Economy

LOCAL VALUE ADDED

Local production in important sales markets is a core element of our growth strategy. Lower logistics costs, procurement prices in line with local market conditions, elimination of import duties and immunity from volatile exchange rates contribute to the competitiveness of our brands. And people in the regions profit as well. Not only do we create skilled jobs, but our production locations attract supplier firms to locate in the area, contributing to local economic development.

Economic Benefits of Localization

The concept of localization helps us to open up new markets. We observe the different markets and specific customer needs and bring our products into line with the local requirements. Thanks to the MQB we have a uniform global platform on which to efficiently make specific regional adaptations to our models. In China, for example, specially modified vehicles and models designed for that market form the cornerstone of our growth strategy. Today our product portfolio in China spans all segments, from compact cars to luxury sports cars. And new vehicle categories such as SUVs were incorporated into local production activities at an early date.

Contributing to Regional Development

Through our focus on the localization of value added, we create jobs in our production locations and generate significant upstream and downstream employment effects at supplier companies, service operations and other local contractors. In Pune (India) for example, since the Volkswagen location was set up 69 new supplier companies have been founded, creating some 13,500 direct and indirect jobs. The decision in 2014 to produce a new SUV at the Chattanooga location (USA) also created 2,000 additional jobs at the Volkswagen plant and added jobs at local suppliers. And thanks to our sustainable supplier development efforts in Kaluga (Russia), at the end of 2014 our plant there was working with a total of 60 suppliers on the locally produced models. Together with our joint venture partners, we are set to invest a total of €18.2 billion in new locations and products in China from 2014 to 2018 – the largest investment program in the history of the Chinese automobile industry. Here the Group’s investments take account of the  Chinese government’s efforts to continue growing and developing the economy in the western part of the country.
At our locations we also support a large number of projects which foster social development, the arts, education and nature conservation and promote regional economic development (see "Projects Worldwide“).

The Volkswagen Polo is built at the Pune plant in India.

Focus Topic

SUVS:
Where emotion meets reason?

In no other segment has demand risen so steeply in recent years as in the category of sport-utility vehicles or SUVs. The ideal view of the road and a high degree of comfort and safety make these off-roaders the ideal everyday companion for customers. But on account of their size and the associated higher level of fuel consumption, these models often come in for criticism from the media or environmental organizations as gas guzzlers and climate killers.

Above all, the expansion of the worldwide SUV market as the segment with the fastest relative growth reveals the scale of the challenges that every automaker faces in respect of compliance with CO2 emissions regulations. Innovations, above all in the fields of lightweight design, aerodynamics and – in particular – electrification are in greater demand now than ever before.
Electrification, however, needs to become more widespread if this type of drive is to become accepted as “normal”. This will also call for reduced cost structures, leading to marked reductions in the surcharges for electric drive and thus to the kind of attractive prices that are necessary. On the way to this goal we have already launched models including the Golf GTE, e-up!, eGolf, A3 e-tron and Cayenne S E-Hybrid. Electrified concept vehicles such as the Cross Coupé GTE or the Sport Coupé Concept GTE signpost the way forward here. The Volkswagen Group already has the highest proportion of electrified models in its product portfolio, offering a combination of fun at the wheel and environmentally compatible consumption, driving the more widespread acceptance of electric mobility, and helping sustainable mobility concepts to make a breakthrough.

Dr. Axel Kalthoff, Head of Sales Coordination,
Volkswagen Group

Innovations in the fields of lightweight design and aerodynamics will enable us to achieve further increases in efficiency. Compared to their predecessors, the latest versions of the Volkswagen Touareg and the Audi Q7 are far lighter. Further savings are achieved through the ongoing enhancement of our energy-efficient engines, so that the Touareg consumes less than 10 liters per 100 kilometers and the Tiguan just 5.3 liters.
In this way, the Volkswagen Group manages to resolve apparently contradictory aspirations such as compliance with climate protection goals on the one hand and responding to the simultaneous rise in individual customer requirements on the other, while making an express commitment to fulfilling its ecological responsibilities, today and in the future.

The concept of localization helps us open up new markets and at the same time contributes to regional development.

Contributing to the Clean Energy Revolution

Subsidies and Taxes

In 2014, for the expansion of its activities in the field of research and development and in the creation of new production locations the Volkswagen Group received €883 million in government grants related to income.
At the same time, thanks to its localization strategy, through taxes and duties the Volkswagen Group helps ensure that state and municipal investments in infrastructure and public welfare are possible in many parts of the world. It is our policy to pay taxes wherever we add value. In 2014 we paid the worldwide tax authorities a total of around €4 billion in income tax. This represents a tax rate of 25.2% for the Volkswagen Group worldwide. Well over half of these payments were accounted for by Germany.