Volkswagen Group - Annual Report 2011 - Volkswagen Group in China

Number of vehicles delivered in China exceeds two million for the first time

The Volkswagen Group continues to build on its success story in China. In fiscal year 2011, the number of vehicles produced by our joint ventures exceeded two million for the first time. The five-millionth vehicle rolled off the production line at FAW-Volkswagen in Changchun.

BUSINESS DEVELOPMENT

Volkswagen has been operating in the Chinese automotive market together with its partners for around 28 years now. The Shanghai-Volkswagen joint venture and the FAW (First Automotive Works)-Volkswagen joint venture in Changchun are accounted for using the equity method in the consolidated financial statements.

China is now the Volkswagen Group’s largest sales market following its rapid unit sales growth over the past few years. The joint ventures sold 2.2 million units of locally produced vehicles in the reporting period, up 17.6% on the previous year. The Volkswagen Group’s product range in the passenger car market in China comprises over 60 models from its Volkswagen Passenger Cars, Audi and ŠKODA volume brands, and its Lamborghini, Bentley and, since 2011, Bugatti luxury brands. The SEAT brand plans to enter the market in 2012.

New Passat

In addition to established Group models, vehicles designed specially for the Chinese market are also produced. These include Volkswagen models such as the Lavida and the New Bora. The New Passat, Magotan and the imported long wheelbase version of the Audi A8 were a selection of models that were successfully introduced to the market in the reporting period.

The Volkswagen Group’s deliveries in China were up 17.4% year-on-year to 2.3 million vehicles in fiscal 2011. The Volkswagen Passenger Cars brand delivered 1.7 million vehicles (+13.8%). At 37.3% and 21.9% respectively, the growth rates recorded by the Audi and ŠKODA brands were also impressive. The Lavida, Jetta, New Bora, Tiguan, Sagitar, New Passat, ŠKODA Octavia and Audi A6 models were particularly popular with Chinese customers. The Volkswagen Group lifted its market share from 16.8% in the previous year to 18.2%, thereby extending its leadership of the Chinese market.

The joint ventures produced a total of 2.2 million vehicles in fiscal 2011, a year-on-year increase of 15.1%.

The Group has ten production facilities in China – both vehicle production plants and component plants. More locations will be added in the coming years. As part of its long-term growth strategy, Volkswagen plans to increase production capacity in China in the medium term to around three million vehicles each year. By the end of 2016, the Group plans to have invested a total of around €14.0 billion in China. This amount is to be financed entirely by the cash flow from the Chinese joint ventures.

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VOLKSWAGEN GROUP IN CHINA
	2011	2010	%
Deliveries (thousand units)	2,259	1,923	+17.4
Vehicle sales	2,201	1,871	+17.6
Production	2,202	1,914	+15.1

2.3 million

VEHICLES DELIVERED TO CUSTOMERS

The joint ventures’ operating profit (proportionate) amounted to €2.6 billion in fiscal 2011, exceeding the prior-year figure by €0.7 billion. This increase was mainly the result of the volume growth, a positive change in the product mix, as well as lower incentives offered for vehicles, accompanied by strict cost discipline and positive exchange rate effects.

The figures for the joint venture companies in China are not included in the Group’s operating result. This is because these companies are accounted for using the equity method and their profits are exclusively allocated to the Group’s financial result on a pro rata basis.

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LOCAL PRODUCTION
Units	2011	2010
Volkswagen Passenger Cars	1,720,346	1,506,886
Audi	258,557	209,645
ŠKODA	222,984	197,076
Total	2,201,887	1,913,607