IHS AUTOMOTIVE Supplying the Volkswagen Group SupplierBusiness 2015 edition supplierbusiness.com SUPPLYING THE OEMS Volkswagen Group Julian Buckley Principal Analyst Regional supplierSAMPLE reports are sponsored by IHS Automotive | Supplying the Volkswagen Group Contents Overview 5 Production Strategy 38 Global market overview 6 Production strategy overview 39 – Financial data 6 Manufacturing network 40 Volkswagen Group financial overview 7 – Germany 41 Product strategy 7 – China 42 – Company history and strategy review 7 – Brazil 43 Major model programmes 9 – Mexico 44 – 1. Volkswagen Golf 9 – United States 44 – 2. Volkswagen Jetta 12 – Czech Republic 45 – 3. Volkswagen Passat 14 – Spain and Portugal 45 – 4. Volkswagen Tiguan 17 – Russia 46 – 5. Volkswagen Polo 18 – Slovakia 46 – 6. Volkswagen Lavida 20 – Poland 47 – 7. Škoda Octavia 21 – India 47 – 8. Audi A4 22 – Future plants 47 – 9. Volkswagen Gol 25 Internal supply network 48 – 10. Audi A6 26 Modularisation strategy 48 Supplier parks 49 Vehicle Platforms 30 Cluster of reference 50 Platform strategy 31 Strategies for manufacturing efficiency 50 Major platforms 32 – 1. PQ35 - (including Audi A3, TT; SEAT Toledo, Leon, Purchasing Strategy 52 Altea; Škoda Octavia, Superb, Yeti; VW Golf, Passat, Purchasing strategy overview 53 Tiguan, Jetta) 32 Levels of vertical integration and outsourcing 53 – 2. PQ25 – (including VW Polo, Jetta; Škoda Fabia, Purchasing organisation 54 Rapid, Roomster; SEAT Ibiza, Toledo; Audi A1) 32 Purchasing offices 55 – 3. MQB A/B – (including VW Golf, SEAT Leon, Škoda Key purchasing personnel 56 Octavia and Audi A3) 33 – Purchasing budget 57 – 4. MLB B/C – (including Audi A4, A5, A6, A7, Q5, Q6; Porsche Macan) 33 Supplier Selection 58 – 5. PQ34 – (including VW New Beetle, Lavida (China Supply base development 59 only), Golf; Škoda Octavia; Seat Leon, Toledo; Audi A3, Major and strategic suppliers 59 TT) 34 – Supplier evaluation criteria 60 – 6. PL/PQ46-47 – (including VW Passat, Sharan, – Working with the Volkswagen Group 61 Magotan (China only); SEAT Exeo, Alhambra; Audi A4) Global Sourcing 62 34 Policy and plans 63 – 7. PQ22 – (VW Gol, Voyage, Saveiro) 35 – EMEA 63 – 8. PQ24 – (including VW Polo, Fox; Škoda Fabia; SEAT – APAC 64 Cordoba, Ibiza; Audi A2) 35 – NAFTA 64 – 9. PL71-72 – (VW Touareg, Audi Q7, Porsche Cayenne) – LATAM 64 35 SAMPLE Component sharing 36 Pricing Policy 66 Volume planning 37 Cost reduction strategies 67 IHS™ AUTOMOTIVE Copyright notice and legal disclaimer © 2015 IHS. 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For more information, please contact IHS at www.ihs.com/CustomerCare. © 2015 IHS 2 2015 edition IHS Automotive | Supplying the Volkswagen Group Raw material price management 67 – Middle of the ranking: OEMs push cost reduction 91 – Payment terms 68 – Bottom ranking: Cost overrules quality 91 Profit potential 92 Quality Management 69 – OEM level 92 Quality level 70 Organization 92 Quality management systems 70 – OEM level 93 Supplier integration into product development 71 Trust 93 Management of suppliers and sub-suppliers 72 – OEM level 93 Supplier awards 72 Pursuit of excellence 93 – OEM level 93 Technology 74 Outlook 93 Technological positioning 75 – OEM Level 93 Areas of focus 75 SuRe by region 93 R&D organisation 76 – North America 94 R&D spending 77 – Europe 94 Access to supplier technology and process – Asia 94 development 77 – SuRe by company size 94 Approach to alternative fuels, electrification and fuel cells 78 SWOT Analysis and Production Locations 96 Special vehicle development 79 SWOT Analysis 97 Global footprint 97 Interviews 81 Matt Smith, Director of Falken UK 82 Global Vehicle and Component Sites 99 Alexander Kocher, President, Automotive Business segment, Elektrobit 83 Forward Model Program 103 Forward Model Program 105 Supplier Relationship Survey 88 Introduction to the SuRe Index 89 Major Suppliers 121 Methodology 89 AUDI Q7 (2015) 122 Executive summary 89 AUDI TT (2014) 125 Performance review – Volkswagen Group 90 Porsche 911 Spyder 127 2014 SuRe survey results 90 Volkswagen Golf (2014) 129 – Top of the ranking: Trust and future potential drive Volkswagen Passat (2014) 131 harmony 90 Volkswagen XL1 135 Figures Figure 1: Global light vehicle production, 2009-2018 6 Figure 5: OEM Supplier Relations - North America 94 Figure 2: OEM Supplier Relations - Top of the Ranking Figure 6: OEM Supplier Relations - Europe 94 91 Figure 7: OEM Supplier Relations - Asia 94 Figure 3: OEM Supplier Relations - Middle of the Figure 8: Map for Volkswagen global assembly plant Ranking 91 locations 97 Figure 4: OEM Supplier RelationsSAMPLE - Bottom of the Figure 9: Map for Volkswagen European assembly Ranking 92 plant locations 98 Tables