04+volkswagen+south+america+market+with+perspective 44 slides

8/2/2019 04+Volkswagen+South+America+Market+With+Perspective 44 Slides

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Volkswagen South America: Market with Perspective!

Volkswagen Group Americas Investor and Analyst ConferenceCarsten IsenseeCFO, Volkswagen do Brasil Ltda.

Chattanooga, 27 September 2011


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Disclaimer

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 Such statements are valid on the date ofpublication and can be superceded.


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Market with perspective !

Agenda

B. The Automotive Market in South America

C. Volkswagen do Brasil

A. South America and Brazil Overview


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A. South America / Brazil Impressions

Key Facts

Macro Outlook

Challenges for Brazil


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Colombia

Peru

Chile

Uruguay

Paraguay

Venezuela GuyanaSuriname

French Guyana

Bolivia

Ecuador

Argentina

Brazil

South America - Impressions
http://www.google.com.br/imgres?imgurl=http://static2.linkatual.com/wp-content/uploads/2011/01/camisa-selecao-brasileira.jpg&imgrefurl=http://www.linkatual.com/selecao-brasileira-amistoso-franca.html&usg=__PGQnbMEN_v0MD3kOfrZtjP-G_fE=&h=375&w=500&sz=222&hl=pt-BR&start=7&zoom=1&tbnid=RbqZAh8dJrPkFM:&tbnh=98&tbnw=130&ei=VD5lTreDE4XWgQeynOCqCg&prev=/search%3Fq%3Dfotos%2Bda%2Bsele%25C3%25A7%25C3%25A3o%2Bbrasileira%26hl%3Dpt-BR%26sa%3DX%26tbm%3Disch%26prmd%3Divnsu&itbs=1


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South America - Country information

Country CapitalTerritory(Mio. Km2)

%Population

Mio.%

Population density

(inhabitants per Km2)GDP USD Bio

2010

Population density / 1,000

(Inhabitants)

Argentina Buenos Aires 2.8 15.53% 41.8 10.49% 14.9 370.3 214

Bolivia La Paz 1.1 6.16% 10.1 2.53% 9.2 19.4 52

Brazil Brasilia 8.5 47.78% 203.4 51.03% 23.9 2,090.3 146

Chile Santiago de Chile 0.8 4.25% 16.9 4.24% 21.1 203.3 171

Colombia Bogot 1.1 6.39% 44.7 11.21% 40.6 285.5 58

Ecuador Quito 0.3 1.59% 15.0 3.76% 50.0 58.9 58

Paraguay Asuncin 0.4 2.28% 6.5 1.63% 16.3 18.5 78

Peru Lima 1.3 7.21% 29.3 7.35% 22.5 152.8 54

Uruguay Montevideo 0.2 0.99% 3.3 0.83% 16.5 40.3 220

Venezuela Caracas 0.9 5.14% 27.6 6.92% 30.7 290.7 151

Total 17.4 100% 398.6 100% 22.9 3,530.0

Source: FMI, Welt-Blick.de (Status: July 2011), VDA Tatsachen und Zahlen, 74. Folge 2010;


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18,31019,989

30,161

2006 2008 2010

3,134 4,1134,793

2006 2008 2010

Source: IHS Global Insight World Car Industry Forecast, 03-2011

South America:Worldwide comparison (Cars and Lights) 2006 - 2010

in thousand cars

19,306

15,90613,973

2006 2008 2010

21,099 21,11418,367

2006 2008 2010

North America Europe

Asia and PacificSouth America


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No. 1 producer of Iron ore 3rd largest producer of Corn 22% of the worlds arable lands

No. 1 producer of Orange juice 3rd largest producer ofBauxite

80.3 million internet users

No. 1 producer/consumer of Coffee 3rd largest producer of pork Self sufficiency in oil, with a production

No. 1 producer of Chicken meat 3rd largest road network of 1.8 mio. barrel / day, being the 15th

