rupert stadler - annual press conference 2014

Speech

Rupert Stadler

Annual Press Conference

AUDI AG, Ingolstadt

March 11, 2014

2/13 *The collective fuel consumption of all models named above and available on the German market can be found in the list provided at the end of this document. (3/2014)

Rupert Stadler

Chairman of the Board of Management of AUDI AG

Speech at the Annual Press Conference

Ingolstadt, March 11, 2014

Part 1

Check against delivery

Ladies and gentlemen,

in the next hour, we will inform you about an exceptional financial year 2013 for the Audi

Group and about how we will keep our company on track for success this year as well.

Or to put it differently: How has our work been fruitful? And how will we sow the seeds

for future harvests? In addition to remarkable financial metrics, we will report on our

enormous globalization progress in recent years, on our product and technology

initiative, which we are pushing forward, and on our companys ongoing volume growth.

Audi is more popular today than ever before. In 2013, more than 1.57 million car buyers

decided in favor of the Four Rings 8.3 percent more than in 2012. In just four years, we

have gained more than 600,000 customers. 1.57 million automobiles: bumper to

bumper, this Audi fleet would stretch from Ingolstadt almost to Beijing.

In China alone, we delivered nearly 492,000 cars, over a fifth more than in the previous

year. Our lead in China is bigger than ever before. We gained major impetus from our

local production, which we expand step by step with new models. Since April, we have

been producing the Audi Q3* in Changchun.

And at the beginning of this year, our plant in Foshan started work. The A3 Sportback* is

produced there, soon to be followed by the A3 Sedan*. We are the only premium brand

to offer two SUV models and three compact cars from local production in China.


Now let us look at Europe. Total car sales in Western Europe seemed to reach their

lowest point in 2013. Since the pre-crisis year of 2007, the market has shrunk by a

quarter. Audi is the only one of the three large premium manufacturers that successfully

defied the crisis we grew in that time by five percent, quite contrary to the market

trend. In 2013, Audi delivered a total of 732,000 automobiles in Europe. That means:

Europe is once again Audis strongest sales region. At the same time: Audi is the

bestselling premium brand in Europe.

How was business in the North America? The Audi fan club there grew at a double-digit

rate once again. From New York to Honolulu, we increased our US unit sales by 13.5

percent to nearly 160,000 cars. In North America overall, we sold more than 190,000

automobiles. Thanks to high-quality prestige products such as the A6*, the A8* and our

RS models, we have been able to improve our price position significantly in recent years.

And our residual values stand out with very good stability. Our SUV models are also

extremely popular with the Americans. The Audi Q5* achieved sales growth of more than

40 percent in the USA, while unit sales of the Q7* actually increased by over 45 percent.

This year, we are expanding our SUV portfolio there with the Audi Q3*.


the coup with the Q has been an unparalleled success for Audi. Worldwide, we have

delivered more than 1.6 million Q models since we entered the SUV business in 2006.

And the trend is still dynamic: Our growth in this segment is three times as fast as

overall. Last autumn, we announced a new addition to the Q family: As of 2016, we will

offer an attractive entry-level SUV below the Q3*: the Audi Q1.

We put 15 new models and derivatives on the road in 2013. Above all, we further

expanded our A3 model series*. The three-door and the Sportback are already market

leaders in Europe. The Sedan and the Cabriolet will give us additional impetus. In the

luxury class, we have set a new highlight with the A8*. It is the first car with innovative

matrix-LED headlights. This technology is unique in the automotive industry.

And we have underscored our status as the sportiest premium brand with four new RS

models.* We now offer more high-performance models than ever before. And all of them

feature the latest turbocharging combined with significantly lower fuel consumption.


Keyword sport: 2013 was one of the most successful years in our motorsport history.

We are looking forward to competing again in Le Mans in the new season now also

against Porsche. I can promise you an exciting race.

