1. PartsHorizon2020: Mandatory backbone for K-TSK presentation
3rd Draft, Poznań April 2014

2. Poland in figures 9th largest country in Europe (6th in EU)SF
9th largest country in Europe (6th in EU)
Surface area: 312,7 thous. km2
Shoreline: 770 km
Population: 38,2 million
Currency: Polish Zloty (PLN)
1 Euro = 4,2 PLN
Poland is member of:
NATO /March 1999
OECD /November 1996
European Union /May 2004

3. Poland - Macroeconomy Economy GDP growth and inflation (%)
Indicator
Date
Value
Changey/y
GDP growth
4Q2013
2,7%
+ 2,0pp
Consumer inflation
0,7%
- 1,0pp
Avg gross salary
4.221PLN
+ 2,8 %
Unemployment rate
14,0%
- 0,2pp
Consumer confidence indicator
81,8
+9,8 p.
Interest rate
2,50%
- 1,5 pp
Fuel prices
Euro exchange rates (avg. monthly rates in PLN)
Fuel
Price
ON (Diesel)
5,38 PLN / 1,28€
PB95
5,33 PLN / 1,27€
PB98
5,61 PLN / 1,34€
LPG
2,66 PLN / 0,63€
Source: GUS, NBP, IPSOS, e-petrol, money.pl, bankier.pl

4. Main vehicle production plants in Poland
Passenger cars and light commercials
Buses
Trucks

5. 01.06.2012 Merger concept Kulczyk Pon Investment Polska Skoda Auto

6. VGP: development steps
GO! 2020
Strategy
NSC
Step 3 3.
GROUP IS MORE THAN JUST COMMON FUNCTIONS
=> 2nd step of integration
NSC structure stabilization
Adapting IT standards and infrastructure
Creation of reliable KPI system and reporting
Development of: HR, purchasing and organizational processes
Defining committees and decision-making frameworks
Promoting Volkswagen AG work culture
2013/ 2014
NSC
Step 2 2.
=> 1st step of integration
Foundation of VGP:
Merger:
NSC
Step 1
2012 1.

7. Volkswagen Group Polska – FTE Development Status November 2013

8. Group After Sales – FTE Development Status February 2014

9. From developing to the best performing NSC
within the area of After Sales

10. Volkswagen Group Polska today
529 employees
Brands with VGP
Official spare parts’ supplier for Poland and Belarus (Atlant-M; Autohaus AV)
Logistic facilities for cars
Own rail terminal for cars unloading
Central high storage spare parts warehouse m2 and 1 additional rented warehouse m2
Dealers’ Service Trainings Center m2; 5 technical training rooms

11. Car Park in Poland – current status
Starting point
Actual Data
Actions
Different data sources by Brands
Different calculation methodologies
Lack of consistency
No common acceptance by Brands
Data differences
Reference date :
Topics coordinated by K-VO-SR:
Workshop with Brands/Regions ( )
cooperation with Brands, POLK and SAMAR*)
I step: definition of reference Car Park figures ( ) – already accepted by all Brands
II Step: estimation till based on different scrappage rate methodology – analyse by brands
Units
VW PC
VW CV
Audi
Seat
Skoda
Group
*) Source – K-VO - SR
*) SAMAR – car institute for car park in Poland
Why do we need it?
Business cases After Sales, STS, Planning Round, Parts Horizon, Network Planning

12. Turnover per Vehicle in PLN
Car Park in Poland
CarPark in ths.
Turnover per Vehicle in PLN
VW CV
Update?
Skoda VW
2.256
SEAT
Audi
931
567
328
260
170
Group VW
Audi
SEAT
Skoda
VW CV
Group VW
Audi
SEAT
Skoda
VW CV

13. Car Park - segments
cars
cars

14. New and used car market development
Share NC
vs. First Reg.
29,6%
29,5%
29,3%

15. Registrations of imported used cars by model
Update?

16. Automobile Market in Poland – New cars
New passenger car registrations per 1000 inhabitants / 2012

17. Car Park – market share
cars
cars

18. Market share – without oil and tires, Segment I Authorized workshops + brands’ connected workshops

19. Market share – without oil and tires, Segment II Authorized workshops + brands’ connected workshops

20. Market share – without oil and tires, Segment III Authorized workshops + brands’ connected workshops

21. Spare parts sales to NORA® customers
8,7 m PLN
3,0 m PLN
2,2 m PLN
0,011 m PLN
Period: January - March Total DNP NORA DNP
NORA turnover [DNP]
VGP brands NORA share development in 2013/2014

