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China: The second home market
of the Volkswagen Group
Carsten Isensee Executive Vice President Finance,
Volkswagen Group China
HSBC Roadshow, Hongkong, 24-25 November 2014
Business overview and sales performance
Market development
Investments Volkswagen Group China
Our products
Emerging business fields and financial results
2
Volkswagen Group China (VGC) at a glance
Volkswagen production facilities in China
Shanghai Volkswagen
Volkswagen FAW Engine
FAW-Volkswagen
(Volkswagen, Audi)
Facts 2014
■ Volkswagen Group ventured into China more
than 30 years ago
Volkswagen FAW Platform
Changchun
Urumqi
Beijing
Volkswagen China
Investment Company
Chengdu
FAW-Volkswagen
Volkswagen
FAW Platform
Dalian
Tianjin
Yizheng
Nanjing
Changzhou
Shanghai
Ningbo
Foshan
Volkswagen Automatic
Transmission Dalian
Volkswagen FAW Engine
Volkswagen Automatic
Transmission Tianjin
Shanghai Volkswagen
MAN Diesel & Turbo
Shanghai Volkswagen
(Volkswagen, ŠKODA)
■ Over 20 million cars delivered to Chinese
customers since market entry
■ 89,000 employees work for the Volkswagen
Group in China
■ Another 360,000 employees work within our
dealer network
■ Volkswagen Group China is represented by
more than 40 entities in China
Shanghai Volkswagen
Volkswagen Transmission
Car production plants
Component plants
FAW-Volkswagen
Headquarters Volkswagen Group China
Volkswagen FAW Platform
■ People are the center of Volkswagen Group
China’s strategy ‘Ren Wei Ben’.
Shanghai Volkswagen
Powertrain
3
Deliveries to customers Volkswagen Group in China (January – October 2014)
Import FBU
(‘000 units)
Locally produced
(‘000 units)
Volkswagen Group: 184
FAW-VW
1,433
SVW
1,409
Ʃ 2,842
Total deliveries region China 3,0261)
1)
incl. Hong Kong, excl. Scania, and Ducati. All figures shown are rounded.
4
Deliveries to customers by brand (January – October 2014)
`000 units
3,000
+14.1%
January – October 2013
January – October 2014
3,026
2,652
+13.8%
2,500
2,000
2,296
2,018
With a solid sales performance year-to-date
all brands contributed to the strong growth
of Volkswagen Group China
1,500
1,000
500
0
1)
incl. Hong Kong, excl. Scania, and Ducati.
+16.1%
399
464
+12.4%
199
224
+18.5%
30
36
5
Volkswagen Group – No. 1 in the Chinese passenger vehicle market
Passenger vehicle market China (January - October 2014 y-t-d)
Others
(i.e. local
brands)
Volkswagen Group
Rank
21%
Brand/Group
30%
10%
Comp.1
10%
5%
Comp.2
5%
Comp.3
Delta of
market share
(y-t-d)
1
Volkswagen Group
+ 0.3%
2
Competitor 1
- 0.3%
3
Competitor 2
- 0.1%
4
Competitor 3
+/- 0.0%
5
Competitor 4
- 0.6%
Comp.4
6
6 out of the Top 10 selling vehicles are Volkswagen brand models
Deliveries to customers
(January – October 2014)
1
Lavida
311,295 vehicles
5
Jetta
247,297 vehicles
2
Santana 266,138 vehicles
9
Tiguan
197,954 vehicles
4
Sagitar
10
New Bora 192,076 vehicles
Source: CPCA
250,184 vehicles
7
Audi in China – Enhancing leadership in the premium segment
Flexible capacity expansion, adjusted to market demand
Annual production capacity, vehicles
up to 700,000
Leading the premium SUV market in China
SUV
400,000
Comparison of growth rates
SUV share of the premium market
18%
40%
38%
+30%
30%
200,000
100,000
25%
Production
Production
2010
2008
+36%
35%
+22%
20%
82%
2013
2017
62%
15%
10%
Pioneering the compact segment
with three locally produced models
5%
0%
2008
Jan-Sep 2014
Jan-Sep 2014
Premium Market
•
•
Audi Q3
Segment leader
50% market share
(Jan-Jul 2014)
•
•
Audi A3 Sedan
1st local premium
compact sedan
launched early
September 2014
•
•
SUV Premium Market
Audi SUV
Audi A3 Sportback
1st local premium
compact hatchback
launched in March
2014
8