Let us stay with the Group family: Our Italian subsidiaries were also very successful in

2013. At Lamborghini, 2,121 super sports cars delivered to customers set a new record

for the third consecutive year. And at Ducati, more than 44,200 motorcycles surpassed

the record of the previous year, despite all the difficulties affecting the motorcycle

market.

If we add to our own three brands the cars that we handed over to customers for other

brands of the Group, we generated record revenue of 49.9 billion euros last year. Our

operating profit amounted to more than five billion euros, despite challenging economic

conditions in some of our key markets. At the same time, we invested 3.6 billion euros

last year ten percent more than in 2012 laying the foundations for our future success.

The focus of investment in 2013 was on expansion and thus new production sites. At the

beginning of last year, we had ten car plants in nine countries. Today, we have twelve

plants in ten countries; and in 2014, we will for the first time produce more cars abroad

than in Germany. By 2016, we will have two more sites: in Mexico and Brazil.

We will then be producing in all regions in which we anticipate above-average growth.

Let us now look at Mexico: Audi is the first premium manufacturer in the country. At this

time last year, our site in San Jos Chiapa was completely untouched, but the plant is

now taking shape. We are already completing some of the buildings. One of the first to

go into operation this year is our training center, so that we can train our new employees.

By the end of the year, more than 1,000 Mexicans will be on board. In total, we will

create jobs for 3,800 people in San Jos Chiapa.

So far, we have received ten times that number of applications, nearly 40,000 that is.

We are creating attractive working conditions with a wide range of opportunities for

further training, excellent health care, shuttle services to the transport interchanges in

the vicinity, and working-time accounts that allow overtime to be offset on an individual

basis something completely new in the Mexican labor market.


A good 7,000 kilometers further to the southeast is Curitiba in Brazil. Last year, we

decided to produce the Audi A3 Sedan* there as of 2015. The Q3* will follow a bit later.

In this context, allow me now to say a few words about the economic outlook for the

emerging markets. After the boom years, people there are now getting anxious that is

what we have been hearing recently. Because the end of the US Federal Reserves ultra-

expansive monetary policy is putting pressure on those countries currencies and

economies. We see things differentiated. The long-term impact depends less upon

whether a country generally has emerging-market status than on which specific issues it

has to solve in its economic structures.

We see Brazil in a good long-term position in this respect: External and public debt are

low compared with other emerging markets. The country is rich in raw materials, giving

it reliable sources of income. It has an effective education system. The population is

young and the affluent middle class is growing. According to the latest industry studies,

demand for premium automobiles in Brazil will double some say it will nearly triple by

2020. We want to utilize this market potential for Audi. We will create the right

conditions to do so by developing our own production facility there.

Our plants in Gyr, Hungary, and in Foshan in the south of China have already gone into operation. I have already mentioned the production of the A3* in Foshan. In Gyr, we opened our new full plant last June. Following the A3 Sedan* and Cabriolet*, pre-series

production of the new Audi TT* is also running there. So the plant is now fully

operational.


the man who ensured the success of these plant projects is going to leave us in a few

weeks my colleague Dr. Frank Dreves will soon retire. He not only established a global

production network at Audi, with the introduction of the Audi Production System, he also

made sure that we maintain top quality standards worldwide; and in quantitative terms,

we have increased our production of automobiles by nearly two thirds under his guidance

as a Member of the Board of Management.


Dear Dr. Dreves, you have always emphasized that such a workload can only be managed

in a team. And you were a shining example of that spirit for your production team. I am

sure that I speak for everyone at Audi when I say: We are reluctant to let you go. But you

more than deserve your retirement after such an intensive working life of more than 30

years at Audi. We sincerely wish you all the best for the future!

Let us stay with the people at the Audi Group: In 2013, we recruited approximately

6,400 new employees. Ingolstadt and Neckarsulm account for the largest number, with

3,000 new employees including about 750 young people who started an apprenticeship

or dual course of study with us. At the end of 2013, 73,751 people worked for us.

