Volkswagen Group China Carsten Arntz, Head of JV Controlling, Finance
Morgan Stanley Investor Visit Beijing, April 10th, 2013 Content
Our Momentum in China
Outlook Market Development
Investments Volkswagen Group China
Driven by Design and Technology
Financial results, challenges and opportunities
2 Introduction of Volkswagen Group China (VGC)
Volkswagen production facilities in China History
FAW-Volkswagen (Volkswagen, Audi) 1985: Founding of Shanghai Volkswagen Automotive Co. (SVW) Volkswagen FAW Platform Changchun as joint venture with Shanghai Automotive Industrial Corporation Dalian Beijing Volkswagen FAW Engine (SAIC). 8 million vehicles produced Volkswagen China as of June 2012. Investment Company Volkswagen Automatic Yizheng Transmission 1991: Founding of FAW-Volkswagen Chengdu Nanjing Automotive Co. Ltd. (FAW-VW) as FAW-Volkswagen Shanghai Shanghai Volkswagen second joint venture with First Automotive Work (FAW). 6 million Shanghai Volkswagen vehicles produced as of June 2012. (Volkswagen, ŠKODA) 2004: Founding of Volkswagen Group Volkswagen Transmission Car production plants China for coordination and Component plants management of activities of Headquarter Volkswagen Group China Shanghai Volkswagen Powertrain Volkswagen Group within China.
Total investments 1985-2012 € 15.7 Billion Today: 17 Volkswagen companies and subsidiaries respectively Planned Investments 2013-2015 € 9.8 Billion (including finance and sales Employees 2012 74,500 companies).
3 Volkswagen as a pioneer in China
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20102011 2012
1985 2011
4 Successful partnership with FAW and SAIC
Foundation Foundation 1991 1985 Share Share FAW 60%, VW AG 30%, AUDI AG 10% SAIC Motor 50%, VW AG 50% Deliveries 2012 Deliveries 2012 1,319,000 units 1,304,000 units Jetta Sagitar Magotan Lavida Santana Passat Volkswagen Volkswagen
New Bora CC Golf Polo Touran Tiguan Škoda
Audi Audi A4L Audi A6L Audi Q3 Audi Q5 Fabia Rapid Octavia Superb
5 Deliveries of Volkswagen in China January to February 2013
Import FBU*) Locally Produced (‘000 Units) (‘000 Units)
VW, VWN 13.2 FAW-VW 171.0 56.8 Audi 11.1
Porsche 5.8 SVW 208.8 39.0 Other Brands 0.9
Ʃ 31.0 Ʃ 475.6
Total Deliveries Region China 506.6
* incl. Hongkong; Source: Volkswagen Group China 6 Deliveries to customers by brand from January – February 2013*
(‘000 Units) +27% 550 507 500 Strong sales +31% performance of all main 450 brands continuing! 398 400 392 350 300 300 250 2013 Jan-Feb 200 150 +16% 2012 Jan-Feb +4% 100 59 68 50 38 39 0 6 0
* Figures including Porsche AG as from 1 August 2012 7 In Jan-Feb 2013, the Volkswagen Group maintained its Number 1 position by market share in China Mainland*
Trends of Changes of Others Rank Brand/Group market share market share (i.e. local Volkswagen (YTD) (YTD) brands) 21%20% 1 Volkswagen Group + 1.2% 32% 2 Hyundai Group + 1.9% 3 GM Group - 0.7% 11% Hyundai 4 Nissan Group - 1.1% 5 Toyota Group - 1.3% Honda 3% 10% 6 Geely Group + 0.0% 3% BYD 3% GM 7 Great Wall + 0.8% 4% 5% PSA 4% 4% 8 PSA Group + 0.3% Great Nissan 9 BYD - 0.1% Wall Geely Toyota 10 Honda Group - 0.8% Others - 0.2%
* Figures including Porsche AG as from 1 August 2012 8 Content
Our Momentum in China
Outlook Market Development
Investments Volkswagen Group China
Driven by Design and Technology
Financial results, challenges and opportunities
