Full speed
ahead to
the future.
A N N UA L R EP O R T 2018
Key Figures
Key Figures
2018
2018
20171
20171
%
%
V O L K SWA G E N G R O U P
V O L K SWA G E N G R O U P
Volume Data2 in thousands
Volume Data2 in thousands
Deliveries to customers (units)
Deliveries to customers (units)
Vehicle sales (units)
Vehicle sales (units)
Production (units)
Production (units)
Employees at Dec. 31
Employees at Dec. 31
Financial Data (IFRSs), € million
Financial Data (IFRSs), € million
Sales revenue
Sales revenue
Operating result before special items
Operating result before special items
Operating return on sales before special items (%)
Operating return on sales before special items (%)
Special items
Special items
10,834
10,834
10,900
10,900
11,018
11,018
664.5
664.5
10,742
10,742
10,777
10,777
10,875
10,875
642.3
642.3
235,849
235,849
17,104
17,104
229,550
229,550
17,041
17,041
7.3
7.3
–3,184
–3,184
7.4
7.4
–3,222
–3,222
+0.9
+0.9
+1.1
+1.1
+1.3
+1.3
+3.5
+3.5
+2.7
+2.7
+0.4
+0.4
–1.2
–1.2
+0.7
+0.7
+14.4
+14.4
+6.0
+6.0
Operating result
Operating result
13,920
13,920
13,818
13,818
Operating return on sales (%)
Operating return on sales (%)
Earnings before tax
Earnings before tax
Return on sales before tax (%)
Return on sales before tax (%)
Earnings after tax
Earnings after tax
5.9
5.9
15,643
15,643
6.0
6.0
13,673
13,673
6.6
6.6
12,153
12,153
6.0
6.0
11,463
11,463
Automotive Division3
Automotive Division3
Total research and development costs
Total research and development costs
13,640
13,640
13,135
13,135
+3.8
+3.8
R&D ratio (%)
R&D ratio (%)
Cash flows from operating activities
Cash flows from investing activities attributable to operating activities4
Cash flows from operating activities
Cash flows from investing activities attributable to operating activities4
of which: capex
of which: capex
capex/sales revenue (%)
capex/sales revenue (%)
Net cash flow
Net cash flow
Net liquidity at Dec. 31
Net liquidity at Dec. 31
Return on investment (ROI) in %
Return on investment (ROI) in %
Financial Services Division
Financial Services Division
Return on equity before tax5 (%)
Return on equity before tax5 (%)
V O L K SWA G E N A G
V O L K SWA G E N A G
Volume Data in thousands
Volume Data in thousands
Employees at Dec. 31
Employees at Dec. 31
Financial Data (HGB), € million
Financial Data (HGB), € million
Sales
Sales
Net income for the fiscal year
Net income for the fiscal year
Dividends (€)
Dividends (€)
per ordinary share
per ordinary share
per preferred share
per preferred share
6.8
6.8
18,531
18,531
6.7
6.7
11,686
11,686
18,837
18,837
13,218
13,218
17,636
17,636
12,631
12,631
6.6
6.6
–306
–306
19,368
19,368
11.0
11.0
6.5
6.5
–5,950
–5,950
22,378
22,378
12.1
12.1
+58.6
+58.6
+6.8
+6.8
+4.6
+4.6
–94.9
–94.9
–13.5
–13.5
9.9
9.9
9.8
9.8
2018
2018
2017
2017
%
%
119.4
119.4
117.4
117.4
+1.7
+1.7
78,001
78,001
4,620
4,620
4.80
4.80
4.86
4.86
76,729
76,729
4,353
4,353
3.90
3.90
3.96
3.96
+1.7
+1.7
+6.1
+6.1
1 Adjusted
2 Volume data including the unconsolidated Chinese joint ventures. These companies are accounted for using the equity method. Prior-year deliveries updated to
1 Adjusted
2 Volume data including the unconsolidated Chinese joint ventures. These companies are accounted for using the equity method. Prior-year deliveries updated to
reflect subsequent statistical trends.
reflect subsequent statistical trends.
3 Including allocation of consolidation adjustments between the Automotive and Financial Services divisions.
4 Excluding acquisition and disposal of equity investments: €18,242 (€17,512) million.
5 Earnings before tax as a percentage of average equity.
3 Including allocation of consolidation adjustments between the Automotive and Financial Services divisions.
4 Excluding acquisition and disposal of equity investments: €18,242 (€17,512) million.
5 Earnings before tax as a percentage of average equity.
This version of the annual report is a translation of the German original. The German takes precedence. All figures shown in the report are rounded, so minor
This version of the annual report is a translation of the German original. The German takes precedence. All figures shown in the report are rounded, so minor
discrepancies may arise from addition of these amounts. The figures from the previous fiscal year are shown in parentheses directly after the figures for the
discrepancies may arise from addition of these amounts. The figures from the previous fiscal year are shown in parentheses directly after the figures for the
current reporting period.
current reporting period.
Moving Globally
VOLKSWAGEN GROUP deliveries – in thousand units
Moving
Globally
Key
Figures
E U R O P E / O T H E R M A R K E T S
2016
2017
2018
4,618
4,738
4,741
+0.1%
N O R T H A M E R I C A
2016
2017
2018
939
976
957
–2.0%
S O U T H A M E R I C A
2016
2017
2018
422
522
590
+13.1%
A S I A - P A C I F I C
2016
2017
2018
4,319
4,506
4,546
+0.9%
We are resolutely pursuing the
transformation of the Volkswagen Group.
By maintaining our course, we will
continue to shape individual mobility
in the future.
2
Contents
1
2
TO OUR SHAREHOLDERS
DIVISIONS
07
10
Letter to our Shareholders
The Board of Management of
Volkswagen Aktiengesellschaft
12
Report of the Supervisory Board
21
24
26
28
30
32
34
36
38
40
Brands and Business Fields
Volkswagen Passenger Cars
Audi
ŠKODA
SEAT
Bentley
Porsche
Volkswagen Commercial Vehicles
TRATON GROUP
Scania
42 MAN
44
46
Volkswagen Group China
Volkswagen Financial Services
Contents
3
3
4
5
GROUP MANAGEMENT REPORT
CONSOLIDATED FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
51
54
56
59
68
86
90
92
95
Goals and Strategies
193
Income Statement
340 Five-Year Review
Internal Management System and
194 Statement of Comprehensive Income
341
Financial Key
Key Performance Indicators
196 Balance Sheet
Performance Indicators
Structure and Business Activities
198 Statement of Changes in Equity
342 Glossary
Corporate Governance Report
200 Cash Flow Statement
344
Index
Remuneration Report
Executive Bodies
Disclosures Required
Under Takeover Law
Diesel Issue
Business Development
201 Notes
346 Scheduled Dates
329 Responsibility Statement
330 Auditor’s Report
108 Shares and Bonds
114 Results of Operations,
Financial Position and Net Assets
129
Volkswagen AG (condensed,
in accordance with the
German Commercial Code)
133 Sustainable Value Enhancement
156 Report on Expected Developments
163 Report on Risks and Opportunities
188 Prospects for 2019
This annual report was published
on the occasion of the Annual Media
Conference on March 12, 2019.
