Volkswagen Group: Financial sustainability on core strengths Volkswagen Aktiengesellschaft Fixed Income Conference with Société Générale, Paris, 7 October 2014
Disclaimer 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. 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, yen, Brazilian real, Chinese rinminbi 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 Such statements are valid on the date of publication and can be superceded. This information does not constitute an offer to exchange or sell or an offer to exchange or buy any securities. 2
Volkswagen Group: Paris, 7 October 2014 Alexander J. Hunger Group Investor Relations Volkswagen AG Kai Otto Head of Capital Markets Asset Management Kai Otto Head of Capital Markets & Asset Management Volkswagen AG Volkswagen AG Bjoern Baetge Treasurer Ulrich Volkswagen Hauswaldt Group of Investor America, Relations Inc. Volkswagen Financial Services AG Nils Allnoch Debt Capital Markets & Rating Volkswagen Financial Services AG 3
Volkswagen Group: Paris, 7 October 2014 Alexander J. Hunger Group Investor Relations Volkswagen AG Kai Otto Head of Capital Markets Asset Management Kai Otto Head of Capital Markets & Asset Management Volkswagen AG Volkswagen AG Bjoern Baetge Treasurer Ulrich Volkswagen Hauswaldt Group of Investor America, Relations Inc. Volkswagen Financial Services AG Nils Allnoch Debt Capital Markets & Rating Volkswagen Financial Services AG 4
Volkswagen Group Leveraging the power of three strong pillars Passenger Cars Automotive Division Commercial Vehicles / Power Engineering Financial Services Division Volkswagen Financial Services Europe / Asia-Pacific / North and South America Financial Services USA / Canada / Spain / Argentina Remaining companies Scania Financial Services Porsche Holding Financial Services Porsche Financial Services 5
Financial Highlights Volkswagen Group (January to June 2014 vs. 2013) Sales revenue Operating profit Profit before tax Profit after tax million million million million + 0.1% 98,687 98,808 + 7.0% + 17.5% + 19.3% 7,777 5,780 6,186 6,620 4,793 5,716 2013 2014 2013 2014 2013 2014 2013 2014 6
Development World Car Market vs. Volkswagen Group Car Deliveries to Customers 1) (Growth y-o-y in deliveries to customers, January to August 2014 vs. 2013) bf World: Car Market: 4.2% Volkswagen Group: 6.1% Car Market Cars + LCV 4.9% VW Group Car Market VW Group Car Market VW Group 5.1% 7.6% 4.1% North America -2.0% Western Europe -7.2% Central & Eastern Europe Car Market VW Group Car Market VW Group Car Market VW Group 8.4% 14.9% -13.4% South America -20.0% -0.3% Rest of World -5.0% Asia Pacific 1) Figures excl. Volkswagen Commercial Vehicles, Scania and MAN. The Saveiro model, previously Volkswagen Commercial Vehicles, is reported in the Volkswagen Passenger Cars brand retrospectively as of January 1, 2013. 7
Volkswagen Group Deliveries to Customers by Brands (January to August 2014 vs. 2013) 000 units 8.000 +5.4% 1) January August 2013 January August 2014 6.276 6.615 Passenger Cars 6.000 +3.4% 4.000 3.897 4.028 2.000 +10.5% 1.030 1.139 +13.4% 598 678 +10.1% +12.2% +21.4% 234 258 107 120 6 7 Volkswagen Group 1) Incl. Volkswagen Commercial Vehicles, Scania (Jan Jun) and MAN (Jan Jun); 6.1% excl. Volkswagen Commercial Vehicles, Scania and MAN. 2) The Saveiro model, previously Volkswagen Commercial Vehicles, is reported in the Volkswagen Passenger Cars brand retrospectively as of January 1, 2013. 8
Volkswagen Group Commercial Vehicles Deliveries to Customers by Brands (January to August 2014 vs. 2013) 000 units 8,000 +5.4% 1) January August 2013 January August 2014 6,000 6,276 6,615 Commercial Vehicles 400 299-3.9% 287 200-11.1% (Jan Jun) +1.1% (Jan Jun) 65 58 38 38 0 Volkswagen Group 2) 1) Incl. Volkswagen Commercial Vehicles, Scania and MAN; 6.1% excl. Volkswagen Commercial Vehicles, Scania and MAN. 2) The Saveiro model, previously Volkswagen Commercial Vehicles, is reported in the Volkswagen Passenger Cars brand retrospectively as of January 1, 2013. 3) MAN incl. MAN Latin America Trucks and Buses GVW > 5t 9
