Volkswagen : Presentation - Leading the Transformation

Leading the Transformation.

Frank Witter

CFO of Volkswagen AG

US Investor Roadshow, New York, Boston, 21-22 November 2019

Disclaimer

The following presentations contain forward-looking statements and information on the business development of the Volkswagen Group. These statements may be spoken or written and can be recognized by terms such as "expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates", "will" or words with similar meaning. These statements are based on assumptions, which we have made on the basis of the information available to us and which we consider to be realistic at the time of going to press. These assumptions relate in particular to the development of the economies of individual countries and markets, the regulatory framework and the development of the automotive industry. Therefore the estimates given involve a degree of risk, and the actual developments may differ from those forecast. The Volkswagen Group currently faces additional risks and uncertainty related to pending claims and investigations of Volkswagen Group members in a number of jurisdictions in connection with findings of irregularities relating to exhaust emissions from diesel engines in certain Volkswagen Group vehicles. The degree to which the Volkswagen Group may be negatively affected by these ongoing claims and investigations remains uncertain.

Consequently, a negative impact relating to ongoing claims or investigations, any unexpected fall in demand or economic stagnation in our key sales markets, such as in Western Europe (and especially Germany) or in the USA, Brazil or China, and trade disputes among major trading partners will have a corresponding impact on the development of our business. The same applies in the event of a significant shift in current exchange rates in particular relative to the US dollar, sterling, yen, Brazilian real, Chinese renminbi and Czech koruna.

If any of these or other risks occur, or if the assumptions underlying any of these statements prove incorrect, the actual results may significantly differ from those expressed or implied by such statements.

We do not update forward-looking statements retrospectively. Such statements are valid on the date of publication and can be superseded. This information does not constitute an offer to exchange or sell or an offer to exchange or buy any securities.

Development World Car Market vs. Volkswagen Group Car Deliveries to Customers1)

(Growth y-o-y in deliveries to customers, January to October 2019 vs. 2018)

Car Market	VW Group
	-1.2%
-1.8%
North America (incl. LCV)

Car Market	VW Group
	0.1%
-5.6%
South America (incl. LCV)

Car Market	VW Group
	3.2%
-1.2%
Western Europe
Car Market	VW Group
	-0.5%
-4.8%
World 2)

Car Market	VW Group
1.5%
	0.0%
Central & Eastern Europe
Car Market	VW Group
	-2.8%
-6.5%
Asia Pacific

1. Volkswagen Group Passenger Cars excl. Volkswagen Commercial Vehicles 2) incl. LCV in North America & South America

3

Volkswagen Group - Deliveries to Customers by Brands1)

(January to October 2019 vs. 2018)

-0.2%

[thsd. units]

January - October 2018

9,000	8,977	8,955											January - October 2019
8,000		Volume				Premium		Sport & Luxury	Truck & Bus
7,000		-0.5 %				-1.1%			+6.1 %			+7.2 %
		-1.2%
6,000
5,000		5,140 5,077
4,000
3,000						-1.2%
2,000		-1.9%
	+11.1%	0.0%	1,525 1,506		+6.3%	+1.1%	+6.1%	+8.8%
		1,038 1,019				+69.4%
1,000
	449	499	410	410
		4	7	214	228	8	8	111	117	77	84
0

1) Volkswagen Group excl. Ducati

4

Volkswagen Group - Analysis by Business Line 1)

(January to September 2019 vs. 2018)

thousand vehicles / € million

Vehicle sales	Sales revenue	Operating profit
2019	2018	2019	2018	2019	2018

Volkswagen Passenger Cars	2,754	2,753		65,447	62,508		3,152	2,330
Audi	900	1,107		41,332	44,257		3,239	3,671
ŠKODA	805	698		14,811	12,598		1,175	1,083
SEAT	517	462		8,828	7,744		248	237
Bentley	7	7		1,306	1,092		65	-137
Porsche Automotive 2)	205	190		18,666	17,507		3,200	3,197
Volkswagen Commercial Vehicles	344	337		8,756	8,572		497	628
Scania 3)	76	69		10,427	9,337		1,209	888
MAN Commercial Vehicles	104	98		9,175	8,599		297	222
Power Engineering	-	-		2,873	2,489		91	142
VW China 4)	2,815	3,021		-	-		-	-
Other 5)	-543	-619		-22,949	-24,762		-411	-872
Volkswagen Financial Services	-	-		27,946	24,635		2,035	1,915
Volkswagen Group before Special Items	-	-		-	-		14,795	13,306
Special Items	-	-		-	-		-1,257	-2,435
Volkswagen Group	7,983	8,123		186,617	174,577		13,539	10,871
Automotive Division 6)	7,983	8,123		157,031	148,424		11,313	8,832
of which: Passenger Cars 7)	7,803	7,956		134,666	128,218		10,103	8,021
of which: Commercial Vehicles 7)	180	167		19,491	17,717		1,307	857
of which: Power Engineering	-	-		2,873	2,489		-98	-46
Financial Services Division	-	-		29,587	26,153		2,226	2,039

