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Annual Report

Summary of expected developments

The Volkswagen Group’s Board of Management expects the intensity of competition in the international automotive markets to increase further in the coming years. The underlying conditions for the automotive business are becoming more and more challenging. Markets may be recovering more quickly than originally anticipated, but uncertainties remain from global economic development. In particular the financial markets continue to entail risks resulting above all from the difficult debt situation of many countries.

We expect the global automotive market to continue to grow in 2011 and 2012. Until then, we anticipate the strongest growth in the Asia-Pacific region as well as in South America, the USA and Russia. The Volkswagen Group already has a large share in many of these markets. We will strengthen this position by expanding production capacities and building more local production facilities that in part produce some vehicles developed specifically for these countries. The Western European market for passenger cars excluding Germany is expected to stagnate in the coming years due to the general economic uncertainties. The Volkswagen Group will maintain its leading market position in this region.

Following the increase in demand for heavy trucks in 2010, we expect further growth in the global markets in 2011 and 2012.

We therefore expect our sales to customers to exceed the previous years’ levels overall in 2011 and 2012. Our Chinese joint venture companies, as well as the new production facilities in Russia, the USA and India, will make a large contribution to this development.

The situation in our core market in Western Europe will negatively impact our earnings growth in the coming years. Sustained interest and exchange rate volatility as well as sharply fluctuating commodities prices will also adversely affect earnings. Nevertheless, we expect the sales revenue and operating profit in the Automotive and Financial Services Divisions to increase in 2011 and 2012 as against 2010. We also believe that this will be the case for the Scania Vehicles and Services segment in the Automotive Division.

Based on the earnings measures for 2010, we are striving to increase the return on sales before tax at Group level to at least 8% in the long-term. The ratio of capital expenditure to sales revenue will fluctuate around the competitive level of 6% on average. In addition, the positive rating compared with the industry as a whole should be maintained and our solid liquidity policy continued.

In order to master the challenges of the automotive future and reach the “Strategy 2018” targets, the decisive advantages for the Volkswagen Group lie in its unique brand portfolio, the young, innovative and environmentally friendly model range, the broad international presence with local value added in many key regions, the significant synergy potential in the Group-wide development of technologies and models, and finally in its financial strength. With the construction of new plants, the development of technologies and platforms, and agreements on strategic partnerships, we are working on more selectively utilizing the strengths of our multi-brand group. Disciplined cost and investment management remains an integral part of our strategy for 2018.

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