Volkswagen Group Analysis of Operating Profit 1) (January to June 2014 vs. 2013) billion 7,0 6,5 6,0 1.0-0.8 0.7-1.0 0.4 0.1 5,5 5,0 5.8 6.2 4,5 4,0 Jan Jun 2013 Volume/ Mix/ Prices Exchange rates Passenger Cars Product costs Fixed costs/ start-up costs Commercial Vehicles, Power Engineering Financial Services Division Jan Jun 2014 1) All figures shown are rounded, minor discrepancies may arise from addition of these amounts. 10
Volkswagen s Automotive Division further strengthens innovation and technology leadership Investments in property, plant and equipment Investment Program 2014 to 2018 billion / in % of sales revenue 10.3 11.0 84.2 bn 41.2 bn 5.8 5.7 7.9 5.6% 5.9% 6.3% Capex to sales ratio between 6 and 7% 63.4 bn Investments in property, plant and equipment Modernizing and extending the product range 22.2 bn Cross-product investments 6.2% 5.0% H1: 3.9 (4.5%) H1: 3.6 (4.1%) 19.5 bn Capitalized R&D 2014-2018 1.3 bn Others Over two-thirds will continue to flow into increasingly efficient vehicles, drives and technologies, as well as environmentally friendly production 2009 2010 2011 2012 2013 2014 In addition, China JVs will invest a total of 18.2 bn in new production facilities and products (fully self funded) Note: All figures shown are rounded. 11
Strong cash generation and sufficient net liquidity Operating cash flow and investments (automotive) Net liquidity (automotive) bn bn 18,6 17,0 16,9 13,7 8,0 8,8 12,8 5,2 13,9 6,9 17,1 7,7 16,2 3,7 20,6 6,1 13,5 10,6 10,6 14,0-5,7-0,9-0,1-8,9-7,6-7,0-2,7-2,1-2,6-9,4-6,6-12,5-3,9-14,5-1,7 8,0 2007 2008 2009 2010 2011 2012 2013 Op. cash flow Investing cash flow Equity investments 1) 2) 3) Net cash flow 2007 2008 2009 2010 2011 2012 2013 H1 2014 1) Cash flow from investing activities attributable to operating activities excl. cash flow from acquisition and disposal of equity investments 2) Cash flow from acquisition and disposal of equity investments 3) Net cash flow before acquisition and disposal of equity investments 12
Volkswagen Group Outlook for 2014 Deliveries to customers (million vehicles) Sales revenue ( billion) Operating return on sales (%) + 4.9% 9,276 9,731 + 2.2% 192.7 197.0 6.0 5.9 2012 2013 Full Year We expect to moderately increase deliveries to customers year-on-year in 2014 in a still challenging market environment. 2014 sales revenue for the Volkswagen Group and its business areas to move within a range of 3 percent around the prior-year figure, depending on the economic condition. In terms of Group operating profit we are expecting an operating return on sales of between 5.5 percent and 6.5 percent in 2014 in light of the challenging economic environment, and the same range for the Passenger Cars Business Area. The Commercial Vehicles/Power Engineering Business Area is likely to moderately exceed the 2013 figure. The operating return on sales in the Financial Services Division is expected to be between 8.0 percent and 9.0 percent. 13
Volkswagen Group A global economic and environmental leader by 2018 Potential upside Product portfolio extension North American expansion and market recovery Commercial vehicle strategy and market recovery Financial Services: strengthen the automotive value chain 6 1 Growth market focus Increased market penetration Top employer Emerging markets expansion Balanced global footprint Leading in customer satisfaction and quality Volkswagen Group profit before tax margin > 8% 2 Modular toolkit strategy Reduction in investment, development and unit costs Scale and efficiency effects Increased production flexibility Reduced time to market Synergy potential Leveraging best practices across the Group Purchasing, production, and distribution benefits 5 4 Volumes > 10 million units p.a. 2) Operating profit measures Strong cost control Process/product optimization 3 Capital discipline > 16% RoI target in automotive business 20% RoE 1) goal in Financial Services Regional scale effects 1) Normalized RoE based on 8% equity ratio 2) Including China Note: All stated Volkswagen Group figures represent financial targets for 2018 14