22. VGP - Mission, Vision, Goals
Be the best automotive group in Poland.
Mission
… by the best performing and satisfied dealer network.
… by competent and motivated employees.
We are the preferred supplier of automotive products and services in Poland generating loyal and satisfied customers …
… by efficient and customer oriented processes.
Goals
Volume +
market share
Profitability
Satisfaction
Top Employer

23. Group After Sales Strategy – Key challenges
New cooperations
(insurance, fleet,
leasing)
Decreasing repair business potential
Increasing competition
(unauthorized services)
KEY CHALLENGES IN THE AFTER SALES BUSINESS
New technologies
(Increasing car complexity)
Law / Rule
(Rule changes)
Changing model and country mix
Rising complexity costs
Changing of customer structures
Expanding product range
Decreasing customer loyality

24. Group After Sales - Mission, Vision, Goals
Main Motive
B1B => Beat One Billion
Vision
Stronger through BRANDS to strengthen the BRANDS for the most effective CUSTOMERS and DEALERS tailored After Sales Business
Mission
We do it right = We do right thing in right quality to right time =
After Sales Excellence

25. Group After Sales Strategy – Strategic and operative targets
B1B
Customer satisfaction
Market exploitation
Quality
Profitability
Transparency
Offers
Channel management
People & Training
Technical service
Pricing
Logistics & disposition
Cost management IT

26. Group After Sales Strategy – Action plan
Strategic sales-concepts to improve market exploitation
Strategic areas to optimize
process/cost structure
Transparency
Market studies – price position, market potential, customer satisfaction
Implement regular reporting, BMO
Logistics & disposition M0
New central depot, stock value optimization, parts availability,
same day delivery concept
M11 M1
Implementation/intensification of product management (including economy parts) IT
Offers
Implementation of repair financing
ET 2000,
Autopart system for all brands M2
M12
Optimization of tyre business M3
Cost management
Efficiency in all processes, pragmatic
approach, monitoring/ benchmarking
of cost drivers
Mobile service offering, warranty extension program
M13 M4
Development of Accident damage management concept M5
Technical service
Repeat repair project, product influencing, special tool
rental concept, technical expertise
Channel management
M14
Development of
fleet business M6
Optimisation / redefinition of
NORA business M7
Development of E-business M8
Pricing
Optimization of price management M9
People & training
TCSS, retail coaching program, motivation concept for network, employee satisfaction, recruitment process
Development of
accessories business
M15
M10

27. TOP Priorities Group After Sales 2014
Parts Horizon 2020
People & Processes
Turnover & Profit
IT support
Cost of Franchise
Transparency
Sales
Tyres
NORA
Used cars approach
Economy parts
Cooperation with FS AG
Product management
ADM
Logistics
New central depot
ET-2000
Export service for Porsche
Obsolete parts process
Same-Day-Delivery
Cooperation with MAN
Service
Performance efficiency
Roadside Assistance
Blue print technical support
IT-monitoring for special equipment
e-mobility
Special tools management
BID number harmonization
Trainings’ Academy
Blue print Trainings’ Academy
Mystery client
GTO development
Further implementation of ”new approach”
Enlargement of the cooperation with brands

28. PartsHorizon2020 Poland Till the End of 05.2014 04.2014
Final presentation to K-TSK
Finalization of the Back Bone and Business Cases in terms of right Car Park figures*)
Second Draft of the Mandatory Backbone with the Business Cases will be sent to the regions
First Draft of Mandatory Backbone sent to the Regions
Kick Off Meeting
*) The Car Park issue for Poland will be coordinate by KVO-SR

29. Assumptions for turnover calculation
Topic
- Details -
Baseline
some of the activities planned within PH2020, have been already considered within PR62, therefore the baseline turnover is underneath the PR62 turnover
Used assortment
Genuine Parts
Tyres
Miscellaneous
2013 –VGP systems integration – implementation of the Kopfsparte allocation methodology
2014 – change in the allocation methodology – from Kopfsparte to Singlelsparte
2014 – Seat - New Brand in portfolio
Baseline Volkswagen PKW
Due to the change of the common parts allocation methodology (Kopfsparte to Singlesparte) VW PKW had a budget adjustment
The baseline of VW PKW is based on the new budget which is about 20. Mio PLN higher than PR62
Car Park
Source POLK
Multibrand approach coordinated by K-VO-SR

