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Annual Report

Development of automotive markets

For 2011, we expect the development of the automotive markets to vary in the individual regions. Overall, global demand for new vehicles in 2011 is expected to exceed demand in 2010. We are expecting an overall positive performance in 2012 as well.

In some Western European countries, the national debt and the expiry of subsidy programs in 2011 will impact demand for new vehicles. At the same time, export-driven economies in Western Europe will benefit from healthy growth in Asia, where markets recovered more quickly in 2010 than previously thought. We expect continued positive trends in the strategically important markets in China and India, and are also anticipating high demand for vehicles in North and South America.

In 2012, the negative effects resulting from the expiry of government support measures will diminish. Therefore, we expect that demand for passenger cars will increase again, in particular in the regions where the Volkswagen Group has a presence.

The Volkswagen Group is well-prepared for this diverse development in the automotive markets. We are confident that our broad product range incorporating the latest generation of consumption-optimized engines gives us a global competitive advantage. We are systematically pursuing the goal of offering each customer mobility and innovation according to their needs and sustainably strengthening our competitive position.

North America

For 2011, we expect the economic climate in the USA to recover further from the effects of the financial and economic crisis. However, the market continues to be adversely impacted by higher fuel prices and the reluctance to lend. We nevertheless expect a slightly positive trend in the US automotive market in 2011 due to rising consumer confidence, which is expected to continue in 2012 with the growing consolidation of the economy. In addition, further impulses are also expected to stimulate demand for passenger cars and light commercial vehicles in the Canadian and Mexican markets.

South America

The global economic stabilization will have a positive effect on the South American markets. For 2011 and 2012, we expect Brazil in particular to benefit from continued strong demand for commodities and that demand there for new vehicles will increase moderately.

Asia-Pacific

We continue to see growth potential for the markets of the Asia-Pacific region in 2011 and 2012. The growing need for individual mobility will increase demand in particular in the markets in China and India. However, rising commodity prices, tighter emissions standards and a decrease in government subsidies may have an adverse effect on demand for automobiles. In addition, we assume that restrictions on automobile registrations in metropolitan areas that have been announced will curb growth in China. In Japan, we anticipate a considerable decrease in demand for automobiles in 2011 following the expiry of the support program in 2010, before the market picks up again in 2012.

Europe/Remaining markets

We are expecting uneven growth in Western Europe. Some Western European countries are recovering more quickly than originally expected. By contrast, the expiry of incentive programs will also impact some core European markets in 2011 – for example the UK and France – since many vehicles were purchased earlier than planned in 2009 and the first half of 2010. To some extent, this will shift the negative impact of the financial and economic crisis in the automotive markets into 2011. In some other main markets – for example Spain and Italy – the recovery will be slowed by the high public debt and drastic austerity measures imposed by governments. Overall, we expect demand for passenger cars in Western Europe to decline in 2011. In 2012, the negative effects resulting from the expiry of government support measures will diminish, resulting in a rise in demand again.

We expect the markets in Central and Eastern Europe to record growth again from 2011. Demand for automobiles is recovering quickly following the economic crisis especially in Russia. After the automobile market there had contracted by half in 2009, demand has been growing again since mid-2010 – supported by the economic stimulus program introduced in March 2010 and subsidized loans to purchase vehicles.

The South African market will benefit from sustainable economic stabilization in 2011. However, we anticipate that market growth will ease off somewhat again from 2012 as an interest rate rise is likely from the end of 2011 due to rising consumer prices.

Germany

The German passenger car market benefited to a particularly strong extent from the government scrapping premium in 2009. Demand slumped as expected in 2010 after the program expired, albeit less than feared. This is attributable in particular to restored consumer confidence and the rebounding economy. As a result of the sustained improvement in underlying economic conditions, we expect demand for passenger cars to rise in Germany in 2011. This trend is also expected to continue in 2012.

DEVELOPMENT OF MARKETS FOR HEAVY TRUCKS

After demand for heavy trucks rose in 2010, we also expect higher growth in the global markets in 2011 and 2012.

Boosted by the economic upturn, demand in the USA will continue to pick up. In the Brazilian market, vehicle sales are expected to increase due to the long-term positive economic climate and the existing government support measures.

Following rapid growth in 2010, demand in China will also develop positively in the future as the logistics flows increase, in particular in long-distance transportation.

In Western Europe, we expect an increased sales volume, primarily as a result of the positive economic development and the renewal of fleets due to postponed investments in replacements.

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