Key sales markets offer substantial growth opportunities bf Market growth 2013 2018 (million units) 3,9 18,4 19,7 19,5 14,9 14,3 3,9 4,8 26,7 28,9 +22% 12,9 +6% 2013 2013 +15% 2016 2018 2013 2016 2018 93 83 6,0 5,8 +35% 2013 98 4,6 3,8 3,0 2016 2018 China (incl. HK) +53% 6,3 2013 +6% 2013 21,4 Central & Eastern Europe (incl. Russia) Western Europe1) North America 2016 2018 +18% 2016 2018 India 2016 2018 South America2) 2013 2016 2018 1) Includes Cyprus and Malta Includes Central America and Caribbean Source: IHS Automotive (data status: August 2014), rounded Note: Market = Cars and LCVs 2) World 15
Passenger Cars Nine independent brands addressing all customer needs Passenger Cars Automotive Division Remaining companies 16
Premium Passenger Cars Strong market penetration through well positioned and differentiated brands Sporty Value for Money Economical Positioning focus Volume brands: Volkswagen Mainstream mobility for the upmarket driver ŠKODA Functional and roomy cars for the product-value focussed audience SEAT Sporty and stylish for the young and young-in-mind driver Family Premium brands: Audi Progressive prestige for innovation seekers Porsche Sporty prestige for the elite high end client Source: Volkswagen Group, EU 5 markets 17
All brands contribute substantially to the targets of the Volkswagen Group Targets Deliveries to customers 1) 6,600,000 > 1,500,000 > 500,000 > 2,000,000 2) > 200,000 > 15,000 Sustainable operating profit margin 3) > 6% 6-8% > 5% 8-10% > 15% > 10% 9,5% 10,9% Return on Investment in the Automotive Division 3,8% 13,5% 17,7% 16,6% 14,5% > 16 % 2007 2008 2009 2010 2011 2012 2013 2018 1) Including deliveries to customers by joint venture companies in China 2) Target for year 2020 3) Excluding operating profit of joint venture companies in China which are accounted for using the equity method 18 Target
New Volkswagen Group models 2014 a strong basis for profitable growth Alternative Powertrains Volkswagen Golf PHEV & e-golf Audi A3 e-tron ŠKODA Octavia CNG SEAT Leon & Leon ST CNG Porsche 918 Spyder Highlights Volkswagen Golf Sportsvan, Passat Lim. & Estate Audi A3-Family (S3 Lim. & Cabrio), TT Coupe ŠKODA Octavia Scout, Fabia & Fabia Estate Porsche Macan & 911 Targa Lamborghini Huracán Bentley Continental GT V8 S, Flying Spur V8 Global Roll-out Volkswagen Golf-Family (China/USA), up! (SAM) Audi A3-Family (China, USA, SAM) ŠKODA Rapid (Russia), Octavia & Rapid Spaceback (China) SEAT Leon ST (Russia) Porsche 911 Turbo 19
Strong market position and profitability in China Production network and implementation of MQB Locally produced models Today: 21 2015: > 30 Existing production site MQB production site by 2016 Planned MQB production site Urumqi Key financial figures Beijing Changchun Chengdu Tianjing Qingdao Nanjing Yizheng Changsha Shanghai Ningbo Foshan ( 000 units) Deliveries to Chinese customers by brand 1) Total Volkswagen Audi ŠKODA Porsche 25 156 28 (+15%) 313 173 (+11%) 364 (+16%) Jan - Aug 2014 Jan - Aug 2013 1.560 2.057 1,827 (+17%) Continuous expansion of dealer network 2,397 (+17%) Passenger car market share Volkswagen Group China (y-t-d): 21.5% Operating profit (proportionate) (Jan - Jun 2014 vs. 2013): Dividends paid to Volkswagen Group in 2013: 2.8 bn 2.62 bn ( 2.37 bn) Retail finance penetration rate 27% (total) Volkswagen Group China (Jan Jul 2014): 11% (via VWFS) Investments 2014-2018 (fully self-funded): 18.2 bn >3,600 ~2,750 2,395 2013 2014e 2018e Others ŠKODA Audi Volkswagen 1) China (incl. Hong Kong), including Volkswagen Commercial Vehicles, excl. Scania and MAN. 20