30. Car Park development 2013-2018 Premise: Age of vehicles ≤15 years
Source: - POLK new estimation method (VWN, Audi, Seat, Skoda)
- POLK historical estimation method (VW Pkw)

31. Baseline:. Baseline turnover (in PLN)
Baseline: Baseline turnover (in PLN) Baseline turnover per car (in PLN)
Premise:
turnover only domestic market
only genuine parts & tyres (incl. Warranty; excl. Oil and accessories)
Turnover responsibility for Seat in 2013 by Iberia Motor Company – data n.a.
Including carpark Seat

32. PR62 – Baseline (in PLN)
turnover
time

33. Actions PartsHorizon2020: Pricing
Brand
- Details -
Pricing VW
Implementation of Market Intelligent Pricing
Price Image Campaign development
Reports, analysis & planning, aftersales market study (MiS Aftersales) development on brand level (add. FTE needed)
VWN
Service packaging
Audi
Brand specific price strategy: Price optimization according to brand value, customer value expectation and OEM price studies.
Specific focus on premium models & brands
Price studies on elasticity and profit optimization (e.g discount groups / rush & stock discounts)
Market oriented prices on both dealer & retail levels
Ongoing analysis of brand and grey market competition
SEAT
Price image campaign with Economy parts packages (seg. 2&3)
SKODA
Price image campaigns with economy price packages, and 4+ discounts supported by importer
Group
Reporting and analysis of aftersales market and parts pricing studies
Appointment of Aftersales Business Analyst to provide insight analysis, reporting to the brand and factory
Development of market competitive Fleet Package Pricing - ensure consistency and transparency of pricing to fleet customers
Market price study as a solid base for price definition
Implementation of new pricing concept (Market oriented price tool - Simon&Kucher)
Implementation of full package pricing
Create attractively priced offers for new vehicle customers to support customer loyalty
Special pricing to retain used vehicle / Segment II and III customers
Exploitation of price potential of „monopoly parts“

34. Actions PartsHorizon2020: Own Workshop
Brand
- Details -
Own Work-shop VW
Loyalty increase:
Extended Warranty
S&M Packages development
Segment II&III increase:
Economy Parts development & implementation of PPS
Development of Direct Express concept
Market exploitation & turnover per throughputs increase (2 FTE’s needed):
Active Selling implementation (2014) & CRM approach for marketing campaigns + predic. marketing
Increase sales potential per throughput with direct reception development (new tools & system solutions needed)
Field operations in dedicated programmes, new tools and systems implementation in network (add. FF needed)
Roll out of predictive marketing - automated reminder program for service, MOT, etc.
Service Plans to retain new and used vehicle customers
Development and implementation of Service app for smart phones
VWN
Development of Direct Express workshops
Service Packages
Loyalty program for service customers
Development of FF-es team responsible for VWN After Sales and support for dealers business of one add. Person (total 3 FF’es for 71 Service Partners)
Audi
Customer loyalty increase via increasing sales of Extended Warranty and Audi Service and Maintenance Packages (either linked to new vehicles sales at the dealer and linked to workshop visit)
Service Maintenance Program implementation for Audi fleet customers
Keeping AOT purchase exclusivity concept
Professionalization of Audi Workshop appearance and processes via mobile solutions for Direct Reception process (iPads concept)
Establishing Body & Paint centers in strategic market areas focus especially on Audi aluminum repairs
Service Segment II/III: “One price for the job”, Season campaigns, Service and Accessories offers in Audi Magazine; development and promotion of sell-out activities: e.g. exhaust test, periodic review , seasonal check (winter / summer), etc.,
CRM – system: Implementation in Service, Audi Insight, Audi App., use of predictive data to optimize market penetration, activities by sending service reminders or re-book at service visit
Direct reception concept to increase part&labour sales for each workshop throughput
1 Specialist needed

