Economy

It’s not about
growth at all costs.

The Volkswagen Group keeps on growing, year after year. In 2014, for the first time ever we sold more than 10 million vehicles. That brought us closer to our corporate goal of being the world’s leading automaker by 2018. But unit sales are not the only measure of success; it’s also about profitability, customer satisfaction and sustainability.

MANAGEMENT APPROACH

Faced with challenges such as globalization, digitization or increasing regulation, it is more essential than ever for us to optimize processes across all of our brands, develop new and innovative products, and invest in our locations and in our employees. In fact, to further expand our market presence and access new markets we must first redefine mobility, and that new definition extends from electric mobility and automated driving all the way to networked mobility systems. Playing a pioneering role here is going to call for major investments.
As we strive to maintain and reinforce our economic stability against the backdrop of shifting markets and economic uncertainty, we continue to put our trust in the enormous diversification of our product portfolio and in broadbased positioning in the global markets. Our policy of adding maximum value at local level not only brings us many economic advantages but also reduces our risk exposure (see "Local Value Added“). At the same time, this approach plays an important part in supporting local development and helps us meet the different customer needs more effectively.
Ensuring stability and profitability therefore constitutes a core action area of the Volkswagen Group – providing a basis for sustainable growth and investment in the future. With this in mind we have put in place a future-oriented efficiency program called Future Tracks. We are targeting further profitable growth so as to be continuously in a position to invest in the future of the Volkswagen Group. By applying intelligent innovations and technologies, we are aiming for global leadership in customer satisfaction and quality. However, the Group’s sustainable success also depends on how promptly we identify risks and opportunities and how consistently we comply with legislation, ethical principles and self-imposed obligations. Consequently, far-sighted risk management and a stringent compliance organization are of decisive importance for us. We not only apply high standards to our own activities but also demand compliance with these standards from our suppliers.

Market Developments

In view of the worldwide patterns of demand for cars and commercial vehicles, the growth markets of Asia, South America and Central and Eastern Europe are particularly important to the Volkswagen Group. These markets offer great potential, although in some countries in these regions the background conditions present obstacles to growing our local unit sales. In Russia, for example, the political crisis and its economic consequences have put a brake on market growth. Nevertheless, Russia has the potential to become one of the world’s largest automobile markets. The US vehicle market again showed tangible growth in 2014, thanks to the positive development of the economy and attractive financing conditions. However, given that the crisis-led backlog in replacement demand has largely been met, market growth now looks set to slow down. In Brazil the economic situation worsened following a promising start to the reporting period, with a negative impact on the vehicle market. Rising inflation and interest rates meant that vehicles became more expensive. To strengthen our competitive position here, we offer models that have been developed specifically for the Brazilian market and are manufactured locally, including the Gol and the Fox. China, the largest market in the Asia-Pacific region, continued to grow in the reporting period. Here, demand for motor vehicles will continue to rise in the coming years, driven by the growing need for personal mobility. Growth rates looks set slow down, however, and will likely shift from the major cities on the coast to the inland regions.

Policies and Guidelines

Our business activities are governed by our policies and the strategic goals of the Group:

  • The Volkswagen Group corporate values: Defined in 2002, these lay the foundations for our activities (see "Sustainable Management“).
  • The Volkswagen Group Code of Conduct: Introduced in 2010, the Group-wide Code of Conduct (see "Compliance“) must also be respected by our business partners.
  • The Volkswagen Group requirements regarding sustainability in its relationships with business partners (Code of Conduct for business partners): Originally defined in 2006, the requirements were revised in 2013. They set out the Group’s expectations concerning its business partners’ conduct with regard to central environmental and social standards. 18
  • Policy on Taxes and Duties: Drawn up in 2014, this describes our Group-wide approach to the topic of tax and duties. 19
  • Quality Policy: In 2008 the Volkswagen brand issued a Quality Policy which covers product quality, process quality, customer satisfaction and on-time delivery. Similar policies are in force at the other Group brands.

