1. Russian Sourcing Project By Bengt Aronsson, Purchasing Director Russia 30 October 2013, Stockholm

2. Content Scania globally Scania in Russia Common sourcing project with MAN Why Russia? Opportunities & Challenges 30 October 2013 Bengt Aronsson, Scania Purchasing 2

3. 3 The world of Scania Regional Product Centres Sales and services untis Production units 1891 Sweden 1957 Brazil 1964 Netherlands 1976 Argentina 1992 France 1993 Poland 2002 Russia Number of employees 38, 600 persons Sales and services 1,000 sales points 1,600 workshops 67,401 trucks and buses sold 2013 Since 2008 Scania is part of VW Group 30 October 2013 3 Bengt Aronsson, Scania Purchasing

4. Luleå Scania Truck Production - Europe Zwolle Angers St Petersburg Södertälje 4 Oskarshamn 30 October 2013 Bengt Aronsson, Scania Purchasing 4

5. Scania Group in Russia today  Production and assembly  Bus production 2000-2009  Truck assembly since 2010  Sales and services  53 dealers all over the country  Products Heavy Trucks Buses Engines  Services Workshops Service agreements Parts Driver training Scania Assistance  Operational leases  Financial leases  Insurance solutions Scania PeterScania Rus Scania Leasing 30 October 2013 5 Bengt Aronsson, Scania Purchasing

6. Haulage Construction Distribution Special purpose Network and services City and suburban Intercity and coach Used vehicles Engines Scania solutions in Russia 30 October 2013 6 Bengt Aronsson, Scania Purchasing

7. Scania Peter Timber truck Tipper 6x6 Mixer 6x4 8x4 Tipper 6x4 8x4 with Trailer adaptation Various chassis models Customer order Tipper P380 6x4 8x4 Euro 4 Stock refill Scania Peter factory facts  CKD + body structure  SOP 2010  Production area 39 000 m2  120 employees  Capacity: 7 500 units in 2 shifts (30 trucks/day) 30 October 2013 7 Bengt Aronsson, Scania Purchasing

8. Scania and MAN are integrated into Global VW Purchasing Konzern- beschaffung Metall Elektrik + Elektronik Exterieur Interieur Powertrain Neue Produktanläufe Allgemeine Beschaffung Prozess-, System-, Kostenmgmt. Lokale Verantwortlichkeit Strategische Ziele Group purchasing Metal Electric+ Electronic Exterior Interior Powertrain Project purchasing NAP Process -, System -, Cost-Management. Purchasing offices within brands and regions Local Responsibility Strategic Goals 30 October 2013 8 Bengt Aronsson, Scania Purchasing

9. Joint Sourcing Team in Russia 30 October 2013 Bengt Aronsson, Scania Purchasing 9 Team Leader B. Aronsson Sourcing Manager E. Byström Supplier Quality T. Gutman Sourcing Manager M. Markow Sourcing Manager I. Strom Supplier Quality S. Hasanbegovic Designer R. Bucksch HQ Support O. Krikun  Common sourcing team located in St Petersburg  Main task is to increase localization for potential legal demands  We work on identifying and evaluating potential local and international suppliers with  High quality processes  Required technologies  Competitive prices  Focus on chassis parts, cab production are under discussion  Other main components will be completed in Sweden and Germany  Bundled volumes Scania+MAN to attract suppliers  Work closely together with line organisations, where final decision is made

10. Supplier Evaluation Process at Scania 30 October 2013 Bengt Aronsson, Scania Purchasing 1. Receive first information about supplier 2. Introduction visit to supplier’s production 3. RFQ, quotation, negotiations 5. Logistics audit and arrangement s 7. Final agreement and tool/part order 6. Sample deliveries 4. First Assessment: quality audit Deviation report Corrective actions 8. PPAP sign-off 9. Serial Delivery S i g n G e n e r a l S u p p l i e r C o n t r a c t 10

11. Basics for doing business with Scania  Scania General Supplier Demands: Healthy financial Status ISO TS 16949 and 14001 certificate Working language: English EDI capability Risk management, contingency plan 30 October 2013 Bengt Aronsson, Scania Purchasing  Supplier shall have a process assuring: Safety and environmental-friendly production 100% Product Quality 100% Delivery Reliability Continuous cost reduction Participation in Scania’s improvement process 11

12. Wheels and tyres Air surge tanks Torque rods Mudguards Leaf and parabolic springs Fuel tanks Priority parts to localize in Russia 30 October 2013 12 Bengt Aronsson, Scania Purchasing Cable harnesses Pressed parts including surface treatment Plastics and rubber Castings, forgings, machining Batteries Frames Scania PeterMAN RusTotal Current 1.3005001.800 Year ~2015 3.000 6.000 Year ~2016-18 7.0006.00013.000

13. Why Russia? Total heavy truck market in Russia is around 100,000 / year: – More than 40,000 trucks per year is sold by western manufactures – all are aiming on localization – Large Russian OEMs like GAZ or KAMAZ are releasing new upgraded programs with lots of western components Trucks on the road are very old and need to be replaced – 76% are >10 years old Only few international suppliers in Russia are specialized on truck components. Most supplier produce parts for passenger cars Russian truck manufacturers have normally component production vertically integrated with limited access to western producers Legislations will demand localization, in one way or another Unique opportunity to take over a large strategic growing market 30 October 2013 Bengt Aronsson, Scania Purchasing 13

14. Opportunities and Challenges 30 October 2013 Bengt Aronsson, Scania Purchasing 14 Opportunities  Very little competition from the local suppliers:  Low quality level, ISO TS 16949 is rare  Old machinery  Limited experience with European OEMs  Language barrier  Higher prices at local suppliers  Inefficient processes  Limited experience of competition  High costs for imported sub components Challenges  Material and surface treatment  Old soviet material standards (GOST), different from EU  Required surface treatment is hard to find  Finance  Complicated and non-transparent rules and regulations  Financial and legal advisors must be involved  Try to establish good relationship with the local governments  More people needed to work with accounting/administration than usual in EU

15. 15 St Petersburg Moscow Kaluga Nizhny Novgorod Togliatti Nab. Chelny Chelyabinsk URAL REGION Major Truck Manufacturing in Russia 30 October 2013 Bengt Aronsson, Scania Purchasing

16. Questions please! 30 October 2013 Bengt Aronsson, Scania Purchasing 16