1) All figures shown are rounded, minor discrepancies may arise from addition of these amounts. 2) Porsche (Automotive and Financial Services): sales revenue € 20,490 (19,117) million, operating profit € 3,346 (3,329) million. 3) Scania (Automotive and Financial Services): sales revenue € 10,762 (9,634) million, operating profit € 1,314 (991) million. 4) The sales
revenue and operating profits of the joint venture companies in China are not included in the figures for the Group. These Chinese companies are accounted for using the equity method and recorded a proportionate operating profit of € 3,187 (3,330) million. 5) In operating profit mainly intragroup items recognized in profit or loss, in particular from the elimination of	5
intercompany profits; the figure includes depreciation and amortization of identifiable assets as part of purchase price allocation for Scania, Porsche Holding Salzburg, MAN and Porsche. 6) Including allocation of consolidation adjustments between the Automotive and Financial Services divisions. 7) Since 1st January 2019 Volkswagen Commercial Vehicles is reported in
the Automotive division, prior year figures have been adjusted.

Volkswagen Group - Analysis of Operating Profit 1)

(January to September 2019 vs. 2018)

[€ billion]
18
16				2.7	0.0	0.5	-2.3		-0.1	0.2
14						0.4		-1.3
12		2.4
10
8											14.8		13.5
6			13.3
10.9
4
2
0	Jan - Sept	Special Items	Jan - Sept	Volume/	Exchange	Product Costs	Fixed Costs	Commercial	Power	Financial	Jan - Sept	Special Items	Jan - Sept
	2018		2018	Mix/ Prices	Rates /			Vehicles**	Engineering**	Services	2019 excl.		2019 incl.
	incl. Special		excl. Special		Derivatives					Division	Spec. Items		Spec. Items
	Items		Items

Passenger Cars*/**

1) All figures shown are rounded, minor discrepancies may arise from addition of these amounts. *) without FS ** ) including PPA

6

Automotive Division - Net Cash Flow Development 1) 2)

(January to September 2019)

[€ billion]
22
20
18		-8.2
16
14
12	20.9		-3.7
10		0.2		-0.6
8
6					9.2		8.6
4
2
0
2018	14.9	-7.9	-3.5	0.1	3.7	-0.2	3.5
	Cash flow from	Capex	Capitalized	Other	Net cash flow before	Acquisition	Net Cash flow 4)
	operating activities		development		equity	and disposal
			costs		investments	of equity
						investments

1) All figures shown are rounded, minor discrepancies may arise from addition of these amounts. 2) Including allocation of consolidation adjustments between Automotive and Financial Services divisions.

7

Automotive Division - Net Cash Flow 1)

(January to September 2019)

[€ billion]

12

10					1.2			0.6
8
6			8.6								10.4
4
2
0
2018	3.5		3.3	0.2		7.0
			Net Cash flow	Diesel outflow		Aquisition and		Net Cash flow
			including Diesel			disposal of equity	underlying business
		payments and M&A			investments

1. Including allocation of consolidation adjustments between Automotive and Financial Services divisions.

8

Automotive Division - Analysis of Net Liquidity 1)

(January to September 2019)

[€ billion]

30

25

20

15

10

5

0

																		-5.3
																	9.0
																		-1.1
																		-2.4								-0.7
																							1.4
				-1.2				-0.6					1.4
		19.4			Net Cash flow (€ 8.6 bn)																19.8

31.12.2018 Diesel Outflow	M&A	China Dividend Operating	IFRS 16	MAN	Dividend to TRATON IPO	Other	30.09.2019
		Business		minorities	VW AG
					Shareholder

1. All figures shown are rounded, minor discrepancies may arise from addition of these amounts.

9

Volkswagen Group - Outlook for 2019

Deliveries to

customers

('000 vehicles)

Sales revenue

(€ billion)

Operating

return on sales

(%)

+0.9%

10.7 10.8

			on the level of prior-year
2017	2018	2019
	+2.7%
229.6	235.8		grow by as much as 5%
2017	2018	2019
7.41)	7.3 1)

Range of 6.5 - 7.5% (before Special Items)

2017

2018

2019

1. before Special Items.

