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.
Households’ worries about the future economic situation 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, it became evident that the effects of the eurozone debt crisis have not yet been overcome. Several automotive markets, particularly in Southern Europe, were unable to recover from their record lows, even if they did return to positive growth. We are countering this buyer reluctance with our attractive range of models and systematic 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. Automotive markets around the world are exposed to risks from government intervention in the form of tax increases, for example, which could curb private consumption.
Commercial vehicles are capital goods and are therefore subject to more extreme cyclical fluctuations than occur in the consumer goods industry. Although production volumes are significantly lower, the complexity of the trucks and buses range in fact significantly exceeds that of passenger cars. 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 Korea, China and Japan. Due to volatile demand in new ship construction and heavy investment by some licensees, there is excess capacity in the market for marine engines, resulting in risks ranging from a decline in license revenues through to bad debt losses. There is also a risk that market share will be lost as a result of Chinese state-owned licensees merging with competitors. We address these risks by constantly monitoring the markets, working closely together with licensees and carefully managing business relationships with them. This also includes receivables management in order to safeguard our license revenues.
Dependence on fleet customer business
In fiscal year 2014, the percentage of total registrations in Germany accounted for by fleet customers rose to 13.3% (12.5%). The Volkswagen Group’s share of this customer segment climbed to 48.4% (47.2%).
In Europe, the Volkswagen Group was able to further extend its position in this customer segment thanks to its comprehensive product range and customized support for this target group; registrations by business fleet customers were up 9.9% year-on-year, while the Group’s share rose to 29.2% (28.8%). 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.