Risks and opportunities

In this section, we outline the risks and opportunities that arise in the course of our business activities. We have grouped them into categories. Unless explicitly mentioned, there were no material changes to the specific risks and opportunities compared with the previous year.

We use competitive and environmental analyses and market studies to identify not only risks but also opportunities with a positive impact on the design of our products, the efficiency with which they are produced, their success in the market and our cost structure. Risks and opportunities that we expect to occur are already reflected in our medium-term planning and our forecast. The following therefore reports on internal and external developments as risks and opportunities that may result in a negative or positive deviation from our forecast.

Macroeconomic risks and opportunities

We believe that the risks to continued global economic growth lie primarily in structural deficits, which pose a threat to the performance of many industrialized nations and some emerging economies. In the eurozone, a sustained economic recovery is being hindered in particular by the situation of numerous financial institutions whose stability and ability to withstand a crisis are still not assured. Persistently high private- and public-sector debt in many places is also clouding the outlook for growth and may cause markets to respond negatively. Declines in growth in key countries and regions often have an immediate impact on the state of the global economy and therefore pose a central risk.

The economic performance of some emerging economies is being overshadowed primarily by overindebtedness, reliance on capital inflows and social tensions. Corruption, inadequate government structures and a lack of legal certainty also pose risks.

Geopolitical tensions and conflicts are a further major risk to the performance of individual economies or regions. As the global economy becomes increasingly interconnected, it is also vulnerable to local developments. Any escalation of the conflicts in Eastern Europe, the Middle East, or North Africa, for example, could disrupt the global energy and commodity markets. The same goes for armed conflicts, terrorist activities, or the spread of infectious diseases, which may prompt unexpected, short-term responses from the markets.

Overall, we consider the probability of a global recession to be low. Due to the risk factors mentioned, however, the possibility of a decline in global economic growth or a period of below-average growth rates cannot be ruled out.

The macroeconomic environment may also give rise to opportunities for the Volkswagen Group if actual developments differ in a positive way from expected developments.

Sector-specific risk and market opportunities

The growth markets of Asia, South America, and Central and Eastern Europe are particularly important for the Volkswagen Group in terms of the global trend in demand for passenger cars and commercial vehicles. Although these markets harbor considerable potential, the underlying conditions in some of the countries in these regions make it difficult to increase unit sales figures there. Some have high customs barriers or minimum local content requirements for domestic production, for example. In addition, in fiscal year 2014, the market trend in Russia was depressed by the political crisis and its economic effects. In South America, structural deficits and social tensions had a negative impact. Restrictions on registrations could enter into force in further Chinese metropolitan areas in future. Furthermore, a global economic slowdown could impact negatively on consumer confidence in some of these countries. Equally, we cannot entirely rule out the possibility of freight deliveries being shifted from trucks to other means of transport and of demand for the Group’s commercial vehicles falling as a result.

At the same time, if the economic and regulatory situation permits, there are opportunities for faster growth above and beyond current projections in emerging markets where vehicle densities are still low. The demand that built up in some established markets during the crisis could also lead to a stronger recovery in these markets should the economic environment ease more quickly.

Price pressure in established automotive markets due to high market saturation is a particular challenge for the Volkswagen Group as a supplier of volume and premium models. As the global economy is still under strain, competitive pressures are likely to remain high in the future. Some manufacturers may respond by offering incentives in order to meet their sales targets, putting the entire sector under additional pressure, particularly in Western Europe, the USA and China.

Western Europe is one of our main sales markets. A drop in prices due to the economic climate triggered by falling demand in this region would have a particularly strong impact on the Company’s earnings. We counter this risk with a clear, customer-oriented and innovative product and pricing policy. Outside Western Europe, overall delivery volumes are broadly diversified throughout the world. The Chinese market accounts for an increasing share. We either already have a strong presence in numerous existing and developing markets or are working hard to build such a presence. Moreover, strategic partnerships help us to increase our presence in these countries and regions and cater to requirements there.

In fiscal year 2014, economic trends varied considerably from region to region: while the situation in Western Europe stabilized, China remained on a growth track and the US economy continued to recover, market conditions in Eastern Europe and South America deteriorated markedly. The resulting challenges for our trading and sales companies, such as efficient inventory management and a profitable dealer network, are considerable and are being met by appropriate measures on their part. However, financing business activities through bank loans remains difficult. Our financial services companies offer dealers financing on attractive terms with the aim of strengthening their business models and reducing operational risk. We have installed a comprehensive liquidity risk management system so that we can promptly counteract any liquidity bottlenecks at the dealers’ end that could hinder smooth business operations.

We continue to approve loans for vehicle finance on the basis of the same cautious principles applied in the past, taking into account the regulatory requirements of section 25a(1) of the Kreditwesengesetz (KWG – German Banking Act).

