Fernando Ortiz-Cañavate, Managing Director at Volkswagen Financial Services spoke at the CFO Event May 2014

1. Proposed Framework for
Presentations
Spain: The role of steering a company back
towards growth
Silverstone, May 2014

2. 2 22
5. Conclusion
3. Automotive strategy is changing
4. Financial approach
2. Spanish crisis: where are we going?
1. Spain: Economic comparisson

3. Spain: it has a sizable economic dimension, close to 47 Mio
population, 1,1 Trio EUR economy and the 4th largest in Europe
2012 GDP: EUR 1.063 Trio
How much bigger than Spain?
GDP size in PPP terms (2012)
3

4. Levels of income and wealth are still lower than those
prevailing in central and northen Europe
2012 GDP per capita
(USD 000´s)
2012 GDP per capita
(Spain = 100)
4

5. Breakdown of economic activities:
Overweight in tourism, construction and autos
5

6. Foreign trade patterns: at some point, the second largest current account deficit
in the world (above USA). In 2013 there were the first surplus in 15 years.
6

7. Public debt 2013
7
94% GDP

8. Public debt 2013
8

9. Public debt 2013
9
94% Spain

10. Conservative party got the biggest part of the cake!
National Parliament
10

11. Financial market: equity market
11

12. There is a dual economy: landscape is dominated by micro-companies with few
large multinationals
12

13. Then in 2011: the early 2000´s business model has collapsed…
Construction spending in GDP (%)
Immigrant population (% of total)
Share of construction in creating
employment
Construction played a disproportionate role in the Spanish business model!
13

14. -
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
…and it brought a collapse in all activity sectors…
Industrial output excluding construction
Retail sales volume index
Car industry
Car sales back to 1986 and down a 58% from its peak !
26 years
14

15. 15
1,5%
1,9%1,8%
2,1%
2,3%2,3%
3,0%
3,3%
3,6%
3,6%
3,8%
3,5%
3,2%
3,1%
3,0%3,1%3,0%
2,9%
2,4%
2,0%
2,0%1,9%
2,1%
1,9%1,9%
2,2%
2,7%
3,4%
3,5%
2,9%2,9%
2,7%2,8%
2,4%
1,4%
2,0%
1,00%
1,50%
2,00%
2,50%
3,00%
3,50%
4,00%
4,50%
Jan
11
Feb
11
Mar
11
Apr
11
May
11
Jun
11
Jul
11
Aug
11
Sep
11
Oct
11
Nov
11
Dec
11
Jan
12
Feb
12
Mar
12
Apr
12
May
12
Jun
12
Jul
12
Aug
12
Sep
12
Oct
12
Nov
12
Dec
12
Jan
13
Feb
13
Mar
13
Apr
13
FC
2013
Consumer Price Index
Source: NationalStatisticsInstitute/ Bank of Spain
…increasing unemployment, reducing GDP and with a high inflation

16. 16
With a significant increase in Risk Premium…
325
352
395
326 319
317
356
411
536
475
546
552
450
415
393395
350
365
377
348
5,18%
5,45%
7,09%
5,56%
5,47%5,40%
5,78%5,78%
6,12%
6,12%
6,51%
6,71%
5,70%
5,47%
5,56%
5,32% 5,40%
5,22%
4,92%
4,73%
3,82% 3,98% 4,04% 4,07% 4,06% 4,04% 4,02% 4,07% 4,07% 4,11% 4,12% 4,13% 4,10% 4,13% 4,12%
3,90% 3,85% 3,83%
3,0%
4,0%
5,0%
6,0%
7,0%
8,0%
100
150
200
250
300
350
400
450
500
550
600
Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13
Risk Premium
GovernmentAuctions 10 years
Central Government Debt Average
InterestRate
Source: Risk Premium and Goverment Auctions http://www.datosmacro.com/prima-riesgo/espana
Source : Central GovermentDebt http://www.tesoro.es/doc/SP/home/estadistica/03.pdf 16

17. …and it brought a collapse in all activity sectors……and a dismal in the job market…
27 % and over 56%
for young people
27.0%
Unemployment rate (%) Happy Spaniards around the world
Massive damage across economic sectors setting Spain back 15 years
17

