Volkswagen Valuation Report

Topics: Automotive industry, Volkswagen Group, Stock market Pages: 13 (3051 words) Published: January 27, 2012
| | |Volkswagen | |Valuation Report |

|Date: | |2011/11/22 |

Part One: Introductory
(1)Profile of Automotive Industry:
▪ Division. Automotive industry could be divided into two parts: auto makers and auto parts makers. The highly competitive auto makers grow fast around the world including Toyota, Volkswagen, GM etc., while the auto parts makers can be divided into 'Original Equipment Manufacturers'(OEMs)which conduct components for automobile manufacture, 'Replacement Parts Production and Distribution Companies' and 'Rubber fabrication' like tires and hoses. [1] ▪ Revenue. Large proportion of revenue generated by automobile makers comes from selling automobiles. Therefore, number of vehicle deliveries and sales are key factors for auto makers. ▪ Cost. The auto industry proves to be highly capital and labor intensive. Thus major costs of auto industry consist of labor cost, material cost , and other costs such as advertisements and market research. Automotive industry depends heavily on consumers trend and taste. Therefore, in order to outperform the competitors, companies locate much expense on updating models and enhancing technologies which increases costs and delays revenue growth. What's more, the increasing demand of environment-friendly autos by the government forces companies to do more R&D which may cost billions of dollars and take years to comes to fruition. This may influence profits and future cash flow of the auto makers. ▪ Leases. It is the major part of auto companies' financial services. Consumers are allowed to own their cars by signing contracts with the companies and paying out only small part of the price. It is a good way for makers to hide true price of vehicles through financing cost. ▪ Other features. (1)Seasonal trend. Auto companies experienced sale dump in the second quarter of a year and drop in the last quarter. This trend is also obvious in the case of Volkswagen.(2)Borrowing rate. The financing rate offered by the car makers and dealers is correlated with sales data of autos. When the rate is on a low level, sales data increases accordingly. (2)Profile of Volkswagen Group:

A. Division
|Automotive Division |Financial Service | |Volkswagen Passenger Cars |Dealer and Customer | |Audi |Financing | |Skoda |Leasing | |SEAT |Directbank | |Bentley |Insurance | |Volkswagen Commercial Vehicles |Fleet business | |Scania | | |Other |  |

table 1 division of Volkswagen
Volkswagen Group is a Germany-based automobile manufacturer. It develops vehicles and components. It also produces and sells vehicles, in particular Volkswagen brand passenger cars and commercial vehicles. Volkswagen AG is the parent company of Volkswagen Group. The accounting policy of Volkswagen follows IFRS as it is regulated and recognized in Europe....
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