Less developed cities in China still provide substantial growth potential Level I cities Level II cities Share of total market ᴓ cars/1,000 inhabitants Number of cities Average # of inhabitants (m) ᴓ cars/1,000 inhabitants Number of cities Average # of inhabitants (m) ᴓ Shantou Hengshui Jingdezhen 62 Beijing Shanghai Guangzhou 119 9 Dalian Xi an Changsha 26 16.7 8.4 Level III cities Level IV cities Level V cities Guyuan Yaan Zigong 68 109 4.8 4.0 95 Haibei Jinchang Turpan 29 25 135 1.8 Level III, IV and V cities Level I and II cities Level I share 41% 2014e Level III share Level V share 59% 2014e 37% 2015e 63% 2015e Level II share 35% 2016e 65% 2016e 34% 2017e Level IV share 66% 2017e 33% 2018e 67% 2018e 21
USA Returning to sustainable profit Electronics Research Laboratory Total Market Silao Plant (engines) Puebla Plant Expanding local footprint Herndon Headquarters Chattanooga Plant Atlanta Headquarters San José Chiapa Plant (SOP 2016) LCV segment remains a large opportunity Segment structure 2013 LCVs Cars 1) Figures including Porsche as from 1 August 2012 2) Thereof Passenger Cars +1.2%, Light Commercial Vehicles +9.0% Deliveries to customers Jan-Aug 2014 vs. Jan-Aug 2013-13.4% +5.1 2) +14.5% +11.6% Continued growth momentum in the U.S. market Deliveries in 000 units by brands 1.000 800 600 400 200 0 120 80 40 0 Volkswagen Audi Porsche Other Clean Diesel as a strong USP in the U.S. Diesel deliveries in 000 units (Volkswagen Group) 2007 2008 2009 2010 2011 2012 2013 Source: POLK, Volkswagen Group of America, Inc. 1) < 25% Other >75% Volkswagen Group Diesel Passenger Car and LCV market in the U.S. in 2013 22
Brazil Short-term challenge, mid-term opportunity Local production of market-leading models Deliveries to customers ( 000 units) Gol Fox 1.200 900 > 1,000 São Carlos (engines) Anchieta Taubaté Curitiba 1) up! 600 300 0 2007 2008 2009 2010 2011 2012 2013 2018 Target A rapidly changing competitive landscape Number of automotive companies in the Brazilian market Importers Other local producers Actions to reach the 2018 sales target for Brazil Renew existing products Introduction of MQB technology Reach 95% market coverage ~ 20 new models in 2013-2018 > 1 million units 1980's 1990's 2010 2015e Source: Anfavea; own research "Big 4" 2) Cost-focused restructuring 2003 2013 2018 1) Audi to start production in São José dos Pinhais in 2015 (Audi A3 Sedan and Q3) 2) Volkswagen, Fiat, General Motors, Ford 23
Vehicle price Volkswagen Group toolkit strategy and responsibilities Continuous roll-out of toolkit strategy across segments, regions and brands A000 A00 A0 A B C D E NSF New Small Family MQB Modular Transverse Toolkit MLB Modular Longitudinal Toolkit MSB Modular Standard Drivetrain Toolkit MSB Responsibilities MLB NSF MQB Established markets Emerging markets Vehicle classes 24
MQB Driving forward economies of scale in unit cost, investment and supporting achievement of emission targets MQB platform ca. 60% of total material costs Distribution of MQB savings Different powertrains The MQB's flexible design is able to accommodate alternative drives: Lower cost per unit Less EHpV 1) Less one-off expenditures = Potential savings Additional serial and option content Savings to be partly absorbed to fulfill regulatory and legal requirements Margin improvement Savings Expenditures Invest 1) Engineered Hours per Vehicle 25
Global roll-out of toolkits supports flexibility and localization Global roll-out of toolkit strategy MQB & MLB share in Volkswagen Group production Existing MQB production locations MQB locations (year-end) 2012 5 2013 9 2014 >10 2016 >20 2012 2013 2014 2015 2016 MQB MLB Rest MQB volume China 26