China has become the most important sales market for ŠKODA
Further volume expansion of ŠKODA
within the next years
Developing the model range in China
> 500,000
Annual deliveries to
customers
Spaceback
226,971
2013
2018
ŠKODA Top 5 markets 1991 vs. 2013
1991
Others
2013
Czech Republic
38%
34%
37%
UK
Poland
Slovak Republic
Germany
6% 7% 10%
Czech Republic
UK
Germany
Russia
Superb Superb
Rapid
Yeti
Yeti
Superb Superb
Superb
Octavia Octavia Octavia Octavia Octavia Octavia Octavia Octavia
2007
25%
15%
5% 6% 8% 9%
Superb
Fabia
China
Others
Import
2007
Local Production
27,000
Rapid
2008
Fabia
2009
Current Models
Fabia
2010
Fabia
2011
Fabia
2012
Fabia
2013
Fabia
2014
Superb
Combi
Superb
Combi
Yeti
Yeti
New Models
9
Porsche is gaining substantial momentum in China
37,425
31,205
2,603
1,418
6,738
1,149
949
24,340
2,402
929
7,726
SUV
CAGR
+15%
Flagship
Increasing model variety and
improving customer experience
Deliveries to customers (in units)
9,148
2011
2012
Cayenne
Panamera
911
Porsche Experience Center Shanghai
Sports Car
13,283
Macan launch in China: Q3 2014
26,666
19,959
2013
Boxster/Cayman
Dealerships (number of dealers)
Sports Car Initiative China
CAGR
+16%
Focus 2014:

40
51
63
2011
2012
2013
Pro-active sports car
market development and
exploitation with 911
and Boxster/Cayman
10
Business overview and sales performance
Market development
Investments Volkswagen Group China
Our products
Emerging business fields and financial results
11
China continues to offer substantial growth potential
Real GDP growth in %
12
Bubble size: real GDP
2013 data unless otherwise stated
10
8
China
China
2020
6
China
2030
4
Japan
India
2
USA
Brazil
0
Russia
Germany
-2
0
10
20
30
40
50
60
Real GDP per capita in `000 USD PPP
Source: IHS Economics
12
Continued positive economic development and the increase in household
income drives private consumption on a solid growth path
%
in USD bn
7,000
9.0
Private Consumption, China (left scale)
Private Consumption Growth Rate, China (right scale)
6,000
8.5
5,000
8.0
4,000
7.5
3,000
7.0
2,000
6.5
1,000
6.0
0
2013
Source: IHS Economics
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
5.5
13
Traffic restrictions reduce local deliveries, however,
rumors on future restrictions lead to front loading of car sales
Deliveries in cities with or
without restrictions1)
Cities with either restriction policy in place or
rumors on future restrictions
Beijing (2011)
in ‘000 units
Tianjin(2014)
Shijiazhuang
Lanzhou
Xi’an Zhengzhou
Chongqing
Chengdu
Wuhan
Cities restricted
Cities with
restriction rumors
Foshan
12,699
Dalian
Qingdao
Nanjing
11,297
2,376
2,376
Shanghai (1994)
2,376
Suzhou
Ningbo
Growth
(y-o-y)
+12.4%
1,246
1,246
Hangzhou (2014)
Dongguan
Shenzhen
7,675
7,675
Guangzhou (2012)
3,111
3,111
1,042
1,042
8,546
8,546
w/ Rumors
(15 cities)
Restricted
(6 cities)
Not
restricted
(326 cities)
30.9%
-16.3%
11.3%
Guiyang (2011)
Remark: Restricted cities include Beijing, Shanghai, Guangzhou, Tianjin, Hangzhou, Guiyang;
15 cities w/ rumors include Chengdu, Chongqing, Dalian, Dongguan, Foshan, Lanzhou, Nanjing, Ningbo, Qingdao,
Shenzhen, Shijiazhuang, Suzhou, Wuhan, Xi’an, Zhengzhou
Source: Registration data, CPCA
Jan - Sep 2013
1)
Jan - Sep 2014
converted to deliveries to customers from registration data
14
Less developed cities provide new opportunities
Level II cities
Beijing
Shanghai
Guangzhou
…
119
Dalian
Xi´an
Changsha
9
16.7
26
8.4
Share of total market
Level I and II cities
Level I cities
95
ᴓ cars/1,000
inhabitants
ᴓ cars/1,000
inhabitants
Number of cities
Average # of
inhabitants (m)
Level III cities
Level IV cities
Level V cities
Shantou
Hengshui
Jingdezhen
…
Guyuan
Yaan
Zigong
…
Haibei
Jinchang
Turpan
…
29
25
109
4.0
135
1.8
