Weiming Soh

Executive Vice President, Group Corporate Strategy and Group Sales & Marketing, Volkswagen Group China JP Morgan Investor Visit, Beijing, 06 June 2017 1 Volkswagen Group China at a glance

2 Review 2016 and Jan – Apr 2017

3 Future development

2 Volkswagen Group in China

More than 12 fascinating 1984: first Joint 1990: FAW-VW was Around 95,000 ~330,000 employees 150 models brands Venture Shanghai founded in employees end of within dealer network VW was founded Changchun 2016 in 2016

30 production Around €4 billion More than 17% Over 30 million 3.98 million Around €5 billion plants end of 2016 investments market share in cars delivered deliveries in 2016 proportionate planned for 2017 China’s passenger since market entry operating profit

car market in 2016 in 2016

3 Volkswagen’s second home market in comparison

Size of the countries Population

CHINA GERMANY CHINA: 9,596,960 km2 INHABITANTS 1,382 million 83 million

DENSITY (People per km2) 144.0 231.6

GERMANY: 357,021km2 AVERAGE AGE 37 years 47 years

UNEMPLOYMENT 4.1 % 6.1 %

Economy Car industry

CHINA GERMANY CHINA GERMANY

GDP $ 9,485 billion $ 3,763 billion TOTAL CAR PARK 95 million 45 million

GDP PER CAPITA $ 6,862 $ 45,498 TOTAL MARKET 22.8 million 3.4 million

GDP GROWTH RATE 6.7 % 1.8 % PRODUCTION SITES 163 25

INFLATION 2.0 % 0.5 % DENSITY (Cars per 1,000 Inh.) 69.2 549

TRADE BALANCE $ 530.6 billion $ 316.8 billion AVERAGE CAR AGE 3.3 9.2

Sources: Data for FY 2016, CIA World Factbook, IHS Markit, VDA, KBA, PwC 4 Volkswagen Group in China – A long-term success story

Volkswagen Group development of deliveries to customers (in ‘000 units)

3,982 4,000 3,675 3,549 3,500 3,271

3,000 2,813

2,500 2,259

1,923 2,000

1,500 1,400 1,024 910 1,000 698 649 711 514 572 500 303 316 337 360 221 240 280 140 149 11 16 20 23 41 90 0 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

5 Volkswagen Group production sites all over China

Volkswagen Group production facilities Facts 2016

 30 production plants in China • 4 FAW-Volkswagen vehicle plants Urumqi Changchun Changchun (2 plants) Dalian Chengdu Beijing Foshan Tianjin • 8 SAIC VOLKSWAGEN vehicle plants Shanghai (3 plants) Chengdu Nanjing Nanjing Yizheng Shanghai Changzhou Yizheng Changsha Ningbo Ningbo Urumqi Foshan Changsha • 18 Component plants

FAW-Volkswagen vehicle plants SAIC VOLKSWAGEN vehicle plants  3,897 thousand produced cars Component plants  3,784 thousand produced engines MAN Diesel & Turbo  2,196 thousand produced transmissions Headquarters Volkswagen Group China  1,919 thousand produced axle systems

6 Joint Venture structure of Volkswagen Group in China

Start of production 1983 (Santana B2) 1991 (Jetta)

1st JV contract signed 1984 1990

JV contract runs until 2035 2041

Volkswagen 1,652 Volkswagen 1,361 Production in 2016 ŠKODA 328 Audi 556 (in ‘000 vehicles) Total 1,980 Total 1,917

10% FAW SAIC 40% 1) 20% VCIC Ownership structure 50% VCIC1) 60% 2) VW AG VW AG 10% 10% Audi AG

1) Volkswagen (China) Investment Co., Ltd. 100% owned by Volkswagen AG. 2) Including a stake hold by ŠKODA AUTO a.s. 7 1) Further entities in China 100% owned by Volkswagen AG2) Joint Venture Companies

