Volkswagen Passenger Cars Corporate Strategy: Benefitting from transformation Moving resolutely and vigorously to the top of the new automotive industry Wolfsburg, 22.11.2016Disclaimer The following presentations contain 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. The Volkswagen Group currently faces additional risks and uncertainty related to pending claims and investigations of Volkswagen Group members in a number of jurisdictions in connection with findings of irregularities relating to exhaust emissions from diesel engines in certain Volkswagen Group vehicles. The degree to which the Volkswagen Group may be negatively affected by these ongoing claims and investigations remains uncertain. Consequently, a negative impact relating to ongoing claims or investigations, 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 Such statements are valid on the date of publication and can be superseded. This information does not constitute an offer to exchange or sell or an offer to exchange or buy any securities. 2Volkswagen Passenger Cars Strategy TRANSFORM 2025 + Initial situation 1. Strategy components 2. Implementation 3. 3Four radical trends set the framework for the Volkswagen strategy TRANSFORM 2025 + Connectivity Number of fully connected vehicles worldwide in 2025 The car becomes the most important internet exchange point The manufacturer is in direct contact with its customers > 600 million Electric mobility is experiencing a breakthrough Electrification Global environmental standards expected to be intensified drastically after 202090 minutes The car performs even more tasks for the driver Shared Mobility Proportion of usage-based automobility in urban areas in 2025 > 10% The car is put to better use Transfor- mation 4Volkswagen passenger cars has significant potential for improvement No recipe for success for US automobile market Eroding market shares in price-sensitive markets of Brazil, India and ASEAN Inconsistent brand image in the regions High increase in fixed costs Growing productivity gap compared to competitors High product complexity (similar to premium segment) is weakening ability to compete in volume segment Product portfolio is lagging behind international trends and requirements of local customers High level of vertical integration / need for investment in fields without differentiation from competitors Centralised, functional and hierarchical organisation Insufficient generation of returns/cash 5Volkswagen has important qualities that enable it to take the lead in the volume segment Global presence and scalable platforms: Volkswagen Group backbone Unsurpassed market leadership in China, market leadership in Europe, and corresponding better price position of products Globally acknowledged and established brand and strong customer loyalty Committed, highly qualified workforce that identifies with the brand Quality orientation, an eye for detail, and superb technical expertise High-quality portfolio cars with character Golf, GTI, Tiguan, Passat, Jetta and Magotan 6The sudden tightening of emissions standards worldwide and even stricter fleet consumption targets are increasing the technical work involved High additional costs increase urgency and need for action The transformation of the automotive industry requires new abilities and high investment Investment in products and the market is needed to win back shares in the BRIC markets The diesel crisis has resulted in a strong loss of trust in the brand 7Volkswagen Passenger Cars Strategy TRANSFORM 2025 + Initial situation 1. Strategy components 2. Implementation 3. 8Strategic realignment of brand will take place in three phases Restructuring Development of expertise Acceleration SUV offensive MEB offensive Extension of earnings base Growth Excellence New business models Mobility solutions worldwide 2015 Diesel crisis 2% RoS* 2020 Leading and profitable volume manufacturer 4% RoS* 2025 Global leader in e-mobility 6% RoS* 2030 Global leader in auto-mobility >6% RoS* *) before special items *) Operating return based on adjusted sales revenue (without turnover from multi brand sales companies) Radical restructuring Leap to the top of electric mobility Major transformation 1 2 3 9Radical restructuring Leap to the top of electric mobility Major transformation We have defined central fields of action for each phase Assert a global brand position Top of Volume SUV as launch pad for emotionalization and earnings power Basis for market leadership in electric mobility Create basis for market leadership in connectivity Europe/China: secure market leadership Turnaround NAR Successful in economy regions/markets (SAM, RUS, IND) Direct customer relationship, new sales and distribution concept Implement Future Pact“ Redirect resources Decentralize organisation and make it more agile Concentrate on value creation in all business areas New corporate culture, anchor entrepreneurial thinking First choice for the aspiring middle class Leader in transformation of the car industry Secure earnings from classic product portfolio First manufacturer with 1 million electric vehicles Cost leadership in electric mobility Leading digital ecosystem in the automotive sector Establish basis for autonomous mobility and future business models Profitable in NAR Growth and profitability in economy segment Operational excellence throughout the entire value chain Leading digital ecosystem in the mobility sector Business model for Autonomous driving Profitable coverage of new fields of mobility Emission-free driving Global and tailored vehicle portfolio 1 2 3 2015 Diesel crisis 2% RoS* 2020 Leading and profitable volume manufacturer 4% RoS* 2025 Global leader in e-mobility 6% RoS* 2030 Global leader in auto-mobility >6% RoS* *) before special items *) Operating return based on adjusted sales revenue (without turnover from multi brand sales companies) 10Radical restructuring Leap to the top of electric mobility Major transformation We have defined central fields of action for each phase Assert a global brand position Top of Volume SUV as launch pad for emotionalisation and earnings power Basis for market leadership in electric mobility Create basis for market leadership in connectivity Europe/China: secure market leadership Turnaround NAR Successful in economy regions/markets (SAM, RUS, IND) Direct customer relationship, new sales and distribution concept Implement Future Pact“ Reroute resources Decentralize organisation and make it more agile Concentrate on value creation in all business areas New corporate culture, anchor entrepreneurial thinking first choice for the aspiring middle class Leader