volkswagen group china · volkswagen financial services also aims to establish - mobility packages...

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






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

11

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

12

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

14

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






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”

16

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

18

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

19

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

20

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






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

24

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 …

25

Optimization of resource consumption in production process

FactoriesPress ShopPress Shop Body ShopBody Shop

Paint ShopPaint Shop InfrastructureInfrastructure

Less:EnergyCO2

WaterWaste

– Example Chengdu –

Content






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

27

Challenges in a regulatory environment

28

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

29

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

31

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

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