No. 1 producer of Sugar 3rd largest footwear producer largest oil producer

No. 1 producer of Soybeans 6th largest grain producer Huge offshore Reservoirs in oil & gas

No. 1 maker of Regional Jets 8th largest chemical industry

2nd largest producer of Ethanol 9th largest steel maker

2nd largest producer of Manganese

2nd largest producer of beef

Brazil offers worldwide competitive strengths:Diversified industrial base and export platform

Source: B-FT Regional Treasury South America / Brazilian Steel Insittute / Abicalados / Abiquim / IBGE


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Source: Central Bank / IBGE

Brazil Macroeconomics: Solid base for sustainable growth

Consumer Inflation (INPC) - In % p.a.Interest Rate (SELIC) - In % p.a.

Exchange Rate - BRL / USD

Consumer Inflation (left axis) Interest Rate (left axis) Exchange Rate (right axis)

1.6

12.1

6.5

28.7

2.5

1.2


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-2.6% -3.3% -4.6%-6.0%

-9.1% -9.2% -9.5% -10.5% -10.6%

-32.4%

Brazil Spain Germany USA Portugal Ireland Italy Greece Japan

Gross Public Debt 2010(in % of GDP)

Fiscal Balance 2010(in % of GDP)

55.1% 60.1%83.2% 85.1% 91.6% 93.0% 96.2%

119.0%142.8%

220.3%

Brazil SpainGermany Euro Area USAPortugal IrelandItaly GreeceJapan

Fiscal Indicators: Comfortable position for Brazil

Source: Bloomberg / IMF / Central Banks

Euro Area


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2.7

5.7

4.0

5.2

7.5

Brazil export of primary goods and solid domestic market:Pillars for growth market convergence

Source: MDIC 2010 / IBGE

Strong domestic marketExport of raw material

Growthfactors

2002 2004 2006 2008 2010

(in Billion USD)

InternalDemand

ExternalDemand

Total GDP (%)

02 03 04 05 06 07 08 09 10

Commodities Total Export

Export/GDP %

12.0 13.2 14.6 13.4 12.7 11.8 12.0 9.6 9.8


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GDP Evolution: Top 5 Economies until 2020

1

2

3

4

5

6

7

8

9

10

1990 2000 2010 2020

USA USA USA China

Japan Japan China USA

Germany Germany Japan Japan

France Great Britain Germany India

Italy France France Brazil

Great Britain China Great Britain Germany

Canada Italy Italy France

Spain Canada Brazil Great Britain

Brazil Brazil India Russia

China Mexico Canada Italy

Source: Global Insight.


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B. Automotive

Development Automotive Sector

Potential to Grow

Evolution of Competition


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Uncertainty,

divestments and restructuresMacroeconomic

Stability

Phase 2: Phase 3:

High Volatility /

Emerging market

Phase1:

Evolution of the Brazilian Automotive Sector

(in Million vehicles)

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

Source: MDIC 2010 / IBGE

10 Years to recover

from 1997 sales levels

3.63.3

0.60.5

0.70.70.2

0.0


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New level/echelon for the Brazilian car industry:Over 5 Million units until 2018

Source: Roland Berger / PwC / JD Power / Global Insight

Forecast car industry50 % New customers in 2010

IndustryForecast

GlobalInsightNew car

buyerAgainbuyer

NewcustomerNew car

NewcustomerUsed car

Max

Min

0,02,5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

2010 2012 2014 2016 20180.0

(in Million units)

Automotive

SpendingPower

PwC JD Power

3.3 1.7 1.2 0.5


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Demographic Bonus

2 1.5 1 0.5 0 0.5 1 1.5 2

Men Women

2 1.5 1 0.5 0 0.5 1 1.5 2

Men Women

2 1.5 1 0.5 0 0.5 1 1.5 2

Men Women

1990 2010 2020

0 a 14 years15 a 64 years65 years or more

34.7%

60.5%

4.8%

24.1%

68.5%

7.4%

20.1%

70.7%

9.2%

146.8 193.1 207.0Total

Population(in Millions)

