Presentation - subject to modification during presentation -

Rupert Stadler, Chairman of the Board of Management of AUDI AG

Neckarsulm, 2013-05-16

Speech to the 124th Annual General Meeting of AUDI AG

Part 1

Ladies and Gentlemen,

my Board of Management colleagues and I would like to welcome you to the Annual Shareholders’ Meeting of AUDI AG at our site here in Neckarsulm with its long and prestigious tradition. More than 14,700 employees here produce premium and luxury automobiles. The following Audi models roll off the assembly lines every day:

  • A4 Sedan  
  • A5 and S5 Cabriolet
  • A6 Sedan, Avant, allroad and S6
  • A7 and S7 Sportback
  • A8, A8L and S8
  • and the hybrid versions of the A6 and A8.

Neckarsulm is also the headquarters of quattro GmbH, our sporty subsidiary. At present, we supply the following top models:

  • Audi R8, R8 Plus,

and both of them as open roadster versions under the Spyder name,

  • RS 5 Cabriolet,
  • RS 6 Avant
  • and RS 7.

On February 25 this year, we delivered the five-millionth Audi with the quattro drive system. quattro – our technology of permanent all-wheel drive is an icon for Vorsprung durch Technik. Out of our 179 different motor control gears, we currently offer a variety of 140 quattro systems. To make sure that such ideas arise that can also be implemented, we closely mesh our production and development engineering. In Neckarsulm for example, we have a lightweight construction center, a pre-series center, the development of diesel engines for motorsport and road cars and the design of our convertible roofs.

And in October last year, we inaugurated our new Engine Test Center. With 57 test benches, it is the world’s largest and most innovative facility to test engines. In brief: There’s a lot here for visitors to discover. That’s why the Audi Forum Neckarsulm is a big attraction both in the region and beyond. Since this wonderful building was opened in May 2005, 1.4 million visitors have picked up their new automobiles, participated in plant tours or visited one of the various events in the Audi Forum.

Ladies and Gentlemen,

when we look back at the year 2012, it can be summarized quite well with these headlines concerning Audi:

  • “Audi Q3 is the Germans’ favorite car” 
  • “Audi A3 wins the Golden Steering Wheel”
  • “Triumph for Audi hybrid at Le Mans”
  • “Audi to build a plant in Mexico”
  • And: “Audi acquires Ducati”

We continued our success story in the year 2012. We set the course for the future with some strategically important decisions. “We” – that is the fascinating brands Audi, Lamborghini and Ducati – as well as Italdesign Giugiaro, our competence center for design and engineering. And Audi includes numerous other subsidiaries as well.

Here, we are taking stock – and the bottom line says: We were extremely successful in 2012.

Last year, we delivered more than 1,455,000 automobiles of the Audi brand: about 152,000 more than in 2011. In other words: Every 22 seconds, we hand over a new Audi to a customer in one of more than 100 markets worldwide. Today, we sell nearly twice as many cars as ten years ago.

At the beginning of 2012 – similar to this year – economic indicators were by no means pointing towards growth everywhere. Especially not in Europe, which is still our most important market, with budget problems in many countries, resulting in the need for public savings and reform programs, high unemployment among young people, as well as uncertain consumers and entrepreneurs. All of this dampened economic growth and demand. In the euro zone, it actually contracted.

That is why I am particularly pleased with the number of cars we shipped last year.

  • Firstly, Audi grew in all regions of the year in 2012 – also in Europe.
  • Secondly, we achieved new best figures in all of those regions.
  • And thirdly, compared with the overall market, we grew at an above-average rate.

Two regions were especially dynamic for us:

  • North America, with an increase of nearly 19 percent
  • and Asia/Pacific,with a good 28 percent plus.

We grew in Europe as well, against the general market trend, in fact. We had to swim against the current and made good progress nonetheless. In absolute terms, our home continent is still our most important sales region. We delivered 739,000 automobiles in Europe – a good 30 percent more than ten years ago. In comparison: The total market in Europe has not actually grown in that time – but we have expanded by more than one third. At the same time, we know that 2013 is a difficult year.

Let’s take a closer look at the market situation in Europe. Spain has reached its lowest market volume since 1986. Demand in Italy is at the level of 1979, which means that its automobile market has been thrown back by more than 33 years.

It is true that Audi has a better-than-average performance there too, but the negative market development has not left us untouched either. We achieved our European growth elsewhere.