62
68
4.8
41%
2014e
Level III, IV and V cities
Number of cities
Average # of
ᴓ
inhabitants (m)
Level I share
Level II share
37%
35%
34%
33%
2015e
2016e
2017e
2018e
Level III share
Level V share
Level IV share
63%
65%
2015e
2016e
66%
67%
2017e
2018e
59%
2014e
15
China will invest further in the construction of road infrastructure
Length of national roads in China (‘000 km)
National expressways
National ordinary roads
National Road Network Construction Plan
265
Urgent need to expand the current road network:
+150%
+84%
106
118
■ more than 900 counties1) in China are not connected
to the national road network
■ more than 18 cities with >200,000 population and
29 regional administrative centers are not connected
to expressways
The Central Government Plan:
64
2011
2030
Source: National Road Network Construction Plan (2013-2030)
■ By 2030, all cities above 200,000 inhabitants will be
connected to the national expressway network, and
all counties will be connected to the national ordinary
road network
1) There
are 2,856 counties in China
16
Southern and Western regions show above average growth supporting
our Go South and Go West Strategy
Regional share of total market sales (Q3 2013 vs. Q3 2014 in %)
22%
20%
Heilongjiang
Northern region
Western region
Jilin
Xinjiang
Inner Mongolia
21%
22%
35%
Q3 2013
Q3 2014
Eastern region
Ningxia
Q3 2014
Q3 2014
35%
Liaoning
Beijing
Tianjin
Hebei
Shanxi
Qinghai
Q3 2013
Q3 2013
Shandong
Gansu
Jiangs u
Henan
Shaanxi
Shanghai
Tibet
Sichuan
Hubei
Anhui
Zhejiang
Chongqing
Guizhou
Hunan
23%
Jiangxi
23%
Fujian
Southern region
Yunnan
Guangxi
Guangdong
Q3 2013
Q3 2014
Hainan
Source: Registration data
17
How big will the Chinese passenger vehicle market be in 2020?
in m vehicles
38
Forecast
32 m
vehicles p.a.
33
10% growth in 2014e:
≙ ~ 17.5 m vehicles
28
23
2013:
15.9 m vehicles
Scenario
CAGR 5%
18
13
2011
2012
2013
Source: Volkswagen Group China scenario calculation
Scenario
CAGR 10%
2014
2015
2016
2017
2018
25 m
vehicles p.a.
2019
2020
18
Business overview and sales performance
Market development
Investments Volkswagen Group China
Our products
Emerging business fields and financial results
19
Investment program and core projects
Total investment of €18.2 bn1)
in 2014 - 2018
Scenario CAGR 5%:
>20 m passenger vehicles
Vehicle
plants
New plant
■ Changsha (SVW)
2011
2012
2013
Assuming a 5% CAGR and
a 20% market share of VGC the
additional annual sales volume…
1m
2014
2015
2016
Capacity increase
■ Foshan (FAW-VW)
■ Chengdu (FAW-VW)
Capacity increase
■ Changchun
■ Chengdu
■ Tianjin
■ Dalian
Products
PHEV products
MQB products
…would imply a need of
2 new factories every 3 years
200,000
Total market
Component
plants
CO2 measures for plants and products
Volkswagen
Group China
1)
Status as per press release 22 November 2013
20
Go West and Go South strategies are core drivers for future growth
Urumqi
Changchun
“Go West Strategy”
Beijing
Tianjin
Qingdao
Yizheng
Nanjing
Chengdu
Changsha
Shanghai
“Go South Strategy”
Ningbo
Foshan
Existing vehicle production site
Planned vehicle production site
21
Capacity expansion plans – on the way to 4 million units in 2018
(Standard capacity of 250 working days)
4 million units
3.135 m
Upward
flexibility
Changsha
Urumqi
Ningbo
Yizheng
Nanjing
Urumqi
Ningbo
Yizheng
Nanjing
Foshan
Chengdu
Changchun
2013
Capacity
2015
Capacity
SVW
Shanghai
Shanghai
Shanghai
2013
Production
Changsha
Urumqi
Ningbo
Yizheng
Nanjing
Foshan
Foshan
Chengdu
Chengdu
Changchun
Changchun
FAW-VW
2018
Capacity1)
Capacity expansion plans are based on the expected growth in unit sales, upward flexibility (e.g. additional working days) and
downward flexibility (e.g. postponement of expansion steps).