Brazil: Upside potential from demographic reshape until 2020

Source: IBGE / Bradesco


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30.0

16.1

42.5

11.4

30.5

16.7

42.1

10.6

25.8

15.8

46.4

12.1

24.4

16.7

45.9

13.0

21.8

15.3

48.9

14.0

19.4

14.3

51.2

15.1

18.8

13.7

52.7

14.8

17.1

13.1

54.5

15.3

2003 2004 2005 2006 2007 2008 2009 2010*

A & B

> BRL 4,807

Class E

< BRL 804

Class D

from BRL 804

until BRL 1,115

Class C

from BRL 1,115

until BRL 4,807

* 2010 estimated on average trend

will lead to a much improved income redistribution!

Especially the C Class for the automotive industry

Source: IBGE

(in %)


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2001 2005 2010 2015 F

7.0

10.7

22.5

32.1

2001 2005 2010 2015 F

Positive household evolution:Potentially 10 Million new customers by 2015

Memo:Amount of households withspending power > EUR 11,000 p.a.(equivalent to the minimumpurchase price of a vehicle)

(in Millions)

Source: Roland Berger / Automotive Market Outlook

45.5 52.9 57.3 64.6TotalHouseholds


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Cars per 1,000 Inhabitants in Brazil

~ 200 Cars

Cars per 1,000 Inhabitants:

2009 2010

~ 67 Cars

Main growth for Brazil is expected in the northern Region

Source: Anfavea & Worldbank


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(in Million cars)

0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2015

Colombia Chile Ecuador Peru Uruguay

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Brazil

Argentina

Venezuela

Brazilian growth: Positive stimulus to neighboring economiesin South America

Source: Global Insight 2011-01


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Indaiatuba

S.B.Campo

S.C.Sul & S.J. Campos

Sumar

Taubat &S.B.Campo

SP SO PAULO

Anpolis

Catalo

GO GOISCE CEAR

Horizonte

BA BAHIA

Camaari

MG MINAS GERAIS

Sete Lagoas

Betim

Juiz de Fora

RJ RIO DE JANEIRO

Porto Real

Brazil: OEM production sites 2010

CE

BA

MG

RJSPPR

RS

GOGO

CE

BA

MG

SP

RS

PR

RJ

PR PARAN

So Josdos Pinhais RS RIO GRANDE DO SUL

Gravata


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CE CEAR

Horizonte

PE PERNAMBUCO

Goiana

MG MINAS GERAIS

Sete Lagoas

Betim

Juiz de Fora

RJ RIO DE JANEIRO

Porto Real

BA BAHIA

Camaari

Indaiatuba & Sorocaba

S.B.CampoS.C.Sul & S.J. Campos

Sumar

Taubat &S.B.Campo

SP SO PAULO

Piracicaba

Jacare

... until 2016 so far 7 new facilities in the pipeline !

CE

BA

MG

RJSPPR

RS

GO

GO

CE

BA

MG

SP

RS

PRRJ

Anpolis

Catalo

GO GOIS

Itumbiara

PEPE

Indaiatuba & Sorocaba

(not defined)

PR PARAN

So Josdos Pinhais

RS RIO GRANDE DO SUL

Gravata

Letter ofIntention(not confirmed)


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Additional production capacity of 1.5 Million cars in Brazil

3,800,000

5,300,000


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C. Volkswagen do Brasil

VW History

Sales Evolution

Brazilian Challenges

Volkswagen do Brasil Sustainability


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Present in Brazil since 1950


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Volkswagen Brazil Sales Evolution (vehicles)

Source: Anfavea

409,832

537,975585,186

684,381

> 2010

697,354

+ 300,000 (until 2010)

