Management Approach

In the 2015 financial year, the global economy grew at a moderate rate, slightly below that of the previous year. Global demand for vehicles continued to rise. Amid increasingly difficult conditions in some of our main markets, deliveries to Volkswagen Group customers were down slightly year-on-year.

The Volkswagen Group selectively expanded key segments of its model portfolio over the reporting period. In addition, successor and upgrade products were presented for important brand models, many of them based on the Modular Transverse Matrix (MQB) platform. The Group’s product range now comprises 337 passenger-car, commercial-vehicle and motorcycle models and their derivatives.

The diversification of our product portfolio and our broad-based positioning in the global marketplace has further strengthened our stability and profitability.

Going forward, people’s mobility needs will undergo a dramatic transformation. In the future, more and more people will rely on mobility-on-demand services instead of their own cars. In large cities in particular, mobility will become ever more flexible, automated and efficient – and not always with human drivers behind the wheel. These changes are presenting us with opportunities which we intend to leverage by applying smart innovations and technologies. The Volkswagen Group’s research and development activities in the 2015 financial year concentrated on expanding our product portfolio and improving the functionality, quality, safety and environmental compatibility of our products. A central challenge for Volkswagen is to identify new developments in society, politics, technology, the environment and the economy at an early stage. They form the basis for many of our innovations, and for our business success.

The Volkswagen Group’s research constantly addresses the latest trends and we have established research offices in the key global automotive markets, including China, Japan and the United States. We are also steadily innovating in all safety-related areas, including vehicle safety, road safety and the safety of each and every one of our products.

Our policy of adding maximum value at local level is a vital part of this approach – and with good reason. Not only does it allow us to reap numerous economic benefits, it also minimizes our risk exposure. In each case, we are an important local driver of growth while at the same time being in a better position to accommodate our customers’ wishes.

Our Company’s long-term success depends on promptly identifying the risks and opportunities arising from our operating activities, and taking a forward-looking approach to managing them. A comprehensive risk management and internal control system helps the Volkswagen Group deal with risks in a responsible manner.

Volkswagen has had a distinct and recognized Group-wide compliance management system for a number of years. In 2015, compliance continued to play an important role in the Governance, Risk and Compliance (GRC) organization in the Volkswagen Group. The Supervisory Board of Volkswagen AG resolved to create a new Board of Management position for Integrity and Legal Affairs, effective January 2016, to visibly reinforce compliance throughout the Company.

Market Developments

Global demand for passenger cars reaches new high

Worldwide, the number of new passenger car registrations increased slightly by 2.6% to 75.6 million vehicles in the 2015 financial year, exceeding the previous year’s record level. While Western Europe, Central Europe, North America and the Asia-Pacific region recorded significant increases in some cases, volumes in the passenger car markets in Eastern Europe and South America were again substantially down on the previous year.

Sector-specific environment

The global passenger car markets returned a very mixed performance in the reporting period: demand recovered in key sales countries in Western Europe, the Chinese market expanded somewhat more slowly than in previous years and Russia and Brazil saw considerable declines.

The sector-specific environment was significantly influenced by fiscal policy measures, which made a substantial contribution to the mixed trends in sales volumes in the various target markets during the 2015 financial year. The instruments used for this were tax reductions or increases, incentive programs and sales incentives, as well as import duties. The automotive industry has also been subject to increasingly stringent regulations at international level, especially related to exhaust emissions.

Non-tariff trade barriers designed to protect various countries’ domestic automotive industries made the free movement of vehicles, parts and components more difficult. Protectionist tendencies were particularly evident where markets were on the decline. This contributed to increasingly volatility in the global procurement and sales markets.

In response to this changing environment, we intend to focus more strongly on high-growth segments and regions – such as the economy segment in China and India. In addition, we are aiming to continue our growth in the fields of e-mobility, autonomous driving and connected mobility, where our new Mobility Solutions unit will act as a driving force.

Key Figures By Market1

  Vehicle sales Sales revenue
Thousand vehicles/€ million 2015 2014 2015 2014
Europe/Other markets 4,524 4,430 132,535 122,858
North America 941 879 35,384 27,619
South America 540 794 10,148 13,868
Asia-Pacific2 4,005 4,114 35,225 38,113
Volkswagen Group2 10,010 10,217 213,292 202,458
 
1 All figures shown are rounded, so minor discrepancies may arise from addition of these amounts.
2 The sales revenue of the joint venture companies in China is not included in the figures for the Group and the Asia-Pacific market.

Quality Assurance

As we expand globally, we aim to guarantee the satisfaction of our vehicle customers by offering products and services of the highest quality. In this context, the growing number of production locations and market-specific model variants presents a major challenge. This is why the Volkswagen Group pursues a standardized quality strategy worldwide. Quality assurance activities are governed by a central body. All Volkswagen brands and regions reflect our high quality standards, both organizationally and thematically. The Group networks together the brands and regions and centrally manages the overarching processes. Responsibility for product quality, however, lies with the Group brands and regional locations. Across all locations and over the entire product lifecycle, some 16,800 quality assurance employees are involved in the relevant processes, helping to avoid and eliminate errors and ensuring that our customers receive the high-quality products that they have come to expect from us.

Going forward, we will further boost the application of the dual-control principle between the divisions and Quality Assurance in our product conformity assessments. Among other measures, we have set up control mechanisms between Development and Quality Assurance, bringing a “second pair of eyes” to the assembly certification process.

The Modular Strategy

The Modular Transverse Matrix (MQB) was developed to ensure that all of the Group’s transverse-engine vehicles can use identical components in the future. MQB allows development costs and production times to be reduced, thus helping us to achieve our economic targets so we can avoid surplus capacity and misallocation of resources. Multiple Group brands can implement MQB, which enables us to build different classes of vehicle on the same production line. This means that we can respond more effectively to our customers’ wishes, as individual components can be swapped out more quickly. In addition to conventional gasoline and diesel engines, MQB can be used for gas, hybrid and electric drives, making our production process more flexible.

And finally, driver-assistance systems such as road sign and pedestrian detection, traffic-jam assistance, emergency assistance and others can also be installed in MQB-based vehicles. The global rollout of MQB is now well advanced, and has been completed in China, South Africa, Brazil and Mexico. In 2014, just 12 plants were using the MQB platform; by the end of the reporting period, this figure had increased to 16, and by 2016, it should have risen to 20. The MQB platform’s share in the Group’s total production output was 25% in 2015.

By reducing the complexity of the production process and improving economic efficiency, the MQB platform gives us a major advantage. Even so, we believe there is still untapped potential for further cost savings and synergies.