Risks and opportunities

In this section, we outline the specific risks and opportunities, which we have grouped into categories. Unless explicitly mentioned, there were no material changes to the specific risks and opportunities compared with the previous year.

We use competitive and environmental analyses and market studies to identify not only risks but also opportunities with a positive impact on the design of our products, the efficiency with which they are produced, their success in the market and our cost structure. Risks and opportunities that we expect to occur are already reflected in our medium-term planning and our forecast. The following therefore reports on internal and external developments as risks and opportunities that may result in a negative or positive deviation from our forecast.

Macroeconomic risks and opportunities

We currently see risks to continued global economic growth primarily in the persistent structural deficits in developed economies. The unanswered questions surrounding the economic and institutional stability of the eurozone are particularly noteworthy in this context, as are the unresolved debt problem in many industrialized countries. In the eurozone, the situation of numerous financial institutions whose stability and ability to withstand a crisis remain in doubt is hindering sustained economic recovery.

Structural deficits also pose a risk to the growth of many emerging economies. Overindebtedness, reliance on capital inflows, violent clashes and corruption are some of the main threats to these countries' development going forward.

As the global economy becomes increasingly interconnected, declines in growth in key countries and regions often have an immediate impact on the state of the global economy and therefore pose a central risk. The trend in the large economies of Europe, the USA and China is especially important for global growth.

Geopolitical risks result primarily from tensions in the Middle East and North Africa and may impact negatively on global energy and commodity prices. In addition, a large number of local and regional conflicts pose a threat to the performance of both individual economies and entire regions.

Overall, we consider the probability of a global recession to be low. Due to the risk factors listed, however, the possibility of a decline in global economic growth or a period of below-average growth rates cannot be ruled out.

The macroeconomic environment may also give rise to opportunities for the Volkswagen Group if actual developments differ in a positive way from expected developments.

Sector-specific risk and market opportunities

The growth markets of Asia, South America, and Central and Eastern Europe are particularly important for the Volkswagen Group in terms of the global trend in demand for passenger cars and commercial vehicles. Although these markets harbor considerable potential, the underlying conditions in some of the countries in these regions make it difficult to increase unit sales figures there. Some have high customs barriers or minimum local content requirements for domestic production, for example. Following the reduction in the number of new vehicles allowed to be registered in places such as Beijing, further restrictions on registrations could enter into force in other Chinese metropolitan areas as well. Furthermore, a potential global economic slowdown could impact negatively on consumer confidence in some of these countries. Equally, we cannot entirely rule out the possibility of freight deliveries being shifted from trucks to other means of transport and of demand for the Group’s commercial vehicles falling as a result.

At the same time, if the economic and regulatory situation permits, there are opportunities for faster growth above and beyond current projections in emerging markets where vehicle ownership rates are still low. The demand that builds up in established markets during a crisis could also lead to a strong recovery in these markets should the economic environment ease more quickly.

Price pressure in established automotive markets is a particular challenge for the Volkswagen Group as a supplier of volume and premium models due to its high level of market coverage. As the global economy is still under strain, competitive pressures are likely to remain high in the future. Some manufacturers will respond by offering incentives in order to meet their sales targets, putting the entire sector under additional pressure, particularly in Western Europe, the USA and China.

Western Europe is one of our main sales markets. A drop in prices due to the economic climate as demand falls in this region would have a particularly strong impact on the Company’s earnings. We counter this risk with a clear, customer-oriented and innovative product and pricing policy. Outside Western Europe, overall delivery volumes are broadly diversified throughout the world. The Chinese market accounts for an increasing share. We either already have a strong presence in numerous existing and developing markets or are working hard to build such a presence. Moreover, strategic partnerships help us to increase our presence in these countries and regions and cater to requirements there.

The global economic climate deteriorated tangibly in fiscal year 2013. The resulting challenges for our trading and sales companies, such as efficient warehouse management and a profitable dealer network, are considerable and are being met by appropriate measures on their part. However, financing business activities through bank loans remains difficult. Our financial services companies offer dealers financing on attractive terms with the aim of strengthening their business models and reducing operational risk. We have installed a comprehensive liquidity risk management system so that we can promptly counteract any liquidity bottlenecks at the dealers’ end that could hinder smooth business operations.

