VOLKSWAGEN Group China. Sales Strategy China. Mr. Weiming Soh Executive Vice President - Sales & Marketing, Volkswagen Group China
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1 Mr. Weiming Soh Executive Vice President - Sales & Marketing, Volkswagen Group China Sales Strategy China Analyst/Investor Conference Shanghai, 24 May
2 Overview 1. Branding / Positioning (Olympic Program) 2. Sales Restructuring (Olympic Program) 3. Sales Volume January-April Sales Outlook
3 Overview 1. Branding / Positioning (Olympic Program) 2. Sales Restructuring (Olympic Program) 3. Sales Volume January-April Sales Outlook
4 Branding / Positioning Group brand profile Volkswagen Group owns 8 strong brands worldwide 6 are present in the Chinese Market Volkswagen AG Audi Brand Group Volkswagen Brand Group Commercial Vehicle Audi Seat Lamborghini Volkswagen Škoda Bentley Bugatti Volkswagen Commercial Vehicles China 4
5 Branding / Positioning Differentiation brand strategy A clear guideline is required to ensure clear differentiation among brands in China FAW-VW / Audi FAW-VW / VW SVW / VW SVW / Skoda Premium Original VW Asian car Smart buy Target customer Prestige & Excellence Performance & Prestige Lifestyle & Fun Life Quality & Efficiency Slogan Vorsprung durch Technik Born to win Enjoy my style Simply clever Differentiators /core values Progressive, sporty, sophisticated Performance status Life-style, fun Functionality, intelligence Sales Channel One dealer network Dual dealer network One dealer network 5
6 Branding / Positioning VW brand differentiation strategy Volkswagen brand further defines it s whole product portfolio 2009/10 Social Status Import Phaeton Touareg FAW-VW / VW B Golf GTI EOS New Beetle SVW / VW Sagitar A A Performance & Prestige B B A0 Lifestyle & Fun A0 Traditional Value Progressive Value 6
7 Branding / Positioning VW, Audi and Skoda target different customer groups minimizing internal overlaps. 7
8 Branding / Positioning FAW-VW/Audi, FAW-VW/VW, SVW/VW and SVW/Skoda target different customer groups minimizing internal cannibalization and overlaps. Source: VGC analysis, SIGMA SENSOR China
9 Overview 1. Branding / Positioning (Olympic Program) 2. Sales Restructuring (Olympic Program) 3. Sales Volume January-April Sales Outlook
10 Sales Restructuring FAW/VW and SVW sales organization restructuring concentrate on 5 areas 1 Organization Restructuring 2 HR Motivation 3 Business Process Re-design 4 Infrastructure Optimization 5 S and M Excellence - specific programs 10
11 Sales Restructuring Sagitar launch a new integrated approach The launch of Sagitar demonstrated our new integrated brand management approach and the differentiation strategy Sagitar 4 Product clinic 5 Naming Pre-launch product clinic to identify product positioning and consumer preference Post-launch product clinic to track consumer feedback Sagitar and 速腾 developed to cater to the preferences of target market Naming tests conducted in key cities in China Telling story behind the name pre-communicated 6 Model/ Color 1.8T AT as key communication model focusing on power (145KW) Shadow blue as communication color to attract young customers 1 Brand strategy & positioning 2 Core opinion leader 3 Positioning statement & marketing Bible High-Performance German Sedan 7 Advertising 8 PR/ Olympic element TVC storyboard highlighting competition and born to win concept Creative testing before on-air Develop integrated campaign to trigger purchasing/dealer activation Aggressive PR campaign focusing on quality and German DNA Media launch event and long-haul test drive to win over press Integrated the Olympic element into the whole launch process Modernity, Performance and Excellence + Prestige & competition Progressive Energetic Show off Self-centeric Self-confident 9 Dealer Network 10 Dealer Auditing Dealer refreshment program to upgrade brand environment Intensive training to reinforce sales talk Audit in 40 cities with 100 dealerships within 8 weeks after launch to check and improve Scorecard linked to marketing incentives 11
12 Sales Restructuring Sagitar - brand launch in sequence The launch of Sagitar is well designed in sequence to build brand reputation and stimulate sales intention Warm Up Pre-Sale Launch of 1.8T/2.0L Launch of 1.6L Dec Jan Feb. - Mar Apr. onwards to Mid May Utilize overseas test drive report with German DNA to enhance image Generate extensive positive press coverage on quality as a result of media factory tour Use cover stories to establish immediate product awareness among the prosumers Dealer showrooms brand environment improved before launch End May to Jun A media salon has been planned on the end of May to communicate pricing information of 1.6L TVC will focus on the World Cup package in CCTV 5, Sports channel to increase awareness of 1.6L launch On June 1, Print ads will focus on key product features of 1.6L, hitech, mature engine, safety and attractive pricing plus launching information Establish a concrete price level Generate public anticipation-sagitar ranked as No.1 most expected car before launch Teaser campaign started on Feb. 25 to grab pre-orders Use Torino Winter Olympics to gain endorsement Grand press launch event to further strengthen brand image and created burst of exposure on Apr. 9 Launch ad campaign starts on Apr Sponsor Football Fan s World Cup with CCTV5 and use as a promotional platform