1
To our
Shareholders
TO OUR SHAREHOLDERS
07
10
Letter to our Shareholders
The Board of Management of
Volkswagen Aktiengesellschaft
12
Report of the Supervisory Board
To our Shareholders
To our Shareholders
Letter to our Shareholders
Letter to our Shareholders
7
7
Letter to our Shareholders
Letter to our Shareholders
There are many reasons to invest in a company. Some look for
There are many reasons to invest in a company. Some look for
returns – for companies built on solid foundations and with
returns – for companies built on solid foundations and with
healthy prospects. Others look for companies that embrace
healthy prospects. Others look for companies that embrace
responsibility for people and the environment. But they all
responsibility for people and the environment. But they all
look for companies that are valuable, that create value and
look for companies that are valuable, that create value and
stand for values. This is the type of company Volkswagen
stand for values. This is the type of company Volkswagen
strives to be. We therefore align our business to the following
strives to be. We therefore align our business to the following
three pillars: digitalization, electrification and an increase in
three pillars: digitalization, electrification and an increase in
shareholder value.
shareholder value.
The 2018 fiscal year has shown that we have added value in
The 2018 fiscal year has shown that we have added value in
spite of the difficult environment. This value is reflected in
spite of the difficult environment. This value is reflected in
10.8 million vehicles delivered – more than ever before. It is
10.8 million vehicles delivered – more than ever before. It is
reflected in more than 70 new models launched by our brands.
reflected in more than 70 new models launched by our brands.
For example SUVs such as the Volkswagen Touareg and T-Roc,
For example SUVs such as the Volkswagen Touareg and T-Roc,
the ŠKODA Kodiaq and Karoq, the SEAT Arona and the
the ŠKODA Kodiaq and Karoq, the SEAT Arona and the
Audi Q8. And it is reflected not least in our financial figures:
Audi Q8. And it is reflected not least in our financial figures:
sales revenue rose to €235.8 billion. Operating profit climbed
sales revenue rose to €235.8 billion. Operating profit climbed
to €17.1 billion (before special items of €–3.2 billion). And at
to €17.1 billion (before special items of €–3.2 billion). And at
7.3 percent, the operating return on sales before special items
7.3 percent, the operating return on sales before special items
was at the upper end of the target range.
was at the upper end of the target range.
The Group is in a solid financial position. Our operating
The Group is in a solid financial position. Our operating
business has proven resilient, despite the headwinds we had
business has proven resilient, despite the headwinds we had
to face. In Europe the new WLTP test procedure caused delays
to face. In Europe the new WLTP test procedure caused delays
in production. There were shifts in distribution, above all in
in production. There were shifts in distribution, above all in
the second half of the year. Volkswagen Passenger Cars and
the second half of the year. Volkswagen Passenger Cars and
Audi were particularly negatively affected by the introduction
Audi were particularly negatively affected by the introduction
of the WLTP. By increasing test capacities and reducing the
of the WLTP. By increasing test capacities and reducing the
range of variants, we intend to pass through the next level of
range of variants, we intend to pass through the next level of
the WLTP more smoothly.
the WLTP more smoothly.
We have also defined extensive countermeasures to improve
We have also defined extensive countermeasures to improve
the earnings situation. Appropriate programs are under way
the earnings situation. Appropriate programs are under way
in all the brands. Bentley, Audi and also the core Volkswagen
in all the brands. Bentley, Audi and also the core Volkswagen
brand in particular will have to work more efficiently. At the
brand in particular will have to work more efficiently. At the
Volkswagen brand, above all the objective is to shape the
Volkswagen brand, above all the objective is to shape the
future from its own resources. At the main plant in Wolfsburg
future from its own resources. At the main plant in Wolfsburg
alone, we therefore want to increase productivity by 25 per-
alone, we therefore want to increase productivity by 25 per-
cent by 2020.
cent by 2020.
These efforts are also necessary as political uncertainty and
These efforts are also necessary as political uncertainty and
an ailing economy are affecting our business in many regions
an ailing economy are affecting our business in many regions
of the world. This also includes China, where the economy
of the world. This also includes China, where the economy
dimmed considerably in the second half of the year because
dimmed considerably in the second half of the year because
of the trade dispute with the USA. Nevertheless, our share of
of the trade dispute with the USA. Nevertheless, our share of
this core market grew further, and deliveries increased
this core market grew further, and deliveries increased
slightly to 4.2 million.
slightly to 4.2 million.
In short, the 2018 result was quite a feat. I offer my sincerest
In short, the 2018 result was quite a feat. I offer my sincerest
thanks to our more than 660,000 employees for their com-
thanks to our more than 660,000 employees for their com-
mitment!
mitment!
And you, our shareholders, will of course also benefit from
And you, our shareholders, will of course also benefit from
our success. The Board of Management and Supervisory
our success. The Board of Management and Supervisory
Board are therefore proposing a significant increase of €0.90
Board are therefore proposing a significant increase of €0.90
in the dividend to €4.80 per ordinary share and €4.86 per
in the dividend to €4.80 per ordinary share and €4.86 per
preferred share.
preferred share.
8
8
Letter to our Shareholders
Letter to our Shareholders
To our Shareholders
To our Shareholders
Our emphasis is on the electric car,
Our emphasis is on the electric car,
because from today’s perspective
because from today’s perspective
it is the best and most efficient choice
it is the best and most efficient choice
for reducing CO2 in transport.
for reducing CO2 in transport.
– Herbert Diess –
– Herbert Diess –
To our Shareholders
Letter to our Shareholders
9
Looking ahead, the situation remains challenging. The tech-
nological change in our industry – from e-mobility through
to digitalization, connectivity, new mobility solutions, and on
to automated driving – is going to take a lot of energy and
financial resources. We want to shape this development from
the top. Therefore, we are realigning our activities. We will
increase our efficiency and competitiveness, pick up speed
and revise our cost structures.
The coming years will be guided by our electric campaign. We
are committed to the Paris Agreement and to making our
contribution to protecting people and the environment.
We’re planning investments of around €30 billion in electric
mobility in the next five years. Our emphasis is on the elec-
tric car, because from today’s perspective it is the best and
most efficient choice for reducing CO2 in transport. By 2025,
we will put 50 new electric models on the road. By then, every
fourth car in our range will be an electric model. With the
Volkswagen ID., we will soon offer the first vehicle with a CO2-
neutral supply chain and production. This will also change
the face of our plants: Zwickau, Emden and Hanover will be
transformed into pure-play electric car plants, forming
Europe’s largest electric production network. In China, too,
the conversion of the Anting and Foshan plants is in full
swing. The production launch of electric cars in North
America is planned for 2022.
infotainment to fully autonomous driving: software will
shape the car of tomorrow. To be globally successful, com-
panies need economies of scale, and as a leading company in
the sector, Volkswagen has the necessary size. What we are
lacking in many areas is software expertise. We are taking
steps to acquire these skills by forging alliances with partners,
increasing resources at full speed, revising our structures and
changing our workflows. We are the first established auto-
maker to separate hardware from software development. At
the Volkswagen brand, we have therefore established a sepa-
rate Board of Management position for software, which
will additionally be responsible for the Digital & Software-
Services Group division.
We are keeping a close eye on our goal to become the global
leading provider of sustainable mobility. This will be possible
if we continue to improve. We want to achieve sustainable
growth and create value. For our customers. For our work-
force. For our shareholders.
I thank you for your trust and invite you to stay with us as we
move forward on this journey.