Memo I: Data is net of Truck & Bus Division, which has been sold in 2009 to MAN

Memo II:Considering only Cars & Lights Registrations


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22,8%23,2%

Rank 1 Rank 2 Rank 3 Rank 4 Rank 5 Rank 6 Rank 7 Rank 8 Rank 9 Rank 10

Argentina GermanyBrazil South Africa BelgiumChina TurkeyMexicoAustria Sweden

Brand Volkswagen - Market Share comparisonBase: August 2011

Source: Volkswagen


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Market Share Brazil - Cars & Lights

23.2% 22.9% 26.4% 29.0%

9.7% 10.1%10.1%

9.5%

20.6% 19.8%19.8% 18.5%

24.6% 24.5%22.7% 22.4%

21.9% 22.8% 20.9% 20.6%

2008 2009 2010 2011 Jan to Aug

Others

Competitor 3

Competitor 2

Competitor 1


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14.5%9.1%

1.4%

75.0%

B/C

A

A0

A00

Brazil - Market SegmentationSegment Distribution 2010


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Sales Profile Brazil - Cars & Light Commercials

23.0%

38.0%

53.0% 52.0%

39.0%

40.0%

35.0% 39.0%

34.0%

18.0%8.0% 4.0%

4.0% 4.0% 5.0%4.0%

2008 2009 2010 2011*

F inancing C ash Leasing C onsorcio

By type of Sale

Source: Volkswagen Bank / Megadata

2.0%

3.0%

18.0%

8.0%

15.0%

5.0%

8.0% 40.0%

Volkswagen Bank Ita/Unibanco BB/BV Finasa

ABN/Santander HSBC Safra Others

Financing Share by Bank


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TackleCusto Brasil

The main Brazilian Challenges

INFRASTRUCTURE / TAXES

RAW MATERIAL

LABOUR
http://www.revistaportuaria.com.br/site/?home=noticias&n=zzNzd&t=ii-forum-modais-sera-dia-24-setembro


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Source:JP Power; Roland Berger

Brazil has one of the highest retail tax burden in the world (a)

11.6% 11.6% 11.6% 11.6% 11.6% 11.6% 11.6% 11.6% 11.6% 11.6% 11.6% 11.6%

12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0%

37.0%

11.0%

41.0%

13.0%

43.0%

18.0%

48.0%

25.0%

55.0%

4.0%

34.0%

7.0%

a) Updated as per recent import protections announced by the Government

Sales taxes in Brazil [%] Sales taxes1) global comparison [%]

< 1.0 LEngine

(Flex / Gas)

1.0 2.0 LEngine

Flex Gas

> 2.0 LEngine

Flex Gas

Light

Commercial

29.7% 30.9%33.6%

37.1%

25.1%

43.5%43.6% 44.3%

46.0%

48.1%

41.0%

1) Based on mid-size passenger cars2) Federal Tax applied over i ndustrialed products on added value. Same concept as IVA (7% - 25%) / Production tax (Brazilian VAT)3) State Tax applied over added value. Same concept as IVA (12%) / State-owned purchase tax4) Federal-owned purchase tax / Federal Tax applied over revenue (11.6%)5) Average of California, Florida, Texas and Michigan

IPI

ICMS

PIS /

CONFINS

27.9%

5)

2)

3)

4)

For Local Production

For BU Imported (Except Mercosul / Mexico)

28.1%

19.0%14.5%

9.1%6.1%

43.2%

Brazil Brazil Germany India Japan USA5


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Import Taxes and Duties on Fully Built-Up Vehicles(imported from)

Source: Volkswagen

TAX RATE COUNTRIES

0%

Mercosul:

Argentina

Uruguay

Paraguay

0% Mexico

35% Europe

35%

Others:

