Volkswagen Group ChinaCarsten Arntz, Head of JV Controlling, Finance
Morgan Stanley Investor VisitBeijing, April 10th, 2013
Our Momentum in China
Outlook Market Development
Investments Volkswagen Group China
Driven by Design and Technology
Financial results, challenges and opportunities
2
Content
Introduction of Volkswagen Group China (VGC)
Volkswagen production facilities in China History
1985: Founding of Shanghai Volkswagen Automotive Co. (SVW) as joint venture with Shanghai Automotive Industrial Corporation (SAIC). 8 million vehicles produced as of June 2012.
1991: Founding of FAW-Volkswagen Automotive Co. Ltd. (FAW-VW) as second joint venture with First Automotive Work (FAW). 6 million vehicles produced as of June 2012.
2004: Founding of Volkswagen Group China for coordination and management of activities of Volkswagen Group within China.
Today: 17 Volkswagen companies and subsidiaries respectively (including finance and sales companies).
Total investments 1985-2012Planned Investments 2013-2015Employees 2012
€ 15.7 Billion€ 9.8 Billion
74,500
Volkswagen Transmission
Shanghai VolkswagenPowertrain
FAW-Volkswagen(Volkswagen, Audi)
Volkswagen FAW Engine
Volkswagen FAW Platform
Shanghai Volkswagen
Shanghai Volkswagen(Volkswagen, ŠKODA)
Volkswagen AutomaticTransmission
Volkswagen China Investment Company
Beijing
Shanghai
DalianChangchun
Chengdu Nanjing
FAW-Volkswagen
Car production plants
Component plants
Headquarter Volkswagen Group China
3
Yizheng
Volkswagen as a pioneer in China
4
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2012
1985 2011
1985 2011
Successful partnership with FAW and SAIC
5
1991
FAW 60%, VW AG 30%, AUDI AG 10%
1,319,000 units
1985
SAIC Motor 50%, VW AG 50%
1,304,000 units
Foundation
Share
Deliveries 2012
Foundation
Share
Deliveries 2012
Volkswagen
Jetta Sagitar Magotan
New Bora CC Golf
Audi
Audi A4L Audi A6L Audi Q3 Audi Q5
Volkswagen
Lavida Santana Passat
Polo Touran Tiguan
Škoda
Fabia Rapid Octavia Superb
Deliveries of Volkswagen in China January to February 2013
6* incl. Hongkong; Source: Volkswagen Group China
VW, VWN
Porsche
Audi
Locally Produced(‘000 Units)
Import FBU*)
(‘000 Units)
FAW-VW
SVW
Ʃ 31.0 Ʃ 475.6
13.2
11.1
5.8
Total Deliveries Region China 506.6
171.0 56.8
39.0208.8Other Brands
0.9
Deliveries to customers by brand from January – February 2013*
038
59
300
398
3968
392
507
0
50
100
150
200
250
300
350
400
450
500
550+27%
+16%+4%
6
+31%
2013 Jan-Feb
2012 Jan-Feb
7
Strong sales performance of all main
brands continuing!
* Figures including Porsche AG as from 1 August 2012
(‘000 Units)
In Jan-Feb 2013, the Volkswagen Group maintained its Number 1 position by market share in China Mainland*
Rank Brand/GroupTrends of
market share(YTD)
Changes ofmarket share
(YTD)
1 Volkswagen Group + 1.2%
2 Hyundai Group + 1.9%
3 GM Group - 0.7%
4 Nissan Group - 1.1%
5 Toyota Group - 1.3%
6 Geely Group + 0.0%
7 Great Wall + 0.8%
8 PSA Group + 0.3%
9 BYD - 0.1%
10 Honda Group - 0.8%
Others - 0.2%
8* Figures including Porsche AG as from 1 August 2012
21%
Nissan
Toyota
BYD
Honda
GreatWall Geely
GM
Hyundai
VolkswagenOthers(i.e. localbrands) 20%
32%
3%3%
3%4%
4% 4%5%
10%
11%
PSA
Our Momentum in China
Outlook Market Development
Investments Volkswagen Group China
Driven by Design and Technology
Financial results, challenges and opportunities
9
Content
2012 GDP reached 7.7% growth year on year, and the economy is now on a path of stable growth
10Source: Deutsche Bank, last update December 2012.