Modular Strategy

One key instrument in the pursuit of our economic goals is the Modular Transverse Matrix, also known by its German abbreviation MQB. The MQB offers a uniform technical framework for virtually all future Volkswagen Group vehicles with a transverse engine. It enables us to use identical components in different models, reducing both development costs and production times. By enabling the replacement of individual components, the MQB helps us respond rapidly to changing customer wishes. In the long term it can be used by multiple Group brands to build different categories of vehicle on one and the same production line. In the event of radical changes in the marketplace, the MQB can thus help avoid excess capacities and misallocation of resources. In addition to conventional gasoline and diesel engines, the MQB also gives us the opportunity to integrate alternative powertrains, such as gas, hybrid, or electric drives. In view of the varied and changing CO2 regulation scenario worldwide, this represents an invaluable added measure of flexibility. New driver assistance systems such as road sign or pedestrian recognition, the traffic jam assistant or Emergency Assist can also be installed with the MQB. The MQB was introduced at the Volkswagen, Audi, SEAT and ŠKODA brands in 2012 and by 2014 more than 2.5 million vehicles had been built on this basis. Additional models based on the MQB in 2014 included the Audi A3 e-tron, the Volkswagen Passat and Passat Estate, and the Golf models Golf Estate CNG, Golf GTE, e-Golf and the Golf Sportsvan. The MQB’s counterpart on the production side is the Modular Production Matrix (MPB), which mandates equipment-related standards for the entire production process.

Quality Assurance

The Volkswagen Group pursues a uniform quality strategy worldwide. The growing number of production locations and marketspecific model variants leaves quality assurance – from product development to customer service – facing major challenges. In order to live up to our high quality standards worldwide, quality assurance activities are governed by a central body at crossbrand level. This ensures a high degree of organizational and thematic standardization. The Group networks the brands and regions and controls the overarching processes in this context. Responsibility for product quality lies with the respective markets and regions. Across all locations and over the entire product life cycle, some 16,000 employees are involved in quality processes, helping to safeguard our growth by avoiding and eliminating errors.

KEY FIGURES BY MARKET 1

Show table
Vehicle sales   Sales revenue  
Thousand vehicles/€ million   2014   2013   2014   2013  

Europe/Other markets
4,430 4,209 122,858 117,062
North America 879 901 27,619 27,434
South America 794 987 13,868 17,495
Asia-Pacific2 4,114 3,632 38,113 35,016
­Volks­wa­gen Group2 10,217 9,728 202,458 197,007

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.

Automated Driving Concepts from Audi and Scania

Automated Driving

For the past 25 years, the Volkswagen Group has been developing a variety of automated driving concepts, starting with driver assistance systems that enhance road safety by providing optimal driver support, while also reducing driver errors. In the future however, the main focus of development work will be on communication-based vehicle speed control, designed to improve overall traffic flow – which at the same time means reduced energy consumption.
Audi is performing pioneering work in the field of automated driving. From Audi Adaptive Cruise Control with Stop & Go function to traffic sign recognition, driver assistance systems designed to ease the load on the driver are already available across the entire Audi model line-up. Later this decade, the brand will also introduce newly developed “piloted driving” technologies. In certain situations, such as driving in heavy, stop-go traffic or parking, these systems can take complete control of the vehicle – if the driver wishes. Audi, which became the world’s first carmaker to receive a license to test autonomous vehicles on public roads in the US state of Nevada in 2013, will open a new chapter in driver assistance systems in 2015 with the launch of the new Audi Q7, featuring solutions such as the Predictive Efficiency Assistant, the Trailer Assistant and Adaptive Cruise Control including the Congestion Assistant. Other Group brands are developing similar concepts. For example, in 2012 the Volkswagen brand presented its Temporary Auto Pilot system, for autonomous driving on motorways at speeds of up to 130 km/h. A production version of this system could be ready in the near future.
In the commercial vehicle sector too, intelligent electronic assistance systems are an important development focus. Scania already offers driver assistance systems that support truck drivers in their day-to-day work, strengthen safety and reduce fuel consumption. Recent examples include the autonomous emergency braking system, which was launched in 2013 and became a mandatory requirement in 2014. This system automatically brakes the vehicle combination if an obstruction on the road is detected and the driver fails to react. The next generation of intelligent electronic assistance systems, now being developed at Scania, offers various autonomous driving capabilities to enhance efficiency and safety, using a range of sensor technologies such as cameras, radar and ultrasound to help guide the vehicle. These systems are now being implemented for the mining industry. In parallel, Scania is developing systems for autonomous high-speed vehicle platooning on motorways, a technology that offers promising potential, in particular for reducing fuel consumption. Scania is currently leading the European Union’s COMPANION research project, which is exploring the potential of vehicle platooning and assessing what legislative changes would be required to implement it.

Intelligent vehicles will mean fewer accidents, fewer traffic jams and less congestion.

According to the UN Convention on Road Traffic, as amended in 2014, automated systems are now permissible as long as they can be overridden or switched off by the driver at any time. Even here, though, change could be on the way. Computers are now capable of driving more safely than distracted or tired drivers, and their reactions are quicker and more precise. As well as reducing accidents, the benefits of intelligent vehicles also include less congestion and reduced driving stress. The Volkswagen Group’s work on these highly complex technologies is closely focused on meeting the evolving needs of modern society.