in transformation of the car industry Secure earnings from classic product portfolio First manufacturer with 1 million electric vehicles Cost leadership in electric mobility Leading digital ecosystem in the automotive sector Establish basis for autonomous mobility and future business models Profitable in NAR Growth and profitability in economy segment Operational excellence throughout the entire value chain Leading digital ecosystem in the mobility sector Business model for Autonomous driving Profitable coverage of new fields of mobility Emission-free driving Global and tailored vehicle portfolio 1 2 3 2015 Diesel crisis 2% RoS* 2020 Leading and profitable volume manufacturer 4% RoS* 2025 Global leader in e-mobility 6% RoS* 2030 Global leader in auto-mobility >6% RoS* *) before special items *) Operating return based on adjusted sales revenue (without turnover from multi brand sales companies) 11Goal: Volkswagen becomes the strongest brand in the volume segment Top of Volume means: Leadership in volume segment in key world markets Products that set the standard in the volume segment concerning innovation, quality and retention of value Premium Top of Volume Volume 12 Premium Competitor C Competitor B Competitor A Competitor D Competitor E Competitor F Competitor G Competitor H Brand positioning Top of Volume Brand image in critical markets will be improved step by step and brought in line with Europe Brand image Transfer price Premium Volume Weak Strong Measures for a globally consistent brand positioning SUV and BEV offensive Customer-relevant innovation Price positioning depending on brand strength and purchasing power in the target group of the aspiring middle class Strengthen brand image by means of uniform brand leadership across the world 13New brand positioning is built on a likeable image and focus on trend-setting topics People-oriented Trend-setting Reliable 14Radical restructuring Leap to the top of electric mobility Major transformation A radically changed product plan focusses resources on the strategic goals Assert a global brand position Top of Volume SUV as launch pad for emotio- nalisation and earnings power Basis for market leadership in electric mobility Create basis for market leadership in connectivity Europe/China: secure market leadership Turnaround NAR Successful in economy regions/markets (SAM, RUS, IND) Direct customer relationship, new sales and distribution concept Implement Future Pact“ Reroute resources Decentralize organisation and make it more agile Concentrate on value creation in all business areas New corporate culture, anchor entrepreneurial thinking First choice for the aspiring middle class Leader in transformation of the car industry Secure earnings from classic product portfolio First manufacturer with 1 million electric vehicles Cost leadership in electric mobility Leading digital ecosystem in the automotive sector Establish basis for autonomous mobility and future business models Profitable in NAR Growth and profitability in economy segment Operational excellence throughout the entire value chain Leading digital ecosystem in the mobility sector Business model for Autonomous driving Profitable coverage of new fields of mobility Emission-free driving Global and tailored vehicle portfolio 1 2 3 2015 Diesel crisis 2% RoS* 2020 Leading and profitable volume manufacturer 4% RoS* 2025 Global leader in e-mobility 6% RoS* 2030 Global leader in auto-mobility >6% RoS* *) before special items *) Operating return based on adjusted sales revenue (without turnover from multi brand sales companies) 15Radical restructuring Leap to the top of electric mobility Major transformation 1 2 3 Realignment of product strategy oriented towards the three phases of the Transform 2025+ corporate strategy SUV campaign 1 st MEB wave 2 nd MEB wave New mobility Conventional product portfolio Transformation Toolkit strategy Powertrain strategy 2015 Diesel crisis 2% RoS* 2020 Leading and profitable volume manufacturer 4% RoS* 2025 Global leader in e-mobility 6% RoS* 2030 Global leader in auto-mobility >6% RoS* *) before special items *) Operating return based on adjusted sales revenue (without turnover from multi brand sales companies) 16The SUV offensive has a global impact: Investment channeled into high earnings and high growth segments Compact SUV Compact SUV T-Roc Small SUV Tiguan Tiguan LWB Touareg Atlas 17Reducing complexity leads to lower expenditure, frees up resources and increases productivity Business field Reduced number of variants Sucessors / new vehicles -30 to -60% Platforms -40% Drive trains -30 to -40% >15,000 fewer component variants >700 Mn lower initial investment 18The number of platforms will be reduced consistently to create economies of scale worldwide Further steps tbd. MQB Incl. global MQB Currently 13 PQx PQ12 2012 2019 2030 2026 MEB Using MQB for second product life cycle minimises the expenditure necessary for the transformation (no further changes to platform basis necessary) MEB enables cost and concept leadership for electric vehicles Conventional toolkit (MQB) Old platforms (PQx) Avoiding expenses for maintaining and upgrading vehicles by discontinuing eleven PQ platforms (except the two PQ12x platforms) New toolkit (MEB) 19The I.D. begins a new era for Volkswagen Design 20The purely electric vehicle architecture allows for new proportions and a significantly larger interior Horizontal structure | Optical height reduction | New graphical elements 21Volkswagen will make electric vehicles affordable and profitable Key measures Concept determined by: customer benefit and package for cost-optimized implementation of e-components MEB: economies of scale from use of MEB across entire Group “Design for manufacturing“: higher productivity, shorter manufacturing time Lower material and distribution costs Significant reduction in variants Early involvement of suppliers 22Radical restructuring Leap to the top of electric mobility Major transformation Direct customer contact and services from the Volkswagen cloud set Volkswagen apart in the volume segment Assert a global brand position Top of Volume SUV as launch pad for emotionalisation and earnings power Basis for market leadership in electric mobility Create basis for market leadership in connectivity Europe/China: secure market leadership Turnaround NAR Successful in economy regions/markets (SAM, RUS, IND) Direct customer relationship, new sales and distribution concept Implement Future Pact“ Reroute resources Decentralize organisation and make it more agile Concentrate on value creation in all business areas New corporate culture, anchor entrepreneuri