7.4%
Q4/12Q1/12
7.7%
Q3/12
9.1%
Q2/12
7.6%8.1%
Q4/11
8.9%
Q3/11Q2/11
9.5%
Q1/11
9.7%
Q4/10
9.8%
Q3/10
9.6%
Q2/10
10.3%
Q1/10
11.9%
Q1/13E Q2/13E Q3/13E Q4/13E
7.9%8.2% 8.4% 8.5%
2010 2011 2012 2013(forecast)
CAGR10.3%
CAGR9.2%
CAGR7.7%
CAGR8.2%
After a strong boom in the past years, passenger car market growth in China is stabilizing and will develop further in the future
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Total Passenger Car Market –China (incl. HK)(‘000 Units)
* EstimateData Source: Volkswagen Group China / IHS Global Insight
>20.000
+6-8%+35%+8%
+9%
+54%
CAGR +19%
2020E2013E2012
13.537
2011
12.388
2010
11.457
2009
8.482
2008
5.503
2003
2.266
2015E
CAGR 6-8%*
Current 5-year-plan: New growth model with focus on domestic market
11th 5-year-plan 2006-2010
12th 5-year-plan 2011-2015
Multi-National-Companies and infrastructure projects as growth generatorBig growth in manufacturing tradeJobs in cities to keep unemployment lowInternationally comparable price stability and well-adjusted foreign trade balance
Domestic consumption as growth acceleratorMegacities as growth generator Focus on environmental protection and energy efficiencyEncouragement of Chinese innovationsSocial stability due to balanced allocation of prosperity Selective policies for foreign investment as well as globalization of Chinese companies
To date:Focus on export and quantitative growth
Now:Focus on domestic market and qualitative growth
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Mega and small cities will be the engine of GDP growth
Source: McKinsey Insights China – Macroeconomic model updated April 2012
Mid-sized (1.5-5.0M)
Mega (10M+)
Distribution by city size2012832 cities
2020865 cities
% of GDP2012 2020
City Level (Urban Population)
Big town (<0.5M)
Small (0.5-1.5M)
Big (5-10M)
New cities
7
3
6
5
56
29
253
82
391
33473
282
61
9
7
424
335
85
11
10 2222 2727
1111
2626
1313
1212
2626
1010
2727 2626
13
GDP Growth development is expected to differentiate more strongly between the various Chinese regions
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Chinese GDP growth per Province
Province Q1 – Q3Growth 2012
Total GDP 2011 (trillion RMB)
Tianjin 13.9% 1.10Guizhou 13.8% 0.56
Chongqing 13.8% 1.00Sichuan 12.8% 2.00Shaanxi 12.7% 1.20Yunnan 12.6% 0.88Gansu 12.3% 0.52Qinghai 12.3% 0.16
Jilin 12.1% 1.04Anhui 12.0% 1.50
Inner Mongolia 11.6% 1.40Xinjiang 11.5% 0.66Fujian 11.4% 1.75Tibet 11.4% 0.06
Hunan 11.2% 1.96Guangxi 11.2% 1.20
Hubei 11.2% 1.80Ningxia 11.0% 0.21Jiangxi 10.6% 1.20Jiangsu 10.1% 4.80Shanxi 10.0% 1.10Henan 10.0% 2.70
Shandong 9.7% 4.54Heilongjiang 9.6% 1.10
Liaoning 9.3% 2.20Hebei 9.3% 2.40
Hainan 8.4% 0.25Guangdong 7.9% 5.30
Zhejiang 7.7% 3.18Beijing 7.5% 1.60
Shanghai 7.4% 1.92
Data Source: Provincial Government Report
Zhejiang
Heilongjiang
Jilin
Liaoning
Hebei Tianjin
Shandong
Guangdong
Hainan
Beijing
Shanghai
Yunnan
Sichuan
Shaanxi Gansu Qinghai
Xinjiang
GDP Growth Q1-Q3 201212-15%
10-12%
7-10%
Tibet
Henan
Anhui
Jiangsu
Jiangxi Fujian
Hunan
Hubei
Inner Mongolia
Shanxi
Guangxi
Ningxia
Chongqing
Guizhou
Content
Our Momentum in China
Outlook Market Development
Investments Volkswagen Group China
Driven by Design and Technology
Financial results, challenges and opportunities
15
Go West and Go South Strategy for further growth
Existing production site
New production site
Urumqi
Chengdu
Changchun
NanjingYizheng
Shanghai
Ningbo
Foshan
Beijing
“Go South Strategy”
“Go West Strategy”
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Capacity expansion plans – on the way to 4 million units in 2018Standard capacity of 250 working days
17
4 million units
Capacity expansion plans are based on certain assumptions for the development of unit sales growth, upward flexibility (e.g. additional working days) and downward flexibility (e.g. postponement of expansion steps) are given.
