Specific risks

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

Macroeconomic risk

The main risk for the medium-term development of the global economy is a prolonged phase of weak growth. In addition, substantial risks are associated with the continuing tight situation on the financial markets, capacity underutilization and the only sluggish improvement of the international job markets. The main risks continue to be high energy and commodity prices, growing protectionism and significant ongoing imbalances in foreign trade. Changes in legislation, taxes, or customs duties and a permanent increase in state intervention may also have a material adverse effect on the Volkswagen Group’s international business.

Sector-specific risk

The markets in Asia, South America, and Central and Eastern Europe are critical for growth in global demand for automobiles. However, some countries in these regions have high customs barriers or minimum local content requirements for domestic production that make it more difficult for us to increase sales volumes. Our substantial market coverage in the main established markets entails risks relating primarily to price levels. In particular massive discounts, which are being used above all to promote sales in the US automotive market, but also in Western Europe and China, continue to put the entire sector under pressure. As a supplier of volume models, we would be particularly affected if competing manufacturers 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.

We sell most of our vehicles in Western Europe. Consequently, a sustained drop in demand or in prices in this region would have a particularly strong impact on us. We counter this risk with a clear, customer-oriented and innovative product and pricing policy. Outside Western Europe, however, our overall delivery volume is widely diversified across the markets of North America, South America, Asia-Pacific, and Central and Eastern Europe. Moreover, we enjoy, or are aiming to achieve, a leading position in a number of established and emerging markets. In addition, strategic partnerships provide us with an opportunity to 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(1) of the Kreditwesengesetz (KWG – German Banking Act).

The business climate for our trading and sales companies has deteriorated considerably as a result of the financial and economic crisis. In particular, bank finance for these companies’ operations has become significantly more expensive and more difficult to obtain. Our dedicated Group support system offers automotive dealers and outlets financing on attractive terms via our financial services companies, thus minimizing the risk of their insolvency. In addition, we have established a risk management system to identify in good time and counteract liquidity bottlenecks that could hinder smooth business operations.

With respect to the potential amendment of the Block Exemption Regulation for sales and customer service, we will take additional measures to exploit the opportunities that this offers and to mitigate potential risks.

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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