Sincerely,
But the transformation of the car will go far beyond drives. It
is becoming a highly complex, connected device, like a “tablet
on wheels”, if you like. From assistance systems through
Herbert Diess
10
The Board of Management
To our Shareholders
The Board of
Management
of Volkswagen Aktiengesellschaft
Hiltrud Dorothea Werner
Integrity and Legal Affair
Dr.-Ing. Herbert Diess
Chairman of the Board of Management of Volkswagen Aktiengesellschaft and
Chairman of the Brand Board of Management of Volkswagen Passenger Cars,
Volume brand group,
China
Andreas Renschler
Chairman of the Board of Management of TRATON SE,
Truck & Bus brand group
To our Shareholders
The Board of Management
11
Gunnar Kilian
Human Resources
Oliver Blume
Chairman of the Board of Management
of Dr. Ing. h.c. F. Porsche AG,
Sport & Luxury brand group
Frank Witter
Finance & IT
Dr.-Ing. Stefan Sommer
Components & Procurement
Bram Schot
Chairman of the Board of Management
of AUDI AG, Premium brand group
12
Report of the Supervisory Board
To our shareholders
Report of the Supervisory Board
(in accordance with section 171(2) of the AktG)
Ladies and gentlemen,
In fiscal year 2018, the work of the Supervisory Board of
Volkswagen AG and its committees focused on the enhance-
ment of the Volkswagen Group management structure. The
efforts to address the diesel issue remained another area of
emphasis. The Supervisory Board regularly deliberated on the
Company’s position and development in the reporting
period. We supervised and supported the Board of Man-
agement in its running of the business and advised it on
issues relating to the management of the Company in accor-
dance with our duties under the law, the Articles of Asso-
ciation and the rules of procedure. We also observed the
relevant recommendations and suggestions of the German
Corporate Governance Code (the Code) at all times. The
Supervisory Board was directly involved in all decisions of
fundamental importance to the Group. Additionally, we
discussed strategic considerations with the Board of Manage-
ment at regular intervals.
The Board of Management regularly, promptly and com-
prehensively informed us in writing or in person on all
matters of relevance to the Company relating to its strategy,
the business development and the Company’s planning and
position. This also included the risk situation and risk man-
agement. In this respect, the Board of Management also
informed the Supervisory Board of further improvements to
the risk and compliance management system. In addition,
the Supervisory Board received information about com-
pliance-related topics and other topical issues by the Board of
Management on an ongoing basis. In all cases, we received
the documents relevant to our decisions in good time for our
meetings. At regular intervals, we also received a detailed
report from the Board of Management on the current busi-
ness position and the forecast for the current year. Any
deviations in performance from the plans and targets
previously drawn up were explained in detail by the Board of
Management, either in person or in writing. Together with
the Board of Management we analyzed the reasons for the
deviations so as to enable countermeasures to be derived. At
the meetings of the Special Committee on Diesel Engines, the
Board of Management presented regular reports on current
developments in connection with the diesel issue.
In addition, the Chairman of the Supervisory Board consulted
with the Chairman of the Board of Management at regular
intervals between meetings to discuss important current
issues. Apart from the diesel issue, they included the Volks-
wagen Group’s strategy and planning, its business develop-
ment, and the risk situation and risk management, including
integrity and compliance issues in the Volkswagen Group.
The Supervisory Board held a total of 14 meetings in fiscal
year 2018. The average attendance rate was 90.0%. In
addition, resolutions on urgent matters were adopted in
writing or using electronic communications media. All of the
members of the Supervisory Board attended over half of the
meetings of the Supervisory Board and the committees of
which they are members.
To our shareholders
Report of the Supervisory Board
13
C O M M I T T E E A C T I V I T I E S
In order to discharge the duties entrusted to it, the Super-
visory Board has established five committees: the Executive
Committee, the Nomination Committee, the Mediation
Committee established in accordance with section 27(3) of
the Mitbestimmungsgesetz (MitbestG – German Codetermi-
nation Act), the Audit Committee and, since October 2015,
the Special Committee on Diesel Engines. The Executive
Committee and the Special Committee on Diesel Engines
each consist of three shareholder representatives and three
employee representatives. The shareholder representatives
on the Executive Committee make up the Nomination Com-
mittee. The remaining two committees are each composed of
two shareholder representatives and two employee represen-
tatives. The members of these committees as of December 31,
2018 are given on page 89 of this annual report.
The Executive Committee met 13 times in the reporting
period. At its meetings, the Executive Committee prepared
the resolutions of the Supervisory Board in detail, dealt with
the composition of the Board of Management and took
decisions on, among other things, contractual issues con-
cerning the Board of Management other than remuneration
and on consenting to ancillary activities by members of the
Board of Management.
The Nomination Committee is responsible for proposing
suitable candidates for the Supervisory Board to recommend
for election to the Annual General Meeting. This committee
met on one occasion in 2018.
The Mediation Committee did not have to be convened in the
reporting period.
The Audit Committee held five meetings in the past fiscal
year. It focused on the annual and consolidated financial
statements, the risk management system including the
effectiveness of the internal control system and the internal
audit system, and the work performed by the Company’s
Compliance organization. In addition, the Audit Committee
concerned itself with the Volkswagen Group’s quarterly
reports and the half-yearly financial report, as well as with
current issues and the supervision of financial reporting and
the financial reporting process, and the examination thereof
by the auditors. Moreover, the Audit Committee completed
the call for bids for audits and other audit-related services in
the Volkswagen Group from fiscal year 2020. In this process,
Volkswagen AG and other public-interest entities of the
Volkswagen Group follow the selection procedure within the
meaning of Article 16(3) of Regulation (EU) No 537/2014.
The Special Committee on Diesel Engines is responsible for
coordinating all activities relating to the diesel issue and
preparing resolutions by the Supervisory Board. To this end,
the Special Committee on Diesel Engines is also provided
with regular information by the Board of Management. This
Special Committee is also entrusted with examining any
consequences of the findings. The Chairman of the Special
Committee on Diesel Engines reports regularly on its work to
the Supervisory Board. In 2018, the Special Committee on
Diesel Engines met on four occasions to discuss, among other
topics, the regulatory offense proceedings terminated by
administrative fine orders issued by the public prosecutor’s
offices in Braunschweig and Munich II and the Supervisory
Board’s proposed resolutions regarding formal approval of
the actions of the members of the Board of Management and
Supervisory Board incumbent in fiscal year 2017.
Furthermore, as a rule, the shareholder and employee
representatives met for separate preliminary discussions
before each of the Supervisory Board meetings.
TO P I C S D I S C U S S E D B Y T H E S U P E RV I S O R Y B O A R D
The Supervisory Board’s first meeting in the reporting period
was held on February 23, 2018. Following a detailed exami-
nation, we approved the consolidated financial statements
and the annual financial statements of Volkswagen AG for
2017 prepared by the Board of Management. We examined
the combined management report, the combined separate
nonfinancial report for 2017 and the Report by the Board of
Management on Relationships of Volkswagen AG with
Affiliated Companies in Accordance with Section 312 of the
AktG (dependent company report). Upon completion of our
examination of the dependent company report, we came to
the conclusion that there were no objections to be raised to
the concluding declaration by the Board of Management in
the dependent company report. Other agenda items included
the current state of affairs with respect to the diesel issue and
the agenda for the 58th Annual General Meeting of Volks-
wagen AG, particularly the Supervisory Board’s proposed
resolutions.
14
14
Report of the Supervisory Board
Report of the Supervisory Board
To our shareholders
To our shareholders
Hans Dieter Pötsch
Hans Dieter Pötsch
Hans Dieter Pötsch
The Supervisory Board meeting on April 12, 2018 focused on
The Supervisory Board meeting on April 12, 2018 focused on
the enhancement of the Volkswagen Group management
the enhancement of the Volkswagen Group management
structure. In this context, we also resolved on changes in the
structure. In this context, we also resolved on changes in the
composition of the Board of Management of Volkswagen AG.
composition of the Board of Management of Volkswagen AG.