9 2012 GDP reached 7.7% growth year on year, and the economy is now on a path of stable growth 2013 2010 2011 2012 (forecast)
CAGR CAGR CAGR CAGR 10.3% 9.2% 7.7% 8.2%
11.9%
10.3% 9.8% 9.6% 9.7% 9.5% 9.1% 8.9% 8.5% 8.2% 8.4% 8.1% 7.9% 7.6% 7.4% 7.7%
Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13E Q2/13E Q3/13E Q4/13E
Source: Deutsche Bank, last update December 2012. 10 After a strong boom in the past years, passenger car market growth in China is stabilizing and will develop further in the future
Total Passenger Car Market – CAGR 6-8%* China (incl. HK) >20.000 (‘000 Units)
+9% +8% +35% 13.537 +6-8% 12.388 11.457 +54% 8.482 CAGR +19% 5.503
2.266
2003 2008 2009 2010 2011 2012 2013E 2015E 2020E * Estimate Data Source: Volkswagen Group China / IHS Global Insight 11 Current 5-year-plan: New growth model with focus on domestic market
To date: Now: Focus on export and quantitative growth Focus on domestic market and qualitative growth
12th 5-year-plan 2011-2015
Domestic consumption as growth accelerator 11th 5-year-plan 2006-2010 Megacities as growth generator Focus on environmental protection and energy Multi-National-Companies and infrastructure efficiency projects as growth generator Encouragement of Chinese innovations Big growth in manufacturing trade Social stability due to balanced allocation of Jobs in cities to keep unemployment low prosperity Internationally comparable price stability and well- Selective policies for foreign investment as well as adjusted foreign trade balance globalization of Chinese companies
12 Mega and small cities will be the engine of GDP growth
Distribution by city size
City Level 2012 2020 % of GDP (Urban Population) 832 cities 865 cities 2012 2020 7 Mega (10M+) 7 10 22 27 3 6 Big (5-10M) 9 11 11 12 5 56 Mid-sized (1.5-5.0M) 61 85 26 26 29 253 Small (0.5-1.5M) 282 335 27 26 82 391 Big town (<0.5M) 473 424 13 10 33 New cities
Source: McKinsey Insights China – Macroeconomic model updated April 2012 13 GDP Growth development is expected to differentiate more strongly between the various Chinese regions
Chinese GDP growth per Province Q1 – Q3 Total GDP Province Growth 2012 2011 (trillion RMB) Tianjin 13.9% 1.10 Guizhou 13.8% 0.56 Heilongjiang Chongqing 13.8% 1.00 Sichuan 12.8% 2.00 Shaanxi 12.7% 1.20 Yunnan 12.6% 0.88 Jilin Gansu 12.3% 0.52 Inner Mongolia Qinghai 12.3% 0.16 Liaoning Jilin 12.1% 1.04 Xinjiang Anhui 12.0% 1.50 Beijing Inner Mongolia 11.6% 1.40 Hebei Tianjin Xinjiang 11.5% 0.66 Fujian 11.4% 1.75 Ningxia Shanxi Shandong Tibet 11.4% 0.06 Hunan 11.2% 1.96 Qinghai Gansu Guangxi 11.2% 1.20 Henan Jiangsu Shaanxi Hubei 11.2% 1.80 Shanghai Ningxia 11.0% 0.21 Tibet Anhui Sichuan Hubei Jiangxi 10.6% 1.20 Zhejiang Jiangsu 10.1% 4.80 Chongqing Shanxi 10.0% 1.10 Hunan Jiangxi Henan 10.0% 2.70 Guizhou Fujian Shandong 9.7% 4.54 Heilongjiang 9.6% 1.10 GDP Growth Q1-Q3 2012 Liaoning 9.3% 2.20 12-15% Yunnan Guangxi Guangdong Hebei 9.3% 2.40 Hainan 8.4% 0.25 10-12% Guangdong 7.9% 5.30 7-10% Zhejiang 7.7% 3.18 Hainan Beijing 7.5% 1.60 Shanghai 7.4% 1.92 Data Source: Provincial Government Report 14 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
Changchun Urumqi
“Go West Strategy” Beijing
Chengdu Yizheng Nanjing Shanghai
Ningbo “Go South Strategy”
Foshan
Existing production site New production site
16 Capacity expansion plans – on the way to 4 million units in 2018 Standard capacity of 250 working days
4 million units
SVW
FAW-VW
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.
