny Mercedes Led To A Luxury Car War With Volkswagen

0 Comments | 19 Dec 2023

If you ask anyone on the street what brand of car a luxury chauffeur should drive, the first word out of many of their mouths will be “Mercedes”.

Thanks to their relentless pursuit of technological perfection, luxury and performance, cars such as the S-Class are platonic ideals for what the chauffeur-driven experience should be. It is sophisticated without being ostentatious.

It has had many competitors over the years, but by far the most unusual was a car designed largely as an act of revenge in an attempt to start a war in the luxury German saloon car market, only to become something of a disaster.

The Volkswagen Phaeton was initially conceived by the then-head of VW Ferdinand Piëch in no small part as a response to the Mercedes A-Class, the Stuttgart company’s first small car.

Angered by a rival’s attempt to muscle into the hatchback market and compete with the VW Golf, Mr Piëch decided to create the best luxury saloon car in the world as his farewell to the company, allegedly at a development cost of over £1.2b.

The car itself has ten development goals it needed to fulfil, including driving for 24 hours at 186 miles per hour at desert temperatures whilst the internal temperature was far more clement. This requirement came despite an electronic limiter being fitted restricting the speed to 155mph.

For those who drove the car, the praise was immeasurable, and the car media of the era were full of praise for how it felt and how it drove.

The problem was ultimately that it looked like a Volkswagen. The VW badge was associated not with luxury but with cars of the people like the Polo and the Passat. An initial cost of £65,000 also put off potential customers and the car sold terribly.

The luxury car to surpass Mercedes, therefore, became a case study in the power of perception and reputation, as well as a lesson to always respect the masters of a market.