#1Phideon VOLKSWAGEN GROUP CHINA Volkswagen Group China Investor Presentation 7 September 2016, Beijing, Audi China Building MAN 1#2Disclaimer VOLKSWAGEN GROUP CHINA 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 relating to the development of the economies of individual countries, and in particular of the automotive industry, 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. The estimates given involve a degree of risk, and the actual developments may differ from those forecast. Consequently, 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, 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 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 Such statements are valid on the date of publication and can be superceded. This information does not constitute an offer to exchange or sell or an offer to exchange or buy any securities. 2#3VOLKSWAGEN GROUP CHINA Volkswagen Group China Investor Presentation Weiming Soh Executive Vice President, Group Corporate Strategy and Group Sales & Marketing, Volkswagen Group China 1 Volkswagen Group China – Introduction to China and Volkswagen Group China Carsten Isensee Executive Vice President, Finance, Volkswagen Group China Volkswagen Group China - Balancing the "New Normal" Joachim Wedler President, Audi China Audi - Premium market leader in China Volkswagen Group China - Introduction to China and Volkswagen Group China Volkswagen Group China - Balancing the "New Normal" Audi Premium market leader in China 3#4VOLKSWAGEN GROUP CHINA Volkswagen Group China Investor Presentation Weiming Soh Executive Vice President, Group Corporate Strategy and Group Sales & Marketing, Volkswagen Group China Volkswagen Group China – Introduction to China and Volkswagen Group China 1. Chinese Market 2. Volkswagen Group in China 3. Strategy and Future Development Volkswagen Group China - Introduction to China and Volkswagen Group China Chinese Market Volkswagen Group in China Strategy and Future Development 4#5VOLKSWAGEN GROUP CHINA Volkswagen's second home market in comparison Size of the countries Population CHINA 1,370 million CHINA: 9,562,911 km² INHABITANTS DENSITY (People per km²) GERMANY: 357,021 km² AVERAGE AGE 37 years UNEMPLOYMENT 139.6 4.1 % GERMANY 81 million 232.1 44 years 6.4% Economy Car industry CHINA CHINA GERMANY GERMANY GDP GDP PER CAPITA $ 10,916 billion $ 3,353 billion TOTAL CAR PARK 83 million 44 million $ 7,833 $ 41,106 TOTAL MARKET 19.7 million 3.2 million GDP GROWTH RATE 6.9 % 1.5% PRODUCTION SITES 172 23 INFLATION 1.4% 0.2% DENSITY (Cars per 1,000 Inh.) 84 548 TRADE BALANCE $ 682.3 billion $ 291.7 billion AVERAGE CAR AGE 3.3 9.0 Sources: Data for FY 2015, Statistisches Bundesamt, National Bureau of Statistics of China; IMF; UN DESA: Bundesagentur fuer Arbeit; WTO; IHS; PWC Autofacts, VDA, IHS Volkswagen Group China - Introduction to China and Volkswagen Group China Volkswagen Group in China Chinese Market Strategy and Future Development 5#6VOLKSWAGEN GROUP CHINA Chinese economy - Declining growth rate towards new normalization China's economic growth Real GDP growth comparison Nominal GDP (in billion $) 14,000 14,505 12% 13,162 12,269 12,000 11,527 9.6% 10% 10,916 11,072 10,433 10,000 9,662 8,549 8,000 7,556 6,000 4,000 2,000 7.8% 7.8% 8% 7.3% 6.9% 6.6% 6.4% 6.4% 6.4% 6.2% 6% 3.7% 4% 2% 0.7% 0.6% 1.6% 1.5% 1.8% 1.7% 1.6% 1.5% 1.7% 0% 0 2011 2012 2013 2014 2015 2016e 2017e 2018e 2019e 2020e Source: IHS Source: IHS Volkswagen Group China - Introduction to China and Volkswagen Group China Chinese Market 2011 2012 2013 2014 2015 2016e 2017e 2018e 2019e 2020e Volkswagen Group in China Strategy and Future Development 6#7VOLKSWAGEN GROUP CHINA Strong historical car market growth changing towards normalization Chinese total car market (in '000 units) Car market growth comparison 25,000 Passenger vehicle market 24,421 20% 23,295 22,256 21,417 21,670 19,717 15% 20,000 18,071 16,185 15,000 13,641 12,644 10,000 5,000 18.6% 8.1% 10% 7.9% 8.8% 5% 0% -5% -2.9% -4.2% 11.7% 9.1% 8.6% 4.7% 4.8% 5.6% 1.2%) 4.8% 2.7% 2.9% -0.1% -1.1% -2.2% -2.4% 0 -10% 2011 2012 2013 2014 2015 2016e 2017e 2018e 2019e 2020e 2011 2012 2013 2014 2015 2016e 2017e 2018e 2019e 2020e Source: IHS Source: IHS 1) 2017 estimate under the assumption of no specific tax cut for cars in China. Volkswagen Group China - Introduction to China and Volkswagen Group China Chinese Market Volkswagen Group in China Strategy and Future Development 7#8VOLKSWAGEN GROUP CHINA Chinese market grows outside tier 1 cities Market development 2016 vs. 2015 (in '000 units) Share of total passenger car market sales by tier city in 2015 Q1: +8.9% Q2: +10.0% 2,200 2,100 2,000 1,900 1,800 1,700 