FAW-VW
SVW
Implementation of MQB*) toolkit in Chinese production network
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Octavia
Urumqi
Chengdu
Changchun
YizhengShanghai
Foshan
Beijing
Ningbo
Existing production siteNew production siteMQB production site
Nanjing
*) MQB: Modularer Querbaukasten / modular transversal toolkit
A3Golf
Start: 2013
MQB provides substantial
efficiency gains
Toolkit affords
Reduction of unit costsLower one-off expenditureLess engineered hours per vehicleSignificant weight and emission reduction
Flexibility in length, height, widthSignificant economies of scaleOpportunity for low volume niche modelsAlternative powertrain concepts
Further strengthening of partnerships with SAIC and FAW
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SAIC FAW
Signing ceremony April 23rd, 2012 in WolfsburgAgreement about Urumqi plant
Signing ceremony April 23rd, 2012 in WolfsburgIntention to extend JV contract with FAW
Volkswagen Group China: Planned product portfolio in 2015 with more than 90 models
Note: number of product models
CKD>30 FBU >60 >90
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Commercial Vehicles
Significant growth of dealer networks planned*)
>3,000
2,054
*) Map includes only Volkswagen, Audi and Škoda dealers, discrepancies may occur due to reporting backlog 21
Content
Our Momentum in China
Outlook Market Development
Investments Volkswagen Group China
Driven by Design and Technology
Financial results, challenges and opportunities
22
Volkswagen Passat – Special design elements for Chinese customers
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Radiator grill Tail lamps Speaker covering Wheel program
Passat USA
Passat China
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Latest powertrain and vehicle technologies of the Volkswagen Group for China
Powertrain TechnologiesPowertrain Technologies
TSI® Downsizing DSG®
Optimized Automatic-Gearbox
E-Mobility
Vehicle TechnologiesVehicle Technologies
Weight Reduction Optimized Aerodynamics Reduced electric power consumption Start-Stop …
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Optimization of resource consumption in production process
FactoriesPress ShopPress Shop Body ShopBody Shop
Paint ShopPaint Shop InfrastructureInfrastructure
Less:EnergyCO2
WaterWaste
– Example Chengdu –
Content
Our Momentum in China
Outlook Market Development
Investments Volkswagen Group China
Driven by Design and Technology
Financial results, challenges and opportunities
26
Volkswagen Group China reported another strong operating result for the business year 2012
Source: Volkswagen Group China
1) SVW Group/FAW-VW Group
Deliveries to Customers
Production (100%)1)
Operating profit (quotal)
(’000 Units)
(’000 Units)
(€ m)
1,024
975
395
2008
1,400
1,387
831
2009 2010
1,923
1,914
1,907
2011
2,259
2,202
2,616
2012
2,813
2,643
3,678
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Challenges in a regulatory environment
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Risk of restrictive policies for new car sales in developed Eastern Megacities
Additional megacities like Hangzhou, Shenzhen, Xi'An et al.are expected to introduce similar restriction measures
Shanghai
Beijing
Guangzhou
Quota
120k cars/year
240k cars/year
< 120k cars/year(not fixed)
Demanding requirements for fleet consumption
Details for Phase IV still under review
Volkswagen Group China has relevant strategies in place
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Future growth prospects also coming from less developed regions and Tier 2-3 cities
Production and Dealer network extension will support
Growth in Western and Southern provinces
