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VOLKSWAGEN AG

Chinas Automotive Market

Challenges and Opportunities

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VOLKSWAGEN AG

Volkswagen Group Key Figures

2003 2002

Deliveries to customers (000 Fzg.) 5,015 4,984

Production (000 units) 5,021 5,023

Workforce 336,843 324,892

Revenues (Mio. ) 87,153 86,948

Operating Profit before special items (Mio. ) 2,491 4,761Operating Profit after special items (Mio. ) 1,780 4,761

Profit before Tax (Mio. ) 1,529 3,986

Dividend (ord. / pref. Shares, ) 1.05/1.11 1.30/1.36

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VOLKSWAGEN AG

943

697

390 340 314 314 284

217 194 117

1 2 3 4 5 6 7 8 9 10

Deliveries to Customers Volkswagen GroupRanking 2003 (in 1,000)

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VOLKSWAGEN AG

Volkswagen Group in China

1984

2002

VW Transmission

2002

VW Import

1990 1990

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VOLKSWAGEN AG

FAW-Volkswagen, Changchun

VW (China) Investment Co. Ltd., Beijing

Shanghai Volkswagen

Volkswagen Transmission (Shanghai) Co. Ltd.

Locations Volkswagen in China

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VOLKSWAGEN AG

Sales Volkswagen Group in China 1985 - 2003

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

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VOLKSWAGEN AG

Local Production >90% Import Vehicles

New Beetle /Cabrio

Golf GTI

Sharan

PhaetonJettaBora A4

Golf A4

Polo Hatch- and Notchback

Gol Santana B2

Santana

2000

Passat

Product Strategy Volkswagen Brand in China

Touareg

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VOLKSWAGEN AG

A6Limousine

A4Limousine

A6Avant

A6Allroad

A4Cabrio

S6

A8

TT Cabrio/-Roadster

Product Strategy Audi Brand in China

Local Production >90% Import Vehicles

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VOLKSWAGEN AG

The Sporting Grand Tourer

Product Strategy Bentley in China

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VOLKSWAGEN AG

Foreign Car Manufacturers in China

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VOLKSWAGEN AG

Estimated Car Density per 100 people in 2020 in China 5

PC-Density per 100

people in 2002:

Germany:

Mexico:

South Africa:

China :

54

12

9

0.5

0

5

10

15

20

2003 2008 2013 20202002

in Mio.vehicle

China is becoming an Auto Society

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VOLKSWAGEN AG

Challenges on the way to an Auto Society

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VOLKSWAGEN AG

Challenges Natural Resources, Unemployment, Banking

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VOLKSWAGEN AG

Challenges Strong Competition

FuturePresent

FF

F

FF

F

FF

F

FF

FF

F

F

FF

F

F

FFFFF

F

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VOLKSWAGEN AG

Europe

China

Absolute cost relation: 100/125 (Europe/China)

Challenges - High Costs of Local Sourced Parts

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VOLKSWAGEN AG

Opportunities Economic Development

Average GDP Growth Rate until 2020 as projected by government: 7.2 % p.a.

7.3%

8.0%

7.7% 7.7%

7.9% 7.9%

6.5%

7.0%

7.5%

8.0%

8.5%

2001 2002 2003 2004 2005 2006

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VOLKSWAGEN AG

Opportunities - Income Development in China

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,00

0

2010: 42.46 %

2001: 28.64 %

2020: 73.09 %

(> 30,000 RMB per year/household)

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VOLKSWAGEN AG

80.0 80.0

50.7 43.0 37.6 30.0 28,0 *) 25,0

70.0 70.0

43.8 38.2 34.2 30.0 28,0 *) 25,030.0 25.2

22.218.6 15.7

13.1 11 . 1/10,0 * * ) 10,00

20

40

60

80

20 00 2001 2002 2003 2004 2005 2006 2007

ComponentsFBU Im portFBU Import >3.0L

*) Reduction from the middle of 2006 on

**) Reduction from 11.1% to 10% from themiddle of 2006 on

%

WTO = World Trade Organization, FBU = Fully Built Up

Opportunities Reduction of Import Duties after WTO Entry

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VOLKSWAGEN AG

Opportunities Demand by Private Customers

40%

65%

25%

18%35%

17%

2002 2006

Private

Customers

Public demand/

Institutions

Taxi

In

d

iv

id

u

a

lisat

ion

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VOLKSWAGEN AG

Opportunities - Olympic Games 2008 and Expo 2010 in China

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VOLKSWAGEN AG

1990 1995 2000 2002 2003 2008 20130

1

2

3

4

5

6

7in Mio.

Germany

China

1985

Passenger Car Market Development Germany - China