18. …and there are still significant inefficiencies in the current model.
18

19. …that implies significant different in the economy of the different regions.
19

20. 20
48,56
50,33 50,85
52,42
55,91
58,00
58,66
57,19
52,17 52,67
56,08
57,70
60,66
40
42
44
46
48
50
52
54
56
58
60
62
64
66
68
70
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Number of foreign tourists (Mio)
There are already some indicators that are showing first green shoots after the recession
Exports have increased
taking the commercial
balance at positive levels
And tourism is at record
levels.
Exports Evolution (mio EUR)
46.994 48.532
38.460
43.949
54.820
54.445
61.604
0
10.000
20.000
30.000
40.000
50.000
60.000
70.000
80.000
2007 2008 2009 2010 2011 2012 2013
Exports

21. 21
2,2%
2,7%
3,4%3,5%
2,9% 2,9%
2,7% 2,8%
2,4%
1,4%
1,7%
2,1%
1,8%
1,5%
0,3%
-0,1%
0,2%
0,3%
0,7%
-0,50%
0,00%
0,50%
1,00%
1,50%
2,00%
2,50%
3,00%
3,50%
4,00%
July 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec12 Jan 13 feb-13 mar-13 Apr13 may-13 jun-13 jul-13 ago-13 sep-13 oct-13 nov-13 dic-13 dic-13
Consumer Price Index (%)
GDP Evolution (%over previous period)
Consumer Price Index is
still under control
GDP has grown for six
consecutive months.

22. But there is still a long way to say that we are completely out of recession
22
Unemployment Evolution
Unemployment is still at the highest levels.
Non performing Loans – Evolution (% total)
Non performing loans are damaging the credit
performance.
And credit is at 25.1% down from its peak.
Credit to individuals and to non financial corporations (Mio EUR)

23. And all activity sectors are still in recession
23
0
200.000
400.000
600.000
800.000
1.000.000
1.200.000
1.400.000
1.600.000
1.800.000
Car industry (# cars)
1994 2013
Construction is still in lowest levels
Despite the last increase, Car sales back to 1994 and
down a 56% from its peak
Industrial output excluding construction index
Wage reductions are affecting Retail Sales.
Retail sales volume index
19 years

24. 4,68%
2,89%
0,70%
1,01%
1,36%
0,19% 0,29% 0,30% 0,30%
4,75%
3,05%
1,25%
1,51%
1,95%
0,54% 0,56% 0,56% 0,56%
4,54%
3,26%
2,74%
2,48%
1,76%
0,77%
1,30% 1,18%
1,18%
0,0%
1,0%
2,0%
3,0%
4,0%
5,0%
2007 2008 2009 2010 2011 2012 2013 2014 2015
Euribor 3 months Euribor 1 Year Swap 5 years
24
Interest Rates Yield Curve – Euribor /Swap
What can we expect for 2014?
• Interest Rates are still under control and refinancing for good rating companies are
reasonable cheap. It is expected that corporate investment will continue the good
trend that has been observed in the last six months.

25. 0,2
-1,1
-2,7
-3,3
-4,6
-2,5
-0,3
1,6
4
-5
-4
-3
-2
-1
0
1
2
3
4
5
4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
25
Consumer Index
2011 2012 2013
What can we expect for 2014?
• Confidence of investors index has improved.
CONCLUSION: We are moderately optimistic and expect a slight recovery in 2014 that
will be translated into a higher level of consumption and an improvement
of the financial situation of families and medium and small companies.