FAW-Volkswagen Sales Co. Volkswagen FAW Engine Changchun Volkswagen Automatic Transmission (Dalian) Beijing Dalian Volkswagen Automatic Transmission (Tianjin) Tianjin Audi China

Volkswagen (China) Investment Company Shanghai Volkswagen Powertrain Shanghai Volkswagen Group Import Yizheng

Volkswagen FAW Platform Chengdu Volkswagen Finance (China)

Foshan SAIC VOLKSWAGEN Sales Co. Volkswagen Group Hong Kong Volkswagen Transmission Volkswagen Hong Kong Hong Kong Sitech Dongchang Automotive Seating 1) Selection of major companies in the region China. 2) Direct and indirect holdings. 8 1 Volkswagen Group China at a glance

2 Review 2016 and Jan – Apr 2017

3 Future development

9 Strong market growth and pre-buy effect end of 2016 lead to slower start in 2017 Total market development (in ‘000 units) 2016 vs. 2015 Q1: +8.8% Q2: +12.0% Q3: +27.8% Q4: +23.1% 2017 vs. 2016 Q1: +1.3%

3,000

2,500

2,000

1,500

1,000 2016

500 2015 2017 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Source: CPCA, Insurance data 10 Volkswagen Group China deliveries to customers grew by 12.2% in 2016

‘000 units units Jan.- Dec. 2015 4,500 +12.2% Jan.- Dec. 2016 3,982 4,000 3,549 +14.0% +3.1% 3,500 5,000 2,999 3,000 3,860 3,980 2,630 4,000 2,500 3,000 2,000 -1.2%

1,500 +3.6% 1,615 1,595 2,000 +12.6% 1,000 -13.3% 571 592 +12.5% 1,000 500 282 317 278 241 58 65 0 0 1)

1) incl. Hong Kong, excl. Ducati. Group numbers incl. MAN and Scania 11 Top models of Volkswagen Group in respective segments in 2016

A0 HB Polo Passat

B NB

Magotan

Golf A HB Gran Lavida B SUV Audi Q5

Lavida

Legend : A NB C NB Audi A6 Ranking No.1

Jetta Ranking No.2

Ranking No.3

Source: CPCA 12 Strong residual values of Volkswagen Group models

Residual value ranking1) Importance of residual values CKD Models High and stable residual values are important due to A0 B MPV Polo CC Touran • Reduced total cost of ownership

Legend: › leading to attractive leasing A B Lavida Passat Ranking No.1 › important argument for sales team Ranking No.2 A SUV-A • Increased new car sales volume Tiguan Ranking No.3 Golf › while stabilizing new car prices FBU Models • Increased pre-owned car business and its competitiveness

A C A0 High and stable residual values finally A1 5-doors A3 S7 lead to higher A0 B D Beetle CC Panamera • Brand value • Customer loyalty A0 B A1 3-doors Magotan Variant • Revenue & Profit

1) China Automotive Residual Value Research Committee - RV Report 11/2016; Rankings based on the 3-year residual value 13 Volkswagen Group China deliveries to customers until April 2017

‘000 units Jan.- Apr. 2016 -4.8% 1,400 Jan.- Apr. 2017 1,251 1,191 1,200 +50.2% units -1.9% 1,600 1,448 1,000 939 922 1,400

1,200 800 964 1,000 600 +91.4% 800

-18.1% 600 400 469 -11.6% -7.5% 400 189 +13.2% 245 200 155 99 88 93 86 200 21 24 0 0 1)

1) incl. Hong Kong, excl. Ducati. Group numbers incl. MAN and Scania 14 Split between locally produced and imported vehicles until April 20171)

Deliveries to customers (in ‘000 vehicles) Import business 2017 (deliveries in ‘000 vehicles)

Others 3 581 16

56 Imported < 5% 24 13 555

Total deliveries in the region China amounted to 1,191 thousand until April in 2017 1)» incl. Hong Kong, excl. Ducati. Group numbers incl. MAN and Scania 15 1 Volkswagen Group China at a glance