1,600 1,500 1,400 1,300 2015 2016 1,200 1,100 1,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 15% Sales growth by tier city in 2015 17.6% 10.7% 9.2% 17.9% 29% 28% 19% 9% Tier 1 Tier 2 Tier 3 Tier 4 Tier 5 Tier 1 -9.1% Source: EIU (Economist intelligence unit) Tier 2 Source: EIU (Economist intelligence unit) Tier 3 Tier 4 Tier 5 Volkswagen Group China - Introduction to China and Volkswagen Group China Chinese Market Volkswagen Group in China Strategy and Future Development 8#9VOLKSWAGEN GROUP CHINA Less developed cities provide new opportunities Level I cities Level Il cities Beijing Shanghai Dalian Xi'an Guangzhou Changsha 135 136 Q cars/1,000 inhabitants Number of cities 9 26 Average # of inhabitants (m) 17.2 8.5 Level Ill cities Level IV cities Level V cities Shantou Hengshui Jingdezhen Guyuan Yaan Zigong Haibei Jinchang Turpan 94 Q cars/1,000 47 39 inhabitants 39 Number of cities 68 109 135 Average # of 4.9 4.0 1.7 inhabitants (m) Source: EIU (Economist intelligence unit) Volkswagen Group China - Introduction to China and Volkswagen Group China Chinese Market Level III, IV and V cities Level I and II cities Share of total market Level I share 44% 41% Level II share 40% 39% 38% 37% 2015 2016e 2017e 2018e 2019e 2020e Level III share Level V share | Level IV share 62% 63% 60% 61% 59% 56% 2015 2016e 2017e 2018e 2019e 2020e Volkswagen Group in China. Strategy and Future Development 9#10VOLKSWAGEN GROUP CHINA Volkswagen Group is taken considerable efforts to meet the legal requirements of average fleet fuel consumption I/100 km 8 7 6 LO 5 + Requirement 2015: 6.91164g CO2/km 上海大众汽车 SHANGHAI VOLKSWAGEN Legal requirement 一汽-大众 FAW-VOLKSWAGEN Requirement 2020: 5.01 117g CO2/km To achieve the legal requirements in China Volkswagen will Develop further emission reducing technologies 3 2012 2013 2014 2015 2016 2017 2018 2019 2020 Volkswagen Group China - Introduction to China and Volkswagen Group China Chinese Market 4.01 • 2025e Actively engage in the NEV market Volkswagen Group in China Strategy and Future Development 10#11VOLKSWAGEN GROUP CHINA China 6 regulation - Worldwide toughest emission legislation mg/km 200 NOx emission legislation 180 Bench test 160 RDE2) 140 120 100 Bench test 80 60 1) Bench test 40 20 0 2015 2016 2017 2018 2019 2020 1) USA fleet average for NMOG+NOx per model year 2) Real Driving Emission RDE2) Highlights Emission regulation China 6 for gasoline engines - Latest draft was published in April 2016 Implementation on national level planned beginning 2019 (Beijing and Shanghai may start with similar regulation 2018) Roller bench test NOx emission should fall below 35 mg/km Measurement of real driving emissions (RDE) will be implemented – RDE target for NOx emission at 75 mg/km Further driving emissions need to be reduced dramatically e.g. CO, THC, PM Volkswagen Group China - Introduction to China and Volkswagen Group China Chinese Market Volkswagen Group in China Strategy and Future Development 11#12VOLKSWAGEN GROUP CHINA New Energy Vehicle strategy supported by Chinese Government Subsidies for local NEVS¹) • National subsidies for NEVS Purchase tax exemption (10% Net Selling Price) No,,circulation tax" Direct subsidy (up to 55,000 RMB for BEV 30,000 RMB for PHEV) Additional subsidies from local provinces Infrastructure investments ➤ Target: Charging infrastructure for 5 million NEVs by 2020 12,100 charging stations (mainly along the east coast) 4,800,000 charging pillars Beijing Shanghai Number plate access Easier access to number plates in some restricted cities C-01559 Free number plates for a certain amount of NEVs Free parking space for NEVS (in discussion) Free NEV driving lanes (in discussion) 1) Subsidies are supposed to run until 2020. Volkswagen Group China - Introduction to China and Volkswagen Group China Chinese Market Volkswagen Group in China Strategy and Future Development 12#13VOLKSWAGEN GROUP CHINA Volkswagen Group China Investor Presentation Weiming Soh Executive Vice President, Group Corporate Strategy and Group Sales & Marketing, Volkswagen Group China Volkswagen Group China – Introduction to China and Volkswagen Group China 1. Chinese Market 2. Volkswagen Group in China 3. Strategy and Future Development Volkswagen Group China - Introduction to China and Volkswagen Group China Chinese Market Volkswagen Group in China Strategy and Future Development 13#14VOLKSWAGEN GROUP CHINA Volkswagen Group in China - A long-term success story Volkswagen Group development of deliveries to customers (in '000 units) 3,500 3,000 2,500 2,000 1,400 1,500 1,024 910 1,000 698 711 649 572 514 500 140 149 90 221 240 280 303 316 337 360 11 16 20 23 41 0 T 2,259 1,923 2,813 3,675 3,549 3,271 T 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Volkswagen Group China - Introduction to China and Volkswagen Group China Chinese Market Volkswagen Group in China Strategy and Future Development 14#15VOLKSWAGEN GROUP CHINA Deliveries to customers by brand January to July 2016 '000 units 2,500 +8.0% 2,148 +8.5% 2,250 1,989 2,000 1,750 1,500 1,250 1,000 750 500 250 0 VOLKSWAGEN GROUP CHINA 1) 1) incl. Hong Kong, excl. Ducati. 