02 Volkswagen in the US an Evolving Growth Story

8/3/2019 02 Volkswagen in the US an Evolving Growth Story

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Volkswagen in the U.S.: An Evolving Growth Story

Volkswagen Group Americas Investor and Analyst Conference

Jonathan Browning President & CEO, Volkswagen Group of America, Inc.Michael Lohscheller EVP & CFO, Volkswagen Group of America, Inc.

Chattanooga, 26 September 2011


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2

This presentation contains forward-looking statements and information on the business development ofthe Volkswagen Group. These statements may be spoken or written and can be recognized by termssuch 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 theeconomies of individual countries, and in particular of the automotive industry, which we have made onthe basis of the information available to us and which we consider to be realistic at the time of going topress. 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 asin Western Europe (and especially Germany) or in the USA, Brazil or China, will have a correspondingimpact on the development of our business. The same applies in the event of a significant shift incurrent exchange rates relative to the US dollar, sterling, yen, Brazilian real, Chinese rinminbi and Czechkoruna.

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 suchstatements.

We do not update forward-looking statements retrospectively. Such statements are valid on the date ofpublication and can be superseded.

Disclaimer


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Volkswagen Group of America Overview

3

LocationsBrands

Group Sales YTD 2011: 285,000 units in USA /+ 19.1 % vs. YTD 20101

Group Market share YTD 2011: 3.4% in USA /+ 0.3 percentage points vs. YTD 20101

Over 4,300 employees

Finance company: Volkswagen Credit, Inc.

Locations in USA:

Corporate Headquarters in Herndon, Virginia Group Quality/Technical Facilities Auburn Hills, MI New factory in Chattanooga, Tennessee Corporate Design Center and Electronic Research

Laboratory (ERL) in California Ports and post production facilities in California,

Georgia, Rhode Island and Texas Parts distribution centers in California, Florida, New

Jersey, Texas and Wisconsin Financial Service Center in Auburn Hills (Remarketing

& Auction) as well as in Il linois and Oregon

Source: 1Autodata Motor Intelligence, Sep. 2011


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4

Volkswagen in AmericaThen and

Flashback to the 1960s... Then to the 1990s...


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Volkswagen Group in America Writing a New Chapter

5

Topemployer

VolkswagenGroup profitbefore tax

margin > 8%1

Volumes> 10 millionunits p.a.1

Leadingin customersatisfactionand quality

1 Global Volkswagen Group Targets

Clear global vision

New chapter in U.S. story

Product, technologies and people


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Key Messages

U.S. car market is recovering, but at a slower pace

Executing 2018 Growth Strategy

Broad-based Momentum established

Volkswagen brand improvements beginning to emerge across

Business

6

Brand, Quality, Customer Experience

Financial move towards Break-even


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Jonathan Browning

Michael Lohscheller

7

U.S. Market Development

Growth Strategy

Product Portfolio

Quality & Customer Experience

Brand Momentum Jetta Example

Agenda

Business Model

Key Profit Drivers

2011 Progress

Profitable Growth Plans


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1,750 6,174 5,603 11,95615,277 22,335

65,166 63,466 73,58394,826

118,363

186,059200,699

(33,106) (24,841)(16,983) (6,495)

(2,013)-50,000

50,000

150,000

250,000

0.8% 2.0%

21.6% 18.0%8.6% 15.1% 14.4%

124.0%

8.5% 14.9% 9.1%22.2% 20.6%

-9.4%

-29.1%

-2.7%

-29.3%

-1.8%

-50%

0%

50%

100%

150%

Total Market Segmentation 2011 vs. 2010 YTD

Source: Autodata Motor Intelligence, Sep. 2011

Changesinunits

Change

sin%

Total SegmentVolume in 1,000

317.8 60.6 617.8 15.7 112.7 208.6 312.5 31.5 78.3 192.3 170.0 517.7 114.6 941.2 733.3 1426.2 1173.81025.3

VW Growth Segments

9


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Volkswagen U.S. Sales Development 1952-2010 & Target

10

Source: Internal

0

100

200

300

400

500

600

700

800

(000) 800 k in 2018

+300kin 2011


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U.S. Volkswagen Brand Sales Development 2010-2011

11

Source: Autodata Motor Intelligence, Sep. 2011

AugustYTD 2010

Market Share: 2.3%

AugustYTD 2011

Market Share: 2.5%

172,747

208,422+21%


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Volkswagen Brand Underperformance in U.S. Market

Market Structure and Product Offer

Quality PerceptionBrand Acceptance

Network and Customer Experience

12

Volkswagen Brand Market Share July 2011 YTD1

Source: 1Volkswagen AG

12.4

8.2

14.5

U.S. ChinaWesternEurope

Global

2.5


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Foundations to Fix Underperformance in U.S. Market