Furthermore, we concerned ourselves with the strategic
Furthermore, we concerned ourselves with the strategic
focus of Volkswagen Truck & Bus GmbH (now TRATON SE)
focus of Volkswagen Truck & Bus GmbH (now TRATON SE)
and discussed the current state of affairs with respect to the
and discussed the current state of affairs with respect to the
diesel issue.
diesel issue.
The Supervisory Board held another meeting on May 2, 2018.
The Supervisory Board held another meeting on May 2, 2018.
The main items on the agenda were the preparation of the
The main items on the agenda were the preparation of the
58th Annual General Meeting of Volkswagen AG held on
58th Annual General Meeting of Volkswagen AG held on
May 3, 2018 and the current state of affairs with respect to the
May 3, 2018 and the current state of affairs with respect to the
diesel issue.
diesel issue.
The principal topic of discussion at the Supervisory Board
The principal topic of discussion at the Supervisory Board
meeting on June 13, 2018 was the administrative fine order
meeting on June 13, 2018 was the administrative fine order
issued by the public prosecutor’s office in Braunschweig
issued by the public prosecutor’s office in Braunschweig
against Volkswagen AG in connection with the diesel issue.
against Volkswagen AG in connection with the diesel issue.
The next Supervisory Board meetings were held on June 18
The next Supervisory Board meetings were held on June 18
and 19, 2018. The main points of discussion at both meetings
and 19, 2018. The main points of discussion at both meetings
were issues relating to the composition of the Board of
were issues relating to the composition of the Board of
Management of Volkswagen AG; at the meeting held on
Management of Volkswagen AG; at the meeting held on
June 18, 2018, we also dealt with the current state of affairs
June 18, 2018, we also dealt with the current state of affairs
with respect to the diesel issue.
with respect to the diesel issue.
The Supervisory Board held two further meetings on July 9
The Supervisory Board held two further meetings on July 9
and 23, 2018, which likewise addressed the composition of
and 23, 2018, which likewise addressed the composition of
To our shareholders
Report of the Supervisory Board
15
the Board of Management of Volkswagen AG; the issues
discussed at the meeting on July 9, 2018 also included the
current state of affairs with respect to the diesel issue.
The agendas of the Supervisory Board meetings on Septem-
ber 17 and 28, 2018 included the current state of affairs with
respect to the diesel issue and other steps relating to
the corporate structure and capital market readiness of
TRATON AG (formerly Volkswagen Truck & Bus GmbH, now
TRATON SE) as well as information on management remuner-
ation and matters relating to the Board of Management.
Starting in autumn 2016, the public prosecutor’s office in
Braunschweig launched criminal investigations against a
number of individuals based on the provisions of the Betriebs-
verfassungsgesetz (BetrVG – German Works Constitution Act)
relating to possibly excessive remuneration granted to the
Chairman of the General and Group Works Councils of Volks-
wagen AG, Mr. Bernd Osterloh, and other works council
members. In order to avoid conceivable conflicts of interest,
Mr. Osterloh always left the meeting room prior to discus-
sions and resolutions adopted by the Supervisory Board that
relate to possibly excessive remuneration granted to him,
based on the provisions of the German Works Constitution Act.
At our meeting on October 2, 2018, we again addressed issues
relating to the composition of the Board of Management of
Volkswagen AG.
No other conflicts of interest were reported or were discern-
ible in the reporting period.
The main topic of discussion at the Supervisory Board
meeting on October 16, 2018 was the administrative fine
order issued by the public prosecutor’s office in Munich II
against AUDI AG in connection with the diesel issue.
On October 25, 2018, the Supervisory Board met again to
discuss strategic issues in connection with TRATON AG (now
TRATON SE).
At the Supervisory Board meeting on November 16, 2018, we
discussed in detail the Volkswagen Group’s investment and
financial planning for the period from 2019 to 2023. The
meeting also focused on strategic issues, including the
utilization of production sites and the current state of affairs
with respect to the diesel issue. We also submitted the annual
declaration of conformity with the Code together with the
Board of Management. Moreover, we adopted an information
policy to provide the Board of Management with detailed
guidance on reporting requirements to the Supervisory
Board.
In the reporting period, we voted in writing on matters such
as the establishment of a branch of Volkswagen AG in
Malaysia and on issues relating to the composition and
remuneration of the Board of Management of Volks-
wagen AG.
C O N F L I C T S O F I N T E R E ST
Mr. Hans Dieter Pötsch was a member of the Board of Man-
agement of Volkswagen AG until October 2015. His move to
the Supervisory Board had already been planned irrespective
of the diesel issue. In order to avoid conceivable conflicts of
interest, Mr. Pötsch always left the meeting room prior to
discussions and resolutions adopted by the Supervisory
Board that might relate to his conduct in connection with the
diesel issue.
C O R P O R AT E G O V E R N A N C E A N D D E C L A R AT I O N O F C O N F O R M I T Y
The Supervisory Board meeting on November 16, 2018
focused on the implementation of the recommendations and
suggestions of the Code in the Volkswagen Group. We dis-
cussed in detail the version of the Code dated February 7,
2017, as published by the government commission on April 24,
2017, and issued the annual declaration of conformity with
the recommendations of the Code in accordance with section
161 of the Aktiengesetz (AktG – German Stock Corporation Act)
together with the Board of Management.
The joint declarations of conformity by the Board of Man-
agement and the Supervisory Board are permanently avail-
able at www.volkswagenag.com/en/InvestorRelations/corpo-
rate-governance/declaration-of-conformity.html. Additional
information on the implementation of the recommendations
and suggestions of the Code can be found in the corporate
governance report starting on page 59 and in the notes to the
consolidated financial statements on page 327 of this annual
report.
M E M B E R S O F T H E S U P E RV I S O RY B O A R D A N D B O A R D O F
M A N A G E M E N T
Ms. Annika Falkengren stepped down as a member of the
Supervisory Board of Volkswagen AG with effect from Febru-
ary 5, 2018. Effective February 14, 2018, the Braunschweig
Registry Court temporarily appointed Ms. Marianne Heiß as a
member of the Supervisory Board until the end of the Annual
General Meeting on May 3, 2018. On May 3, 2018, the Annual
General Meeting elected Ms. Heiß as a member of the Super-
visory Board of Volkswagen AG for a full term of office.
The term of office of Dr. Wolfgang Porsche on the Super-
visory Board of Volkswagen AG duly ended at the close of the
58th Annual General Meeting. The Annual General Meeting
reelected Dr. Porsche on May 3, 2018 for a further full term of
office on the Supervisory Board.
16
Report of the Supervisory Board
To our shareholders
Effective February 8, 2019, Mr. Uwe Hück stepped down from
his position as a member of the Volkswagen AG Supervisory
Board. Upon request of the Chairman of the Supervisory
in accordance with section 104 AktG, the
Board and
Braunschweig Registry Court appointed Mr. Werner Weresch
to succeed him as a member of the Volkswagen AG Super-
visory Board, effective February 21, 2019.
The enhancement of the Volkswagen Group management
structure also gave rise to changes in the composition of the
Board of Management of Volkswagen AG. Mr. Matthias Müller
resigned from his position as Chairman of the Board of Man-
agement of Volkswagen AG by mutual agreement with effect
from April 12, 2018. Dr. Herbert Diess was appointed
to succeed him, effective April 13, 2018. Dr. Diess also heads
the Volume brand group, which
includes the Volks-
wagen Passenger Cars brand. Dr. Karlheinz Blessing and
Dr. Francisco Javier Garcia also left their positions as
members of the Board of Management on April 12, 2018,
Dr. Blessing by mutual agreement and Dr. Garcia of his own
volition. Mr. Gunnar Kilian was appointed to succeed
Dr. Blessing as member of the Board of Management of
Volkswagen AG with responsibility for Human Resources
effective April 13, 2018. Dr. Stefan Sommer took over from Dr.