Colombia

Ecuador

Peru

Venezuela


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Plants

VW do BrasilLocal Material 88%

CKD 10%

Dir. Import 2%

Supplier base in South America - Material management

Local Material 50%

CKD 35%

Direct Import 15%

VW Argentina

Numbers of Suppliers

544336

208

Numbers of Suppliers

14073

67

~ 75% of turnover managed by global suppliers

Total GlobalSuppliers

LocalSuppliers

Total GlobalSuppliers

LocalSuppliers


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Labour SkillsGraduated engineer yearly

Investment in R&D (% of sales)

Annual investment per student in education (USD)

Brazil needs to invest in education

30,000 400,000

1.02% 2.68%

2,080 7,325 8,270 9,312


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Competitive advantage for VW in Brazil

Cost-driven

Restructure

Turn VW SAM into the mostcompetitive company based ongroup technologies:

Use of group car platform; Use group powertrain;

Use of group electronicplatforms

Process reengineering plusPortfolio renewal overexisting Platforms:

Gol G5/Voyage;

Saveiro SC/Saveiro DC; Saveiro Cross/Fox; CrossFox/Suran;

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Biggest dealer network (620 Dealers) with adequate geographical country coverage

Nearness between VW production facilities and the main markets Solid compliance with Brazilian and Mercosul content throughout VW production processes Strong financial partner with VW FS with an excellent infrastructur Ample and well diversified Product Portfolio with 21 different models


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Sustainability

Volkswagen do Brasil


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Sustainability


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APPENDIX


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South America production: What is where produced ?

VW Parati

ANCHIETA TAUBATVW New Fox 2D

VW Golf

CURITIBAVW - Gol G5

VN Kombi

VW Polo Hatch VW Voyage

VW Gol G4

VW Polo Sedan

PACHECOVW NewSpacefox/Suran

VN Amarok DC

VN Saveiro CE

VN Saveiro CS

VW New Fox 4D

VW New Crossfox

Turntable

VN Amarok SC

VW SuranCross

VN Saveiro Cross VW NewSpacefox/Suran

Temporary

Local Produced Models

13

VWB i d Wh i i d f h ?


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VWB imported cars: What is imported from where ?Germany Mexico Slovakia

VW Passat CC VW Beetle

VW Tiguan

VW New Jetta

VW Jetta Variant

VW TouaregVW Passat

VW Passat Variant

Imported Models

8

B ili C l B k i h di il bili


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Compulsory Deposits:

- Applied for Banks with Time Deposits over BRL 10 Billions Increased from 20% to25% (applicable for the delta in excess above limit);

- Retail Bank Accounts Cash deposits from Individuals forced banks to freeze 12% withthe Central Bank (vis-a-vis the previous 8%)

Vehicles Financing:

- Relevant Net Worth Ratio increased from 11% to 16.5% (above Basle III)

Brazilian Central Bank measures to tighten credit availability(since 12/2010)

C di C i i ff i V hi l Fi i


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Credit Constraint actions affecting Vehicle Financing(since 12/2010) PRIOR

SITUATIONCURRENTSITUATION

Down-paymentCapital (*)

RequirementDown-payment

Capital (*)Requirement

Retail Financing

Installments:

6 24 months

No Restriction 11.0%

No changes

25 36 monthsless than 20%

more than 20%

16.5%

11.0%


more than 30%

16.5%

11.0%


more than 40%

16.5%

11.0%

61 months on all from 11.0% to 16.5%

(*) Net Worth / Assets Ratio Credit Availability:

Example: Car Financing for 100,00:- Prior = 11.0 (Net Worth) / 89.0 (Other Funding Sources)- Current = 16.5 (Net Worth) / 83.5 (Other Funding Sources)

Source: Volkswagen


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Volkswagen South America: Market with Perspective!Volkswagen Group Americas Investor and Analyst Conference

Carsten IsenseeCFO, Volkswagen do Brasil Ltda.

Chattanooga, 27 September 2011

04+volkswagen+south+america+market+with+perspective 44 slides

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