Volkswagen Group China - J.P. Morgan: China Conference 2012 - Dr. Jörg Mull Beijing, June 14 th, 2012
Content Our Momentum in China Outlook Market Development Investments Volkswagen Group China Technologies Volkswagen Group China Brand Images Volkswagen Group China 2
Comeback of a world power Share world BIP (Year 1 2009; in %) Rest of the world Japan Europe & N. America Mohammad s Hegira Fall of Roman Empire Marco Polo s trips to Asia Discovery of America French and US Revolution Industrial Revolution Oil crisis Internet Revolution 100 80 60 India 40 China Year 0 0 500 1000 1500 2009 20 "For Chinese leadership, it is not surprising that China is on the verge of becoming a superpower, but rather that they have not been for the last 300 years" Henry Kissinger, former US Secretary of State Source: McKinsey 3
Introduction of Volkswagen Group China (VGC) Volkswagen production facilities in China History FAW-Volkswagen Volkswagen China Investment Company Chengdu Car production plants Component plants Headquarter Volkswagen Group China Beijing Nanjing Shanghai Total investments 1985-2011 Employees 2011 Dalian Changchun FAW-Volkswagen (Volkswagen, Audi) Volkswagen FAW Platform Volkswagen FAW Engine Volkswagen Automatic Transmission Shanghai Volkswagen Shanghai Volkswagen (Volkswagen, ŠKODA) Volkswagen Transmission Shanghai Volkswagen Powertrain 12.4 Billion 48,058 1985: Founding of Shanghai Volkswagen Automotive Co. (SVW) as joint venture with Shanghai Automotive Industrial Corporation (SAIC). 7.5 million vehicles as of February 2012. 1991: Founding of FAW-Volkswagen Automotive Co. Ltd. (FAW-VW) as second joint venture with First Automotive Work (FAW). 5.5 million vehicles as of February 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). 4
First connections of Volkswagen with the Chinese automobile industry 5
Volkswagen as pioneer in China 1985 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 2011 2012 1985 2011 6
Successful partnership with FAW and SAIC Foundation 1991 Foundation 1985 Share FAW 60%, VW AG 30%, AUDI AG 10% Share SAIC Motor 50%, VW AG 50% Deliveries 2011 993,000 Deliveries 2011 1,141,000 Jetta Bora Sagitar Santana Santana Vista Polo HB Polo NB Golf Golf GTI Magotan CC CrossPolo Lavida Touran Tiguan Passat A4L Q5 A6L Fabia Fabia Scout Octavia Octavia RS Superb 7
2,259 thousand vehicles delivered to customers in 2011 Deliveries to Customers ( 000 Units) 2,400 New record 2011: 2.0 million vehicles 2,259 2,000 1,600 Volume doubled in the last 3 years 1,723 1,200 800 400 Volkswagen Group Volkswagen Audi ŠKODA 313 220 0 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 8
In Jan-Apr 2012, the Volkswagen Group maintained its Number 1 position by market share in China Mainland Others (i.e. local Volkswagen brands) 20% 33% c 10% GM Chery 3% 9% 3% Geely 3% Hyundai 3% 6% PSA 4% 6% BYD Toyota Honda Nissan Rank Brand/Group Trends of market share Changes of market share 1 Volkswagen Group + 1.7% 2 GM Group - 0.2% 3 Hyundai Group + 0.6% 4 Toyota Group + 0.4% 5 Nissan Group + 0.3% 6 Honda Group - 0.5% 7 BYD - 0.4% 8 PSA Group + 0.1% 9 Geely Group - 0.4% 10 Chery Group - 0.3% Others - 0.4% 9
Deliveries of Volkswagen in China January to April 2012 Import FBU 1) ( 000 Units) Locally Produced ( 000 Units) VW, VWN 25.3 FAW-VW 279.2 100.0 Audi 24.2 Lamborghini, Bentley, SEAT 1.1 SVW 349.5 79.6 Ʃ 50.6 Ʃ 808.3 Total Deliveries Region China 858.9 1) incl. Hongkong; Source: Volkswagen Group China 10
Volkswagen Group China Achievements 2008 2009 2010 2011 Q1/2012 Deliveries to Customers ( 000 Units) 1,024 1,400 1,923 2,259 634 Production (100%) 1) ( 000 Units) 975 1,387 1,914 2,202 611 Operating profit (quotal) 1) ( m) 395 831 1,907 2,616 848 1) SVW Group/FAW-VW Group Source: Volkswagen Group China 11
Content Our Momentum in China Outlook Market Development Investments Volkswagen Group China Technologies Volkswagen Group China Brand Images Volkswagen Group China 12
