Volkswagen Group China

BUSINESS DEVELOPMENT

Volkswagen extended its cooperation with its Chinese joint venture partner First Automotive Works (FAW) by a further 25 years in the reporting period. The partnership already has 23 years of success behind it. In future, the plan is also to significantly expand the existing research and development activities in China and to open up new business areas, primarily in alternative drive systems.

The production of direct shift gearboxes began at the new components plant in Tianjin, northeastern China, in November 2014. This facility is one of the world’s most environmentally friendly transmission plants. It manufactures the latest generation gearboxes specially for the Chinese market. They are intended for use in a number of Volkswagen Passenger Cars, Audi and ŠKODA brand models in the A-segment and B-segment. Vehicles and components are currently manufactured at a total of 18 locations in China. Shanghai-Volkswagen will open a further location in Changsha in 2015. There are also plans for two new vehicle plants in Qingdao and Tianjin on China’s east coast. These will be constructed in cooperation with our joint venture partner FAW and will manufacture environmentally friendly models. The overall goal is to expand capacity gradually to more than five million vehicles per year by 2019. The joint venture companies will invest a total of around €22.0 billion in new production facilities and products in China between 2015 and 2019. These investments will be financed entirely by the companies’ cash flows.

The launch of the electric-up! kicked off our major e-mobility initiative in China in the reporting period. The e-Golf and Golf GTE will follow in 2015. Our e-mobility strategy is tailored to the Chinese market and provides for both joint ventures to successively produce plug-in hybrids and electric vehicles locally. Our plan for the next four years is to launch around 20 models with alternative drive systems in the Chinese market, where there is a tremendous focus on these technologies.

The Volkswagen Group offers more than 80 models in the Chinese passenger car market, representing the Volkswagen Passenger Cars, Audi, ŠKODA, Porsche, Bentley, Lamborghini, SEAT, Bugatti and Volkswagen Commercial Vehicles brands. The Volkswagen Group’s deliveries to customers in China increased by 12.4 % year-on-year to 3.7 million vehicles (including imports). This consolidated our strong market position in China. The Volkswagen Lavida, Sagitar, New Santana and New Jetta, the Audi Q5 and A6, and the ŠKODA Rapid proved particularly popular with Chinese customers.

Our two joint ventures, Shanghai-Volkswagen and FAW-Volkswagen, produced a total of 3.5 million vehicles in the reporting period, up 12.6 % year-on-year. The joint ventures produced a mixture of established Group models and those specially modified for Chinese customers (e.g. with a lengthened wheelbase), as well as vehicles developed exclusively for the Chinese market (such as the Volkswagen Lavida, New Bora, New Jetta and New Santana). Production commenced on the new Lamando saloon, a model specially designed for Chinese customers, at the end of 2014.

The joint ventures generated a proportionate operating profit of €5.2 billion in 2014, up €0.9 billion on the prior-year figure. This positive development was due to increased volumes, lower material costs, consistent cost discipline and the high capacity utilization at our plants.

The Chinese joint venture companies’ figures are not included in Group earnings as they are accounted for using the equity method. Their profits are included solely in the Group’s financial result on a proportionate basis.