1)
As per 12/2013; the new vehicle plants planned in Qingdao and Tianjin are not included in the chart (planned start of production in 2017/18)
22
Implementation of the MQB toolkit in the Chinese production network
MQB & MLB share of
Volkswagen Group production
Changchun
Urumqi
Beijing
Tianjing
Qingdao
Yizheng
Chengdu
Shanghai
Nanjing
Changsha
Ningbo
Foshan
Existing production site
MQB production site by 2016
Planned MQB production site
Golf
A3 SB
2012
2013
2014
2015
2016
MQB
MLB
MQB volume China
A3
Octavia
Lamando
Implementation of MQB in the Chinese production network
will significantly reduce investments for new models
23
Significant growth of dealer networks planned1)
>3,600
45
Heilongjiang
31
Xinjiang
41
Jilin
60
94
106
Inner Mongolia Beijing 43 Liaoning
15
136 Tianjin
11
Ningxia 71 Hebei 216
Qinghai
Shanxi Shandong
Shaanxi 114
248
68
Henan 72
107
Jiangsu
67
91 Shanghai
Sichuan 30
Anhui
Hubei
Chongqing
Zhejiang
Hunan 46
34
217
71 Jiangxi
60
Guizhou
Fujian
Yunnan
71
Guangxi
Guangdong
32
151
10
Gansu
28
6
Tibet
[as of H1 2014]
2,395
~2,750
320
341
1,593
2013
2014e
2018e
Hainan
1)
Map includes only Volkswagen, Audi and ŠKODA dealers; discrepancies may occur due to reporting backlog
24
Business overview and sales performance
Market development
Investments Volkswagen Group China
Our products
Emerging business fields and financial results
25
Broad local product portfolio at FAW-Volkswagen and SVW
CC
Golf
A4L
A6L
A3 SB
A3
Note: Status as per July 2014
Magotan
Jetta
Q3
Q5
ŠKODA
Audi
Sagitar
Volkswagen
Volkswagen
New Bora
Gran Lavida
Santana
Passat
Tiguan
Polo
Touran
Lavida
Lamando
Yeti
Fabia
Superb
Octavia
Rapid
Rapid SB
26
Model launches in 2014: Continuously strong product momentum
SVW
New locally produced models
Polo
e-up!
Golf Variant
Scirocco
T5 Caravelle
A3
S3
RS7
A8L
S8
A8 Hybrid
Macan
Cayenne
Octavia
Flying Spur V8
A3 Sportback
A3 Sportback
Rapid Spaceback
FAW-VW
Cross Polo
New import models
Cayenne GTS
Continental GT V8S Cont. GT Conv. V8S
Cayman GTS
Boxster GTS
918 Spyder
Huracán
A3
27
Significant extension of product portfolio planned:
More than 100 models by 2018
2013:
CKD 22
FBU 41
2018e:
CKD >35
FBU >65
Note: number of models including derivatives
63
>100
28
SUVs are already the second largest body type in the Chinese market –
and the growth is expected to continue
2012 - 2014 body type market share
2020
2024
53.4
53.4
52.5
52.5
13.1
13.1
13.3
13.3
4.6
4.6
4.6
4.6
%
Notchback
Hatchback
MPV
SUV
Others
63.2
63,2
61,6
61.6
59,9
59.9
12,3
12,3
12,3
12.3
4.1
4.1
21.5
21,5
23.0
23,0
28.0
28.0
28.7
28.7
0.7
0.5
0.7
0.9
0.9
2012
2013
2014e
14,3
14.3
4.3
17,5
17.7
Source: Volkswagen Group China, % share of body type in total passenger car market
2020e
2024e
29
Volkswagen China – Product solutions to match our customers’ needs
China special detail solutions
Passat USA
Passat China
China specific wheelbase extensions, trim and colors
A6 Europe
A6 L China
Yeti Europe
Yeti China
China
exclusive
spare wheel
30
Toolkits support the localisation of of our products
Platform
Extended Wheel Base
Lamando
Exterior
Chrome
Interior
Leather
Wood
Lighting
Color
31
Legal requirements of average fuel consumption targets for fleets in China
l/100 km
9.0
8.5
8.0
7.5
7.0
6.5
6.0
5.5
5.0
4.5
4.0
0
The Chinese target is
challenging due to
7.5
low proportion of
diesel cars in China
of only ~1%
6.9l ≙ 164g CO2/km
5.0l
120g CO2/km ≙ 4.8l1)
► customers’ preference
95g CO2/km
≙ 3.8l1)
2012
2013
Published data
1)
► the
2014
2015
2016
2017
2018
2019
for larger vehicles
2020
Assumptions of the Volkswagen Group
Committed EU targets of the Volkswagen Group
32
Volkswagen Group China to actively engage in the New Energy Vehicle
market with locally produced cars as well as the localization of technology
Timing
2013
2016
20132016
2020
Introduction
Porsche Panamera Volkswagen e-up!