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(1) of the Kreditwesengesetz (KWG – German Banking Act).

Volkswagen may be exposed to increased competition in aftermarkets for two reasons: firstly, because of the provisions of the new Block Exemption Regulations, which have been in force for after-sales service since June 2010, and, secondly, because of the amendments included in EU Regulation 566/2011 dated June 8, 2011, which expand independent market participants’ access to technical information.

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.

Below, we outline the market opportunities for the Volkswagen Group. We see the greatest potential for growth in the markets of the Asia-Pacific region and in North America.


China, the largest market in the Asia-Pacific region, saw further market growth in 2013. Here, demand for vehicles will continue to increase in the coming years due to the need for individual mobility, although growth will probably shift from the large cities on the coast to the country’s interior. To be able to leverage the considerable opportunities offered by this market and defend our strong market position in China over the long term, we are continuously expanding our product range to include models that have been specially developed for this market. We are further expanding our production capacity in this growing market through additional production facilities.


India achieved a lower market volume in fiscal year 2013 than in the previous year due to the difficult environment. Demand was impacted in particular by high inflation and increased fuel prices. We expect demand to stabilize in the coming years, however. The Group is currently consolidating its activities in this difficult environment. Despite the current situation, India is still a strategically important market of the future for the Group.


The automotive markets in the ASEAN economic area offer substantial growth opportunities in the aggregate. The Volkswagen Group is gradually working toward the long-term penetration of these markets. High price sensitivity means that having a local manufacturing operation in the region is a condition for a competitive offering. Alongside with the Passat, we have been additionally producing the Polo hatchback and notchback, plus the Jetta, since 2013. To further strengthen our market position, we are investigating and evaluating opportunities for assembling vehicles locally in additional countries in the region. Independent of this, we are working hard to improve local sales structures.

North America

The government crisis in the USA had relatively little impact on the vehicle market in 2013. Despite the political uncertainty, pent-up demand and the availability of auto loans pushed the overall market above the prior-year level in 2013. We anticipate further growth but slower momentum in 2014. In Canada and Mexico, market growth was moderate in 2013; it is expected to continue in 2014. North America remains a growth region for the Volkswagen Group. In the United States, we are systematically pursuing our strategy of becoming a full-fledged volume supplier. Together with an engine plant, the development of additional production capacity in the region to manufacture the Golf and the Audi Q5 will allow us to better serve the market in the future. We are also working hard on offering additional products tailored specifically for the US market, for example a large SUV.


In 2012, the Brazilian government supported local industry, including the automotive industry, by providing tax breaks. This support was partially withdrawn in January 2013, slowing growth in the automotive market. In the first half of the year, the market trend was also impacted by rising interest rates and an upturn in inflation. To prevent a further decline in the Brazilian market as a whole, the tax breaks will be initially continued in 2014 in a weakened form. The growing number of automobile manufacturers with local production has resulted in a sharp increase in price pressure and competition. The Brazilian market plays a key role for the Volkswagen Group. To strengthen our competitive position here, we offer vehicles that have been specially developed for this market and locally produced, for example the Gol and the Fox.


We continue to expect that Russia has the potential to grow into one of the largest automotive markets in the world. However, its heavy reliance on currently stagnating oil revenues is slowing economic growth. The discontinuation of subsidized loans in 2014 is also depressing demand for vehicles. The market remains of strategic importance for the Volkswagen Group, which is why it is a primary focus of our activities. In addition to the local production in Kaluga, our contract manufacturing agreement with local manufacturer GAZ has added capacity that will enable us to better serve the market. We are also examining additional opportunities to further strengthen our market position.

Middle East

Despite economic and political instability, the Middle East region offers growth opportunities. We are leveraging the potential for sustainable growth without operating our own production facilities by offering a range of vehicles that has been specifically tailored to this market. Optimized sales channels are also intended to help lift our market share.