Driving the future Serving all customer needs 1) 2013 2014 + + Hybrid vehicle (PHEV) Volkswagen XL1 Porsche 918 Spyder Porsche Panamera S E-Hybrid Audi A3 e-tron Volkswagen Golf GTE + Battery vehicle (BEV) Volkswagen e-up! Volkswagen e-golf CNG Compressed Natural Gas Audi A3 g-tron Volkswagen Golf TGI SEAT León TGI ŠKODA Octavia Sedan ŠKODA Octavia Combi SEAT León ST Ethanol 2) Volkswagen Saveiro Volkswagen Gol Rallye 1) Market introduction of Volkswagen Group models with alternative drivetrains 2) Developed for distribution in the Brazilian market Volkswagen Fox Bluemotion Volkswagen up! Volkswagen CrossFox Volkswagen SpaceFox 27
Commercial Vehicles A cornerstone in Volkswagen Group s Strategy 2018 Automotive Division Commercial Vehicles / Power Engineering 28
Transaction rationale: Pre-requisite to improve competitiveness and efficiency based on integration of Volkswagen s trucks businesses Integration drivers Synergies (Operating Profit impact) Foundation: management of independent and strong brands on the basis of integrated technology and operations Objective: modular toolkit strategy for commercial vehicles with common components and systems Achieved by the end of 2014 (existing structure) 200+ million Focus on purchasing Synergy potential limited due to arm s-length requirements Additional potential through the transaction Scale benefits: improved efficiency of resource allocation and increased flexibility concerning vertical integration 650+ million per year long-term average with 10-15 years gradual phase-in based on life cycles of vehicles and systems / components Majority of benefits from joint R&D, purchasing and sourcing components Significant benefits from capex savings 29
Volkswagen Group: Global automotive leader 2018 Economic and environmental leadership in the global automotive industry Economic leadership Environmental leadership Expansion of brand and product portfolio Diversified portfolio of drivetrain technologies Increasing global footprint and emerging markets presence Realization of cost savings, toolkit modularization and localization of products Creation of sustainable value Continuous improvements in internal combustion engines Leadership in alternative powertrain technologies 25 percent less energy and water consumption, waste and emissions in Group production 30
Volkswagen Golf GTE 31
Audi TT 32
ŠKODA Fabia 33
SEAT Leon X-Perience 34
Porsche Cayman GTS 35
Bentley Continental GT3-R 36
Lamborghini Huracán LP 610-4 37
Volkswagen Group: Paris, 7 October 2014 Alexander J. Hunger Group Investor Relations Volkswagen AG Kai Otto Head of Capital Markets Asset Management Kai Otto Head of Capital Markets & Asset Management Volkswagen AG Volkswagen AG Bjoern Baetge Treasurer Ulrich Volkswagen Hauswaldt Group of Investor America, Relations Inc. Volkswagen Financial Services AG Nils Allnoch Debt Capital Markets & Rating Volkswagen Financial Services AG 38
Volkswagen Group s financial stability is backed by a strong liquidity position... Automotive Net liquidity in bn 18,6 17 16,9 13,5 Current Ratings 14 10,6 10,6 8 2007 2008 2009 2010 2011 2012 2013 HY 2014 Source: Volkswagen Group 39
and stable Ratings Current Ratings S&P Moody s Long-term A stable A3 positive Short-term A-1 stable P-2 positive Last Rating change 22 September 2014 30 August 2011 Valid for Volkswagen AG, Volkswagen Financial Services AG and Volkswagen Bank GmbH 40
Volkswagen Group Treasury Key Global Markets Figures 1) Liquidity and Refinancing Automotive Net Liquidity Money and Capital Markets Outstanding Customer Deposits Banks and Supranationals 14.0 bn 76.2 bn 22.6 bn 15.2 bn Hedging Activities Global Foreign Currency Hedging USD, GBP, RMB, CHF, MXN, SEK, PLN, AUD Global Commodity Hedging Base and Precious Metals Counterparties Bank Lines Globally 2) 39.1 bn Relationships with > 150 Banking Groups Key Account Management Acting as a Service Center > 1,300 VW Group Companies 1) as of June 30, 2014; ABS included 2) excluding Porsche, MAN and Scania Source: Volkswagen Group 41