13

Sustainable profitability

Consumer First choice

800,000 unit sales

20182011FC

Product

Deliveries toCustomers

Challenges

VW

Goals

Focus

20182011

FC

2011

FC

201820182011 20182011

Q1

Consideration Initial Quality (IQS) LoyaltyThroughput

per dealerUsed VW Car sales

2011

Q2

2018

Brand

DevelopmentQuality

Customer

ExperienceNetwork

Used

Cars/Fleet

Source: Internal


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New Leadership Team in Place to Drive Transition & Growth

14

Product & Brand Development

Tim Mahoney

Executive Vice President,

Chief Product

& Marketing Officer

Scott Vazin

Vice President,

Brand Communications

Marc Trahan

Executive Vice President,

Group Quality

Rainer Michel

Vice President,

Product Marketing

& Strategy

Mark Barnes

Vice President,

Customer Experience

Frank Trivieri

Vice President,

Sales


Sustainable profitability

Consumer First choice

800,000 unit sales


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Product Portfolio Continues to Develop

15

Passat Beetle Jetta GLI

Golf R Tiguan


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16

2012 Passat


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Passat Delivers Volkswagen Core Values

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Brand Positioning

Brand InsightPeople love ourbrand. They just

dont buy our cars.

BetterEngineering

for All Product InsightGiving people a

ration alibi, by

delivering betterengineering at an

affordable price.

Human Insight

People want

permission to buywhat they desire.

Core Tenets

Elevating Every Segment

Committed to Delivering Better

Engineering

Technology

Fit and Finish

Handling and DriverExperience

Priced within Reach


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Creating Brand Momentum Prior to the Passat LaunchKey 2011 Brand Momentum Moments

Source: Internal, Polk, Urban Science

Think Blue

Brand Campaign

Global Beetle

Super Bowl

Chattanooga

Oprah

Metric Result(YTD)

Brand Sales +21%

Jetta Sales +72%

Brand Loyalty +1%

Jetta Leads +103%

Brand Leads +49%

Jetta


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Passat Priced for the Market

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Passat2.5L

PassatTDI

PassatV6

Passat2010

Comp 1 Comp 2 Comp 3 Comp 4 Comp 5 Comp 6

$32,950

$19,995


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2012 Jetta Rounding Out the Jetta Line

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Class-leading power (among volume engines): 170 hp / 177 lb-ft torque

EPA fuel economy rating of 42 mpg highway with TDI

Class-leading rear legroom

Class-leading trunk space

Fender Premium Audio standard on SEL

S, SE, SEL TDI GLI


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Quality & Safety Awards

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Best Full-line Manufacturer

Small Multi-Function Golf

Mid-Size Car Jetta

Entry Utility Tiguan

Volkswagen ranks 2nd among Volume Makes

Compact Sporty Car GTI & EOSCompact Car Golf & Jetta

Compact Crossover SUV Tiguan

Entry Premium Car CC

Mid-Size Premium Crossover SUV Touareg

Top Safety Pick Award:

2012 Volkswagen Passat: good performance in front, side,

rollover, and rear tests and standard electronic stability control

(IIHS)


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Voice of the Customer Process

22

Steering

Committee

Market SupportGroup

Factory/ProductGroup

Concept/DesignGroup

Analysisofcustomer

feedback

Voice ofCustomer

Escalation

Meeting

(Board-Level)

Monthly reporting on Voice of Customer relevant topics toensure continuous information exchange


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IQS - Concept and Factory Activities

23

Q1 Q2 Q4

JDP factory meeting

with Mr.WaltlJun. 1 Nov. 15

Mar. 28 Oct. 13JDP concept meeting

with Dr. Hackenberg

CW05

Beetle

Static eval.

CW06

Chattanooga

Plant eval.

CW 15

Puebla

Plant eval.

CW13

Golf

DTU - eval.

CW 12

BT Voice Rec.

Customer Clinic

Jul. 13

Sep. 28

CW 28

Wolfsburg

Plant eval.

CW26/27

Passat/Beetle

Dynamic eval.

CW 37

Emden

Plant eval.