10

The transformation of our portfolio has started

Broad product portfolio

Transformation

CO2 neutral cars

ICE

BEV

2020

2050

11

Our worldwide SUV mix is expected to increase strongly

Volkswagen Group - SUV share

(in % of regional Group Deliveries to Customers)

Europe China NAR

> 50%

49%

56%

Worldwide

≈ 13%

12%											69%
14%
17%
2014	2015	2016	2017	2018	2019	2020*	2021*	2022*	2023*	2024*	2025*

* Target

12

The significant increase in BEV deliveries will support CO2 compliance

Volkswagen Group - BEV volume by regions

(BEV share of total Group Deliveries in %)

e-tron	e-Bora	ID.3	e-Mii
Taycan	e-Lavida	el-Born	e-Citigo
Q2L e-tron	Moia Shuttle	e-tron SB	Taycan Sport Turismo
eTGE		e-Tharu	Vision iV
		ID.Crozz

• 4%

≈ 1%

Europe China NAR RoW

> 20%

≈ 3 mn units

2019

2020*

2021*

2022*

2023*

2024*

2025*

* Target

14

Development Global passenger car markets

Markets by regions (2020-2025)

					>20%
				> 20%
	~ 5%	~ 2%	> 20%
2020	Europe	North America	South America	China incl. HK	RoW	2025

North America and South America incl. Light Commercial Vehicle; Source: IHS Markit I November 2019

15

Group KPI's confirmed

Key financial targets	2016	2017	2018	2019		2020	2025
		Actual	Actual	Actual	Outlook		Strategic	Strategic
							Targets	Targets
Operating return on sales	6.7%	7.4%	7.3%	6.5-7.5%		6.5-7.5%	7-8%
BeforeSpecial Items
Return on investment	13.9%	14.4%	13.1%	12-14%		12-14%2)	>14%2)
Automotive Division beforeSpecial
Items
Capex ratio	6.9%	6.4%	6.6%	6.5-7%		6%	6%
Automotive Division
R&D cost ratio	7.3%	6.7%	6.8%	6.5-7%		6%	6%
Automotive Divison
Cash	a) Net Cashflow1)	€ 4.9 bn	€ 10.3 bn	€5.6 bn	≥ €9 bn		≥ € 10 bn	> € 10 bn
Automotive Division				> € 15 bn2)		> € 20 bn2)
	b) Net Liquidity	€ 27.2bn	€ 22.4 bn	€ 19.4 bn		~10% of Group
				turnover

1) Ex Diesel payments and M&A 2) Including the negative IFRS 16 impact, effective from 1st January 2019.	16

CY 2020 - Updated

Basis: Result 2016			2020 Updated
				CMD March 2017	PR 66	PR 67	PR 68
Sales revenue (€ bn)	217.3		+ > 20 %	+ > 25 %	+ > 25 %	+ ≥ 20 %
Operating profit (€ bn)	14.6		+ 25 %	+ ≥ 25 %	+ > 30 %	+ ≥ 25 %
before special items
Profit before tax (€ bn)	14.8		+ ≥ 25 %	+ ≥ 30 %	+ ≥ 40 %	+ ≥ 30 %
Earnings per Pref. Share	10.3 €	≥ 25 €	> 25 €	≥ 30 €	27-28 €

17

Scalable Technology: The dedicated platforms (MEB/PPE) guarantee superior customer experience, scale and versatility

18

The ID. DNA | What makes our ID. Family special

Visionary	New sense of	Smart	Intuitive	Sustainable
design	space	connected	usability	platform

Affordable | High Ranges | Fast Charging Technology | Good residual values

19

To maximize the climate impact of MEB we are open to share it to other car manufactures as well

1 Large range	8	designed for
fast charging

2	attractive costs	7	performancehigh

3 maximum security	6 lifespanlong
4 availabilityrobustness and	5 useworldwide

20

The car becomes the most complex internet device

20

Expanding production of electric vehicles worldwide on a massive scale by the end of 2022

21

BEV challenges addressed by three key elements

22

Driving forward Strategy: New collaborative approach

23

Ford and Volkswagen extend global alliance, Volkswagen simultaneously invests in Argo AI