In the United Kingdom for example: Audi achieved a new sales record of more than 123,000 units and an increase of seven percent compared with 2011. At one time, we were the number three in the premium segment there, and now we are battling neck-and-neck for first place.

In Russia for example, 44 percent growth is the strongest of all our top-ten markets. We have doubled our sales volume to about 33,500 units in just three years. And Russia is also a market with good prospects for the future. That’s clear from the numbers since the beginning of this year. Since January 2013, we have achieved growth in shipments of 14 percent.

And as a last example, in Germany, we achieved a new sales record of 263,000 units. That means for the first time, we were the premium brand number one in the car business in our domestic market – on the home turf of the big three premium brands. And this year, we have so far maintained the level of last year.

Let’s look across the Atlantic: We profited to an above-average degree from the dynamism of the US market. A remarkable fact is that since January 2011, each single month – 28 months in a row that is – was a record for Audi in the United States. It is also pleasing that not only the quantity of business is increasing, but also the quality. In 2010, roughly every fifth Audi sold in the United States was a model from the upper premium segment. Today, every third Audi sold there is an A6, A7, A8 or Q7.

Three facts on China: We once again significantly extended our lead over the competition in 2012. Audi gained more new Chinese customers than ever before within one year. We were the first premium supplier to pass the magic mark of 400,000 deliveries in one year. In comparison: We achieved that number in 1995 worldwide; today in China alone. At the end of 2010, we delivered the one-millionth Audi in China. It took us more than 20 years to do that. We then announced that we would reach the second million within three more years. We will in fact get there about the middle of this year.

Ladies and Gentlemen,

that brings us from the markets to the models, the drivers of this growth. The Q-model family has long since established itself as the second cornerstone of our unit sales. Every fourth Audi is already an SUV. More than 200,000 units sold last year make the Audi Q5 the global market leader in its segment once again. And it has held this position without any interruptions since 2009. For its little brother, the Q3, 2012 was the first full year on the market, and with a successful performance: Nearly 80,000 units were delivered in Europe alone. This year, we will launch the Q3 in additional markets, and have started local production in China.

Our deliveries in the full-size segment also continued to increase at an above-average rate. The proportion of models in the prestigious C and D segments has continued to grow in recent years. And since last year, our new S-models – S6, S7 and S8 – have also been available. They give the model series even more emotion and sportiness. At the same time, we have made further substantial efficiency progress compared with those models’ predecessors: for example the Audi S8 with an unparalleled decrease in fuel consumption of about one quarter. We achieve these efficiency advantages with technologies like our cylinder-on-demand system.

In addition to the S models, we expanded the full-size segment, with the A8 hybrid version. This model follows the Audi Q5 hybrid quattro and the A6 hybrid, which have been available since 2011. Audi therefore has a bigger fleet of full hybrids than all its competitors.

Every single model that we launched in 2012 sets standards. Also in the segment of compact cars. I would like to emphasize one of them: the new Audi A3. For us, without a doubt the most important new model of the year 2012. Since the first generation, which was launched in the mid-1990s, the Audi A3 has been a driver of our growth:

Around the middle of this year, we will hand over the three-millionth A3 to customer. Our customers loved the new generation right from the start, and the press was also convinced. That’s one of the reasons why we won the Golden Steering Wheel in 2012, the most important prize awarded by the European automobile press.

The Audi A3 is a demonstration of important technology of the future. Here are three examples: Keyword lightweight construction: 80 kilograms weight saved – that’s remarkable with a compact car.

  • Keyword connectivity: Via integrated Facebook you can find out where
    your friends are located and plan the route straight to them. And you can access current train or flight information. That’s just a small selection of the many possibilities that the new A3 offers.
  • Keyword efficiency: With its 1.6 liter TDI engine, the new A3 has CO2 emissions of just 99 grams per kilometer.

And in early March, we presented two more models at the Geneva Motor Show.

The A3 g-tron with bivalent gasoline/natural-gas drive and emissions of 95 grams of CO2 per kilometer in natural-gas operation. A customer using Audi e-gas, is actually driving the A3 g-tron CO2-neutral.