26. 26 2626
5. Conclusion
3. Automotive strategy is changing
4. Financial approach
2. Spanish crisis: where are we going?
1. Spain: Economic comparisson

27. Good products alone are no longer enough!
Sustainable success for OEMs is based on several factors
Strong research &
development /
strong production
Strong presenceStrong products + +
OEM = Original Equipment Manufacturers, i. e.
manufacturers
27

28. Groups with greater market coverage enjoy advantages
Market
coverage
Geographical
coverage
High
Low
Regional Global
Niche
players
28

29. The sustainable success of a manufacturer is also
based on a powerful captive
Strong
Automobile Manufacturer
Strong
Financial Services Provider
29

30. The high volatility in many saturated markets requires a
high degree of flexibility and good portfolio management
0,0
4,0
3,0
3,5
Newregistrationsinmillions
1,8
0,0
2,0
1,9
2,1
2,4
2,2
2,3
2,6
Newregistrationsinmillions
1,6
1,5
1,4
1,3
1,2
1,1
1,0
0,9
0,8
0,0
Newregistrationsinmillions
17
16
15
14
13
12
11
0
Newregistrationsinmillions
30

31. The importance of the car is continually decreasing for
young and urban people
Source: Next Practice 2010, Volkswagen, Young without Cars, Study 2010
Trend towards commodity with related price and volume risks
Without connectivity, a car is no longer in
the „relevant" set for the young/urban
Ownership of a car is less relevant for
young customers
What is a 30-year old man interested in?
Interne
t
Aut
o
Telekommunikation
2008
1998
62
Telecommunications Car
31

32. Declining loyalty
to authorised
workshops
Workshop
steering by
insurers
Decreasing
volume &
profit
Cost pressure in
workshops
New
technologies
(BEV)
The workshop business – vitally important for dealers
– is under massive threat
Ertrag Handel (in %)
Sales After Sales
Better
vehicles
Workshop business: very profitable
Dealer profit (in %)
Dealer turnover (in %)
32

33. Experts expect customer loyalty to authorised workshops
to fall even further
1 2 3 4 5 6 7 8
Segment Ia Segment Ib Segment II Segment III
Vehicle age
80 %
60 %
40 %
20 %
Customer loyalty to authorised
workshops
Workshop revenue lost due to decreasing customer loyalty
Basis:
Loyalty 2008
Loyalty 2010
Loyalty 2014
33

34. The classic car dealer format is appealing for proud
owners – but not for flexible users!
Close 1:1 relationship between
vehicle ownership and vehicle use
Pay and use
Mobility yesterday and today
Flexible mobility solutions and services
for individual mobility objectives
Pay per use
Mobility today and tomorrow
New mobility
concepts
34

35. Volume concentration on demanding commercial
customers is becoming a challenge for dealerships
Source: ADL; VW FS AG
Major complexity to date:
Differing needs of many different
individual customers
Major complexity tomorrow:
Increasing volume concentration on fleet
customers with high demands
Leasing
Courtesy
cars
Radio tax
Road tolls
Car
registration
Fuel cards
Scheduled service
Maintenance
Tyre replacement
Insurance
Wear and tear
Driving licence
checks
Long-term rental
Reporting systems
Fleet management
Fleet advisory
Legal inspection
Tyre change and storage
Claims management
35

36. Many customers wish to have a dealership in their city centre.
Locations in industrial estates become increasingly unattractive
High structural investments outside cities Audi City (virtual dealer)
A4 A6 A8
Saloon Avant Quattro
A1 A3 A4 A5 A6 A7 A8 Q3 Q5 Q7 TT R8
CoupéSportback
S series RS series Roadster
Saloon Avant Quattro
CabrioletCabriolet
36

37. Captives also have specific challenges!
... for example, the over-50s pay cash!
BUT: Average age of
new car buyers is increasing
AND: The older a customer, the less
affinity to financial services
Decreasing financing volume
Source: VW FS AG, AutoUni
20251995 65-75 yrs. > 75 yrs.55-65 yrs.
(Financing rate in %)
Today, more than every second vehicle in Germany is financed
37

38. Increasing regulation also affects automotive financial services
providers…
Captives
Stricter
regulation
of
financial
services
§§ §
§
§
§§ §
§
§
§
Universal
banks
Insurance
companies
Trigger Political reaction Target
Collateral
damage
38

39. … and creates great challenges for them!
End 2014Pre 2010
Number of employees engaged in meeting legal requirements
Increasing regulation
+
140%
39

