Chinese Car Market Customer Requirements

VOLKSWAGENGroupChina1VOLKSWAGENGroupChinaXuJianVicePresidentStrategy&CorporateDevelopmentVolkswagenGroupChinaChineseCarMarket&CustomerRequirementsAnalyst/InvestorConferenceShanghai,24May2006VOLKSWAGENGroupChina21.ChineseCarMarket2.CustomerRequirementsOverviewVOLKSWAGENGroupChina31.ChineseCarMarket2.CustomerRequirementsOverviewVOLKSWAGENGroupChina4TheChinesecarmarketwillcontinuetodeveloptowardsthesophisticationofdevelopedcountries1.ContinuingstablegrowthWillbecomeworldNo.2by2010ChineseCarMarket2.Proliferationofsmall/fuelefficientcarsA,A0andA00accountfor2/3oftotalmarket3.Rateofpriceerosiondeclines10-12%cum.forthenext5years4.DieselcarsbecomingmorepopularAccounting10%oftotalmarketby20105.UsedcarbusinesspickingupGrowthratetripledinlinewithnewcarsalesChineseCarMarketTrendsVOLKSWAGENGroupChina5TheChinesepassengercarmarkethasbeengrowingbyover40%p.a.overthelast5years.ThistrendwillcontinueatalowerspeedChinesecarmarketsalesforecast1),conservativescenario[millionunits]Source:CAAMandinternalanalysisChineseCarMarketContinuingStableGrowth2.61.40.82.3CAGR*=+42%3.33.64.55.6CAGR=+6%200120022003200420052006E2010E2015E*CompoundAnnualGrowthRate1)Optimisticscenario:3.8mio.unitsin2006and5.0mio.unitsin2010VOLKSWAGENGroupChina62082412682903033117148278809549956557588429129099323453834564764881,0211,6431,6011,5341,4161,2401,071298010002000300040005000200520062007200820092010A,A0andA00willaccountformorethan2/3ofthetotalmarket.Proliferationofsmallandfuel-efficientcarsForecastonlyreferstoMainlandChinaChineseCarMarketSegmentDevelopment(2005-2010)3,2943,6003,9204,2464,4314,547A00(Mini)A0(Polo)A(Golf)B(Passat)C(AudiA6)D(Phaeton)‘000unitsVOLKSWAGENGroupChina7Dieselpoweredcarswillgrowfastertoreach10%shareby2010Passengercarmarketstructurebyfueltype(2005-2010E)[%]Source:VGCinternalanalysis,Externalexpertinterviews20052007E2010E100%100%100%99%87~95%~2%0~3%5~10%~98%PetrolDieselHybridandalternativetechnologies1%3.33.94.5[millionunits]ChineseCarMarketPassengerCarMarketStructurebyFuelTypeIllustrativeVOLKSWAGENGroupChina8Passengercar25%20%15%10%5%0123455%3%8%9%12%15%20%1.52.5Newconsumptiontaxsystemimposeshighertaxforpassengervehicleswithengineabove2.0litresSources:MinistryofFinanceofPRC;VGCinternalanalysis,ExternalpubliceinformationandinterviewsNewconsumptiontaxOldconsumptiontaxSUV25%20%15%10%5%0123455%3%9%12%15%20%2.5NewconsumptiontaxOldconsumptiontax1.55%Tax%Tax%Enginesize(liter)Enginesize(liter)ChineseCarMarketNewConsumptionTaxsinceApril1,2006VOLKSWAGENGroupChina9China’susedcarmarketisstillinitsinfancy.Weexpectstrongergrowthofover30%perannumupto2010Source:MercerManagementConsulting;KPMGestimates,desktopresearchGrowthofChina’susedcarmarket–(2004-2010)ComparisonoftotalcarsalesinChinaandU.S.[units:million][units:‘000]*:Datain2003Forecast20042006E2007E2009E2010E2008E20054605327801,0801,4501,8152,4006.82010E35%65%48U.S.*75%25%UsedcarsNewcars3.87200514%86%ChinaCAGR=+32%ChineseCarMarketDevelopmentofUsedCarMarketVOLKSWAGENGroupChina10ThesaleschannelsofusedcarswillchangeinfavorofOEM’sdealersandindependentonlineplatformsDevelopmentofusedcarsaleschannels[Units:million]Specializedusedcarmarkets0.53200580%10%10%2.42010E30%50%20%OnlineplatformsOEMs’dealersSource:chinawuliu.com;dealersurvey;desktopresearchChineseCarMarketDevelopmentofUsedCarSalesChannelsVOLKSWAGENGroupChina111.ChineseCarMarket2.CustomerRequirementsOverviewVOLKSWAGENGroupChina12Chinesecustomersarebecomingmorediversifiedandindividual.Moremainstreambuyers
FromelitetomainstreamwhitecollarYoungerandmorefemalebuyers
Agefrom40’sto30’s
Femalebuyersincreasefrom15%to25%Insearchoffreshnessofdesignandmaximumfeatures/equipments
Freshdesign
MaximumfeaturesandequipmentDiversifiedbuyingpreference
GermanandJapanesecarmorepreferred
Exclusivebodytypetoreflectindividuality
AuthorizedshopsandAutofinancebecomingpopularIIIIIIIVCustomerRequirementsTrendsChinesecustomersVOLKSWAGENGroupChina13SocialStatus高层高层高层高层High现代，性能，卓越现代，性能，卓越现代，性能，卓越现代，性能，卓越Modernity,PerformanceandExcellence生活方式生活方式生活方式生活方式&&&&技术技术技术技术Lifestyle&Technology声望声望声望声望&&&&攀比攀比攀比攀比Prestige&Competition多功能性多功能性多功能性多功能性&&&&经济经济经济经济Versatility&Economy低预算低预算低预算低预算&&&&耐久性耐久性耐久性耐久性LowBudget&Durability传统豪华传统豪华传统豪华传统豪华TraditionalLuxury中层中层中层中层MiddleMiddle中上层中上层中上层中上层UpperMiddleSources:SIGMASENSORChina2005StudyChineseCustomer7AutomotiveSegments/MilieusValueOrientation地位地位地位地位&&&&舒适舒适舒适舒适Status&ComfortModernTraditionalVOLKSWAGENGroupChina14CustomerRequirementsCustomerCharacteristics&BuyingBehaviorWesub-dividethemarketby:-Characteristicsofthepotentialcustomerand-BuyingpowerofthehouseholdVOLKSWAGENGroupChina15Thepotentialcarbuyersarebecomingyoungerandtherewillbemorefemalebuyers.AgeGender46-60yr36-45yr26-35yr18-25yr9%20%40%41%35%28%16%11%OwnerPotentialBuyerMaleFemale15%25%85%75%OwnerPotentialBuyerSource:VGCbrandingproject,Customersurveydata(China,April2005,n=6123,18-60yrs)CustomerRequirementsDevelopmentofCustomerClustersVOLKSWAGENGroupChina16Chinesecustomersaredemanding.Atagivenqualitylevel90%ofpotentialcarbuyerswillpurchaseacarwithmaximumperformanceandfeatures.Po