13 Sales Restructuring Sagitar - brand launch event Event marketing played a critical role in boosting dealer morale, generating press coverage and triggering orders in all local markets Pre-Sale 24th Feb. Guangzhou Gymnasium More than 700 dealers attended Sagitar s dealer launch event followed by dealer awards banquet and a two-day marketing training program Launch 9th April Shanghai Auto Exhibition Center More than 500 press, selected dealers and guests attended the grand launch event in Shanghai, followed by a media test drive tour to Zhou Shan Island 1
14 Sales Restructuring Sagitar - first car delivery ceremony A first car delivery ceremony was conducted two days after national launch in the flagship Volkswagen Beijing Center not only to woo customers but serve as a model event Unveiling of Sagitar in Beijing More than 260 guests attended including first batch of customers, DMA Beijing, press and regional reps attended Drama to highlight delivery process A drama was performed to illustrate the standard VW car handover process Customer photo call Customers visited state-of-the-art maintenance area and took group photographs 14
15 Sales Restructuring Passat Lingyu brand launch The successful launch of PASSAT Lingyu has regained ground for VW brand in the B segment and set a benchmark for future brand launches Warm-up/ Pre-Sale Oct 2005 Precise positioning for traditional elites Launch of 1.8T/2.8L Nov Dealer and press launch event Launch of 2.0L MFi Engine April 2006 Used an aggressive 2.0L MFi engine communication strategy Key messages of 2.0L MFi engine focused on powerful, mature engine, safety and be perfect for urban road. Brand positioning cascaded into ad, PR, DM, web and dealer launch as impactful integrated campaign Intensive dealers training 2,806 salesmen were trained for 440 dealers in 24 cities within 30 days before launch, which laid solid ground for dealer launch and improved sales performance Successful events in Hangzhou and Beijing in Nov 9, and 24 respectively created talk of the town Aggressive PR communications More than 400 stories were released during presale and launch creating extensive press coverage and won CCTV Car of the Year award Besides TVC, print ad and on-line campaign, the road show which focused on commercial areas of 10 key cities is also on-going to closely communicate the product features 3
16 Overview 1. Branding / Positioning (Olympic Program) 2. Sales Restructuring (Olympic Program) 3. Sales Volume January-April Sales Outlook
17 Sales Performance Jan-Apr 2006 VW Group China out-performed in the first 4 months of 2006 versus 2005 and achieved a market share of approximately 17% Deliveries to Customers VGC Actual Performance 65,741 66,287 Average Market Share ,857 54, ,514 28,680 49,493 51,918 Jan-Apr % Deliveries to Customers Jan-Apr ,626 0 Jan Feb Mar Apr Market Share % 17.1% 17.6% 17.6% +38% vs
18 Sales Performance Market share development To stop the market share decline, a series of strategic counter-measures have been implemented starting in the 2 nd half of
19 Price Positioning The previous price positioning of VGC was 120%. This is being reduced step by step taking industry price erosion into consideration. 19
20 Inventory Level Volkswagen Group China has achieved an optimal stock level Inventory STOCK STATUS Stock structure in a healthy status: 1/3 in the manufacturers, 2/3 in the dealers Optimal Stock Level: 1.2 month Remark: Total Stock includes manufacturer stock and dealer stock Jan 05 Mar 05 May 05 Jul 05 Sep 05 Nov 05 Jan 06 Mar 06 20
21 Overview 1. Branding / Positioning (Olympic Program) 2. Sales Restructuring (Olympic Program) 3. Sales Volume January-April Sales Outlook
22 Sales outlook Moving forward, Volkswagen Group China aims to strengthen the market leadership in China VGC Volume target 2006: >600,000 units Q1 is on track, Q2 should maintain momentum Total Market: million units Target VGC: 850, ,000 units Market leader 22
23 Mr. Weiming Soh Executive Vice President - Sales & Marketing, Volkswagen Group China Sales Strategy China Analyst/Investor Conference Shanghai, 24 May
24 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 and the yen. 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.
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