35. Actions PartsHorizon2020: Own Workshop
Brand
- Details -
Own Work-shop
SEAT
Extended Warranty implementation on country standard level
Service Packages implementation
SEAT Insurance implementation
SEAT Connect application
Roll out of predictive marketing - automated reminder program for service, MOT, etc.
Service Plans to retain new and used vehicle customers
Development and implementation of Service app for smart phones
SKODA
Implementation of Direct Reception process
Supporting IT tool for service process (Digital Check-in)
CRM approach for central and local marketing campaigns (Automated Sales chances)
Skoda Care products launch with VW Bank (Insurance and re-launch of S&M Packages)
Development and implementation of Service app for smartphones
Group
Ensure implementation and further development of new product range „Economy parts“ (depending on launch of new product groups from the factory)
Development and implementation of Accident Management concept to increase customer loyalty / Development of Group insurance concept (incl. price management) with VW Bank
Development and further implementation a product for repair financing together with VW Bank
Product groups analysis and intensive follow up by field forces
Service reception using tablets as a supporting tool
Full implementation and further development and optimization of E-mobility concept/business

36. Actions PartsHorizon2020: Fleet
Brand
- Details -
Fleet VW
Fleet loyalty programme development:
Fleet Business/Service Center implementation,
Measures development: unified labor rate, oil strategy, discount rules connected with volume targets
Incorporate of small fleet customers to the programme
Mobility offer & services (ie. door to door) development – main competitive advantage on fleet service market
Increase number of fleet customer in programme and service revenue by more active acquisition & maintaining relations (Fleet FF needed)
VWN
Auto Team Fleet Plattform and further development of the platform
Audi
Development of the service fleet programme at Brand level, dealer implementation (including IT solution)
Develop and promote actively customized Fleet Service products
Definition and implementation of loyalty measures for insurance and lease companies
Active steering of fleet vehicles in Audi workshops via incentive/loyalty systems/programmes
SEAT
Service Fleet Program development
SKODA
Service Program for fleet further development
2014: simplify legal solution, new discount rules, oil strategy based on VW branded oil, semi automated authorization process,
2015: new IT tool Fleet Connect with CRM support for fleet and fully automated authorization process
Group
Development of market competitive Fleet Package Pricing - ensure consistency and transparency of pricing to fleet customers
Create and implement a framework that can be marketed to fleet customers by the Brands

37. Actions PartsHorizon2020: NORA
Brand
- Details -
NORA VW
VWN
Mobility offer for SP transport between dealers and Nora customers. Special offer for new car purchase for Nora customers.
Audi
SEAT
NORA business model implementation in SEAT service network
SKODA
Group
Development and implementation of regular reporting system for retail network
Re-definition of NORA concept to support further market exploitation (e.g. NORA Centers)
Optimization of NORA bonus conditions
Implementation of consistent auditing process of NORA business

38. Actions PartsHorizon2020: Tyres
Brand
- Details -
Tyres VW
VWN
Audi
SEAT
Fixed tyres seasonal campaign
Extended tyres offer
SKODA
Supporting products launch:
Tyre warranty
Tyre storage
Group
Development and implementation of regular reporting system for retail network
Development of marketing activities
Market and potential analysis of tyre business
Joining the central tyre business project
Tyre insurance
Tyre Etka

39. Additional turnover of PartsHorizon2020 actions (in PLN) (1/2)

40. Additional turnover of PartsHorizon2020 actions (in PLN) (2/2)

41. Turnover incl. PartsHorizon2020: Total turnover (in PLN)
Additional turnover vs. Baseline (in PLN)
Additional turnover vs. PR 62/Budget (in PLN)

42. PR 62 vs. Baseline vs. PartsHorizon2020
turnover
time

43. Turnover incl. PartsHorizon2020: Total turnover (in PLN)
Additional turnover vs. Baseline (in PLN)
Including carpark Seat
Turnover responsibility for Seat in 2013 by Iberia Motor Company – data n.a.