The second new model presented was the Audi A3 e-tron. This plug-in hybrid manages 35 grams per kilometer. Apropos e-tron. We impressively demonstrated the strengths, of this Audi-technology on the racetrack in 2012. With  the victory of the Audi R18 e-tron Quattro in the 24 Hours of Le Mans and with the world record of the R8 e-tron on the Nürburgring. We gained a lot of experience from the work on this record-holder and our A1 e-tron fleet, especially with regard to high-performance electronics and thermal management. This knowledge is now being transferred into the model series. So for us, the models mentioned are the pacemakers on the way to series-produced electric cars.

In the review of 2012, I would now like to talk about another new arrival. Since July 2012, Ducati has belonged to the Audi Group. The latest member of our family is fascinating, sporty, fast- and after five decades, we have reawakened our company’s motorcycle genes. With the brands DKW and NSU, we were once the biggest manufacturer of motorcycles in the world.

In the past ten months, Ducati has gained us a lot of new friends. And this brand’s fan base is growing not only with us. With more than 44,000 motorcycles, Ducati set a new record for deliveries in 2012. That’s approximately four percent more than in 2011. Ducati is in demand all over the world, with continuous growth in Western Europe, Asia and North America.

The biggest individual market was the United States with more than 9,300 motorcycles sold – twice as many as in 2003. Why do I mention that? Because the relevant overall market has contracted by more than half in the same period. So Ducati successfully utilized one of the most difficult times in the American motorcycle business as an opportunity.

This is in line with a spirit that connects the two brands – Audi and Ducati – and the people behind them, in the same way as the fascination for emotive products and pioneering technology. Three examples: Last autumn, Ducati presented the Hypermotard. Deliveries to customers will begin this year, along with the Multistrada 1200 S Pikes Peak in its new look and feel, and the new 1199 Panigale R, the top version of the sports motorcycle from Bologna.

Ladies and Gentlemen,

25 minutes by car from Ducati is the Lamborghini headquarters. Our colleagues there also look back on a successful year 2012. The key figure is deliveries of 2,083 super sports cars, 30 percent more than in 2011. The Lamborghini Aventador was the driver of that growth. 2012 was its first full year on the market. This year, we will follow up with the launch of the Aventador Roadster. Customer interest is enormous. Production is already covered by orders into the second quarter of 2014. Excellent conditions for a successful jubilee year: Because Lamborghini celebrates its fiftieth anniversary in 2013. Last week, we were in Sant’Agata Bolognese for the official ceremony.

Let’s have a brief look at how the past year is reflected in the Audi Group’s key financial metrics.

We increased our revenue in 2012 by about 10.6 percent to the new record level of 48.8 billion euros. We even surpassed the record operating profit of the prior year once again, with earnings of 5.4 billion euros. This is extremely positive, especially against the backdrop of the difficult economic situation.

As I already stated at our annual press conference: There are years in our industry in which one reaps, and there are years in which one sows. Our top priority for this year is to invest in future technologies and to expand our capacities. Over the next years, we are preparing for the next major growth step towards two million automobiles. CFO Axel Strotbek will give you some more financial details in a few minutes. 

But before that, let us look at the people who have worked hard and passionately to achieve these results. At the end of 2012, 68,804 people worked at the Audi Group. Worldwide, we took about 5,800 new employees on board. Ducati is included in that figure. But we also strengthened our workforce by means of targeted new recruitment.

In Germany alone, we recruited close to 3,000 people, including about 1,600 experts mainly in the fields of electric mobility and lightweight construction. Another 620 skilled workers were given full contracts of employment, most of whom had previously had temporary contracts. And nearly 750 young people started an apprenticeship or dual course of study in Ingolstadt or Neckarsulm. In Győr our new car plant will go online at the end of June. For that reason, we added more than 1,600 new employees there last year. At our site in Brussels, we recruited about 200. In other words, more people joined the Audi family in 2012 than ever before in one year.

Ladies and Gentlemen, each individual at our company has made a contribution so that we can report such positive figures to you today. Whoever contributes to success should also participate in it. That’s the reason for our Audi profit sharing.

This year, the employees of AUDI AG covered by collective wage agreements will receive an average of 8,030 euros each. In order to further strengthen the company pension, we will recognize an employer-financed addition to the retirement pension obligation of up to 1,000 euros out of the profit share. Our subsidiaries in Germany and abroad have their own arrangements for letting employees participate in their successful business operations.

Before I hand you over to Mr. Strotbek, it is important to me to take this opportunity to say “thank you” to all of our employees at all of our sites around the world. It makes one proud to work for Audi.

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Rupert Stadler Speech to the Annual General Meeting - Part 1
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