Garcia Sanz as member of the Board of Management with
responsibility for Components and Procurement effective
September 1, 2018. Mr. Oliver Blume, Chairman of the Board
of Management of Dr. Ing. h.c. F. Porsche AG, was newly
appointed to the Group Board of Management with effect
from April 13, 2018. Mr. Blume is the member of the Group
Board of Management responsible for the Sport & Luxury
brand group.
With effect from October 2, 2018, Mr. Rupert Stadler left the
Board of Management of Volkswagen AG and the Board of
Management of AUDI AG. Mr. Abraham Schot was appointed
to succeed him as member of the Board of Management of
Volkswagen AG and Chairman of the Board of Management
of AUDI AG, effective January 1, 2019. Mr. Schot is the member
of the Group Board of Management responsible for the
Premium brand group. He became interim Chairman of the
Board of Management at AUDI AG on June 19, 2018 and first
attended the meetings of the Volkswagen AG Board of
Management as a guest.
AU D I T O F T H E A N N UA L A N D C O N S O L I DAT E D F I N A N C I A L
STAT E M E N T S
In line with our proposal, the Annual General Meeting of
Volkswagen AG on May 3, 2018 elected Pricewaterhouse-
Coopers GmbH Wirtschaftsprüfungsgesellschaft (PwC) as
auditors for fiscal year 2018. The auditors audited the annual
financial statements of Volkswagen AG, the consolidated
financial statements of the Volkswagen Group and the
combined management report and issued unqualified audit
reports in each case.
The Supervisory Board commissioned PwC to conduct an
external content-related audit of the combined separate non-
financial report for 2018.
In addition, the auditors analyzed the risk management and
internal control systems, concluding that the Board of Man-
agement had taken the measures required by section 91(2) of
the AktG to ensure early detection of any risks endangering
the continued existence of the Company. The Report on
Relationships of Volkswagen AG with Affiliated Companies in
Accordance with Section 312 of the AktG for the period from
January 1 to December 31, 2018 (dependent company report)
submitted by the Board of Management was also audited by
the auditors, who issued the following opinion: “In our
opinion and in accordance with our statutory audit, we
certify that the factual disclosures provided in the report are
correct and that the Company’s consideration concerning
legal transactions referred to in the report was not unduly
high.”
The members of the Audit Committee and the members of
the Supervisory Board were provided in each case with the
documentation relating to the annual and consolidated
financial statements, including the dependent company
report, the documentation relating to the combined manage-
ment report, and also the audit reports prepared by the
auditors and the report from PwC on the external content-
related audit of the combined separate nonfinancial report
for 2018 in good time for their meetings on February 21, 2019
and February 22, 2019 respectively. The auditors reported
extensively at both meetings on the material findings of their
audit and were available to provide additional information.
Prof. Jochem Heizmann retired from the Board of Manage-
ment of Volkswagen AG with effect from January 10, 2019
under a retirement program. His Board responsibility for the
China division was transferred to Dr. Diess with effect from
January 11, 2019.
into consideration the audit reports and the
Taking
discussion with the auditors and based on
its own
conclusions, the Audit Committee prepared the documents
for the Supervisory Board’s examination of the consolidated
financial statements, the annual financial statements of
Volkswagen AG, the combined management report, the
Our sincere thanks go to all of the departing members of the
Supervisory Board and the Board of Management for their
work.
To our shareholders
Report of the Supervisory Board
17
dependent company report as well as the combined separate
nonfinancial report, and reported on these at the Supervisory
Board meeting on February 22, 2019. Following this, the
Audit Committee recommended that the Supervisory Board
approve the annual and consolidated financial statements.
We examined the documents in depth in the knowledge and
on the basis of the report by the Audit Committee and the
audit report as well as in talks and discussions with the
auditors. We came to the conclusion that they are due and
proper and that the assessment of the position of the
Company and the Group presented by the Board of Manage-
ment in the combined management report corresponds to
the assessment by the Supervisory Board.
We therefore concurred with the auditors’ findings and
approved the annual financial statements and the consoli-
dated financial statements prepared by the Board of Manage-
ment at our meeting on February 22, 2019, at which the
auditors also took part in discussions on the agenda items
relating to the annual and consolidated financial statements,
the dependent company report and the combined manage-
ment report. The annual financial statements are thus
adopted. Upon completion of our examination of the
dependent company report, there are no objections to be
raised to the concluding declaration by the Board of Man-
agement in the dependent company report. We reviewed the
proposal on the appropriation of net profit submitted by the
Board of Management, taking into account in particular the
interests of the Company and its shareholders, and endorsed
the proposal. PwC conducted an external content-related
audit of the combined separate nonfinancial report for 2018
to attain limited assurance and issued an unqualified report.
At our meeting on February 22, 2019, PwC took part in the
discussions on the agenda items relating to the combined
separate nonfinancial report for 2018. Upon completion of its
own independent examination of the combined separate
nonfinancial report for 2018, the Supervisory Board did not
have any objections.
We would like to express our thanks and particular appre-
ciation to the members of the Board of Management, the
Works Council, the management and all the employees of
Volkswagen AG and its affiliated companies for their work in
2018. With your immense personal commitment, great
loyalty and unwavering readiness to support the changes
implemented, you made a decisive contribution in helping
the Volkswagen Group to conclude fiscal year 2018 success-
fully in spite of the many challenges presented.
Wolfsburg, February 22, 2019
Hans Dieter Pötsch
Chairman of the Supervisory Board
S
N
O
I
S
I
V
I
D
2
Divisions
DIVISIONS
21
24
26
28
30
32
34
36
38
40
Brands and Business Fields
Volkswagen Passenger Cars
Audi
ŠKODA
SEAT
Bentley
Porsche
Volkswagen Commercial Vehicles
TRATON GROUP
Scania
42 MAN
44
46
Volkswagen Group China
Volkswagen Financial Services
Divisions
Brands and Business Fields
21
Brands and Business Fields
Despite the continued challenging environment, the Volkswagen Group remained on its
growth course in the reporting year. Unit sales, sales revenue and profit increased,
while special items attributable to the diesel issue continued to weigh on profit.
G R O U P ST R U C T U R E
The Volkswagen Group consists of two divisions: the Automotive Division and the Financial Services Division.
The Automotive Division comprises the Passenger Cars, Commercial Vehicles and Power Engineering business
areas. We report on the Passenger Cars segment and the reconciliation in the Passenger Cars Business Area. The
Commercial Vehicles Business Area and Power Engineering Business Area correspond to the segments of the
same name. Activities of the Automotive Division comprise the development of vehicles and engines, the
production and sale of passenger cars, light commercial vehicles, trucks, buses and motorcycles, as well as
genuine parts, large-bore diesel engines, turbomachinery, special gear units, propulsion components and
testing systems businesses. The Ducati brand is allocated to the Audi brand and thus to the Passenger Cars
Business Area. The activities of the Financial Services Division, which corresponds to the Financial Services
segment, comprise dealer and customer financing, vehicle leasing, direct banking and insurance activities, fleet
management and mobility offerings.