1,603 1,478 Jan.- Jul. 2015 Jan.- Jul. 2016 units -15.9% 2,500 2,258 1,899 2,000 1,500 -18.6% 811 1,000 +6.5% 660 316 337 +6.7% -5.5% 500 157 167 +8.6% 34 37 164 155 ŠKODA Volkswagen Group China - Introduction to China and Volkswagen Group China Chinese Market PORSCHE LAMBORGHINI B BENTLEY Commercial Vehicles Volkswagen Group in China 0 Strategy and Future Development 15#16VOLKSWAGEN GROUP CHINA Great range of locally produced vehicles... 上汽大众 SAIC VOLKSWAGEN ŠKODA 一汽-大众 FAW-VOLKSWAGEN 00 A3 A3 Limousine Golf Golf Sportsvan Polo Santana Gran Santana Fabia Rapid Spaceback Jetta Bora Lavida Gran Lavida Lamando Rapid Octavia A4L A6L Touran L Tiguan Passat Superb Yeti Volkswagen Group China - Introduction to China and Volkswagen Group China Chinese Market Sagitar Magotan CC Q3 Q5 Volkswagen Group in China Strategy and Future Development 16#17VOLKSWAGEN GROUP CHINA and imported passenger cars serving Chinese customers' demand 000 PORSCHE B BENTLEY up! Beetle Golf Scirocco Sharan Tiguan Magotan Variant Touareg Phaeton A1 TT A3 A4 Allroad A5 Q5 A6 A6 Allroad A7/S7 Q7 R8 A8 Boxster Cayman 911 Macan Panamera Cayenne Flying Spur Continental GT Bentayga Mulsanne LAMBORGHINI Volkswagen Group China - Introduction to China and Volkswagen Group China Chinese Market Huracan Coupe Aventador Roadster Aventador BUGATTI Veyron Volkswagen Group in China Strategy and Future Development 17#18VOLKSWAGEN GROUP CHINA Volkswagen Group - No. 1 in the Chinese passenger vehicle market Passenger vehicles market share, YTD Jul 2016 Others Market share Rank Volkswagen Group 18% 29.6% Group (Delta vs YTD Jul 2015) 1 Volkswagen Group - 0.7% 11.3% 2 Comp. 1 Comp.1 + 0.7% 3 7.9% Comp. 2 - 0.6% 6.2% Comp. 2 4 Comp. 3 0% 5.5% 5 Comp. 3 Comp. 4 - 0.3% Comp. 4 Volkswagen Group China - Introduction to China and Volkswagen Group China Chinese Market Source: CKD from China Passenger Car Association (CPCA), CAAM; FBU from insurance data Volkswagen Group in China Strategy and Future Development 18#19VOLKSWAGEN GROUP CHINA Volkswagen Group sales well is leading the market in all tier cities Total market performance (Sales share by tier level in %) Volkswagen Group sales performance (Sales share by tier level in %) 8% 8% 8% 8% 9% 6% 6% 7% 7% 7% 14% 15% 16% 16% 17% 17% 18% 18% 18% 19% - Level 5 Level 5 27% 27% 27% 27% 28% Level 4 28% 27% 28% 27% 28% Level 4 Level 3 Level 3 28% 27% 28% 29% 27% 27% "Level 2 27% 28% 29% 29% "Level 2 'Level 1 Level 1 24% 24% 20% 20% 19% 22% 21% 18% 18% 15% 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 All figures shown are rounded. Source: EIU (Economist intelligence unit) Volkswagen Group China - Introduction to China and Volkswagen Group China Chinese Market Volkswagen Group in China Strategy and Future Development 19#20VOLKSWAGEN GROUP CHINA Strong focus on growth of our well diversified dealer network Dealer network >3,400 2,779 2,657 2,364 361 366 320 405 439 341 Well diversified through tier cities Tier 1 Share of Volkswagen Group sales volume, 2015 Share of Volkswagen Group dealers, 2015 18% 19% 1,586 1,770 1,835 Tier 2 2013 2014 2015 2019e Tier 3 B BENTLEY PORSCHE ŠKODA SKODA Volkswagen Group China - Introduction to China and Volkswagen Group China Chinese Market 17% Tier 4 18% 7% Tier 5 8% 29% 26% 28% 30% All figures shown are rounded. Source for market share by tier city: EIU (Economist intelligence unit) Volkswagen Group in China Strategy and Future Development 20#21VOLKSWAGEN GROUP CHINA Strong residual values of Volkswagen Group models Residual value ranking¹) CKD Models AO B SUV-A Polo HB Magotan Tiguan A B SUV-B Lavida Passat Q5 A с Golf A6L B MPV CC Touran FBU Models A0 D MPV Beetle Panamera Multivan Importance of residual values High and stable residual values are important due to • Reduced total cost of ownership > leading to attractive leasing › important argument for sales team Increased new car sales volume > while stabilizing new car prices Increased pre-owned car business and its competitiveness High and stable residual values finally lead to higher A SUV-A Legend: Golf Variant Tiguan Ranking No.1 • Cabriolet/ Variant Ranking No.2 Magotan Variant Ranking No.3 B Scirocco • Brand value Customer loyalty Revenue & Profit 