Annual Report

Specific risks

The following section explains the specific risks arising from our business activities.

Macroeconomic risk

High energy and commodity prices, increasing international trade restrictions, persistent imbalances in foreign trade and ongoing political conflicts present significant risks to the global economy. The high level of debt in many countries is also a major potential threat. Although the risk of renewed global recession is relatively low at present, the above-mentioned factors could result in a prolonged period of below-average global economic growth.

Likewise, changes in legislation, taxes, or customs duties in individual countries may have a severe adverse effect on international trade and present significant risks to the Volkswagen Group.

Sector-specific risk

The growth markets of Asia, South America, and Central and Eastern Europe are particularly important in terms of the global trend in demand for passenger cars. Although these markets harbor the greatest potential, the overall environment in some of the countries in these regions makes it difficult to increase unit sales figures; some have high customs barriers or minimum local content requirements for domestic production, for example. The announced reduction in the number of new vehicles allowed to be registered in Beijing could be followed by further restrictions on registrations in other metropolitan areas in China. In established markets, meanwhile, there is a risk of price pressure due to the high level of market coverage. In the automotive markets of Western Europe, the USA and China in particular, various manufacturers are using massive discounts to promote sales of their own vehicles, thereby putting the entire sector under pressure. This is a particular challenge for Volkswagen as a supplier of volume models, as we would be especially affected if competing automakers were to further step up their sales incentives.

Freight transportation faces the risk of transported volumes being shifted from commercial vehicles to other means of transport.

Volkswagen sells most of its vehicles in Western Europe. Consequently, a sustained drop in prices and resulting fall in demand in this region would have a particularly strong impact on the Company’s earnings. Volkswagen counters this risk with a clear, customer-oriented and innovative product and pricing policy. By contrast, its overall delivery volume outside Western Europe is broadly diversified across the markets of North America, South America, Asia-Pacific, and Central and Eastern Europe, with the Chinese market accounting for an increasing share of the volume. To our advantage, we are already market leader in numerous existing and developing markets or are working resolutely to become market leader. In addition, strategic partnerships are enabling us to increase our presence in the relevant countries and regions and cater to regional requirements.

We continue to approve loans for vehicle finance on the basis of the same cautious principles applied in the past, taking into account the regulatory requirements of section 25a(l) of the KWG.

The economy recovered markedly overall during the past fiscal year. However, our trading and sales companies continue to feel the effects of the financial and economic crisis, as it remains difficult to raise bank loans to finance business operations. A Group support program that granted automotive dealers and outlets financing on attractive terms via our financial services companies during the financial and economic crisis, thus reducing the risk of their insolvency, was therefore very well received. In addition, we have established a risk management system to identify in good time and counteract liquidity bottlenecks that could hinder smooth business operations.

The provisions of the new Block Exemption Regulation and European legislative initiatives could result in further liberalization and therefore increasing competition, particularly in after-sales service and the sale of genuine parts.

The European Commission is planning to end design protection for visible vehicle parts. If this plan is actually implemented, it could adversely affect the Volkswagen Group’s genuine parts business.

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