V O L K S W A G E N G R O U P R E P O R T I N G S T R U C T U RE
A U T O M O T I V E
D I V I S I ON
Passenger Cars Business Area
Commercial Vehicles Business Area
Power Engineering Business Area
Volkswagen Commercial Vehicles
Scania Vehicles and Services
MAN Commercial Vehicles
MAN Power Engineering
Volkswagen Passenger Cars
Audi
ŠKODA
SEAT
Bentley
Porsche Automotive
Others
F I N A N C I A L S E R V I C E S
D I V I S I ON
Dealer and customer financing
Leasing
Direct bank
Insurance
Fleet management
Mobility offerings
22
Brands and Business Fields
Divisions
In this chapter, we present the key volume and financial data relating to the Group brands and to Volkswagen
Financial Services. In light of the considerable importance of the development of business in the world’s largest
single market for the Volkswagen Group, we also report on business developments and the results of our
activities in China in this chapter.
The production figures and deliveries to customers are differentiated by brand and their models that
carry the corresponding brand logo. Unit sales figures contain vehicles sold by respective brand companies,
including models of other Group brands. In some cases, there are marked differences between delivery figures
and unit sales as a result of our business development in China.
K E Y F I G U R E S B Y M A R K E T
In fiscal year 2018, the Volkswagen Group generated an operating profit before special items of €17.1 (17.0) bil-
lion. Special items which resulted from the diesel issue weighed on the operating profit in the amount of
€–3.2 (–3.2 ) billion.
Amid fierce competition in a challenging market environment, the Volkswagen Group lifted sales to a new
record of 10.9 (10.8) million vehicles. Sales revenue increased by 2.7% to €235.8 billion.
In the Europe/Other markets region, we sold 4.7 million vehicles (+0.2 %). Sales revenue amounted to
€143.1 (142.8) billion. Negative exchange rate effects were offset by higher volume. The second half of 2018 was
negatively impacted by the changeover to the WLTP test procedure.
In North America, Group sales stood at 0.9 million vehicles, a decline of 6.8% year-on-year. Sales revenue of
€37.7 (37.7) billion was on a level with the previous year. Negative effects resulted from the decline in new
vehicle sales and from exchange rates, while improvements in the mix and the financial services business, as
well as revenue stemming from retrofitted used vehicles in connection with the diesel issue, had a positive
impact.
In the markets of the South America region, we increased unit sales by 13.2% to 0.6 million vehicles. Volume
and mix improvements increased sales revenue by 4.2% to €10.4 billion; exchange rate trends had a negative
impact.
In the Asia-Pacific region – including the Chinese joint ventures – we sold a total of 4.6 (4.5) million vehicles
in the reporting year. Sales revenue rose by 10.3% to €43.2 billion due to higher volumes and improvements in
the components business at our fully consolidated companies. This figure does not include the sales revenue of
our equity-accounted Chinese joint ventures.
Since the new accounting standard IFRS 9 was applied on January 1, 2018, income and expenses realized
from hedging transactions relating to sales revenue in foreign currency have been allocated to sales revenue; in
fiscal year 2018, hedging transactions increased the sales revenue of the Volkswagen Group by €1.5 billion.
Divisions
Brands and Business Fields
23
K E Y F I G U R E S B Y B R A N D A N D B U S I N E S S F I E L D
V E H I C L E S A L E S
S A L E S R E V E N U E
O P E R A T I N G R E S U L T
Thousand vehicles/€ million
2018
2017
2018
Volkswagen Passenger Cars
Audi
ŠKODA
SEAT
Bentley
Porsche Automotive2
Volkswagen Commercial Vehicles
Scania3
MAN Commercial Vehicles
MAN Power Engineering
VW China4
Other5
Volkswagen Financial Services
Volkswagen Group before special items
Special items
Volkswagen Group
Automotive Division6
of which: Passenger Cars Business Area
Commercial Vehicles Business Area
Power Engineering Business Area
Financial Services Division
3,715
1,467
3,573
1,530
957
608
10
253
469
97
137
–
4,101
–912
–
–
–
10,900
10,900
10,206
694
–
–
937
595
11
248
498
92
114
–
4,020
–840
–
–
–
10,777
10,777
10,077
700
–
–
20171
79,186
59,789
16,559
9,892
1,843
21,674
11,909
12,789
11,087
3,283
–
84,585
59,248
17,293
10,202
1,548
23,668
11,875
13,360
12,104
3,608
–
–34,408
32,764
–30,288
31,826
–
–
235,849
201,067
160,802
36,656
3,608
34,782
–
–
229,550
195,817
157,334
35,200
3,283
33,733
2018
2017
3,239
4,705
1,377
254
–288
4,110
780
1,346
332
193
–
–1,557
2,612
17,104
–3,184
13,920
11,127
9,220
1,971
–64
2,793
3,301
5,058
1,611
191
55
4,003
853
1,289
362
193
–
–2,335
2,460
17,041
–3,222
13,818
11,146
9,309
1,892
–55
2,673
1 Adjusted; see disclosures about the application of new International Financial Reporting Standards on page 114.
2 Porsche (Automotive and Financial Services): sales revenue €25,784 (23,491) million, operating profit €4,291 (4,144) million.
3 Including financial services.
4 The sales revenue and operating profits of the joint venture companies in China are not included in the figures for the Group. These Chinese companies are
accounted for using the equity method and recorded a proportionate operating profit of €4,627 (4,746) million.
5 In operating profit, mainly intragroup items recognized in profit or loss, in particular from the elimination of intercompany profits; the figure includes
depreciation and amortization of identifiable assets as part of purchase price allocation for Scania, Porsche Holding Salzburg, MAN and Porsche.
6 Including allocation of consolidation adjustments between the Automotive and Financial Services divisions.
K E Y F I G U R E S B Y M A R K E T
Thousand vehicles/€ million
Europe/Other markets
North America
South America
Asia-Pacific2
Hedges on sales revenue
Volkswagen Group2
V E H I C L E S A L E S
S A L E S R E V E N U E
2018
2017
2018
20171
4,739
925
596
4,640
–
10,900
4,731
992
526
4,527
–
10,777
143,089
142,753
37,656
10,405
43,166
1,535
37,686
9,988
39,123
–
235,849
229,550
1 Adjusted; see disclosures about the application of new International Financial Reporting Standards on page 114.
2 The sales revenue of the joint venture companies in China is not included in the figures for the Group and the Asia-Pacific market.
24
24
24
Volkswagen Passenger Cars
Volkswagen Passenger Cars
Volkswagen Passenger Cars
Divisions
Divisions
Divisions
The Volkswagen Passenger Cars brand continued its global product initiative in 2018,
The Volkswagen Passenger Cars brand continued its global product initiative in 2018,
The Volkswagen Passenger Cars brand continued its global product initiative in 2018,
including the world premiere of the new Touareg. Moreover, media representatives
including the world premiere of the new Touareg. Moreover, media representatives
including the world premiere of the new Touareg. Moreover, media representatives
were given a preview of the Modular Electric Drive Toolkit (MEB).
were given a preview of the Modular Electric Drive Toolkit (MEB).
were given a preview of the Modular Electric Drive Toolkit (MEB).
B U S I N E S S D E V E L O P M E N T
B U S I N E S S D E V E L O P M E N T
B U S I N E S S D E V E L O P M E N T
The Volkswagen Passenger Cars vision is “Moving people and driving them forwards”. The “TRANSFORM 2025+”
The Volkswagen Passenger Cars vision is “Moving people and driving them forwards”. The “TRANSFORM 2025+”
The Volkswagen Passenger Cars vision is “Moving people and driving them forwards”. The “TRANSFORM 2025+”
strategy therefore centers on a global model initiative through which the brand aims to lead innovation, tech-
strategy therefore centers on a global model initiative through which the brand aims to lead innovation, tech-
strategy therefore centers on a global model initiative through which the brand aims to lead innovation, tech-
nology and quality in the volume segment.
nology and quality in the volume segment.
nology and quality in the volume segment.