Table 1: Key financial performance values for Table 3: VW Golf European sales and segment Volkswagen AG 6 competitors (by Sales brand, Sales nameplate) 2007- Table 2: VW Group Top 10 best-selling models 2017 12 worldwide (by Sales brand, Global nameplate) 2008- Table 4: VW Jetta North American sales and segment 2013-2018 9 competitors (by Sales brand, Sales nameplate) 2007- © 2015 IHS 3 2015 edition IHS Automotive | Supplying the Volkswagen Group 2017 14 Table 12: VW Group Top 10 most-used Global platforms Table 5: Global sales for the VW Tiguan (by region) (by Strategic Group) 2007-2013-2015-2018 32 2007-2018 18 Table 13: Global OEM total annual vehicle output (by Table 6: W Polo Global sales and segment competitors Strategic Group) 39 (by Sales brand, Sales nameplate) 2007-2017 19 Table 14: Purchasing volume by brand (over 2013, in Table 7: Shanghai VW (New) Lavida - China national EUR billion) 57 sales (by sales nameplate) 2009–2017 21 Table 15: Automotive sales of SuRe Index survey Table 8: Škoda Octavia Global sales (by region) 2007- repondents 95 2018 22 Table 16: SWOT Analysis - Volkswagen Group 97 Table 9: Audi A4 Global sales and segment Table 17: VW Group Global vehicle and component competitors (by Sales brand, Sales nameplate) 2007- production locations. 100 2018 24 Table 18: AUDI Q7 (2015, SLOVAKIA, BRATISLAVA) 122 Table 10: VW Gol and Brazilian segment competitors Table 19: AUDI TT (2014, HUNGARY, GYOR) 125 (by Sales Brand and Sales Nameplate) ranked by 2014 Table 20: PORSCHE 918 SPYDER (2013, GERMANY, figures 26 ZUFFENHAUSEN) 127 Table 11: Audi A6 Global sales and segment Table 21: VW GOLF (2014, MEXICO, PUEBLA) 129 competitors (by Sales brand, Sales nameplate) 2007- Table 22: VW PASSAT (2014, GERMANY, EMDEN) 132 2018 28 Table 23: VW XL1 (2013, GERMANY, OSNABRUCK) 135 SAMPLE © 2015 IHS 4 2015 edition IHS Automotive | Supplying the Volkswagen Group CHAPTER TWO Vehicle Platforms SAMPLE © 2015 IHS 30 2015 edition IHS Automotive | Supplying the Volkswagen Group Platform strategy start competing against each other, potentially in the same dealer showroom, and that is before other segment As each successive brand has been added to the Volkswagen competitors from other OEMs are factored into the picture. Group, there has been a broader effort to reorganize platform usage across all group companies building models Unlike many global carmakers, the Volkswagen Group has of the same segment and size. This process has generally largely managed to avoid this trap. While fundamentally taken two forms: where a single platform has been identical architectures are regularly shared across a series introduced across an existing segment as a new generation of brands, those individual carmakers have worked to has been introduced; or where a new model is developed create the brand-specific production, equipment and by one carmaker, other OEMs within the group are tasked pricing strategies needed to differentiate those models – all with developing their own version of that vehicle, using while highlighting the brand’s own core ethos, whether the same architecture. it is premium (Audi), sub-premium (VW), value (Škoda) or sporty (SEAT). Within this, suppliers play a key role in Sharing platforms can be traced back to the Type I Beetle, delivering that differentiation, producing components and which donated updated versions of its chassis to a variety parts which, while meeting key guidelines, have varying of later models, including the Karmann Ghia coupé and designs and characteristics needed to make those parts also the 1600 Variant and its derivatives – these compact unique to the brand. wagon models included the Brasilia, of which more than one million units were produced in Brazil and Mexico The Volkswagen Group is now well advanced in rolling out between 1973 and 1982. The first case of actual platform the various modular ‘toolkits’, platform systems which, as sharing, where models based on the same fundamental Volkswagen states, are expected to: ‘significantly reduce structure were in production at the same time, was the fuel consumption of our vehicles, producing them at between the Audi 50 and Mark I Polo; although the Audi globally competitive costs and simultaneously increasing was first to market, it was phased out only three years after profitability and productivity – these are the Volkswagen the launch of the cheaper VW. Group’s goals for its modular toolkits’. This early example reveals an inherent flaw in the Specifically, the group of systems is as follows: systematic sharing of vehicle platforms, in that models which are too similar to each other can cannibalize sales of NSF New Small Family Serving the A00 and A0 segments the less-popular variant.