2 Review 2016 and Jan – Apr 2017

3 Future development

16 The continued rapid growth phase of China’s market is over, looking into the future we expect normalized growth

Rapid Growth Continued Growth New Normal 30,000 CAGR: +28% CAGR: +12% CAGR: +3% 25,413 24,445 25,000 22,874 23,530 23,255 Passenger vehicle market (in ’000 units) 19,352 20,000 17,829 15,903 15,000 13,503 12,354 11,428

10,000 8,460

5,077 5,475 4,155 5,000 3,294

0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017e 2018e 2019e 2020e Source: Forecast by IHS (as of Jan. 2017) 17 New product offering with an expanded SUV offering 1)

Body style trends until 20201) New vehicle launches 2017 and to follow2)

SUV

Rest 46% Teramont Q5 KODIAQ 40% SUV

Tiguan LWB … MPV YETI

Others Notchback & imported locally produced Hatchback 53% 47%

Panamera A5 Coupé TT Phideon PHEV Lavida Turbo

2016 2020e Q7 e-tron R8 Spyder Panamera Variant GTE Bora LWB

1) Source: IHS 2) Schematic overview – does not show all models 18 Audi paves the way for the new two-partner strategy in China

Audi on the road to 2025

Further localization with focus on electrified cars with FAW-Volkswagen › Strengthen development competencies in the area of electric mobility › 5 new localized e-tron models within the next 5 years › To advance localization, the collaboration in the field of tool making will be enhanced › Establish new joint company with FAW-Volkswagen focusing on mobility and digital services

New business potential through planned collaboration with SAIC Motor › Evaluating long-term collaboration for the production and distribution of Audi models and establishing data and mobility services › Audi models from planned SAIC Audi collaboration to be distributed through existing dealer network › New sales steering structure planned for unified distribution of Audi products

19 Mid- to Long-Term Development Plan for Automobile Industry foresees fast growing NEV market

New Energy Passenger Vehicles (in ‘000 units)

~ 25% CAGR 20% of PHEV total market BEV

60% CAGR >60% ~ 2,000

310 191 75 63 235 128 2015 2016 2020e 2025e

Source for data 2015-2016: CPCA 20 We will be prepared to deliver around 400,000 NEVs by 2020 and 1,500,000 by 2025

Introduction of locally produced NEV Mass market BEV cooperation

Phase 1

Plug-in hybrids based on current toolkits

+ +

Phase 2 Pure electric vehicles based on current toolkits + + Phase 3

Pure electric vehicles based on scalable electric toolkit +

21 Volkswagen Group and JAC enter a 50:50 Joint Venture to develop, produce and sell new energy vehicles and mobility services

JV with an initial term of 25 years, will utilize the technical and commercial advantages of the two parties in a fully-fledged cooperation

Very attractively priced BEVs for Chinese consumers to promote the development of the Chinese NEV sector

We aim to have first cars in the first half of 2018

Initial capacity of the new plant is 100,000 vehicles per year

As a first step, the joint venture entails a total investment by both JV parties of around RMB 6 billion over a period of several years

22 The Volkswagen Group China strives for a leading position in Mobility Services

> Goal: Top Provider of Mobility Services > We are in the process of developing a comprehensive portfolio of digital services for all brands > To generate a sustainable competitive advantage, we build up new core competences

23 Goal: transformation from car manufacturer to leading mobility provider

Announced agreements for potential strategic partnerships

Ride-hailing Pre-owned car market Car-sharing

Didi Chuxing Youxin Shouqi

24 Volkswagen Group China and Mobvoi join forces to develop and implement Artificial Intelligence technologies in cars

Significant milestone of Artificial Intelligence technologies for Chinese car owners

50:50 Joint venture to develop automotive applications

Volkswagen Group committed an overall investment of USD 180m into the joint automotive activities and further growth story of Mobvoi Inc.

