Volkswagen engineers are working with Lotus on a large coupe that's in the early stages of development. Autocar sources spotted a number of Wolfsburg-registered vehicles at Lotus's Hethel HQ over the last few weeks. An insider at Lotus told Autocar last week that engineers were working on a 'big coupe' for VW. The latest rumour is that vehicle will be a direct rival for the Mercedes SL and will be based on the next-generation Volkswagen Phaeton. Since then, a very early prototype has been spotted on the country lanes around Hethel. It appears to be a two-door Audi A8 with a dramatically cut-down wheelbase and the correct proportions for large coupe-cabriolet. Although there has been no confirmation, the A8-derived mule suggests that the next-generation Phaeton could be based on the Audi A8's aluminium spaceframe chassis. Such a move would neatly follow Mercedes¹s decision to also build the next-generation SL around an aluminium chassis.The VW Phaeton was the pet project of then-VW Group boss Ferdinand Piech. One of his aims for VW was to drive the brand upmarket and directly target Mercedes. Although the Phaeton has sold relatively slowly it looks like Piech - now chairman of the VW supervisory board and major shareholder in Porsche - has insisted that an expanded Phaeton family survives for a second generation. The co-operation between Lotus and VW has another intriguing aspect. VW is said to be close to buying the ailing Malaysian car-maker Proton. Lotus is also owned by parent company Proton Holdings. A buy-out could eventually bring Lotus and VW even closer together.