1) China Automotive Residual Value Research Committee - RV Report 2016; Rankings based on the 3-year residual value Volkswagen Group China - Introduction to China and Volkswagen Group China Chinese Market Volkswagen Group in China Strategy and Future Development 21#22VOLKSWAGEN GROUP CHINA Volkswagen Group China Investor Presentation Weiming Soh Executive Vice President, Group Corporate Strategy and Group Sales & Marketing, Volkswagen Group China Volkswagen Group China – Introduction to China and Volkswagen Group China 1. Chinese Market 2. Volkswagen Group in China 3. Strategy and Future Development Volkswagen Group China - Introduction to China and Volkswagen Group China Chinese Market Volkswagen Group in China Strategy and Future Development 22#23VOLKSWAGEN GROUP CHINA New product offering aligned with expected future market trends¹) Body group trends until 20201) New vehicle launches 2016 and to follow²) Total market volume in 2015 Sedan SUV Van Others (in million vehicles) 0 5 10 1) Source: IHS Growth until 20201) Sedan Magotan +7% New Bora SUV +38% Bentayga Others Golf Sportsvan Q7 e-tron Touran L 2) Schematic overview - does not show all models Volkswagen Group China - Introduction to China and Volkswagen Group China Chinese Market 911 A4L Tiguan Phideon Tiguan LWB R8 Coupé Boxster A6 L PHEV B-SUV Phideon PHEV Kodiaq Bora Derivative A5 Coupé Volkswagen Group in China Strategy and Future Development 23#24VOLKSWAGEN GROUP CHINA Strong growth in SUV segment - 10 additional locally produced SUVs planned over the next three to four years Passenger Car deliveries by body style (in '000 units) Total market Current SUV portfolio of Volkswagen Group in China Volkswagen Group 11,808 2,141 10,540 Others 14% + 36% 45% 1% ■SUV 33% 15% MPV Hatchback 5% 10% - 17% +17% 5% 8% Significant SUV portfolio expansion planned in 2016 - 2020 69% Sedan 52% +2% 54% Jan.- Jul. 2015 Jan.- Jul. 2016 Jan.- Jul. 2016 Volkswagen Group China - Introduction to China and Volkswagen Group China Chinese Market AO A B C D/E Volkswagen Group in China Strategy and Future Development 24#25VOLKSWAGEN GROUP CHINA Volkswagen Group China is actively engaging in the New Energy Vehicle market with locally produced cars Phase 1 Phase 2 Locally produced plug-in hybrids based on current toolkits Locally produced pure electric vehicles based on current toolkits ☑ Range: up to 1.000km + + Pure electric: up to 60km + Pure electric: up to 300km Phase 3 Locally produced pure electric vehicles based on scalable electric toolkit (MEB) for different vehicle classes Pure electric: up to 650km Speed charging of 80% in just 15min Audi A6 L e-tron Volkswagen Phideon PHEV Volkswagen Group China - Introduction to China and Volkswagen Group China Chinese Market Volkswagen Group in China Strategy and Future Development 25#26VOLKSWAGEN GROUP CHINA Urban Mobility is evolving from traditional transportation to "New Mobility" trends Traditional Transportation Car Ownership Limited Choices Government funded Public Transit Unconnected and suboptimal Source: McKinsey "Urban mobility at a tipping point", September 2015 TAXI Multimodal and Shared Transport Technology Financing New Business Model More Choices Public and private transit operate in parallel On-demand and Connected O New Urban Mobility Volkswagen Group China - Introduction to China and Volkswagen Group China Chinese Market Volkswagen Group in China Strategy and Future Development 26#27VOLKSWAGEN GROUP CHINA Volkswagen Group is exploring business opportunities through strategic partnerships in 4 key areas 1 Ride Sharing •Driver Partnership Program ⚫Customized vehicles for on- demand mobility ⚫R&D Autonomous Driving D TAXI 2 Mobility Club •Premium Mobility Club •Executive Mobility Club Car-sharing Mobility Club MBER 3 Car Sharing • New business model is to be adopted for the rollout nationwide 4 Financial Leasing and PoC e-Commerce •Proactive Sourcing • Financial Leasing UBER EMBER MEMBER Used new Volkswagen Group China - Introduction to China and Volkswagen Group China Chinese Market Volkswagen Group in China. Strategy and Future Development 27#28VOLKSWAGEN GROUP CHINA Strategy 2025 - We are addressing key opportunities Vision "We are a leading provider of sustainable mobility in China with our partners " Mission In close cooperation with our partners, we ... ... offer tailor-made mobility solutions to our customers ... serve our customers' diverse needs with a portfolio of f strong brands assume responsibility regarding the environment, safety and social issues act with integrity and build on reliability, quality and passion as the foundation for our work Excited customers Excellent employer