Volkswagen Passenger Cars celebrated the world premiere of the new Touareg in the reporting year. With its
Volkswagen Passenger Cars celebrated the world premiere of the new Touareg in the reporting year. With its
Volkswagen Passenger Cars celebrated the world premiere of the new Touareg in the reporting year. With its
expressive design, its extensive equipment, high-quality materials and top-class craftsmanship, it occupies a
expressive design, its extensive equipment, high-quality materials and top-class craftsmanship, it occupies a
expressive design, its extensive equipment, high-quality materials and top-class craftsmanship, it occupies a
top position in the premium SUV segment. The brand also presented the T-Cross, a versatile, practical and
top position in the premium SUV segment. The brand also presented the T-Cross, a versatile, practical and
top position in the premium SUV segment. The brand also presented the T-Cross, a versatile, practical and
urban crossover model, which is set to launch in 2019. In addition, it unveiled the ID. VIZZION concept car, the
urban crossover model, which is set to launch in 2019. In addition, it unveiled the ID. VIZZION concept car, the
urban crossover model, which is set to launch in 2019. In addition, it unveiled the ID. VIZZION concept car, the
electric-driven ID. family's new flagship. The saloon car of tomorrow is self-driving, effortless to operate thanks
electric-driven ID. family's new flagship. The saloon car of tomorrow is self-driving, effortless to operate thanks
electric-driven ID. family's new flagship. The saloon car of tomorrow is self-driving, effortless to operate thanks
to augmented reality, and capable of learning through artificial intelligence. In September 2018, Volkswagen
to augmented reality, and capable of learning through artificial intelligence. In September 2018, Volkswagen
to augmented reality, and capable of learning through artificial intelligence. In September 2018, Volkswagen
gave media representatives from all around the world a first glimpse of its platform strategy for electric
gave media representatives from all around the world a first glimpse of its platform strategy for electric
gave media representatives from all around the world a first glimpse of its platform strategy for electric
vehicles. The aim of the Modular Electric Drive Toolkit (MEB) is to translate electric mobility into mass mobility
vehicles. The aim of the Modular Electric Drive Toolkit (MEB) is to translate electric mobility into mass mobility
vehicles. The aim of the Modular Electric Drive Toolkit (MEB) is to translate electric mobility into mass mobility
at affordable prices. The all-electric ID. family based on the MEB will be manufactured in Zwickau from late
at affordable prices. The all-electric ID. family based on the MEB will be manufactured in Zwickau from late
at affordable prices. The all-electric ID. family based on the MEB will be manufactured in Zwickau from late
2019. Vehicles with all-electric drive will also roll off the assembly line in Emden.
2019. Vehicles with all-electric drive will also roll off the assembly line in Emden.
2019. Vehicles with all-electric drive will also roll off the assembly line in Emden.
Volkswagen Passenger Cars delivered a record 6.2 million vehicles worldwide in 2018 (+0.2%). There was
Volkswagen Passenger Cars delivered a record 6.2 million vehicles worldwide in 2018 (+0.2%). There was
Volkswagen Passenger Cars delivered a record 6.2 million vehicles worldwide in 2018 (+0.2%). There was
strong growth especially in Italy (+11.8%), Russia (+18.5%) and Brazil (+28.6%). The Polo, T-Roc, Tiguan and
strong growth especially in Italy (+11.8%), Russia (+18.5%) and Brazil (+28.6%). The Polo, T-Roc, Tiguan and
strong growth especially in Italy (+11.8%), Russia (+18.5%) and Brazil (+28.6%). The Polo, T-Roc, Tiguan and
Virtus models were especially popular.
Virtus models were especially popular.
Virtus models were especially popular.
The Volkswagen Passenger Cars brand sold 3.7 (3.6) million vehicles in the reporting year. The difference
The Volkswagen Passenger Cars brand sold 3.7 (3.6) million vehicles in the reporting year. The difference
The Volkswagen Passenger Cars brand sold 3.7 (3.6) million vehicles in the reporting year. The difference
between deliveries and unit sales is mainly due to the fact that the vehicle-producing joint ventures in China are
between deliveries and unit sales is mainly due to the fact that the vehicle-producing joint ventures in China are
between deliveries and unit sales is mainly due to the fact that the vehicle-producing joint ventures in China are
not attributed to the companies in the Volkswagen Passenger Cars brand.
not attributed to the companies in the Volkswagen Passenger Cars brand.
not attributed to the companies in the Volkswagen Passenger Cars brand.
The Volkswagen Passenger Cars brand produced 6.3 (6.3) million vehicles worldwide in fiscal year 2018. The
The Volkswagen Passenger Cars brand produced 6.3 (6.3) million vehicles worldwide in fiscal year 2018. The
The Volkswagen Passenger Cars brand produced 6.3 (6.3) million vehicles worldwide in fiscal year 2018. The
Mexican plant in Puebla produced its twelve millionth vehicle.
Mexican plant in Puebla produced its twelve millionth vehicle.
Mexican plant in Puebla produced its twelve millionth vehicle.
S A L E S R E V E N U E A N D E A R N I N G S
S A L E S R E V E N U E A N D E A R N I N G S
S A L E S R E V E N U E A N D E A R N I N G S
At €84.6 billion, the sales revenue of the Volkswagen Passenger Cars brand in 2018 was 6.8% higher than in the
At €84.6 billion, the sales revenue of the Volkswagen Passenger Cars brand in 2018 was 6.8% higher than in the
At €84.6 billion, the sales revenue of the Volkswagen Passenger Cars brand in 2018 was 6.8% higher than in the
previous year. Operating profit before special items amounted to €3.2 (3.3) billion. The increase in vehicle sales
previous year. Operating profit before special items amounted to €3.2 (3.3) billion. The increase in vehicle sales
previous year. Operating profit before special items amounted to €3.2 (3.3) billion. The increase in vehicle sales
and improved product costs had a positive effect. Higher sales expenses resulting from factors such as the
and improved product costs had a positive effect. Higher sales expenses resulting from factors such as the
and improved product costs had a positive effect. Higher sales expenses resulting from factors such as the
environmental bonus, exchange rate effects and upfront expenditures for new products, especially in con-
environmental bonus, exchange rate effects and upfront expenditures for new products, especially in con-
environmental bonus, exchange rate effects and upfront expenditures for new products, especially in con-
nection with the implementation of the electric mobility campaign, weighed on the operating profit. In
nection with the implementation of the electric mobility campaign, weighed on the operating profit. In
nection with the implementation of the electric mobility campaign, weighed on the operating profit. In
addition, the WLTP test procedure presented challenges. The operating return on sales before special items was
addition, the WLTP test procedure presented challenges. The operating return on sales before special items was
addition, the WLTP test procedure presented challenges. The operating return on sales before special items was
3.8 (4.2)%. The diesel issue gave rise to special items of €–1.9 (–2.8) billion.
3.8 (4.2)%. The diesel issue gave rise to special items of €–1.9 (–2.8) billion.
3.8 (4.2)%. The diesel issue gave rise to special items of €–1.9 (–2.8) billion.