Audi is more attractive as an employer than ever before. The latest proof is delivered by a

joint poll carried out by the magazine Focus and the career network Xing. 19,000

participants selected the best employers in Germany. The result: first place for Audi. The

study gave special weighting to the fact that our employees are happy to recommend

Audi as an employer. On behalf of the Board of Management, I can only return this

compliment: I would also recommend our Audi employees at any time. But I would

prefer to keep them here at Audi; because they are responsible for the good results of

last year. For their outstanding work, the employees of AUDI AG paid according to wage-

tariff agreements will this year once again receive a good profit-sharing bonus at an

average of 6,900 euros.

Before I hand you over to Mr. Strotbek, just a few words about the rate of investment at

Audi. We are now shifting up a gear in this respect. The lions share of our new

investment program will flow into the next stage of our product and technology

initiative. In a few years, we will have 60 models in our product range; we are reinforcing

our claim to leadership in innovative fields such as lighting technology, lightweight

construction, connectivity and piloted driving; we are investing in the further

development of our quattro drive and our highly efficient advanced engines;

and we are continuing with the rollout of our alternative drive systems. Dr. Ulrich

Hackenberg will tell you more about that later.

End


Rupert Stadler

Chairman of the Board of Management of AUDI AG

Speech at the Annual Press Conference

Ingolstadt, March 11, 2014

Part 2

Check against delivery


let me summarize: We achieved our interim targets for volume growth two years faster

than planned. We are laying the foundations for our future success with an unparalleled

investment program. And with a customer-focused innovation initiative, we are

extending our Vorsprung durch Technik for example by putting our e-tron technology

into the midsize and large model series.

What does that mean specifically for 2014? First of all, for our growth. As Mr. Strotbek

has already said: We will further expand our unit sales and increase our revenue to more

than 50 billion euros. Our car deliveries will grow in all regions of the world also in

Europe. In the United States, we are taking the next big step towards 200,000 our

milestone for the year 2020. We are very optimistic that we will pass that milestone

ahead of time. And in China, we aim to be the first premium manufacturer to sell more

than half a million cars this year.

We made a very good start to the year 2014: In January and February, we delivered a

total of 242,400 automobiles, surpassing the prior-year figure by 9.3 percent. Our

compact class is proving to be very attractive to customers. Demand for the A3* was 53

percent above the prior-year level, although the new generation is not yet available

everywhere.


Our next important product launches this year include the start of sales of the new A3

family* in China and the United States. In both countries, the compact class is still

under-represented in the sales statistics of the premium market but that is changing.

In China for example, this segment is growing more than twice as fast as the premium

market overall. We will profit from this development especially with the A3 Sedan*. It is

the optimal model at the right time, in the right place.

At the same time, we will strengthen the luxury class with the new version of the A8*. It

will be available worldwide this year. This is an important step, because two thirds of our

A8 customers are in China or North America.

You can see some of this years particularly sporty new models here on the stage. For the

first time, the Cabriolet of the A3 family is available as an S3* with quattro. The Audi A1*

is our proof that the quattro success formula can be applied to any size of car that is

pure driving pleasure made by Audi in Brussels. And the new Audi TT* is the embodiment

of Audi pure.

One week ago in Geneva, our subsidiaries also presented important new models.

Lamborghini opened a completely new chapter with the Huracn*. It is the successor to

the Gallardo, the most successful Lamborghini in the brands history so far. The Huracn

has already proven to be a worthy successor: more than 1,000 Lamborghini fans have

already placed their orders. Ducati celebrated the world premiere of the new Diavel*. It

will boost sales in 2014 along with the new Monster 1200*, which already had its trade-

fair debut in November.

But back to our core brand and to our new ultra-light models. What is behind this

label? We have started an efficiency championship across the entire model range. We

call our CO2 champions of each model series the Audi ultra models. This is to the benefit

of our customers. Because thanks to the new efficiency label, they can be sure that they

are driving the most economical model. And for us at Audi, ultra means an additional

incentive to set a new efficiency benchmark with each model version.