Volkswagen Group Funding Strategy Overview Diversification of Funding Sources 1)2) Currencies MTN/Bonds Breakdown 2010 HY 2014 2) Direct Banking Deposits 18% Commercial Paper 4% Equity- Linked and Hybrid Instruments 7% GBP 5% other³ 11% CAD 4% Bank Loans 14% AUD 3% ABS 17% Medium Term Notes / Bonds 40% USD 21% EUR 56% 1) 2) as of June 30, 2014 excluding Porsche, MAN, Scania; ABS including Porsche, MAN ³) CZK, JPY, MXN, NOK, RMB, SEK, TRY, BRL, NZD, INR Source: Volkswagen Group 42
Volkswagen Group Funding Strategy Programs & Outstandings 1) June 30, 2014 Money and Capital Markets in billion Commercial Papers Medium Term Notes / Bonds USA 144A Notes Hybrids ABS 2) Authorization 24.7 76.7 17.5 7.5 49.5 Utilization 4.8 41.1 8.7 5.0 21.6 Borrowings in billion Committed Lines Uncommitted Lines Supranationals, development banks, government, other Direct Banking Deposits Total Debt 1) excluding Porsche, MAN, Scania 15.2 23.9 8.2./../. 2.5 7.6 8.2 22.6 117.1 2) Including Porsche, MAN Source: Volkswagen Group 43
Volkswagen Group Funding Stragtegy Major Funding Vehicles / Guarantors Volkswagen AG Volkswagen FS AG Volkswagen Bank GmbH EUR 10.0 bn Multi-Currency Commercial Paper Programme EUR 2.5 bn Multi CCY CP-Programme EUR 30.0 bn Debt Issuance Programme EUR 25.0 bn Debt Issuance Programme EUR 10.0 bn Debt Issuance Programme Volkswagen International Finance N.V. (Volkswagen Group of America Finance LLC) Volkswagen Credit, Inc. Volkswagen Credit Canada, Inc. Volkswagen Financial Services AG Volkswagen Financial Services N.V. Volkswagen Leasing GmbH Volkswagen Bank GmbH Automotive Division (opportunistic funding) Financial Services Division (strategic funding) 44
Hybrid Issuance Rationale Strong commitment to A / A3 ratings Bolstering our net liquidity position further Intention to use hybrid bonds as an efficient building block in our capital structure Optimization of financing portfolio through the flexible use of instruments 45
Volkswagen Group Funding Strategy Maturity Profile (in million) 1) 14.000 12.000 10.000 8.000 6.000 4.000 2.000 0 72.000 63.000 54.000 45.000 36.000 27.000 18.000 9.000 0 CP MTN 144A Notes Hybrids (1st Call) (EUR 5.0bn) Accumulated outstanding debt (incl. hybrid capital) 1) as of June 30, 2014; excluding Porsche, MAN, Scania Source: Volkswagen Group 46
Volkswagen Group Funding Strategy Tenor Split 1) 2013/2014 YTD 2011/2012 33% 22% 10% 30% 45% 2yr > 2-5yr > 5yr 60% 2yr > 2-5yr > 5yr 1) As per 30.06.2014, MTN, Bonds, including Hybrids; excluding Porsche, MAN, Scania Source: Volkswagen Group 47
Volkswagen Group Funding Strategy Benchmark Issuances (in million) 1) EUR (MTN Program) EUR Convertibles / Hybrids USD (Rule 144A) 3.000 2.500 2.000 1.500 1.000 500 0 1) as of June 30, 2014; excluding Porsche, MAN, Scania Source: Volkswagen Group 48
Volkswagen Group: Paris, 7 October 2014 Alexander J. Hunger Group Investor Relations Volkswagen AG Kai Otto Head of Capital Markets Asset Management Kai Otto Head of Capital Markets & Asset Management Volkswagen AG Volkswagen AG Bjoern Baetge Treasurer Ulrich Volkswagen Hauswaldt Group of Investor America, Relations Inc. Volkswagen Financial Services AG Nils Allnoch Debt Capital Markets & Rating Volkswagen Financial Services AG 49
Volkswagen Group leveraging the power of three strong pillars Passenger Cars Automotive Division Commercial Vehicles / Power Engineering Financial Services Division Volkswagen Financial Services Europe / Asia-Pacific / North and South America Financial Services USA / Canada / Spain / Argentina Remaining companies Scania Financial Services Porsche Holding Financial Services Porsche Financial Services 50
