Risks arising from changes in demand

Consumer demand is shaped not only by real factors such as disposable income, but also by psychological factors that are impossible to plan for.

Increased fuel and energy prices could result in unexpected buyer reluctance, which could be further exacerbated by media reports, for example. This is particularly the case in saturated automotive markets such as Western Europe, where demand could drop as a result of owners holding on to their vehicles for longer. In the reporting period, the effect of unplannable psychological demand factors was exacerbated by the euro crisis and its impact on the global economy and the entire automotive industry. Several automotive markets, particularly in Southern Europe, were unable to recover from their record lows in the reporting period and even contracted further in some cases. We are countering this buyer reluctance with our attractive range of models and in-depth customer orientation.

A combination of buyer reluctance as a result of the crisis and increases in some vehicle taxes based on CO2 emissions – such as those already formulated in some European countries – is driving a shift in demand towards smaller segments and engines in individual markets. We counter the risk that such a shift will negatively impact the Volkswagen Group’s earnings by constantly developing new, fuel-efficient vehicles and alternative drive technologies, based on our drivetrain and fuel strategy. In automotive markets around the world, risks arise due to government intervention in the form of tax increases, for example, which could curb private consumption.

As industrial goods, commercial vehicles are influenced by the general economic environment, which means that the market is highly cyclical. Although production volumes are significantly lower, the complexity of the trucks and buses range even exceeds that of passenger cars, since they are tailored to the customers’ requirements. The priorities for commercial vehicle customers are overall running costs, vehicle reliability and the service provided.

MAN Power Engineering’s two-stroke engines are produced exclusively by licensees, particularly in China and Korea. Weaker demand could result in licensees having excess capacity and consequently in risks due to declining license revenues or bad debt losses up to and including the loss of licensees. We address the risks by constantly monitoring the markets, carefully managing business relationships with licensees and, if necessary, agreeing payment plans.

Dependence on fleet customer business

In fiscal year 2013, the percentage of total registrations in Germany accounted for by fleet customers fell to 12.5% (12.7%). The Volkswagen Group’s share of this customer segment decreased to 47.2% (47.7%).

In Europe, the Volkswagen Group was unable to extend its position in this customer segment despite its comprehensive product range and customized support for this target group; registrations by business fleet customers were down 2.2% year-on-year, while the Group’s share fell to 28.8% (29.4%). The fleet customer business continues to be marked by increasing concentration and internationalization. With its broad product portfolio, the Group is well positioned to face the growing importance of the issue of CO2 and the trend towards downsizing. No default risk concentrations exist for individual corporate customers.