44. Turnover per car Baseline vs. Parts Horizon2020
Group Ø
VW Pkw
VWN
AUDI
SEAT
SKODA

45. Requirements NSC: Additional Headcounts (organizational correlation) (1/2)
Actions
Brand
2014
2015
2016
2017
2018
Total
Pricing VW
VWN
Audi
SEAT
SKODA
Group 1
Total
Own Workshop 2 6
Fleet
x field force level
x specialist level

46. Requirements NSC: Additional Headcounts (organizational correlation) (2/2)
Actions
Brand
2014
2015
2016
2017
2018
Total
NORA VW
VWN
Audi
SEAT
SKODA
Group 1
Total
Tyres
Total NSC (incl. Tyres) 2 5 6 10
x field force level
x specialist level

47. Financial result: NSC level (in PLN) (1/2)

48. Financial result: NSC level (in PLN) (2/2)

49. Backup

50. Merger concept
Back up

51. VOLKSWAGEN GROUP POLSKA
Merger concept
Back up
KPI SC KT
KPI BS
SAP
KPI SC
VIF
KPI SC
VOLKSWAGEN GROUP POLSKA
100%
KPI SC will be renamed into Volkswagen Group Polska Sp. z o.o. (GmbH) – r.

52. Merger concept
Back up

53. New Regional Parts Distribution Centre in Poland and ET2000
Back up
Main issues
Consolidation into one building ( m2 warehouse space) and equipment implementation
ET corporate solution for spare parts distribution
Both projects should have the same go-live date – May 2015
Expenditures
Planning phase: 0,5 Mio. €
ET 2000: 4,85 Mio. €
Equipment & Infrastructure: 4,3 Mio. €
Warehouse will be leased for 10 years (estimated cost per annum: 1,45 Mio. €)
Location:
Komorniki (Poznań area) I

54. Final preparation phase
ET2000 implementation
Back up
Optimization of multi brand logistics by:
implementation of multi brand logistics
international servicing areas for logistics
regional/national trade and marketing
Poland is the first country to implement EWM module.
Total project budget: 4,85 Mio. EUR
ET2000 SAP
productive
planned
/ in roll out
2013
2014
2015 09 10 11 12 01 02 03 04 05 06 07 08
Full Go Live
IAM
Testing done
Planning phase
Implementation phase
Final preparation phase
Purchasing Design Testing
Training
Inbound start
Blueprint
Business Case

55. New Regional Parts Distribution Centre
Back up
Location: Poznań area
Storage space: sq.m.
Option to expand up to: sq.m.
Height:11 m
Building Class: A
Green certificate (BREEAM)
Accessible for handicapped people
Investment of 95 Mio PLN
Storing common and exclusive parts for all VGP brands
Amount of stored parts: indexes
2013
2014
2015 01 02 03 04 05 06 07 08 09 10 11 12
Full Go Live
Contract with developer
Early access
Planning phase
Construction phase
Final preparation phase
Approval Planning
Racking
Feasibility Study
Business Case
Equipment Tendering & Negotiation
Building Construction
Migration Ramp up

56. Automobile Market in Poland New Passenger Cars Registrations in 2013
Back up
Market Share
Change vs PY in pp
12,6%
0,7%
9,0%
0,6%
8,1%
0,8%
6,7%
0,5%
6,3%
-0,7%
5,9%
0,4%
5,8%
0,2%
5,1%
0,3%
4,5%
0,1%
3,8%
3,7%
-1,2%
-0,2%
3,2%
-1,5%
3,1%
2,2%
-0,3%
2,1%
-0,1%
2,0%
1,9%
0,0%
- VGP Brands
- Main Volume Brands Competitors

57. Backup Baseline - VW ≈ 4,5 Mio PLN  Difference baseline PR62
Top Measures
DNP
Direct Express €
Economy Parts & Packages €
Fleet
K&L: Unfallspezialist €
Active Selling €
Sum €
≈ 4,5 Mio PLN
 Difference baseline PR62

58. Backup Baseline - VWN

59. Backup Baseline - Audi

60. Backup Baseline - Seat

61. Backup Baseline - Skoda

62. Backup: Detailed Assumptions for turnover calculation
Topic
- Details -
Marketing cost
In % of the additional turnover according to the budget
3,5% for tyre business all brands
Personnel
zł (HR value) field force zł travel expense (based on budget 2014)
zł (HR value) specialist zł travel expense (based on budget 2014)
Group personnel and travel expense is allocated with the PR 62 allocation key
Tyres
Allocation of additional turnover to the brands according official local accesories allocation key
Direct cost
According % out of the budget planning 2014