Different measures in place to realize the ambitious fleet consumption targets
New technologies and products will help to achieve targets
“Go South Strategy”
“Go West Strategy”
Engine andtransmissiontechnology
E-Traction
Vehiclemeasures
TSI
Downsizing
Dual clutch transmission
Recuperation
Start-Stop
Optimal ATM
Weight reduction
Aerodynamic optimization
Reduction of electricconsumption
Hybrid EVs
BEVs
Plug-in hybrid EVs
Additional business opportunities
30
Growing Chinese used car market Financial Services expects increase in retail finance share2)
Volkswagen Financial Services also aims to establish- Mobility packages- Long Term Rental & Fleet Business- Insurance Related & After Sales Services
2010
2.4
2016E2014E2012
+30% p.a.
2018E
20.0
million units
Total Used Car Market forecast1)
Roll out and Implementation of the successful Volkswagen Group used car brand “Das WeltAuto” in the Chinese dealer network
stronger finance demand expected
cash buyer dominance
1) Source: China Automotive Dealer Association 2) Based on the total passenger car sales in the market China
2012 2018
Volkswagen Group China
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Volkswagen Group China is well positioned to maintain its number one position in the market and seize additional opportunities in the future
Delivered vehicles in million units
0
0,5
1
1,5
2
2,5
3
3,5
Disclaimer
This presentation contains forward-looking statements and information on the business development of the Volkswagen Group. These statements may be spoken or written and can be recognized by terms such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “will” or words with similar meaning. These statements are based on assumptions relating to the development of the economies of individual countries, and in particular of the automotive industry, which we have made on the basis of the information available to us and which we consider to be realistic at the time of going to press. The estimates given involve a degree of risk, and the actual developments may differ from those forecast.
Consequently, any unexpected fall in demand or economic stagnation in our key sales markets, such as in Western Europe (and especially Germany) or in the USA, Brazil or China, will have a corresponding impact on the development of our business. The same applies in the event of a significant shift in current exchange rates relative to the US dollar, sterling, yen, Brazilian real, Chinese renminbi and Czech koruna.
If any of these or other risks occur, or if the assumptions underlying any of these statements prove incorrect, the actual results may significantly differ from those expressed or implied by such statements.
We do not update forward-looking statements retrospectively. Such statements are valid on the date of publication and can be superceded.
This information does not constitute an offer to exchange or sell or an offer to exchange or buy any securities.
32
Volkswagen Group
3.3(3.1)
2.6(1.9)
2.6(2.2) 2.1
(1.8)1.6
(1.7)
1.8(1.4)
1.7(1.7)
1.6(1.4)
1.6(1.4)
1.5(1.3)
1.4(1.3)
1.3(1.1) 1.1
(1.2)1.2
(1.5)1.2
(1.4)1.2
(1.4)1.1
(0.9)1.1
(0.9)1.0
(0.8)
Audi SkodaComp. 4
Comp.5
Comp.13
Comp.11
Comp.7
Comp. 6
Comp.9
Comp.8
Comp. 1
Comp.10
Comp. 2
Industry Comp.12
Comp. 3
Comp.15
SVW VW
FAW-VW VW
Comp.14
1.1(1.3)
Industrial stock level by end of February 2013 increased to 1.8
Current stock level (in months) of major OEMs
(>1.5) (1.3~1.5) (<1.3)
Source: CPCA, / VGC stock figures based on internal report.(x.x) stock level by end of December 2012*Stock level =month-end stock / average 3 month AaK. All brands refer to CKD only 33