S E-Hybrid
Porsche 918
Spyder
Audi A3 e-tron
e-Golf
Phase
Development
Audi A6 e-tron
Golf GTE
Import
Local production
Localization of New Electric Vehicle technology
33
Expansion of Research & Development know-how in China
~ 2,700
engineers in
R&D in China
Design
Engine development
Body development
Electric & Electronics development
Prototype workshops
Vehicle testing facilities
3D development environments
34
Business overview and sales performance
Market development
Investments Volkswagen Group China
Our products
Emerging business fields and financial results
35
Car park development of Volkswagen Group China shows substantial
opportunities for growth in the service and spare parts businesses
Car park of Volkswagen Group China brands
in m units
Age segmentation of car park 2014
8-10 years
10%
>48
>10-15 years
5%
5-8 years
20%
1-2 years
39%
3-4 years
26%
Age segmentation of car park 2023
7.0
8.6
10.2
12.4
15.1
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Car park covers all Volkswagen Group brands (only luxury car park does not use scrapping rate)
Definition: Car park 2014 is car park as at 31 Dec 2013
8-10 years
19%
5-8 years
27%
>10-15 years
11%
1-2 years
22%
3-4 years
21%
Car park will grow approx. 2 times by 2018 and 3 times by 2023 compared to 2014
36
Development of pre-owned car dealer business
Total pre-owned car market forecast1)
Group pre-owned car dealer roll-out
in m units
304
18.2
16.0
in `000 units
330
285
14.0
Pre-Owned Commercial Vehicles
Pre-Owned Passenger Cars
12.4
182
10.6
8.7
4.3
4.8
2.7
3.1
2011
2012
5.1
3.5
6.5
4.8
6.3
7.2
8.4
9.5
10.3
10.9
2013 2014e 2015e 2016e 2017e 2018e 2019e 2020e
11
2013 2014e
Volkswagen
+ ŠKODA
(Das WeltAuto)
2013 2014e
Audi
(refined
recomm.)
20
2013 2014e
Porsche
(approved
pre-owned)
1
4
2013 2014e
Bentley
(Bentley
pre-owned)
Qualitative and quantitative roll-out of group pre-owned car dealers
37
Volkswagen Financial Services is further growing its business
Gaining share in an expanding retail financing market
Strong retail finance development
Volkswagen Finance (China) retail finance penetration in the Volkswagen Group
China network
(% of deliveries to customers)
New retail finance contracts (number of units)
2007
Cash
09/2014
Finance
Cash
Finance
2018e
Cash
390,000
Finance
227,000
90%
73%
67%
10%
27%
33%
8%
16%
18%
2%
11%
15%
VW FS
Others
VW FS
Others
VW FS
149,000
78,000
Others
2011
2012
2013
2014e
Financial Services China: Strategic growth dimensions
Leasing / Credits
Fleet Management
Used Cars
New Mobility
After Sales / Insurance
38
Another strong operating result from January to September 2014
1)
2010
2011
2012
2013
Q1-Q3
2014
Deliveries to Customers
(’000 Units)
1,923
2,259
2,815
3,271
2,719
Production (100%)1)
(’000 Units)
1,914
2,202
2,643
3,135
2,615
Operating profit (100%)
(€ m)
4,389
6,134
8,424
9,569
9,061
Operating profit
(proportionate)
(€ m)
1,907
2,616
3,678
4,296
3,920
SVW Group / FAW-VW Group
39
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 (in € bn)
6.5
Total amount of dividend Chinese Joint Ventures
thereof paid to Volkswagen Group
4.6
2.8
2.8
2.0
1.8
0.7
0.8
0.3
2008
0.4
2009
0.8
2010
1.2
2011
2012
2013
40
Volkswagen Group China is well positioned to maintain its number one
position in the market and seize additional opportunities in the future
4.0
3.5
in m units
3.0
2.5
2.0
1.5
1.0
0.5
0.0
41