Volkswagen may be exposed to increased competition in aftermarkets for two reasons in particular: firstly, because of the provisions of the block exemption regulations, which have been in force for after-sales service since June 2010, and, secondly, because of the amendments included in EU Regulation 566/2011 of June 8, 2011, which expand independent market participants’ access to technical information.

In addition, the European Commission is currently evaluating the market with regard to existing design protection. If design protection for visible genuine parts were to be abolished as a result, this could adversely affect the Volkswagen Group’s genuine parts business.

Below, we outline the market opportunities for the Volkswagen Group. We see the greatest potential for growth in the markets of the Asia-Pacific region and in North America.


China, the largest market in the Asia-Pacific region, saw further growth in the reporting period. Here, demand for vehicles will continue to increase in the coming years due to the need for individual mobility. This growth will probably decelerate and shift from the large cities on the coast to the country’s interior. To be able to leverage the considerable opportunities offered by this market and defend our strong market position in China over the long term, we are continuously expanding our product range to include models that have been specially developed for this market. We are further expanding our production capacity in this growing market through additional production facilities.


The political and economic situation in India stabilized following the elections in 2014. After declining in the previous year, vehicle markets also recovered slightly. High inflation continues to weigh on demand, however. We expect the Indian market to continue to recover in the coming years. The Group is currently consolidating its activities in this difficult environment. Despite the current situation, India is still a strategically important market of the future for the Group.


The automotive markets in the ASEAN economic area are volatile, but offer substantial growth opportunities in the aggregate. The Volkswagen Group is working successively to achieve long-term penetration of these markets. High price sensitivity means that having a local manufacturing operation in the region is a condition for a competitive offering. Together with our partners in Malaysia and Indonesia, we assemble models from the Volkswagen Passenger Cars, Audi and Volkswagen Commercial Vehicles brands locally. We are also investigating and evaluating opportunities for this in additional countries in the region. Independent of this, we are driving forward improvements to local sales structures.

North America

The US vehicle market saw noticeable growth again in 2014 thanks to the encouraging economic trend and favorable financing conditions. Market growth should now slow, however, as the demand for replacement vehicles that had built up as a result of the crisis has largely been met. North America remains a growth region for the Volkswagen Group. In the United States, Volkswagen Group of America is systematically pursuing our strategy of becoming a full-fledged volume supplier. Together with an engine plant, the development of additional production capacity in the region will allow the Group to better serve the market in the future. The Group is also pressing forward with additional products tailored specifically for the US market, for example a large SUV.


After a promising start, the economic situation in Brazil deteriorated in the course of the reporting period, which also impacted negatively on vehicle markets. Vehicles became more expensive as inflation and interest rates rose. The anticipated recovery failed to materialize and, instead, the economic outlook continued to worsen. We expect the downturn in the vehicle market to persist in 2015. The growing number of automobile manufacturers with local production has resulted in a sharp increase in price pressure and competition. The Brazilian market plays a key role for the Volkswagen Group. To strengthen our competitive position here, we offer vehicles that have been specially developed for this market and locally produced, such as the Gol and the Fox.


Russia has the potential to grow into one of the largest automotive markets in the world. However, its heavy reliance on currently lower oil revenues and the weakness of the ruble led to a significant decline in the overall market in 2014. Demand for vehicles was also impacted by the political crisis and the related sanctions imposed by the EU and the USA. The market remains of strategic importance for the Volkswagen Group, which is why we are working intensively there.

Middle East

Despite economic and political instability, the Middle East region offers growth opportunities. We are leveraging the potential for sustainable growth without operating our own production facilities by offering a range of vehicles that has been specifically tailored to this market. Optimized sales channels are also intended to help lift our market share.

Power Engineering

The underlying global economic trends will continue, such as sustained economic growth, a greater international division of labor and resulting increase in global transportation routes and volumes, growing demand for energy, the increasing requirement for capital spending by the oil and gas industry, and forces for innovation powered by trends in global climate policy.

We are working systematically to leverage these market opportunities at global level. In the medium term, significant potential can be leveraged by enhancing the after sales business through new products and in expanding the service network. Going forward, stricter requirements with respect to the reliability and availability of plant, as well as the increase in environmental compatibility and efficient operation, together with the large number of engines and plants in operation, will provide the basis for profitable, long-term growth.

As part of the capital goods industry, the Power Engineering Business Area is subject to fluctuations in the investment climate. Even small changes in growth or growth forecasts, for example due to geopolitical uncertainties or volatile commodities markets, can lead to significant changes in demand or can result in existing orders being cancelled. Among other things, flexible production concepts enable us to counter the significant economic risks.