Sustainable growth Competitive profitability Role model for environment, safety and integrity Volkswagen Group China - Introduction to China and Volkswagen Group China TOGETHER STRATEGY 2025 Chinese Market Volkswagen Group in China Strategy and Future Development 28#29VOLKSWAGEN GROUP CHINA Volkswagen Group China Investor Presentation Weiming Soh Executive Vice President, Group Corporate Strategy and Group Sales & Marketing, Volkswagen Group China - Volkswagen Group China – Introduction to China and Volkswagen Group China Carsten Isensee Executive Vice President, Finance, Volkswagen Group China Volkswagen Group China – Balancing the "New Normal" - Joachim Wedler President, Audi China Audi - Premium market leader in China Volkswagen Group China - Introduction to China and Volkswagen Group China Volkswagen Group China - Balancing the "New Normal" Audi Premium market leader in China 29 29#30VOLKSWAGEN GROUP CHINA Volkswagen Group China Investor Presentation Carsten Isensee Executive Vice President, Finance, Volkswagen Group China Volkswagen Group China - Balancing the "New Normal" 1. Financials 2. Investments 3. Financial Services Volkswagen Group China - Balancing the "New Normal" Financials Investments Financial Services 30#31VOLKSWAGEN GROUP CHINA Strong volume and profit development of Volkswagen Group China Volkswagen Group deliveries to customers and proportionate operating profit in China Deliveries to customers (in '000) 6,000 Proportionate operating profit 6,000 Deliveries to customers € 5,182 € 5,214 5,000 5,000 € 4,296 4,000 € 3,678 4,000 3,000 € 2,616 3,675 3,549 € 2,366 3,000 3,271 2,813 2,000 2,259 1,000 2,000 1,862 1,000 0 0 2011 2012 2013 2014 2015 H1 2016 Volkswagen Group China - Balancing the "New Normal" Financials Investments Proportionate op. profit ( in € million) Financial Services 31#32VOLKSWAGEN GROUP CHINA Chinese Joint Ventures generate substantial, self-funded growth and at the same time robust dividend pay-out Total amount of dividends paid out to Joint Venture partners (in € billion) II Total amount of dividend Chinese Joint Ventures ■thereof paid to Volkswagen Group * Dividend for the year 2015 declared 2.8 1.2 4.6 6.5 6.7 2.8 3.0 2.0 10.0 4.5 8.1* 3.6* 2011 2012 2013 2014 2015 2016 Volkswagen Group China - Balancing the "New Normal" Financials Investments Financial Services 32 32#33VOLKSWAGEN GROUP CHINA Chinese Joint Ventures with strong financial performance in 20151) (January to December 2015 vs. 2014, in € million) FAW-Volkswagen Automotive Company (40%) - 5.5% 42,812 SAIC VOLKSWAGEN Automotive Company (50%) + 12.4% 26,018 SAIC VOLKSWAGEN Sales Company (30%) + 11.4% 26,956 30,035 40,462 -0.2% 4,714 4,705 + 55% 2,170 1,400 23,142 + 5.4% 3,376 3,558 + 54.2% 2,048 1,328 + 11.1% + 38.8% 404 449 103 143 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 Dividends received³) Sales revenue Sales revenue²) Post-tax profit Post-tax profit 1) Financial data on a 100% basis, Volkswagen Group equity interest in brackets; SAIC VOLKSWAGEN sales revenue is mostly generated from its business with SAIC VOLKSWAGEN, which sells passenger cars for SAIC VOLKSWAGEN. 2) Including sales revenue from sales of imported Audi models 3) Dividends received by the Volkswagen Group related to the previews year's local result of our joint ventures. Dividends received³) Sales revenue Post-tax profit Dividends received³) Volkswagen Group China - Balancing the "New Normal" Financials Investments Financial Services 33#34VOLKSWAGEN GROUP CHINA Another solid operating result for the Volkswagen Group in China 2014 2015 Deliveries to customers ('000 units) 3,675 3,549 Production (100%)* *SAIC-VW Group / FAW-VW Group ('000 units) 3,528 3,420 Proportionate Operating Profit (€ million) 5,182 5,214 € 2.774 m H1 2015 H1 2016 1,743 1,862 1,817 1,846 2,744 2,366 Proportionate operating profit development H1 2016 vs 2015 • € - 408 m + Volume increase Material cost improvements Improved efficiency with specific programs Mix effect (eg. Passat ramp-up) Major impact due to lower pricing Negative currency effect H1 2015 Volkswagen Group China - Balancing the "New Normal" Financials Investments € 2.366 m H1 2016 Financial Services 34#35VOLKSWAGEN GROUP CHINA Euro decreased significantly vs. Chinese Renminbi over the last decade but is increasing year-to-date 12 EUR/CNY long-term development CNY decreased 6% on average YTD vs. EUR 7.60 11 10 6 8 7 37% +5% -7% -10% 7.00 6.40 6 Q1 Q2 Q3 Q4 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 -2015 -2016 Volkswagen Group China - Balancing the "New Normal" Financials Investments Financial Services 35 35#36VOLKSWAGEN GROUP CHINA Efficiency program to