BILD

Volkswagen in China
Prof. Dr. h.c. Winfried Vahland
Executive Vice President of Volkswagen AG
President and CEO of Volkswagen Group China
PLACEHOLDER FOR PICTURE
2
Volkswagen in China
Recent Developments
Strategy 2018
South China Strategy
Volkswagen Group China Investor Conference 2010 in Beijing
3
First contact with China in 1978
4
Why did Volkswagen decide to come to China?
5
Putting China on four wheels
6
Volkswagen Group China is committed to Educational Programs
such as Road Safety and Environmental Protection
7
Volkswagen China
Investment Company
Beijing
Volkswagen Transmission
Shanghai Volkswagen
Powertrain
Volkswagen Finance
(China) Co., Ltd.
Shanghai
FAW-Volkswagen
Dalian
Volkswagen FAW Engine
Changchun
Volkswagen FAW Platform
Chengdu
Nanjing
Volkswagen Automatic
Transmission
FAW-Volkswagen
Shanghai Volkswagen
Shanghai Volkswagen
VW HK Co. Ltd.
Sitech
Audi China
Volkswagen Beijing Centre
VW Import Co. Ltd.
Volkswagens operations in China
Total Investments 1984-2009: 7.8bn (2010-2012: 6.0bn)
Turnover 2009: 20bn
Deliveries to Customers 2009: 1.400m units
Employees 2009: 43,100
History
1984: Shanghai Volkswagen Automotive
Co. (SVW) as a joint venture between
Volkswagen and Shanghai Automotive
Industrial Corporation (or SAIC) was
founded. Production milestone in October
2009 5,000,000 cars.
Volkswagen was the automotive pioneer
in the modern Chinese market.
1990: FAW-Volkswagen Automotive Co.
Ltd. was set-up as our second joint
venture in China. Production milestone in
August 2009 3,000,000 cars.
2004: Volkswagen China Investment
Company was founded to co-ordinate and
manage all Volkswagen activities in China.
Today: Volkswagen is represented by 16
companies in China
Volkswagen Group in China 2009
Source: Volkswagen Group China
8
Jetta Sagitar Audi A6L
Magotan New Bora
Audi A4L
Golf A6 Audi Q5 CC
Polo Jinqing Polo Jinqu
Passat New LY
Santana
Touran
Santana Vista
Cross Polo
Lavida
Octavia
Fabia
Superb Tiguan LWB
Foundation
Share
Deliveries
Sales Ranking
Employees
1984
SAIC Motor: 50%, VW AG: 50%
690,616
No. 1
19,100
1990
FAW: 60%, VW AG: 30%, Audi AG: 10%
670,037
No. 3
21,300
Successful Partnership with FAW and SAIC
Source: Volkswagen Group China
9
Volkswagen
Lamborghini, Bentley
Audi
Local CKD
Sales
Import FBU
Sales
122.6
527.7 142.4
568.1
FAW-VW
SVW
22.2
16.6
0.6
Total Sales Region China 1,400.0
Sales of Volkswagen in China 2009 (000 Units)
Source: Volkswagen Group China
10
FAW-VW
Volkswagen brand 527.7
Audi brand 142.3
Total 670.0
SVW
Volkswagen brand 585.1
Skoda brand 131.8
Total 716.9
Total Region China 1,386.9
Chengdu
Nanjing
Shanghai
Beijing
Changchun
vehicle plant
Vehicle Manufacturing Companies of Volkswagen
in China 2009 (000 Units)
Source: Volkswagen Group China
11
Localization
rate
>90%
~60%
>90%
Volkswagen and Audi
Parts Export Program:
~1bn
Purchasing Activities of Volkswagen in China
Source: Volkswagen Group China
12
Shanghai
Changchun
component plant
Dalian
FAW-VW
Engine EA113, EA111; Transmission MQ250, 02K
VW/FAW 40/60
VWPF (VW FAW Platform)
Platform parts
VW/FAW 60/40
VWED (VW FAW Engine Dalian)
Engine EA888
VW/FAW 60/40
VWATD (Volkswagen Automatic Transmission Dalian)
Transmission DQ200
VW 100
Shanghai Volkswagen
Engine EA113, EA827, EA888
VW/SAIC 50/50
VWPT (Shanghai Volkswagen Powertrain)
Engine EA111
VW/SAIC 60/40
VWTS (Volkswagen Transmission Shanghai)
Transmission MQ200
VW/SAIC/FAW 60/20/20
Sitech-Dongchang Automotive Seating
Seats; Seat Components
Sitech/Dongchang/Etern 60/20/20
Component Manufacturing Companies of Volkswagen in China
Source: Volkswagen Group China
13
Volkswagen in China
Recent Developments
Strategy 2018
South China Strategy
Volkswagen Group China Investor Conference 2010 in Beijing
14
Successful Achievements of Olympic Program Targets 2005 2008
Branding/
Positioning
Strongest brand portfolio in China
Products 12-14 new models by the end of 2008
Product Costs Competitive cost structure / competitive suppliers
Sales
& Marketing
Best in class dealer network and customer evaluation
Corporate
Culture
Accelerating the decision process and localized lean
management
Capacity, Struc-
ture & Synergy
90% capacity utilization / synergies
15
Worldwide
Economic Crisis
Olympic program
S
t
r
a
t
e
g
y
2
0
1
8
2006 2011 2005 2008 2009 2012 2007 2010
2
0
0
9

