The Volkswagen Phaeton was VW’s answer to the Audi A8, BMW 7 series and Mercedes-Benz S-class. Ferdinand Piëch wanted Volkswagen engineers to create a car that would surpass the German prestige market leaders, Mercedes-Benz and BMW. The decision to release the Phaeton was a response to Mercedes, which competed with the A-class against the Golf. The parameters which had to be fulfilled were extremely high. However the Phaeton was not the success where VW was hoping for.
However Volkswagen has announced that there will be a new Phaeton, which will compete against the luxury cars of BMW, Mercedes, Lexus and Audi. And is positioned above the upcoming Volkswagen CC.