Mobvoi Inc. overview Mobvoi Technology & Products

Founded 2012 . Voice recognition Headquarters Beijing, China . Natural Language No. of employees 310 Processing R&D quota 50% engineers (Master or higher) . Search No. of patents >50 (thereof 10 in Deep Learning) . Text-to-speech

25 Appendix

Strong operating result for the Volkswagen Group in China

2012 2013 2014 2015 2016

Deliveries to customers 2,815 3,271 3,675 3,549 3,982 (in ‘000 units)

Production 2,643 3,135 3,528 3,420 3,897 (in ‘000 units)

Operating profit 8,424 9,569 12,077 11,937 11,094 (100% level; in € million)

Prop. Operating profit 3,678 4,296 5,182 5,214 4,956 (in € million)

27 Financials 2016 by car manufacturing JV – on 100% level

Deliveries to customers 1,854 (+13.5%) 1,949 (+12.3%) (in ‘000 units) of which 1,315 Volkswagen and 539 Audi of which 1,632 Volkswagen and 317 ŠKODA

Sales revenue 40,875 (+1.0%) 26,064 (+0.2%) (in € million)

Pre-tax profit 5,546 (-10.1%) 4,589 (+4.1%) (in € million)

Margin 13.6% 17.6%

28 Summarized financial information on our Joint Ventures

FAW-Volkswagen SAIC VOLKSWAGEN SAIC VOLKSWAGEN Automotive Company Automotive Company Sales Company 2016 2015 +/- (%) 2016 2015 +/- (%) 2016 2015 +/- (%) Equity interest 40% 40% 50% 50% 30% 30%

Deliveries to customers1) '000 units 1,854 1,634 +13.5% 1,949 1,736 +12.3%

Sales revenue € million 40,875 40,462 +1.0% 26,064 26,018 +0.2% 30,707 30,035 +2.2% Depreciation, amortization, and impairment losses € million 1,120 1,033 +8.4% 1,091 907 +20.3% 4 4 Interest income € million 82 64 +28.1% 40 79 -49.4% - - Pre-tax profit from continuing operations € million 5,546 6,169 -10.1% 4,589 4,408 +4.1% 614 600 +2.3% Pre-tax margin 13.6% 15.2% 17.6% 16.9% 2.0% 2.0% Income tax € million 1,576 1,464 7.7% 1,127 850 +32.6% 154 151 +2.0% Post-tax profit from continuing operations € million 3,970 4,705 -15.6% 3,462 3,558 -2.7% 460 449 +2.4% Pre-tax margin 9.7% 11.6% 13.3% 13.7% 1.5% 1.5%

Dividend received (as per equity interest) € million 1,631 2,170 -24.8% 1,661 2,048 -18.9% 127 143 -11.2%

29 Chinese Joint Ventures generate substantial, self-funded growth and at the same time sustainably rising dividends

Total amount of dividends paid out to Joint Venture partners and Volkswagen Group (in € billion)

Total amount of dividend Chinese Joint Ventures thereof paid to Volkswagen Group 10

8.1

6.5 6.7

4.6 4.5 3.7 2.8 2.8 3.0 2.0 1.2

2011 2012 2013 2014 2015 2016

30 Positive effect through better mix and material cost improvements did not offset the negative effects in Q1 2017

Proportionate operating profit (in € million)

- 62 1,174 1,112 + –

+ Mix effect (e.g. introduction - Audi dealer situation of Tiguan L) - Volume decline + Material cost - Currency effect improvements

Q1 2016 Q1 2017

31 Volkswagen Group Investor Relations – Your point of contact

Worldwide offices Investor Relations in China

Herndon/ USA Beijing/ CN Lennart Schmidt

London/ UK Wolfsburg/ GER CIIA/CEFA, CIRO Investor Relations Manager

Volkswagen Group China No. 3A, Xi Liu Jie, Sanlitun Road Chaoyang District Beijing 100027, P.R. China Phone: +86 106 531 4132 Email: [email protected] www.volkswagenag.com/ir

32 Weiming Soh

Executive Vice President, Group Corporate Strategy and Group Sales & Marketing, Volkswagen Group China JP Morgan Investor Visit, Beijing, 06 June 2017