2
0
1
0
Mid-term Challenges
Government support policy
DYnaMic 2010
Source: Volkswagen Group China, schematic development
16
Deliveries to Customers 2005 2009
Source: Volkswagen Group China
Audi
VW
Skoda
2007 2008 2009 2010* 2005 2006
0
500
1,000
000 Units
1,500
1
27
59
123 82
102
120
159
629
781
844
1,118
712
910
1,024
1,400
1
59
512
572
Market
Growth
* expected
17
China strong GDP Growth and favorable Automotive Industry Policy
2007 2008
0.7
China
EU
2009
-4.2
0.7
2010 E
GDP growth in %
Reduced purchasing tax rate
1
Further subsidy for people
living in the countryside
2
Higher subsidy for early
scrapping
3
Support for public new
energy vehicles
4
2.8
13.0
9.6
8.7
9.8
Source: Eurostat; Volkswagen Group China
18
Deliveries to Customers Q1/2010
Volkswagen Group Volkswagen Audi Skoda Bentley/Lamborghini
284,146
457,259
235,772
362,874
29,010
51,449
19,248
42,707 210
229
+60.9%
+53.9%
+77.3%
+121.9%
+9.0%
2010
2009
Source: Volkswagen Group China
19
Volkswagen in China
Recent Developments
Strategy 2018
South China Strategy
Volkswagen Group China Investor Conference 2010 in Beijing
20
1m sales
Chinese
Culture
Social
Responsibility
1m sales
European
Culture
Corporate
Responsibility
Strategy 2018 (as of February 2009)
The Whole Is More Than
The Sum Of Its Parts.
Aristotle
21
Four Key Areas of Strategy 2018
Products
and
Technology
Production
and
Supply
Sales
and
Customers
Responsibility
and
Partnership
Strategy 2018
Joint Ventures As The Foundation
22
Volkswagen Group China reduces Fuel Consumption further than
Competitor (Base: 2005)
Main Competitor Volkswagen Group China
Source: Volkswagen Group China own calculation
-20%
2005 2006 2007 2008 2009 2010 2005 2006 2007 2008 2009
F
l
e
e
t

f
u
e
l
c
o
n
s
u
m
p
t
i
o
n
23
Volkswagen in China
Recent Developments
Strategy 2018
South China Strategy
Volkswagen Group China Investor Conference 2010 in Beijing
24
1m sales
European
Culture
Corporate
Responsibility
1m sales
Chinese
Culture
Social
Responsibility
Strategy 2018 and South China Strategy (as of November 2009)
South China
Strategy
25
Hong Kong is important to China, especially in the South
Hong Kong is:
Hong Kong
No. 1 FDI
1
source of mainland
No. 3 export destination
No. 1 overseas tourist destination
No. 1 overseas media source
Trend-setter and similar consumer
behavior with South China Mainland
1
FDI =Foreign Direct Investment
26
South China Strategy: Target to achieve National Average Market Share
in the near future
Volkswagen Group Sales (000 units) Volkswagen Group Market Share %
+40-50% >2.0 times
2009 Future 2009 Future
13.0
Average National
Market Share
251
>500
Source: Volkswagen Group China
27
Volkswagen Group China is planning significant Volume Growth in the future
(000 Units)
2018 (E) 2010 (E)
Market
Growth
2005
571
2006
711
2007
910
2008
1,024
2009
1,400
Near Future
2,000
Source: Volkswagen Group China
28
Volkswagen Group China Capacity Increase
(000 Units)
Source: Volkswagen Group China
1,400
400
More working days (wd)
Further capacity optimization
2010
Mid-term
Upward
flexibility
~30%
250 wd
4 additional
plants
250 wd
29
Investment 2010 2012:
Published in 2009 4.4bn
Recently added 1.6bn
New investment total 6.0bn
Chengdu
Nanjing
Shanghai
Beijing
Changchun
existing vehicle plant
Volkswagen Group 4 new Vehicle Plants in China
Source: Volkswagen Group China
Guangdong
new vehicle plant
North
East
Go South Strategy
Go West Strategy
+1 SVW plant
(location tbd)
BILD
Volkswagen in China
Prof. Dr. h.c. Winfried Vahland
Executive Vice President of Volkswagen AG
President and CEO of Volkswagen Group China
PLACEHOLDER FOR PICTURE
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.