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Annual Press Conference:
Diess Praises Employees All Over the World –
Strong 2017 Balance

During the annual press conference in Wolfsburg, Germany, on Wednesday, CEO Herbert Diess began by talking about the brand’s staff. "My thanks go to all of our employees all over the world – in Germany, China, Latin America, the US, Mexico, and many other countries," said Diess in front of more than one hundred national and international journalists. To employees, he emphasized, "You’ve all done extraordinary things in the past year, sometimes under difficult circumstances. And you’ve proved how strong this team is. I’m proud of you!"

"2017 showed the strength of Volkswagen and its employees."

Overall, the Volkswagen brand can look back on a successful fiscal year in 2017: It sold 6.23 million vehicles and increased its turnover to 80 billion euros. Operating profits pre-exceptionals increased again for the first time in five years, reaching its highest level since 2012 at 3.3 billion euros. The returns (pre-exceptionals) improved from 1.8 percent last year to 4.1 percent. This means the Volkswagen brand has exceeded its goals for 2017.

"2017 showed the strength of Volkswagen and its employees. We reached a turning point and became significantly more competitive in all areas. The implementation of the TRANSFORM 2025+ strategy is progressing and yielding palpable results. From the Pact for the Future to the SUV offensive, all the way up to the regional strategies, all our initiatives are contributing to Volkswagen’s positive development. We are going to use this momentum and keep up the pressure when implementing our strategy in 2018," said Diess.

All key financial figures improved

Last year, the brand sold 6.23 million vehicles to customers – an increase of 4.2 percent over the previous year. With the Golf, Tiguan, and Polo, three Volkswagen models rank among the ten best-selling cars in the world. The brand registered the strongest growth in the SUV segment: 200,000 more units of the Tiguan were sold than last year, at a total of 720,000 vehicles. The Atlas, available in the US, and its Chinese sister model, Teramont, are already exceeding expectations just a few months after their launch. And the T-Roc, which has been available since the fall of 2017, is also in high demand. One out of seven Volkswagens sold is now an SUV. This is set to climb to up to 40 percent by 2020.

The heavy demand for the brand’s products has made for significantly higher turnover. It rose by roughly eight percent – adjusted for structural changes – compared to the previous year’s value, to 80 billion euros.

The brand’s financial performance also saw positive development: The operating profit, referred to as the EBIT in professional jargon, pre-exceptionals, rose by roughly 77 percent to 3.3 billion euros; accordingly, the EBIT margin improved significantly to 4.1 percent. Originally, the brand had set a return of 2.5 to 3.5 percent as its goal for 2017. The exceptionals from the diesel crisis strained the 2017 operating profit with 2.8 billion euros. It was still 5.2 billion euros in 2016.

SUV offensive and Pact for the Future as primary profit drivers

The key drivers of this positive development in earnings were volume effects and an improved product mix. Moreover, product costs were successfully reduced. Concentration on the Modular Transverse Matrix (MQB) in particular is paying off here. 40 percent of all vehicles shipped in 2017 were based on the MQB, roughly twice as many as in 2015. This positive trend is set to accelerate in the coming years. Despite the ongoing model offensive, fixed costs rose only slightly.

The Pact for the Future has made an essential contribution to our improved competitive standing. The agreed-upon measures are set to yield an annual positive effect on earnings of 3.7 billion euros starting in 2020, 3.0 billion euros of which will be in Germany alone. Last year, all of the necessary 9,200 partial retirement contracts were signed, which will now gradually take effect until 2020. Productivity in the German locations was also increased. The Wolfsburg (Tiguan and Touran), Emden, Salzgitter, and Kassel plants in particular improved at an above-average rate.

Regions: effective turnaround plans

The regions were also an important factor for success in the last financial year. Volkswagen was able to increase its market share in all major regions of the world and consolidate its market position with models developed specifically for the regions. In the US, Volkswagen recorded an increase in deliveries for the first time since 2013 (+5.2 percent), while the market as a whole shrunk. The brand also saw double-digit growth in Russia (+20.4 percent) and Brazil (+19.7 percent). In China, Volkswagen increased its shipments by 5.9 percent and was the world’s first brand to ship more than 3 million vehicles in a single market.

"With this improved result, the brand is making a significant contribution to the success of the entire Group."

Says Herbert Diess, "We are heading in the right direction. With this improved result, the brand is making a significant contribution to the success of the entire Group. But we’re just getting started. With further progress in our core business, we are strengthening our foundation to make Volkswagen the global leader in electromobility by 2025."

Electro offensive: new "e-mobility" management division

Volkswagen will intensify preparations for the start of the electric offensive in 2018. With the newly created “e-mobility” management division under the leadership of Thomas Ulbrich, the brand is bundling its electric activities and anchoring this key topic of the future at the board level.

Starting in 2020, the Volkswagen brand plans to introduce a completely new generation of purely electric cars based on the Modular Electrification Toolkit (MEB). The preparations for this are proceeding according to plan. For example, the brand will expand the Zwickau plant into a European competence center for e-mobility for around one billion euros, where it will produce all MEB vehicles for the European market. There, up to 1,500 MEB vehicles are set to be produced per day. Further leading plants are planned in China and North America. This means that the new generation of electric cars can start up almost simultaneously in the three major regions.

As the first model of the I.D. family, the Volkswagen I.D. will debut in 2020. Vehicles to follow at short intervals include an electric SUV – the I.D. CROZZ – and the I.D. BUZZ as the van of the future. Just a few days ago, Volkswagen offered a glimpse of the future flagship of the I.D. family with the I.D. VIZZION. The study illustrates the enormous potential of the MEB. Volkswagen is also creating a comprehensive ecosystem around the vehicles, ranging from charging stations to green electricity and digital services. This makes switching to an electric vehicle as easy and attractive as possible.

"The high demand for the e-Golf shows that electric vehicles are increasingly gaining acceptance. If the technology and price are right, customers are happy to switch. With the I.D. family, we’re going to be at the forefront of the electric movement," said the CEO.

2018 forecast: shipments, sales, and earnings to continue to climb

Volkswagen has had a good start to the 2018 fiscal year. The brand shipped over 940,000 vehicles worldwide in January and February, surpassing the figures for the same period last year by 6.5 percent. In the brand’s home market, Germany, in particular, there’s a clear upward trend, with a 13.3 percent increase in sales.

In the further course of the year, the Volkswagen brand intends to continue this upward trend and further increase shipments, sales, and earnings. The SUV offensive will reach a new high point with the new version of the Touareg, among other things. In late 2018, Volkswagen will launch an entirely new segment with the T-Cross. In addition, four new SUVs are specially planned for the Chinese market this year.

"With TRANSFORM 2025+, we’ve set off on the path towards positioning Volkswagen to be fit for the future. After a good start, we are now going to maintain our speed. Our electric strategy is fully on schedule. If we keep up the momentum we’ve had thus far, I am confident that 2018 will be another good year for Volkswagen and that we will succeed in the long-term transformation of the brand," Diess concluded.