40. And where do we go from here?
40

41. • Long-term
rental
• Short-term
rental
• Micro-rental
(car sharing)
Rentals
1. Extended product range necessary!
Offer solutions with a board range of products
• Accounts
• Instalment
credits
• Investments
• New mobility
offers
Direct bank
• Automotive
• Credit
protection
insurance
• Industry
InsuranceServices
• Inspection
service
• Maintenance
packages
• Maintenance
and repair
Leasing
• Finance
leasing
• Operating
leasing
• Fuel
• Tyres
• Reporting
Fleet mgmt.Bank
• Customer
financing
• Dealer
financing
• Factoring
Risk taking and risk management as core competence
41

42. 2. Role change needed! From pure sale promotion to customer
and car relationship manager
Joe
Bloggs
VSSZZZ
1PZCR
07913
2
CRM² = Customer Relationship
Management
Car Relationship
Management
x
Student 1st job
Young
family
Family
Post-
family
Pension
Company
car
1-year-
old car
3-year-
old UC
5-year-
old UC
8-year-
old UC
…
UC = used car 42

43. 3. Global orientation necessary!
Concentration on home market and "cherry
picking" are not enough
Global orientation
43

44. And where do we go from here?
Broad product range Worldwide deploymentLife cycle management
44

45. Establish three strategic pillars!
Broad product range Worldwide deploymentLife cycle management
45

46. What we then also have is:
Broad product range Worldwide deploymentLife cycle managementWin WinWin
46

47. To excite the customer: size matters!
… conviently from one single provider!
The right product package… … at any time… … at the desired place…
47

48. 4848
5. Conclusion
3. Automotive strategy is changing
4. Financial approach
2. Spanish crisis: where are we going?
1. Spain: Economic comparisson

49. % Penetration
20,0
23,9
27,4
29,4
33,9 35,1
44,1
51,8
0
5
10
15
20
25
30
35
40
45
50
55
60
2006 2007 2008 2009 2010 2011 2012 2013
1.005,3 951,2
639,8 666,9 494,9
396,1 356,3 379,5
1.634,6 1.614,8
1.161,2
952,8 982,0
810,0
699,6 722,7
0
500
1.000
1.500
2.000
2006 2007 2008 2009 2010 2011 2012 2013
Private Market
Total Market Sales (Tsd. Vehicles)
Passengers Cars- 56%
+ 159%
49
In a very complicated environment

50. 215,1 225,0 227,0 231,3
264,5 285,2 306,2 297,2
86,0 69,1
61,7
65,8
65,7 69,5
44,7
80,9
215,1 225,0
313,0 300,4
326,1
351,0
416,6
447,6
2006 2007 2008 2009 2010 2011 2012 2013
Finance+Leasing Insurance Services
New Contracts (Tsd. Units)
Total Portfolio (Tsd. Units)
73,2 86,3 74,0 67,8
90,7 83,5 89,9 105,3
0,0
0,0
111,3
92,7
165,7
110,0 116,2
127,5
26,7
32,7
37,6
73,2
86,3
185,3
160,5
256,4
220,2
238,9
270,5
2006 2007 2008 2009 2010 2011 2012 2013
Finance+Leasing Insurance Services
50
VWFS Spain has diversified its products and services growing in
a depressed market with a different business plan

51. 51
0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000
FGA CAPITAL
SPAIN
BANSABADEL
L FINCOM
FINCONSUM
TOYOTA
KREDITBANK
BANCO
CETELEM
BMW BANK
GMBH
BANQUE PSA
FINANCE
RCI Banque
Suc en
España
BBVA
CONSUMER
FINANCE
SANTANDER
CONSUMER
FINANCE
VOLKSWAGE
N FINANCE
Dec 2013 Dec 2012
Source: ASNEF
TOTAL Credit Investment €: Competitors
Volkswagen Finance has
become market leader in
customer credit for
Automotive Industry (New
Cars + Used Cars).
At December 2013
cumulative growth of VW
Finance is 10,1% compared
to 2012.
+10,1%
-2,9%
-1,5%
+20,6%
-14,5%
+14,6%
+30,9%
+4,9%
+6,5%
2,2%
+38,6%
And become market leader above other general
financial institutions

52. VW FS AG | Investor Update
Thank you very much!52