Volkswagen Financial Services at a Glance (06/30/2014) Worldwide presence Total assets Equity Customer deposits Operating profit 126.6 bn 14.7 bn 25.3 bn 776 m Employees 11,859 Contracts (units) Key company figures Business Volume* 105.9 bn Leasing 37.4 bn 11.5 m Volkswagen Financial Services conducts business in 49 countries Wholesale 13.9 bn Credit 54.6 bn *Receivables + Leased Assets 51
Volkswagen Financial Services: Our business model Dealers Automotive Brands Customers 52
Volkswagen Financial Services offers the whole range of services under one roof BANK LEASING INSURANCE MOBILITY Bank Direct Bank Leasing Insurance Services Rent Retail Finance Dealer Finance Factoring Deposits Instalment Loans Investment Products Finance Lease Operating Leasing Automotive Payment Protection Industry Fleet Management Tyre Wear & Tear Long-term rent Short-term rent Carsharing 53
Strong Benefits for Automotive through Captive Equipment Turnover Brand Loyalty + 26% + 34% + 17% Holding Period (years) Cash Payer Captive Customer 100% 126% 7.2 4.8 34% 23% 66% 76% Cash Payer Captive Customer Cash Payer Captive Customer Switch to Competitor Stay Loyal 54
3 Growth Dimensions Retail/Corporate Customers Fleet Management Used Cars After Sales & Insurance New Mobility 55
Penetration Rates Rising penetration rates 32.5% 32.9% 34.9% 36.3% 40.7% 43.0% 44.20% w/o China 26.4% 25.0% 24.7% 25.4% 27.5% 27.7% 29.70% with China 2008 2009 2010 2011 2012 2013 H1 2014 56
Risk Management Operational Risk Earnings Risk Other Risks* Credit Risk Portfolio Structure Retail 75% Corporate 25% Residual Value Risk * Liquidity Risk, Strategic Risk, Reputational Risk, Market Price Risk, Shareholder Risk + Issuer Risk + Counterparty Risk 57
Volkswagen Financial Services Credit Risks Credit risk remains at low level despite challenging market environment 2.5% 2.2% 2.0% 2.0% Provision Ratio 0.7% Ø Dynamic Loss Ratio 0.8% 0.6% 0.9% 0.5% 0.5% 0.4% 0.6% 0.6% 0.5% 0.4% 0.4% 0.4% 0.4% 0.3% 0.3% 2010 2011 2012 2013 Retail Financing Leasing Corporate Financing 58
Volkswagen Financial Services Residual Value Residual value risks well covered by provisions 1.538.292 1.410.842 Units 1.102.203 1.204.342 1.279.833 Provision per car in 548 482 517 553 484 Risk per car in 282 386 423 352 352 in m 310 495 465 556 541 569 608 684 496 514 1) 1) 1) Jun 2012 Dec 2012 Jun 2013 Dec 2013 Jun 2014 Residual Value Risk Provision Units 1) retroactive inclusion of contracts from employee/staff car leasing and long-term rentals 59
Volkswagen Financial Services Key data 2010 HJ 2014 (IFRS) 2010 2011 2012 2013 HJ 2014 Portfolio ( 000) 7,481 8,245 9,640 10,725 11,514 Retail + Leasing receivables ( mn) 52,916 57,386 64,255 66,916 74,318 Wholesale receivables ( mn) 10,106 11,942 12,942 13,154 13,857 Customer deposits ( mn) 20,129 23,795 24,899 24,286 25,329 Employees 7,741 8,335 10,133 10,945 11,859 IFRS profit before tax ( mn) 1,096 1,309 1,414 1,711 842 60
Volkswagen Group: Paris, 7 October 2014 Alexander J. Hunger Group Investor Relations Volkswagen AG Kai Otto Head of Capital Markets Asset Management Kai Otto Head of Capital Markets & Asset Management Volkswagen AG Volkswagen AG Bjoern Baetge Treasurer Ulrich Volkswagen Hauswaldt Group of Investor America, Relations Inc. Volkswagen Financial Services AG Nils Allnoch Debt Capital Markets & Rating Volkswagen Financial Services AG 61
Funding structure Volkswagen Financial Services AG Total 100.6 bn Strategic Funding Sources Liabilities to affiliated companies 6.8 bn Others 5.4 bn Equity 11.8 bn Asset Backed Securitization 11.1 bn Bonds issued 26.5 bn Deposits ABS Capital Markets Customer Deposits 25.3 bn Remark: strategic funding allocation Liabilities to financial institutions 10.6 bn Commercial Paper 3.1 bn as of 30 June 2014 62