Q3


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Design Improvements Specifically for the U.S. Market

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New Voice Recognition andoperating logic for Bluetoothin USA

Redesigned new seatrecliner lever for ease of use

Redesigned climate controlimproves ease of use


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Momentum Jetta Story so far

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AttractiveProduct

BrandPremium

MarketMomentum

Source: 1J.D. Power & Associates, Power Information Network [PIN], Sep. 20112 Polk

2011

28.8

2009

16.4

Jetta Conquests in 1,000

(Q1 & Q2)2

72%

2011Aug YTD

102.5

2010Aug YTD

59.5

Jetta Sales in 1,000


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All Activities Ladder up to Volkswagen Brand

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Everyone Deserves a Better Car

Thats the Power of German Engineering

&

Product Benefit

Turbo Performance and 43 MPG

Five Star Safety

Care Free Maintenance

(No Charge 3 Year or 36,000 miles)

Brand Benefit

Relatable Moments /

Simple, Human, Cool


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Jonathan Browning

Michael Lohscheller

27

U.S. Market Development

Growth Strategy

Product Portfolio


Brand Momentum Jetta Example

Agenda

Business Model

Key Profit Drivers

2011 Progress

Profitable Growth Plans


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Past U.S. Business Structure

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Previous U.S. business model was

based on imports of cars from Europe Imports from Mexico had high

proportion of European components

U.S. imports cars from Europe

Mexico imports components fromEurope

U.S. imports cars from Mexico

Operations

Comments


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High Dependency on Exchange Rate Movements

29

USD/EUR Exchange Rate Comments

Strengthening of theEURO against the U.S.Dollar leads to lowermargins

Strategic disadvantageagainst domestic, butalso Japanesecompetitors with highlocalization in the U.S.

Source: European Central Bank

1.2

1.1

1.0

0.9

0.8

0.7

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011


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Key Profit Drivers

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Introduction of products in the sweet spot of their segmentsVolkswagen: Jetta, Passat, Beetle, Tiguan, GolfUSP: TDI products

Product

Competitive entry prices while maintaining price premiumRevenue management

Pricing

Increase of localized cars to 75% for Volkswagen BrandHigh localization of parts and components

Localization of carsand components

Localized MDO (Market Delivery Options) strategyIncrease revenue per car

Parts & Accessories

Leveraging efficiencies of the group:

- Marketing/IT/FacilitiesCost EfficienciesIntegrated customer approachLocal funding

Financial Services


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Financial Highlights 2011

31

Jetta Success

Passat and Beetle Launch

Revenue per Car Increase

Incentive Reduction

Marketing Efficiencies

Parts Business

Increase of Used Car Proceeds

Successful Local Funding

Improved Dealer Profitability


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Volkswagen Retail Sales Development 2010-2014

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2014 Forecast2010

LocalizedImported

46%

25%

54%

75%


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Volkswagen Retail Sales Development 2010-2014

33

2014 Forecast2010

RetailsFleet


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Local Content of Passat, Jetta, Beetle

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Passat Jetta / Beetle

85%85%

Local ContentLocal Content

Sourcing in North America


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Revenue per Car Projected to Increase

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Competitive Entry Prices

Maintain Price Premium

Efficient Incentives

Revenue Management


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0

500

1000

1500

2000

2500

3000

3500

4000

CYTD 2010

CYTD 2011

Volkswagen Incentives are More Than 30% Below the Industry Average

36

Source: AutoData Motor Intelligence; September 2011

-24%

-10%

-31%

IndustryAverage


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Leasing / APR Penetration 2011

37

2011 Forecast

30%

30%APR

Leasing

Highly profitable businessmodel with VW Credit, Inc.

High customer loyalty of

leasing and APR customers

Local funding in the U.S.


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CPO (Certified Pre-Owned) Sales Development2010 August 2011

38

2010

Monthly Year-To-Date

2011

+41%

2010AUG YTD

2011AUG YTD

0

10,000

20,000

30,000

40,000

50,000

60,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

J F M A M J J A S O N D J F M A M J J A


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Dealer Profitability & Value of the Volkswagen Brand Franchise

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Volkswagen brand ranks 3 in dealer confidencein the value of the franchise (next 12 months)

Return on SalesVW National vs. NADA

Source: Volkswagen Group of America, Inc.; National Automobile Dealers Association, 2011

in %

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2011 June YTD

NADA 20 Group Average

Volkswagen


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Summary

Profitable growth will be achieved through:

40

1) Increase of localized cars in NAR

2) High percentage of local content

3) Competitive product strategy while maintaining price premium

4) Leveraging the benefits of the Group

5) Profitable financial service business


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Volkswagen in the U.S.: An Evolving Growth Story

Volkswagen Group Americas Investor and Analyst Conference

Jonathan Browning President & CEO, Volkswagen Group of America, Inc.Michael Lohscheller EVP & CFO, Volkswagen Group of America, Inc.

Chattanooga, 26 September 2011

02 Volkswagen in the US an Evolving Growth Story

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