Local Value Added
Within its growth strategy, the Volkswagen Group is focusing on localizing the value-added process. As a concept, localization stands for the regional integration and concentration of production activities and helps offset many of the drawbacks of an international distribution of labor in ecological, economic and social terms. Relocating supplier firms in the vicinity of new production plants creates new jobs and the local population benefits from rising prosperity. At the same time, the concept of localization also brings with it numerous economic advantages. These include lower logistics costs, procurement prices in line with local market conditions, elimination of import duties and immunity from volatile exchange rates.
Economic Benefits of Localization
One inestimable advantage of localization is the proximity to the customer that it brings. This makes it easier to identify specific regional customer needs and design products accordingly. Also, products manufactured in the vicinity enable local people to identify with them. So the concept of localization systematically pursued by the Volkswagen Group serves not least to open up new markets. Thanks to the MQB we have a uniform global platform on which to make specific regional adaptations to our models while
at the same time keeping our production operations lean and efficient. To prepare the ground, we observe the various markets, obtain information and link up to the regional knowledge networks. Our decentralized production and research sites provide valuable regional bases for these activities.
Contributing to Regional Development
Through the localization of value added, we are giving people in many parts of the world an opportunity to improve their standard of living. Many jobs are being created at our newly built plants in places such as Silao (Mexico), Foshan and Urumqi (China), leading to additional jobs being generated outside the Company among suppliers, service providers and local craftsmen. In Pune (India) for example, since the Volkswagen plant was set up, 67 new supplier companies have been founded, together providing work for around 13,000 people.
AUDI AG is underpinning its successful growth in the North American market by establishing a new plant in San José Chaipa, Mexico. The cornerstone ceremony took place in May 2013. The plant will have its own body shop, paintshop, assembly lines and press shop, representing an investment of more than €900 million. Three years before start of production is scheduled, in the summer of 2013 the first training course began for 64 future mechanics and mechatronics specialists. Training is aligned with the German dual model of vocational training that unites theory and practice. In addition, German language courses are provided for the young Mexicans. At the end of February 2014 a further 46 young people joined them at the training center that Audi had built at the site.
GO WEST: The Volkswagen Group’s Strategy in China
In China, the Group will open yet another production plant by the end of 2014. By 2018 the number of employees in Chine is set to rise from around 75,000 to 100,000 as production capacity increases to more than 4 million vehicles per year. At the same time, research and development resources are to be expanded to 2,500 employees. Overall, and particularly through our Go West strategy in China we are helping create broad-based participation in prosperity and economic growth.
As our engineers in Germany supervise the construction of the new factories and monitor component testing and quality assurance at our plants overseas, expansion abroad at the same time invariably helps safeguard jobs in Germany.
Market Expansion in Russia
The Volkswagen Group is one of the largest foreign investors in the
automotive industry in Russia. Our company Volkswagen Group Rus
brings together the activities of seven Group brands: Volkswagen
Passenger Cars, Audi, ŠKODA , SEAT , Volkswagen Commercial Vehicles,
Bentley and Lamborghini in the Russian market. Between 2006 and
2013, a total of some €1.3 billion was invested in local production.
By the end of 2018 we will be investing another €1.2 billion. In
November 2013 the 700,000th Volkswagen brand vehicle rolled off
the production lines in Kaluga, where operations have created
5,500 direct jobs and at least twice as many indirect ones. At the
end of 2012 contract production also began at the Nizhny Novgorod
plant of partner company GAZ, where 2,200 people are employed.
Concepts in Germany
In Germany too the Volkswagen Group is providing new impetus for growth. Take Osnabrück for example, where we acquired the insolvent Wilhelm Karmann GmbH and in 2012 launched series production of the Porsche Boxter and the Porsche Cayman. In the meantime the plant has established itself as a center of excellence for cabriolets and small-series models. At the Group’s Wolfsburg site we have joined forces with the civic authorities to form Wolfsburg AG with the aim of promoting business in the region and at the same time improving the quality of life. In addition, the “Allianz für die Region” or Regional Alliance, which arose in January 2013 out of a joint initiative between Wolfsburg AG and the REGION BRAUNSCHWEIG GMBH project, is striving to en-hance local facilities for residents and businesses and to attract skilled labor to the area.
The Porsche Cayman . At the end of 2012 production started at the Osnabrück plant as well.
Subsidies and Taxes
For the expansion of its activities in the field of research and in the creation of new production plants, in 2013 the Volkswagen Group received €610 million in public subsidies.
At the same time, thanks to its localization strategy, through taxes and duties the Volkswagen Group helps ensure that state and municipal investments in infrastructure and public welfare are possible in many parts of the world. We pay taxes wherever we add value – the majority in Germany. In 2013 we paid the tax authorities a total of around €3.1 billion in income tax alone.