As the non-plus ultra, our ultimate goal is CO2-neutral mobility. We look beyond the

lifecycle of a car and organize the entire value chain according to this goal. For example,

100 percent of the electricity that we use at our plant here in Ingolstadt is from

regenerative sources.


also with our cars modular platform system, the focus is on efficiency. We

systematically utilize all possible synergies in the expansion of our product range. We

are currently developing the next stage of evolution our longitudinal modular platform.

In addition to our site projects and investments in future technologies, we are also

making enormous expenditure for future growth with our modular strategy. We sow

today what we reap tomorrow. Nonetheless, we will remain within our strategic target

corridor in 2014, that is, an operating return on sales of between eight and ten percent.

Our course here is clear: long-term, sustainable success.

We have already spoken in detail about the technical innovations that will ensure our

lasting success. How are we preparing Audi for the future in other ways? We will

continue with our targeted recruitment. The focus is on electric mobility and CO2

performance, car connectivity, and lightweight construction with a multi-material mix.

In Germany alone, we will recruit about 1,500 employees in 2014, and will offer

apprenticeships to more than 750 young people. In the medium term, we will approach

the mark of 80,000 employees.

In parallel, it is important to continuously further develop our processes and structures,

so that we can react quickly and flexibly to market requirements even in a world of

almost unlimited options. Because the customer is king! And flexibility and speed are the

competitive advantages of the future.

All the links in the value chain have to play their part: In the development of our

automobiles, we take full advantage of our trump card: the modular platform. In

procurement, it is a matter of identifying the best partners for our innovation projects

and developing strong supplier structures around our new plants. Globalization through

localization is the motto here. The shorter the distances in the supply chain, the more

precisely components can be delivered just in time and just in sequence.


That is why for example we are starting in Mexico this year with the construction of a

supplier park close to the plant and creating the right conditions for our partners to set

up facilities there. We want to localize two thirds of components in Mexico by the time

the Q5* goes into series production.

And now to production: The bigger the variety of models, the more flexibly we have to

assembly multiple models in one plant on the same lines. Our modular development

strategy and the Audi Production System are crucial competitive advantages also in this

context. At present for example, we are preparing our plants for the production of plug-

in-hybrids. We integrate them into existing assembly lines so we do not need a separate

plant for our e-tron models. This allows us to meet regionally different needs and to

flexibly adjust our production to demand without risking high fluctuations in capacity

utilization. This flexibility makes it easier for us to up-scale our e-tron drive system

quickly into other segments and several factories.

More models, more drive systems, more equipment versions that presents a difficult

task for sales as well. The important skill here is to offer customers all possible options,

but not to overburden them with an excessive selection. Our Audi City showrooms

demonstrate how this can be done. They are our innovation laboratory for the sales of

tomorrow. Customers can playfully experience Audis diversity in the last detail. In

February, we opened our third Audi City worldwide in Berlin. More will follow. And we

will use elements of the digital Audi City technology also in conventional retailing. At the

same time, we are convinced that a premium product needs top advice, which responds

individually to the customers wishes. That is why personal contact remains at the heart

of Audi sales. The example shows: Our Vorsprung durch Technik is always there to

serve people.

We have exactly the same approach to piloted driving. This is a matter above all of more

safety and better traffic flows on the roads. We plan for implementation at speeds up to

60 kilometers per hour in series production already this decade. The development is

based on driver assistance systems that we already offer in our current models. At the

beginning of this year, we presented our zFAS Board at the Consumer Electronics Show

trade fair in Las Vegas.


This new control system combines all driver assistance systems with minimal space

requirements in the car it is as small as a tablet computer.

Why have I brought up this topic again? Because in addition to technical aspects, we

have always emphasized that a legal basis must be created. For a few weeks now, round-

table talks have been held between manufacturers, associations, insurers and the

relevant federal ministries. We welcome this initiative and are actively involved in it. It is

already clear that it will be a mammoth task, because various laws will be fundamentally

affected some of them 50 years old. But our attitude is clear: There is no dodging this

issue. Because anyone who wants to be the number one as we do has to look beyond

the limits of his own company. Thinking about the future means thinking out of the box.

