Introductory Statement for the Hearing of AG in the European Parliament`s Committee of Inquiry into Emission Measurements in the Automotive Sector (EMIS)

Held in Brussels, January 24, 2017

- CHECK AGAINST DELIVERY

Madam Chairperson,

Ladies and gentlemen,

My colleague and I appear before you to speak today on behalf of the Chairman of the AUDI AG Board of Management, Professor Rupert Stadler,

• Mr Oliver Hoffmann is Head of Powertrain Development

• and my name is Florian Heuberger; I am Head of Technical Service.

We are looking forward to today’s discussion with you. First, we will briefly address the areas dealt with in the information we provided to you. In this regard, we fully adopt and share the statements previously made by Dr. Eichhorn, the Head of Research and Development at the VW Group.

The emissions issue has left many customers annoyed - including a lot of Audi customers. It has harmed our reputation. And it requires a large amount of time and effort.

When we went about tackling this issue, it was clear from the outset that: The top priority was finding a technical solution, as a first step. In parallel with that, we need to establish who is responsible here and how this could have been allowed to happen. And along with finding a solution and investigating the facts and circumstances, we see integrity as the third element here, and the only way out of this issue.

I am sure you can imagine that we are working far more intensively than ever before with a system of multi-level checks and controls, that we have implemented new compliance mechanisms and that we are demanding our team to ‘shout’, if something looks like it may not be in line with the law or with good morality and ethics.

It is a long road, to regain the trust and confidence of our customers and of the public. But we are taking this road because we at Audi believe in our brand. Because this is about the livelihood of tens of thousands of honest and innocent people.

Ladies and Gentlemen,

As Dr. Eichhorn already stated back in July 2016, the global automotive industry is struggling with the reality that there are no uniform global standards. The amount of time and effort that is required to fulfil country-specific approval and registration requirements is simply enormous.

And I’m not only talking about having to use different colours for indicator lights. We are talking about hundreds of details, about diverging requirements for crash tests and about emissions regulations.

A decade ago, the EU was focused on CO2, while in the USA, it was NOx. This resulted in a situation whereby finding a solution to the different standards meant conflicting objectives when it came to developing technology. Solving this conflict of objectives has meant an enormous amount of time and effort for the automotive industry. Without uniform approval standards, it is impossible to have one engine that can be used worldwide.

The next point that is significant from the perspective of legislation would be: Please think about the product life cycle of an automobile. A manufacturer normally offers a car for sale for a period of seven years. That period is preceded by a development phase of roughly five years. What this means is that at the beginning of a vehicle development project the team must have knowledge of the legislation applicable for the next twelve years. This means that it is important to set the course for the long term.

For us manufacturers, this is a question of being able to plan with certainty. You have raised the matter yourselves in your list of questions: The cost-related dilemma that faces the entire automotive industry is clear for all to see.

On the one hand, we are trying to give new technology a major boost. On the other hand, we have to first earn the money from existing technology to be able to build for the future. This makes clear communication and guidance from policymakers even more important.

We need reliable timelines that can be used to plan realistically, and signals to consumers to speed up the transition to electric mobility, for instance. The customer wants to know for certain that they will have the necessary infrastructure available to them when they buy an electric car.

We want to solve this “chicken and egg” situation that exists in the e-mobility world. Thus, , Porsche and Audi, together with BMW, Daimler and Ford have announced a joint venture. (Press release: 29 November 2016) We are building a network of fast-charging points on Europe’s key traffic routes. Starting in 2017 we are initially creating 400 charging points. By 2020 the plan is to have thousands of high-power charging points.

These are equipped to have a charging output of up to 350 kilowatts. Our vision is as follows: After 500 kilometres you take a short stop-off for a coffee break. And in that time you have charged a large part of your car’s battery. From the customer’s point of view, everyday usability is key. No customer wants to compromise. Therefore, ranges of less than 400 kilometres don’t come into question for us.