Chinese automotive market as the biggest worldwide Production Volume of Passenger Cars and Commercial Vehicles 2007 2014E million vehicles 25 China 20 15 10 5 USA Japan Germany South Korea 0 2007 2008 2009 2010 2011 2012E 2013E 2014E Source: IHS Global Insight, March 2012 13
After a strong boom in the past two years, passenger car market growth in China is stabilizing Total Passenger Car Market China (incl. HK) ( 000 Units) +54% +35% 11,457 +9% 12,386 5-10% 1) CAGR +19% 8,482 5,503 2,266 2003 2008 2009 2010 2011 2012E 1) Estimate; Data Source: CKD CPCA; FBU - Registration 14
Total passenger car market in China will develop further in the future Total Passenger Car Market China (incl. HK) ( 000 Units) Average Annual Growth Rate >7% >8% >20,000 5-10% >15,000 12,386 2011 2012E 2013E 2020E Source: Volkswagen Group China / IHS Global Insight 15
2011 GDP reached a 9.2% growth year on year, and the economy is now in a path of stable growth 2009 2010 2011 2012 (forecast) CAGR 9.2% CAGR 10.3% CAGR 9.2% CAGR 8.5% 7.9% 8.9% 10.7% 11.9% 10.3% 9.6% 9.8% 9.7% 9.5% 9.1% 8.9% 8.1% 8.1% 8.7% 8.8% 6.1% Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12E Q3/12E Q4/12E Source: Deutsche Bank, Last update May 2012 16
Current 5-year-plan: New growth model with focus on domestic market Up to now: Focus on export and quantitative growth Now: Focus on domestic market and qualitative growth 12 th 5-year-plan 2011-2015 11 th 5-year-plan 2006-2010 Multi-National-Companies and infrastructure projects as growth generator Big growth in manufacturing trade Jobs in cities to keep unemployment low Internationally comparable price stability and well-adjusted foreign trade balance Domestic consumption as growth accelerator Megacities as growth generator Focus on environmental protection and energy efficiency Encouragement of own innovations Social stability due to balanced allocation of prosperity Selective policies for foreign investment as well as globalization of Chinese companies 17
Mega and small cities will be the engine of GDP growth City Level (Urban Population) Mega (10M+) Big (5-10M) Mid-sized (1.5-5.0M) Small (0.5-1.5M) Big town (<0.5M) 2005 819 cities 3 12 58 Distribution by city size New cities Remark: 6 mega cities in 2010 (Shanghai, Beijing, Chongqing, Shenzhen, Tianjin, Guangzhou) Source: McKinsey Insights China Macroeconomic model updated April 2012 202 544 3 5 52 169 7 6 33 166 378 46 2020 865 cities 11 85 335 424 % of GDP 2005 2020 10 13 27 22 27 15 12 26 23 26 10 18
GDP Growth development is expected to differentiate more strongly between the various Chinese regions Tibet Xinjiang Expected GDP Growth 2012 12-15% 10-12% 8-10% Source: Provincial Government Report Qinghai Yunnan Ningxia Gansu Sichuan Chongqing Guizhou Shaanxi Guangxi Zhejiang Heilongjiang Inner Mongolia Jilin Beijing Liaoning Hebei Tianjin Shanxi Shandong Henan Jiangsu Hubei Anhui Shanghai Hunan Jiangxi Guangdong Hainan Fujian Estimate of Chinese GDP 2012 per Province Province Expected Total GDP Growth 2012 2011 (trillion RMB) Inner Mongolia 15.0% 1.40 Guizhou 14.0% 0.56 Chongqing 13.5% 1.00 Shaanxi 13.0% 1.20 Hainan 13.0% 0.25 Anhui 12.6% 1.50 Sichuan 12.0% 2.00 Heilongjiang 12.0% 1.10 Tianjin 12.0% 1.10 Shanxi 12.0% 1.10 Jilin 12.0% 1.04 Gansu 12.0% 0.52 Ningxia 12.0% 0.21 Qinghai 12.0% 0.16 Yunnan 12.0% 0.88 Liaoning 11.0% 2.20 Hunan 11.0% 1.96 Fujian 11.0% 1.75 Guanxi 11.0% 1.20 Xinjiang 11.0% 0.66 Tibet 11.0% 0.06 Henan 10.0% 2.70 Hubei 10.0% 1.80 Jiangxi 10.0% 1.20 Shangdong 9.5% 4.54 Hebei 9.0% 2.40 Guangdong 8.5% 5.30 Zhejiang 8.5% 3.18 Jiangsu 8%-10% 4.80 Shanghai 8.0% 1.92 Beijing 8.0% 1.60 19
Content Our Momentum in China Outlook Market Development Investments Volkswagen Group China Technologies Volkswagen Group China Brand Images Volkswagen Group China 20
Go West and Go South Strategy for further growth Planned investments 2012-2016 14.0 Billion Urumqi Changchun Go West Strategy Beijing Dalian Chengdu Nanjing Yizheng Shanghai Foshan Ningbo Go South Strategy Existing production site New production site 21