		EQUAL SHAREHOLDER WITH FORD;
ANNOUNCED 2019	VOLKSWAGEN TO SUPPLY	TRANSACTION REPRESENTS
MEB PLATFORM TO FORD	$7.25B VALUATION*
		NEW COLLABORATION

		VOLKSWAGEN
COMMERCIAL VAN	FULLY ELECTRIC	MAKES
AUTONOMOUS
AND PICKUP	VEHICLES
DRIVING
		INVESTMENT

*Estimated

24

Key Messages
1.	2.		3.	4.
Leading the		Cost effective	First in		Increased focus
transformation to		transformation	transforming into		on
e-mobility		path	software OEM		value creation

25

TRATON Group- New Era for TRATON with IPO

• TRATON shares begantradingon the regulated market of the Frankfurt Stock Exchange (Prime Standard) and the regulated market ofNasdaqStockholm (Large Cap Segment) in June 2019.
• Significant step to create additionalvalue for allstakeholders and drive the Global Champion strategy.

Global Champion

• Scale and global reach through leading brands and strategic alliance partners
• Strong platform enabling growth and positioning for best-in-class profitability

Growth

• Customer value focused product and service offering
• New product generations
• Further expansion in key geographies through

smart partnerships

Profitability

• Focuson earnings growth and cash generation
• Stand alone brand

performance and synergies

• Concrete path to profitability improvement

Execution

• Strong team with industry-leading track record

26

Volkswagen Financial Services 1): global, well diversified and successful

Strong global presence

Continuous portfolio expansion

Rising penetration rates (without China)

in '000 contracts

						7,717	10,102
6,322	7,218	7,641				Total
									portfolio
		2,760	3,921	4,149	4,564
2,518		21,223
5,833	6,155	5,672	5,935	6,557
2015	2016	2017 *	2018		Q3 2019 **

		Financing		Leasing		Insurance / Services
		*) Reclassification Finance / Lease contracts **) contracts from international JVs included
		Diversified funding structure
Equity, liabilities to				Asset backed securitization

48.7%

49.4% 49.3%

affiliated companies,	31%	18%
other

47.8%

46.9%

16%	35%	Bonds,
Customer deposits		Commercial Paper,
	liabilities to financial

institutions

30.09.2019: € 219.3 bn

1. Excl. activities of Scania and Porsche Holding Salzburg; incl. Financial Services of Porsche AG and MAN Financial Services.

27

Volkswagen Brand - Pushing the Turnaround in the US with new products

SUV offensive #1SedansSUV offensive #2

Deliveries to US customers, '000' units
2017			2018-19		2019-21
500

306

Atlas

Jetta

Atlas Cross Sport

250

Tiguan

Passat

Compact SUV

0
2012	2013	2014 2015	2016	2017	2018 1-10/2019
Refreshed Golf		Arteon			ID Crozz
Market	3.0	2.6	2.2	2.0	1.8	2.0	-
Share %

28

Volkswagen Group China performance

(January to October 2019 vs. 2018)

January - October 2018

[thsd. units]

Proportionate operating profit, January to September

January - October 2019

[units]

4,000			-1.8%
3,500		3,405
	3,344
3,000
2,500
2,000
1,500
1,000
500
0

1)

-0.1%

2,515 2,492

-4.3%
€ 3.3 bn	€ 3.2 bn
Q1-Q3 2018	Q1-Q3 2019

+2.1%

540	551	-20.0%
276	221		+13.7%
		63	72

-30.1%

1,703

>400%1,191

703

123

-32.6%

4,603

3,101

5,000

4,500

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

1. Incl. Hong Kong, excl. Ducati. Group numbers incl. Volkswagen Commercial Vehicles, Scania and MAN.

Together4Integrity: Group-wide integrity and compliance program in full
swing
STRATEGY
			Ethics and compliance is
			central to business strategy
				3~	50%1)
	RISK MANAGEMENT			1	CULTURE OF INTEGRITY
	Ethics and compliance risks		2			Leaders at all levels across the
	are identified, owned,					organization build and sustain
	managed and mitigated		4		5		a culture of integrity
	SPEAK-UP ENVIRONMENT							RESOLUTE ACCOUNTABILITY
	The organization encourages,							The organization takes action
	protects and values the							and holds itself accountable
	reporting of concerns and							when wrongdoing occurs
	suspected wrongdoing

1. Group entities covered; as of 12th March, 2019.

30

Group Compliance action plan for 2019

Standards, Organization

Processes

& Tools

Business

partner

Certification

1. Whistleblower Group Guideline
2. Staffing of Group Compliance
3. Strengthening the group-wide Compliance Organization
4. Consistent Compliance Risk Assessment
5. Worldwide Anti-Money Laundering System
6. Risk-basedrevision of group guidelines
7. New Business partner approval process for suppliers and sales organization
8. Compliance in M&A transactions and post merger integration for non-controlled shareholdings
9. Support Monitorship + implementation of Monitor Recommendations

31

Investor Relations Team

We are pleased to answer your inquiries regarding Volkswagen shares and other capital market related questions.