support our margins in a market characterized by increased competition China efficiency program Production & Logistics optimization Review of product portfolio € Implementation of new culture & lean decision making processes Change focus from "production volume maximization" to "cost- efficiency" • Improved production processes Optimized maintenance Shift from "trucks only" to train and ship transportation within China Investment plan adjustment Variance Reduction • Decrease number of overlapping models • Reduce number of component variances ■Add models in major growth segments Volkswagen Group China - Balancing the "New Normal" Financials Investments ■New organizational structure • • Enhance responsibility in China • Flexible and decision-oriented structure . . Improved information flow and lead-time Entrepreneurial spirit Project house working environment e.g. NEVS Financial Services 36#37VOLKSWAGEN GROUP CHINA Volkswagen Group China Investor Presentation Carsten Isensee Executive Vice President Finance, Volkswagen Group China Volkswagen Group China – Balancing the "New Normal" 1. Financials 2. Investments 3. Financial Services Volkswagen Group China - Balancing the "New Normal" Financials Investments Financial Services 37#38VOLKSWAGEN GROUP CHINA Investments of our Joint Ventures in China are fully self-funded Joint Venture investments Prior planning as of November 2014 | Planning as of November 2015 €22 bn Prioritization and focus on investments ~ €4.4 bn Increased investments in development for digitalization, new energy vehicle technology and autonomous driving New attractive models to address the needs of our discerning Chinese customers ~ €4.4 bn 2 2015 - 2019 Ø per year 2016 Volkswagen Group China - Balancing the "New Normal" Financials Ongoing investment plan adjustment process to take latest market developments into account Capacity expansion through investments in existing and future factories for vehicles as well as components Investments Financial Services 38#39VOLKSWAGEN GROUP CHINA Volkswagen and its partners invest in capacity expansion and modernization of factories to lower the CO2 emission output Production sites and capacity New vehicle plants Vehicle plants expansions New component plants Component plant expansion Existing plants Urumqi Changchun Dalian Tianjin Qingda Chengdu Nanjing Shanghai Yizheng Changzhou Changsha Ningbo Foshan towards 3,420 268 = ~110% ~5 million New plants and capacity expansions Vehicle plants New plants Tianjin (FAW-VW) Qingdao (FAW-VW) Capacity increase Foshan (FAW-VW) Chengdu (FAW-VW) Ningbo (SAIC VW) Component plants New plants Changchun (FAW-VW) Qingdao (FAW-VW) Capacity increase Tianjin (VW ATJ) ŠKODA 2,662 Volkswagen Audi 490 Production 1) 2015 Capacity 2) 2015 1) Actual production volume in '000 vehicles Capacity 2) 2020 2) Installed capacity on the basis of 250 working days. Volkswagen Group China - Balancing the "New Normal" Financials CO₂ measures in place to reduce emissions Investments Financial Services 39 39#40VOLKSWAGEN GROUP CHINA Sustainable and efficient production is supporting the environment and is giving us a competitive advantage Volkswagen Group's global environmental standards throughout the whole production process Waste Energy EUGLBA CO2 CO₂ CO³ Water Ma Philosophy of our environmental management We build and extend production facilities according to advanced environmental technologies, e.g. Wastewater treatment & reuse systems Online energy metering systems Waste management systems etc. We continue to reconstruct our existing plants and upgrade the production technology, e.g. • Solvent . emissions • Natural gas boiler Photovoltaic power generation systems Combined heat & power systems Water-base paint shops etc. Volkswagen Group China - Balancing the "New Normal" Financials Investments Financial Services 40#41VOLKSWAGEN GROUP CHINA Investment in attractive new products - 10 additional SUVs and 15 NEVs to be produced locally within the next 3-4 years 10 additional locally produced SUVs in China within the next 3-4 years ŠKODA C 15 locally produced New Energy Vehicles in China within the next 3-4 years Phase 1 Audi A6 L e-tron Volkswagen Phideon PHEV further Plug-in Hybrids Phase 2 Pure Electric Vehicles Volkswagen Group China - Balancing the "New Normal" Financials Investments Financial Services 41#42VOLKSWAGEN GROUP CHINA Core components of our plug-in hybrids and pure electric vehicles to be localized Electric powertrain components Further components BEV PHEV Battery Electric Vehicle Plug-in Hybrid Electric Vehicle High Voltage Heater BEV PHEV Air cond. compressor BEV PHEV BEV PHEV PHEV BEV PHEV BEV PHEV BEV