Volkswagen Financial Services Worldwide Capital Market Activities VW Credit Inc. (USA) $ 4 bn CP Program (VWoA + VW Credit Inc.) 10 bn CP Program (VW Group) 30 bn Debt Issuance Program (VW Group) 144a Bond issuances via VWGoAF VW Credit Canada Inc. 30 bn Debt Issuance Program (VW Group) CAD 1 bn CP Program VW FS Group 10 bn CP Program 25 bn Debt Issuance Program VW Bank 2.5 bn CP Program 10 bn Debt Issuance Program VW Bank Polska PLN 3 bn Debt Issuance Program VW Bank Russia Domestic 50bn RUB Bond Program VW FS Korea Domestic KRW Bond Issuances VW Leasing Mexico MXN 15 bn Dual Program* VW Bank Mexico MXN 7 bn Debt Issuance Program VDF Turkey Domestic TRY Bond Issuances VW FS India Domestic INR CP + Bond Issuances VW FS Japan JPY 60 bn ECP Program VW Finance China Feasibility study *Dual = CP + Debt Issuance Banco VW Brazil Domestic Letra Financeira VW FS Australia AUD 3 bn Debt Issuance Program 63
Security for Investors Three Layer of Protection 1. Solvency and Creditworthiness of the Issuer (VW Leasing, VW FS AG, VW FS Japan, VW FS Australia, VW FS N.V.) Irrevocable and Unconditional Guarantee 2. Solvency and Creditworthiness of the Guarantor (Volkswagen Financial Services AG) S&P: A stable / Moody s: A3 positive Control & Profit / Loss Transfer Agreement 3. Solvency and Creditworthiness of the Ultimate Parent (Volkswagen AG) S&P: A stable / Moody s: A3 positive One Risk One Price! 64
DCM Activities in 2014 (until 30/09/2014) Germany: VW Leasing Volkswagen FS AG 3 Issuances 2,750 mn EUR tenor: 3.5 to 10 years Germany: VW Bank 11 Issuances 2,625 mn EUR tenor: 1 to 5 years Russia: VW Bank RUS Australia: VW FS Australia Japan: VW FS Japan India: VW FS India Mexico: VW Leasing Brasil: Banco VW Korea: VWFS Korea International: VW FS N.V. 1 Issuance 5,000 mn RUB tenor: 5 years* 1 Issuance 250 mn AUD tenor: 4 years 6 Issuances 22,000 mn JPY tenor: 4 to 5 years 2 Issuances 4,000 mn INR tenor: 2 to 3 years 1 Issuances 2,000 mn MXN tenor: 2.5 years 4 Issuances 610 mn BRL tenor: 2 years 1 Issuance 100 bn KRW tenor: 3 years 16 Issuances 1,850 mn EUR** tenor: 2 to 6.5 years * Economically 2 years as per Put-Option ** Issuances in various currencies (NOK, SEK, GBP, EUR, TRY, NZD, CZK) 65
Volkswagen Financial Services Worldwide ABS Activities 66
Rating History (09/22/2014) Moody s S&P Development S&P of credit ratings (Standard & Poor s) Toyota Aa3 AA- Honda A1 A+ BMW A2 A+ VW AG / VW FS AG A3 A VW Bank GmbH A3 A MAN A3 -- 1) Scania -- A- Daimler A3 A- RCI Banque Baa3 BBB FMCC Baa3 BBB- Banque PSA Ba1 BB 1) Rating withdrawn at company s request as of Dec. 2012 Volkswagen Financial Services AG has a solid and stable rating history Data Source: Reuters 67
Standard &Poor s Statements about Volkswagen Financial Services We consider VW FS to be core to its ultimate parent, VW AG, and equalize our ratings on VW FS with those on VW AG. As a core entity of VW AG, any rating action on the parent - positive or negative - would translate into a similar action on VW FS. We consider VW FS corporate strategy to be prudent, well-executed, and focused on its core business, in which it has expertise. ( ) reflects our view that captive finance operations will remain integral to the VW group s overall corporate strategy. We believe that VW FS will preserve its current conservative capital and risk management, and that its asset mix and growth trends are unlikely to change materially in the short to medium term. Source: S&P Research, July 31, 2014 68
Thank You!
Contact Ulrich Hauswaldt Senior Investor Relations Officer Nils Allnoch Debt Capital Markets & Rating Tel.: +49 531 212 3071 ulrich.hauswaldt@vwfs.com Interim Report Volkswagen Financial Services AG: http://www.vwfsag.com/hy14 Tel.: +49 531 212 2459 nils.allnoch@vwfs.com Memorandum of Clifford Chance concerning the Domination and Profit and Loss Transfer Agreement VWAG VWFSAG http://www.vwfsag.com/ 70
Volkswagen Group: Financial sustainability on core strengths Volkswagen Aktiengesellschaft Fixed Income Conference with Société Genérale, Paris, 7 October 2014