Helen Beckermann (Wolfsburg office)

Interim Head of Group Investor Relations

E-Mail: [e-mail]

Telephone: [phone]

Lennart Schmidt (China office)	Alexander Hunger (Wolfsburg office)	Andreas Buchta (Wolfsburg office)
Investor Relations Manager	Senior Investor Relations Officer	Senior Investor Relations Manager
E-Mail: [e-mail]	E-Mail: [e-mail]	E-Mail: [e-mail]
Telephone: + 86 10 6531 4732	Telephone: + 49 5361 9 40765
Telephone: [phone]

Andreas Kowalczyk (Wolfsburg office)	Monika Kowalski (Wolfsburg office)	Ulrich Hauswaldt (Wolfsburg office)
Senior Investor Relations Officer	Investor Relations
Senior Investor Relations Officer
E-Mail: [e-mail]	E-Mail: [e-mail]
E-Mail: [e-mail]
Telephone: [phone]	Telephone: [phone]
Telephone: [phone]

The official website of Volkswagen Group Investor Relations. Company topics, brandchannels, innovation and informations.

32

Appendix

The Shareholder Structure, Supervisory and Management Board

Shareholder Structure of Volkswagen AG

Number of Outstanding Shares	Preferred shares
	206,205,445

41,1%

58,9%

Ordinary shares 295,089,818

Current Voting Rights Distribution

Others

10.8%

Qatar Holding
17,0%
					Porsche SE,
				52,2%
20.0%			Stuttgart2)
State of Lower
Saxony, Hanover	(as at December 31, 2018)

Supervisory Board of Volkswagen AG

Chairman Hans Dieter Pötsch

Members Dr. Hussain Ali Al Abdulla Dr. Hessa Sultan Al Jaber Dr. Bernd Althusmann Dr. Hans-Peter Fischer Marianne Heiß

Jörg Hofmann

Johan Järvklo

Ulrike Jakob

Dr. Louise Kiesling Peter Mosch

Bertina Murkovic

Bernd Osterloh

Dr. jur. Hans Michel Piëch

Dr. jur. Ferdinand Oliver Porsche Dr. rer. comm. Wolfgang Porsche Conny Schönhardt Athanasios Stimoniaris Stephan Weil

Werner Weresch

Board of Management of Volkswagen AG1)

Chairman of VW AG	Dr. Herbert Diess
and VW Passenger
Cars brand
Porsche AG	Dr. Oliver Blume
Human Resources	Gunnar Kilian
TRATON Group	Andreas Renschler
Audi AG	Abraham Schot
Integrity and Legal	Hiltrud Dorothea Werner
Affairs
Finance and IT	Frank Witter
Components and	Dr. Stefan Sommer
Procurement

1) Each Board Member is responsible for one or more functions within the Volkswagen Group. The work of the Board of Management of Volkswagen AG is supported by the boards	34
of the brands and regions as well as by the other group business units and holdings. 2) On March 13 2019, Porsche SE announced increase in voting rights to 53.1%.

Automotive Division - Research and Development Costs

(January to September 2019 vs. 2018)

[€ million]
12,000		2019		12,000
		33.2%
8,000		3,667	2,807		8,000
	34.3%
	10,697			9,837
4,000				4,000
0	Total	of which	amortization	Recognized in
	R&D costs	capitalized		the income
				statement

	2018
	36.9%
	3,505	2,812
	35.6%
9,850			9,157
Total	of which	amortization	Recognized in
R&D costs	capitalized		the income
			statement

Diesel issue: Special Items & payments

€ (bn)

2015

2016

2017

2018

2019

Total

Diesel special items		Payments
Legal	7.0
Other items	9.2
	16.2
Mainly legal risks	6.4
Buyback/retrofit program	2.2
Legal	1.0
	3.2
Mainly legal risks	3.2
Mainly legal risks	1.3	Expected
	30.0	Payments made until 2018

-

~3.0

~16.1

~5.3

~2.0

~24.6

36

We are speeding up the transformation and becoming the leading

provider of sustainable mobility.