17 Implementation of MQB*) toolkit in Chinese production network
Changchun Urumqi
Beijing
Chengdu Yizheng Nanjing Shanghai
Ningbo Foshan
Existing production site New production site MQB production site MQB provides Toolkit affords substantial efficiency gains Reduction of unit costs Flexibility in length, height, width Lower one-off expenditure Golf A3 Octavia Less engineered hours per Significant economies of vehicle scale Significant weight and Opportunity for low volume emission reduction niche models Alternative powertrain concepts Start: 2013
*) MQB: Modularer Querbaukasten / modular transversal toolkit 18 Further strengthening of partnerships with SAIC and FAW
SAIC FAW
Signing ceremony April 23rd, 2012 Signing ceremony April 23rd, 2012 in Wolfsburg in Wolfsburg Agreement about Urumqi plant Intention to extend JV contract with FAW
19 Volkswagen Group China: Planned product portfolio in 2015 with more than 90 models
Commercial Vehicles
CKD>30 FBU >60 >90
Note: number of product models 20 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
Radiator grill Tail lamps Speaker covering Wheel program
Passat USA
Passat China
23 Latest powertrain and vehicle technologies of the Volkswagen Group for China
Powertrain Technologies Vehicle Technologies
. TSI® . Weight Reduction . Downsizing . Optimized Aerodynamics . DSG® . Reduced electric power consumption . Optimized Automatic-Gearbox . Start-Stop . …
. E-Mobility
24 Optimization of resource consumption in production process
– Example Chengdu – Factories Press Shop Body Shop
Less: Energy
CO2 Water Paint Shop Infrastructure Waste
25 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
2008 2009 2010 2011 2012
Deliveries to Customers (’000 Units) 1,024 1,400 1,923 2,259 2,813
1) Production (100%) (’000 Units) 975 1,387 1,914 2,202 2,643
1) SVW Group/FAW-VW Group
Operating profit (quotal) (€ m) 395 831 1,907 2,616 3,678
Source: Volkswagen Group China 27 Challenges in a regulatory environment
Risk of restrictive policies for new car sales in Demanding requirements for fleet consumption developed Eastern Megacities
Quota
240k cars/year
Beijing
< 120k cars/year Shanghai (not fixed) Guangzhou
120k cars/year
Additional megacities like Hangzhou, Shenzhen, Xi'An et al. Details for Phase IV still under review are expected to introduce similar restriction measures
28 Volkswagen Group China has relevant strategies in place
Future growth prospects also coming from less Different measures in place to realize the ambitious developed regions and Tier 2-3 cities fleet consumption targets
Recuperation TSI Engine and transmission Start-Stop Downsizing technology Optimal ATM Dual clutch “Go West Strategy” transmission Weight reduction Vehicle measures Aerodynamic optimization Reduction of electric consumption “Go South Strategy” Hybrid EVs E-Traction BEVs Plug-in hybrid EVs
Production and Dealer network extension will support New technologies and products will help to achieve targets Growth in Western and Southern provinces
29 Additional business opportunities
Financial Services expects increase Growing Chinese used car market in retail finance share2)
1) Total Used Car Market forecast 2012 2018 20.0 million units +30% p.a.
2.4
2010 2012 2014E 2016E 2018E cash buyer dominance stronger finance demand expected
Volkswagen Financial Services also aims to establish Roll out and Implementation of the successful Volkswagen Group used - Mobility packages car brand “Das WeltAuto” in the - Long Term Rental & Fleet Business Chinese dealer network - Insurance Related & After Sales Services
1) Source: China Automotive Dealer Association 2) Based on the total passenger car sales in the market China
30 Volkswagen Group China is well positioned to maintain its number one position in the market and seize additional opportunities in the future Volkswagen Group China
3,5
3 Delivered vehicles in million units
2,5
2
1,5
1
0,5
0
31 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 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)
3.3 (3.1) 2.6 2.6 (1.9) (2.2) 2.1 (1.8) 1.8 1.7 1.6 1.6 1.6 (1.4) 1.5 (1.7) (1.7) 1.4 1.3 (1.4) (1.4) 1.2 1.2 1.2 1.1 (1.3) (1.3) (1.1) 1.1 1.1 1.1 1.0 (1.4) (1.4) (1.5) (1.3) (1.2) (0.9) (0.9) (0.8)
Comp. Comp. Comp. Comp. Industry Comp. Comp. Comp. Comp. Comp. Comp. Comp. Comp. FAW-VW Audi SVW Skoda Comp. Comp. Comp. 1 2 3 4 5 6 7 8 9 10 11 12 VW VW 13 14 15
Volkswagen Group 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