And it does not matter whether with helping to shape the framework conditions, the

internationalization of our company, groundbreaking technology, or fascinating Audi

models we play to win in all events! Thank you.

End

Contact:

Corporate Communications Jrgen De Graeve

Tel. +49 841 89 34084


Fuel consumption of the models named above: Audi A1/S1: Combined fuel consumption in l/100 km: 7.2 - 3.8; Combined CO2-emissions in g/km: 166 - 99 Audi A1/S1 Sportback: Combined fuel consumption in l/100 km: 7.3 - 3.8; Combined CO2-emissions in g/km: 168 - 99 Audi A3/S3: Combined fuel consumption in l/100 km: 7.0 - 3.2; Combined CO2-emissions in g/km: 162 - 85 Audi A3/S3 Sportback: Combined fuel consumption in l/100 km: 7.0 - 3.3; Combined CO2-emissions in g/km: 162 - 88 Audi A3/S6 Limousine: Combined fuel consumption in l/100 km: 7.0 - 3.8; Combined CO2-emissions in g/km: 162 - 99 Audi A3/S3 Cabriolet: Combined fuel consumption in l/100 km: 7.1 - 4.2; Combined CO2-emissions in g/km: 165 - 110 Audi A3 Sportback e-tron: Combined fuel consumption in l/100 km: 1.5; Combined CO2-emissions in g/km: 35 Audi A3 Sportback g-tron: Combined fuel consumption: CNG 3.3 - 3.2 kg/100 km, petrol 5.2 - 5.0 l/100 km Combined CO2-emissions : CNG 92 - 88 g/km, petrol 120 - 115 g/km A4/S4 Combined fuel consumption in l/100 km: 8.1 4.0; Combined CO2-emissions in g/km: 190 - 104 A4/S4/RS46 Avant Combined fuel consumption in l/100 km: 10.7 - 4.2; Combined CO2-emissions in g/km: 249 - 109 A4 allroad quattro Combined fuel consumption in l/100 km: 7.1 - 5.8; Combined CO2-emissions in g/km: 164 - 153 A6/S6 Combined fuel consumption in l/100 km: 9.6 - 4.4; Combined CO2-emissions in g/km: 225 - 114


A6/S6/RS6 Avant Combined fuel consumption in l/100 km: 9.8 - 4.6; Combined CO2-emissions in g/km: 229 - 119 A6 allroad quattro Combined fuel consumption in l/100 km: 8.9 - 6.1; Combined CO2-emissions in g/km: 206 - 159 A8/S8 Combined fuel consumption in l/100 km: 11.3 - 5.9; Combined CO2-emissions in g/km: 264 - 155 Audi Q3/RS Q3 Combined fuel consumption in l/100 km: 8.8 - 3.2; Combined CO2-emissions in g/km: 206 - 137 Audi Q5/SQ5 Combined fuel consumption in l/100 km: 8.5 - 5.3; Combined CO2-emissions in g/km: 199 - 139 Audi Q7 Combined fuel consumption in l/100 km: 10.7 - 7.2; Combined CO2-emissions in g/km: 249 - 189 Audi TT/TTS: This car is not yet on sale. It has not yet been homologated and is therefore not subject to the 1999/94/EG guideline. Provisional data: Combined fuel consumption in l/100 km: 7.1 - 4.2; Combined CO2-emissions in g/km: 164 - 110 Lamborghini Huracn LP 610-4: Combined fuel consumption in l/100 km: 12.5; Combined CO2-emissions in g/km: 290 Ducati Diavel: Combined fuel consumption in l/100 km: 7.1; Combined CO2-emissions in g/km: 169 Ducati Monster 1200: Combined fuel consumption in l/100 km: 6.4; Combined CO2-emissions in g/km: 150

rupert stadler - annual press conference 2014

Documents