Phaeton no, but what about the Passat W8 4Motion? That's getting pretty close to $40K.

As for the Phaeton vs A8, I though the point was that Volkswagen brand would be heading up VAG's Luxury Division and Audi brand would be heading up the Sport Division. So while they seem to be competing with each other, in the mind of VAG honchos, they're not. The Phaeton is supposed to be their response to luxo-cruisers like the Lexus LS430 and Mercedes S430, while the Audi A8 goes up against the sportier BMW 745i and Jaguar XJ8.