Ladies and gentlemen,

We run eight plants in six European countries and employ more than 81,400 people in Europe alone. In Italy you will find us on the list of the 25 largest employers. In Hungary we are in fact the largest foreign employer and investor – to mention just two examples. And here in Brussels we will start to build our first electric car in 2018. More than 2,500 loyal Audi employees work here.

In the midst of the emissions issue, we adopted our new Audi 2025 Strategy. Along with the major trends towards digitalisation and urbanisation, sustainability is the linchpin of this strategy.

Announcing plans for three electric cars by 2020, is seen by many as the perfect answer at this time. We will be starting in 2018, with an electric SUV in the upper mid-sized range. And this model will be born directly here in Brussels – a strong sign for Europe! A sporty electric saloon in the executive range will follow in 2019. And in 2020 we will offer electric cars in the compact range, meaning cars the size of an .

From 2021/22 onwards, we will gradually transform our core car lines to full electric. We are currently discussing the issue of production locations for these electric cars. After kicking off production in Brussels we are also looking at our main German plants in and Neckarsulm.

We currently find ourselves in the largest transformation our industry has ever seen. Electric engines require far fewer parts than a combustion engine. The power train of tomorrow involves the same complexities as it does today. Job profiles in the automotive industry of the future are becoming broader and more diverse.

And of course this means proper training and qualifications! Our Audi academies and cooperative arrangements with colleges are there for this very purpose, which enable us to constantly develop our offering in this area.

Ladies and gentlemen,

The key to navigating the road to an electrified future is putting the customer in the front seat. And as already mentioned, everyday usability for our customers plays a central role here. That is why we have launched the plug-in hybrid.

Two and a half years ago, we launched our Audi A3 e-tron and, one year ago, we brought out the e-tron. These are plug-in hybrids that offer the best of both worlds: the range offered by an efficient combustion engine and emission-free driving for most everyday trips, i.e. distances of up to 50 kilometres.

In the future we will be offering a plug-in option in every model range. There is more than just one facet to sustainable mobility. It covers e-mobility, fuel cells and renewable fuels. For instance, we are putting an emphasis on gas-powered models, which we call “g-tron”.

In two months’ time, at the Geneva Motor Show, we will be presenting the Sportback as the third model in our g-tron fleet. Vehicles powered by natural gas inherently create around 20 per cent lower CO2 emissions. g-tron drivers drive in an economical and environmentally friendly way.

Costing roughly 4 to 5 euros per 100 kilometres. The network of fuelling stations is there, and for more market penetration, further steps are needed in industry and politics. Our renewable gas is taking us one significant step forward. When everything is factored into the equation, from the production and supply of the energy source to its use to power the vehicle, these fuels result in 80 per cent less CO2 as a fossil fuel.

How exactly is Audi doing this? Using excess power from wind turbines (keyword “power-to- gas”) or from bio-methane from waste materials, in Germany we have the potential for millions of gas-operated cars.

But potential alone will do nothing for our climate, this potential has to be realised. Since 2013 Audi has been operating the world’s first power-to-gas plant in Emsland. We supply the required amount of clean Audi e-gas into the natural gas grid for all Audi g-tron vehicles with approval from 2017.

In concrete terms, that means a saving of 50,000 tonnes of CO2, which would otherwise be directly emitted into the atmosphere.

This is very clearly good for the environment and shows how combustion engines also have their place in our new strategy.

What can you do to help? When introducing new rules for CO2 fleet emissions as of 2020, it will be important to recognise combustion engines with innovative fuels as contributing to the solution here.

This also represents a means of achieving the Paris world climate targets.

Ladies and gentlemen,

We have been following the work you have been doing over the past number of months with great interest and would like to make a real contribution in our discussion today.

We are convinced that this consultation is important to create understanding, exchange views and arguments and to work on a regime of forward-thinking rules.

Europe is an economic hub where key technology for sustainable mobility can also be created in the future.

Thank you!