Further strengthening of partnerships with SAIC and FAW SAIC FAW Signing ceremony April 23 rd, 2012 in Wolfsburg Agreement about Urumqi plant Signing ceremony April 23 rd, 2012 in Wolfsburg Intension to extend JV contract with FAW 22
Volkswagen Group China: Planned product portfolio in 2015 with 75 models Commercial Vehicles CKD 32 FBU 43 75 Note: number of product models 23
Content Our Momentum in China Outlook Market Development Investments Volkswagen Group China Technologies Volkswagen Group China Brand Images Volkswagen Group China 24
Volkswagen Passat Special design elements for Chinese customers Radiator grill Tail lamps Speaker covering Tire program Passat USA Passat China 25
Latest TSI- and DSG-technologies of Volkswagen Group for China [CO 2 /km] [Volume] Optimized gears Recuperation Start-stop Rolling friction New engine generation Prototypes with innovative Technologies e-traction New TSI generation Fleet emissions 2010 Future s technology 26
NEVs for sustainable transportation PHEV series production BEV From Demonstration to Mass Market Phase 1: Demonstration 2010 to 2013/14 Field test > 100 vehicles Various models Phase 2: Start series production 2014 to 2018 Series Range 100-200 km > 10,000 vehicles 2 models Phase 3: Mass market After 2018 Series, e-optimized Range options > 100,000 vehicles HEV Series production 2012 2013 2014 2015 2016 2017 2018 27
Green factories for sustainable production (example Chengdu) Press Shop Body Shop Paint Shop Assembly Permanent operation instead of switch on/of Optimization of cuts 100% recycling of metal waste Spot welding instead of weld seam Modern laser technology Heat exchanger instead of airconditioning Integration of filler characteristic into base coat Dry cleaning process instead of venturiwashing process Leak test with closed water circulation Drying with compressor instead of pressed air Modern conveyor technique 28
Content Our Momentum in China Outlook Market Development Investments Volkswagen Group China Technologies Volkswagen Group China Brand Images Volkswagen Group China 29
Introduction of new brand SEAT in Chinese market SEAT s unique mix of creativity, design flair and dynamic driving pleasure combines with the highest standards of technology, engineering, quality and durability. We call it Enjoyneering. James Muir, CEO of SEAT 30
Awards for brands and products of Volkswagen Group China Volkswagen Audi ŠKODA Annual Best Import Brand (Motor Trend) 2010-2011 Best Innovative Brand (General Assembly On China Brands and Communications 2011, Top Brands Contributors Awarding Ceremony) 2011 China Low-Carbon Emission Auto Brand VW Touareg Hybrid (Xinhua Agency, International Herald Leader) The Best Cars 2012 : 3 brand awards and 3 model awards (Auto Motor Sport) 2012 Annual Luxury Car Audi A8L (China Auto Pictorial) Most Popular Import Audi A1 (Car and Driver) The Best Branding of 2011 (China Times and Auto Business) The Champion of Joint Venture Brand (Lian Xin Tian Xia) Customer Loyalty & ŠKODA Human Touch (Auto Driving and Service, Sohu Auto, Business Unit, Shanghai Evening Post) 31
Santana as a Heritage Deliveries to Customers 250,000 ca. 95% of total group sales ca. 75% of total group sales ca. 10% of total group sales 200,000 150,000 100,000 50,000 0 1990 1995 2000 2005 2010 Santana B2 Santana B2 Variant Santana 2000/3000/Vista 32
People s Car Project : Brand digitization and customer interaction INSPIRE Users get inspiration for own ideas and creations CREATE Users visualize und describe their ideas BUILD Users get updates about their ideas status, process and result COMPETE Users value ideas of other users 33
Summary Volkswagen Group China Commercial Vehicles Past Presence Future One of the first OEMs in China New sales records Market leader and winner of market shares Investments for future Strong relationship with 2 joint ventures Modern and exciting technologies Popular and innovative brands Video 34
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