Electric Break booster PHEV Modified Engine Gear box & E-Machine >> Power electronics Volkswagen Group China - Balancing the "New Normal" Battery system We plan to localize all our core components for NEVs in China Financials Investments Financial Services 42#43VOLKSWAGEN GROUP CHINA Volkswagen is making digital transformation a top priority with focus on digitalization and autonomous driving Volkswagen Group Future Centers • Three new Volkswagen Group Future Centers in Silicon Valley, Potsdam and Beijing Approach: Designers and digitalization experts work hand in hand to create the car of the future Our Goal Best in class customer experience, interface design and user friendliness, new interior concepts, integration of infotainment and entertainment systems 20th Century: Engine is the core of the automobile Top fields of use Individual urban mobility 21st Century: Self-driving system is the core of the automobile Commercial vehicles Premium cars Public transport- ation Group is building on strong knowledge base - initiative started to get to market ahead of competitors Volkswagen Group China - Balancing the "New Normal" Financials Investments Financial Services 43#44VOLKSWAGEN GROUP CHINA Volkswagen Group China Investor Presentation Carsten Isensee Executive Vice President Finance, Volkswagen Group China Volkswagen Group China – Balancing the "New Normal" 1. Financials 2. Investments 3. Financial Services Volkswagen Group China - Balancing the "New Normal" Financials Investments Financial Services 44#45VOLKSWAGEN GROUP CHINA Volkswagen Finance (China) - Gaining share in an expanding market Growing penetration of financing business Retail finance penetration (% of deliveries to customers for Volkswagen Group) Highest customer satisfaction¹) 2007 Cash Finance 90% 10% 8% 2% 2016 H1 Cash Finance 63% 37% 25% 12% 2018e 69 69 57 Cash Finance 50 55 VW FS Others VW FS Others VW FS Others Average Total Volkswagen Finance Other Banks Credit AFC2) Cards 1) 2014-2015 China Auto Finance Consumer Behavior Report (Conducted by Ipsos and VWFC) 2) Other Automotive Finance Companies Financial Services China: Strategic growth dimensions Leasing / Credits Fleet Management Volkswagen Group China - Balancing the "New Normal" Used Cars Financials New Mobility After Sales / Insurance Investments Financial Services 45#46VOLKSWAGEN GROUP CHINA Volkswagen Finance (China) is establishing a well deversified funding structure Strategic funding sources Actual funding allocation Bank Lines RMB17.1 bn Deposits ABS 37% 13% DCM RMB6.0 bn 18% Capital Markets Automotive RMB8.2 bn 13% 2% 16% ABS RMB6.1 bn Others RMB1.2 bn 1% Dealer Deposits Equity RMB7.3 bn RMB0.4 bn Volkswagen Group China - Balancing the "New Normal" Financials Investments Financial Services 46#47VOLKSWAGEN GROUP CHINA • . Successful capital market transactions in the local market Asset Backed Securities Driver China one: RMB 0.8bn (08/2014) Driver China two: RMB 1.9bn (07/2015) Driver China three: RMB 3.0bn (01/2016) Driver China four: RMB 3.0bn (07/2016) First ABS transaction in China with international ratings; Driver China one was placed with both, national and international investors First ABS transaction in China certified by TSI (True Sale International). The Banker DEALS OF THE 中国化 YEAR 2015 China Securitization Forum IFR IFRASIA AWARDS 2014 AWARDS 2014 IFLR INTERNATIONAL FINANCIAL LAW REVIEW GlobalCapital Asia Awards ASIAMONEY ASIAN A THE Asset TRIPLE A WARDS • Debt Capital Markets 1st bond: RMB 2bn (05/2016), due 05/2019 The issue was oversubscribed 2.2 times "Our business in China has grown strongly during the last few years. The fact that we are now also active in the unsecured capital market in China following the establishment of our ABS programme is a consequence of our clearly defined refinancing strategy." (Frank Fiedler, CFO Volkswagen Financial Services AG) Volkswagen Group China - Balancing the "New Normal" Financials Investments Financial Services 47#48VOLKSWAGEN GROUP CHINA Volkswagen Group China Investor Presentation Weiming Soh Executive Vice President, Group Corporate Strategy and Group Sales & Marketing, Volkswagen Group China Volkswagen Group China - Introduction to China and Volkswagen Group China Carsten Isensee Executive Vice President, Finance, Volkswagen Group China Volkswagen Group China – Balancing the "New Normal" Joachim Wedler President, Audi China Audi - Premium market leader in China Volkswagen Group China - Balancing the "New Normal" Volkswagen brand in China - Focusing on customer needs Audi Premium market leader in China 48#49WAS 3000 а Audi - Premium market leader in China Joachim Wedler, President of Audi China