The only reason for which the VW Phaeton still exists today is the Chinese market, where the luxury sedan enjoyed a commercial success that offset poor demand from Europe and North America.

The Phaeton’s success in China may be the reason for which VW is reportedly planning a new luxury car, designed exclusively for the world’s largest car market. Said to be based on the long-wheelbase Audi A6 L, VW’s premium sedan would hopefully bring larger profit margins, according to a report from Reuters who cited two people familiar with the plan.

While the price of VW’s premium sedan has not been determined yet, pricing it close to the Audi A6 L would risk cannibalizing Audi sales. But VW is attracted to Audi’s margins, with the luxury brand earning more than double the profit of VW-branded cars.

Codenamed 511, the VW premium sedan was designed in Europe but will be manufactured and sold in China by Shanghai Volkswagen, a joint venture with China’s SAIC Motor Corp Ltd.

Volkswagen will enter China’s high-end car market toward the end of 2015, with the company setting an annual sales target of 50,000 vehicles, one of the sources said. To boost its brand image, Shanghai Volkswagen will open 100 upscale dealerships across China over the next three years.

A VW China spokeswoman confirmed the plan for a luxury sedan but didn’t provide details, while SAIC Motor declined to comment. It remains to be seen whether this model would replace the Phaeton, as previous reports said, or will be marketed under a different name.

Note: 2012 Audi A6 L e-tron Concept pictured

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