September 7, 2016, Beijing#50Disclaimer This presentation contains forward-looking statements and information on the business development of the Audi 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 relating to the development of the economies of individual countries, and in particular of the automotive industry, 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. The estimates given involve a degree of risk, and the actual developments may differ from those forecast. Consequently, any unexpected fall in demand or economic stagnation in our key sales markets, such as in Western Europe (and especially Germany) or in China or the USA, 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 relative to the US dollar, sterling, yen and Chinese renminbi. 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.#51Audi in China Changchun Beijing Tianjin FAW-Volkswagen Audi Production and Audi Sales Division (A6 L, A4 L, Q5, Q3) Audi China with Audi R&D Beijing Foshan Volkswagen Automatic Transmission Tianjin Audi transmission plant FAW-Volkswagen Audi Production (A3 Sportback, A3 Sedan)#52Premium leader in localization First localized long-wheel base versions Audi A6 L (since 1999) Audi A4 L (since 2009) First localized premium transmission First localized premium SUV First localized premium engine Audi Q5 (since 2008) 7 speed S tronic (since 2016) 2.0 TFSI 140/185 KW (since 2007)#53Audi continues to lead the premium market in China Most successful first seven months in company history for Audi in China Audi deliveries to customers in China (incl. Hong Kong), vehicles NO. 1 578,900 570,900 492,000 405,800 313,000 227,900 158,900 102,000 119,600 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Jan. - Jul. 2016 336.600 units +6.5%#54Audi plans to continue the growth in 2016 Every third delivery in China Audi deliveries to customers worldwide, vehicles 1,803,200 1,741,100 1,575,500 1,455,100 1,302,700 1,092,400 949,700 17% 2009 32% China: 570,900 2010 2011 2012 2013 2014 2015 Worldwide China#55Over 60% of sales volume updated New Audi A4 L to be launched on September 10, 2016 Share of models updated between December 2015 and September 2016 [in %] New models CKD: A4 L >60% FBU: Q7, RS7 plus, TTS Coupe, TTS Cabrio, R8 Coupe Facelifts CKD: Q3, A6L FBU: RS6 Avant SOSAA MI Audi A4 L IN Q3100 Audi Q3#56Audi leads the SUV growth segment SUV share of the premium market Segment leaders 18% 40% 82% 60% 2008 Jan-Jul 2016 Audi Q3 (43% share*) CLLO Since 2015: New Audi Q7 m Audi 03 IN-Q7200 Audi Q5 (31% share*) (110 *January to July 2016#57Leading a diverse market: Private buyers dominate Audi in China, customer mix Government 2011 2016 1 % 0 % Fleet customers <10% <10% Private customers >90% >90%#58Verified Top Service: Audi in J.D. Power Rankings China SSI 2016 (Sales Satisfaction Index) CSI 2016 (After Sales Service Index) NO. 1 since 2010 NO. 1 since 2013#59Financial services business is growing Financing in percent of Audi car sales in China 28% 22% 48% 46% 39% 36% 2011 2012 2013 2014 2015 2016 Jan.-Jul.#60Sustainable expansion of sales network Number of Audi dealerships in China ~230 ~170 ~150 H ~340 -290 ~450 ~430 ~ 400 2009 2010 2011 2012 2013 2014 2015 Aug. 2016 Audi ****#61Paving the way for Audi's future Strategic key areas for Audi in China New Energy Vehicles Automated Driving C-tren 3000 IN QE7001 Audi ploted dow Audipited driving Com Audi plated ding Digitalization Leden Fahrzeug Forverriegelung B#62Leading into the future: Strong focus on efficiency Efficiency programme Technology Over 20 percent reduction of average fuel consumption of local models since 2011 First localized e-tron m Audi A6 L e-tron produced in China and to be launched in 2016 Efficient components Localized 7-speed S tronic Best-in-class efficiency (with 2.0 T engine) Developed for Asia B-tran Audi Q7 e-tron Special TFSI version to be launched in China in 2017#63Audi is the leader for piloted driving Audi piloted driving AUDI AG • The next generation Audi A8 will be the first series model to master piloted driving up to a speed of 65 km/h Audi Vorsprung durcb Technik Audi R&D Beijing • • Testing Advanced Driver Assistance Systems in China since 2013 Adaption to Chinese traffic conditions Predevelopment of next generation driver assist systems.#64Audi cooperates with China's leading digital companies 2 Alibaba Group 阿里巴巴集团 Tencent 腾讯 Audi is the first premium manufacturer to offer high-resolution 3D maps in its navigations systems in China. Map data supplied by Alibaba Integration of Wechat funtions into the Audi MMI under development Baidu B Baidu Car Life to be integrated into the Audi MMI in 2017#65се Thank you