12 million
12 million
12 million
Vehicles produced in Mexico
Vehicles produced in Mexico
Vehicles produced in Mexico
Divisions
Divisions
Divisions
Volkswagen Passenger Cars
Volkswagen Passenger Cars
Volkswagen Passenger Cars
25
25
25
P R O D U C T I O N
P R O D U C T I O N
P R O D U C T I O N
V O L K SWA G E N PA S S E N G E R C A R S B R A N D
V O L K SWA G E N PA S S E N G E R C A R S B R A N D
V O L K SWA G E N PA S S E N G E R C A R S B R A N D
Units
Units
Units
Tiguan
Tiguan
Tiguan
Polo/Virtus
Polo/Virtus
Polo/Virtus
Golf
Golf
Golf
Jetta/Sagitar
Jetta/Sagitar
Jetta/Sagitar
Passat/Magotan
Passat/Magotan
Passat/Magotan
Lavida
Lavida
Lavida
Santana
Santana
Santana
Bora
Bora
Bora
T-Roc
T-Roc
T-Roc
Atlas/Teramont
Atlas/Teramont
Atlas/Teramont
Gol
Gol
Gol
Lamando
Lamando
Lamando
up!
up!
up!
Touran
Touran
Touran
Saveiro
Saveiro
Saveiro
Arteon/CC
Arteon/CC
Arteon/CC
Fox
Fox
Fox
Touareg
Touareg
Touareg
Beetle
Beetle
Beetle
Sharan
Sharan
Sharan
Tharu
Tharu
Tharu
Phideon
Phideon
Phideon
Suran
Suran
Suran
Scirocco
Scirocco
Scirocco
2018
2018
2018
2017
2017
2017
2018
2018
2018
20171
20171
20171
6,245
6,245
6,245
3,715
3,715
3,715
6,297
6,297
6,297
6,230
6,230
6,230
3,573
3,573
3,573
6,317
6,317
6,317
769,870
769,870
769,870
Deliveries (thousand units)
Deliveries (thousand units)
Deliveries (thousand units)
755,506
755,506
755,506
Vehicle sales
Vehicle sales
Vehicle sales
968,284
968,284
968,284
Production
Production
Production
883,346
883,346
883,346
Sales revenue (€ million)
Sales revenue (€ million)
Sales revenue (€ million)
84,585
84,585
84,585
79,186
79,186
79,186
Operating result before
special items
Operating result before
Operating result before
special items
special items
Operating return on sales (%)
Operating return on sales (%)
Operating return on sales (%)
3,239
3,239
3,239
3.8
3.8
3.8
3,301
3,301
3,301
4.2
4.2
4.2
%
%
%
+0.2
+0.2
+0.2
+4.0
+4.0
+4.0
–0.3
–0.3
–0.3
+6.8
+6.8
+6.8
–1.9
–1.9
–1.9
1 Sales revenue adjusted; see disclosures about the application of new International
1 Sales revenue adjusted; see disclosures about the application of new International
1 Sales revenue adjusted; see disclosures about the application of new International
Financial Reporting Standards on page 114.
Financial Reporting Standards on page 114.
Financial Reporting Standards on page 114.
861,331
861,331
861,331
855,179
855,179
855,179
805,752
805,752
805,752
770,447
770,447
770,447
656,249
656,249
656,249
513,556
513,556
513,556
272,080
272,080
272,080
269,390
269,390
269,390
236,977
236,977
236,977
166,034
166,034
166,034
156,410
156,410
156,410
141,076
141,076
141,076
136,512
136,512
136,512
130,417
130,417
130,417
59,233
59,233
59,233
49,735
49,735
49,735
40,596
40,596
40,596
40,387
40,387
40,387
37,846
37,846
37,846
30,459
30,459
30,459
26,986
26,986
26,986
24,102
24,102
24,102
16,356
16,356
16,356
–
–
–
660,996
660,996
660,996
507,574
507,574
507,574
293,313
293,313
293,313
334,900
334,900
334,900
22,724
22,724
22,724
129,724
129,724
129,724
203,148
203,148
203,148
138,943
138,943
138,943
158,795
158,795
158,795
144,676
144,676
144,676
66,431
66,431
66,431
37,972
37,972
37,972
50,739
50,739
50,739
42,407
42,407
42,407
59,483
59,483
59,483
45,695
45,695
45,695
–
–
–
13,014
13,014
13,014
21,093
21,093
21,093
8,199
8,199
8,199
6,297,110
6,297,110
6,297,110
6,316,832
6,316,832
6,316,832
Touareg
Touareg
Touareg
D E L I V E R I E S B Y M A R K E T
in percent
D E L I V E R I E S B Y M A R K E T
D E L I V E R I E S B Y M A R K E T
in percent
in percent
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
North America
North America
North America
North America
North America
North America
South America
South America
South America
South America
South America
South America
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
30.6 %
30.6 %
30.6 %
30.6 %
30.6 %
30.6 %
9.2 %
9.2 %
9.2 %
9.2 %
9.2 %
9.2 %
7.6 %
7.6 %
7.6 %
7.6 %
7.6 %
7.6 %
52.6 %
52.6 %
52.6 %
52.6 %
52.6 %
52.6 %
i
i
i
F U R T H E R I N F O R M A T I O N
F U R T H E R I N F O R M A T I O N www.volkswagen.com
www.volkswagen.com
F U R T H E R I N F O R M A T I O N www.volkswagen.com
F U R T H E R I N F O R M A T I O N
www.volkswagen.com
F U R T H E R I N F O R M A T I O N
F U R T H E R I N F O R M A T I O N www.volkswagen.com
www.volkswagen.com
26
26
26
Audi
Audi
Audi
Divisions
Divisions
Divisions
Audi continued to drive its major model and technology initiative in a difficult market
Audi continued to drive its major model and technology initiative in a difficult market
Audi continued to drive its major model and technology initiative in a difficult market
environment. It presented the e-tron premium SUV, the brand’s first
environment. It presented the e-tron premium SUV, the brand’s first
environment. It presented the e-tron premium SUV, the brand’s first
fully electric series-produced model.
fully electric series-produced model.
fully electric series-produced model.
B U S I N E S S D E V E L O P M E N T
B U S I N E S S D E V E L O P M E N T
B U S I N E S S D E V E L O P M E N T
“Vorsprung” is an active brand promise that is delivered throughout the world, making Audi one of the most
“Vorsprung” is an active brand promise that is delivered throughout the world, making Audi one of the most
“Vorsprung” is an active brand promise that is delivered throughout the world, making Audi one of the most
highly desired brands in the premium segment. In 2018, the brand had around 20 market launches, thus
highly desired brands in the premium segment. In 2018, the brand had around 20 market launches, thus
highly desired brands in the premium segment. In 2018, the brand had around 20 market launches, thus
continuing the renewal of its model range and further strengthening its product portfolio. Audi presented the
continuing the renewal of its model range and further strengthening its product portfolio. Audi presented the
continuing the renewal of its model range and further strengthening its product portfolio. Audi presented the
new A6, the eighth generation of its successful premium saloon. The A6 features dynamic surfaces, sharp
new A6, the eighth generation of its successful premium saloon. The A6 features dynamic surfaces, sharp
new A6, the eighth generation of its successful premium saloon. The A6 features dynamic surfaces, sharp
contours and striking lines, conveying sporty elegance, cutting-edge technology and sophistication. Audi also
contours and striking lines, conveying sporty elegance, cutting-edge technology and sophistication. Audi also
contours and striking lines, conveying sporty elegance, cutting-edge technology and sophistication. Audi also
presented the new face of its Q family for the first time: the Audi Q8. This combines the elegance of a four-door
presented the new face of its Q family for the first time: the Audi Q8. This combines the elegance of a four-door
presented the new face of its Q family for the first time: the Audi Q8. This combines the elegance of a four-door
luxury coupé with the practical versatility of a large SUV. Its distinguished design is underlined by an imposing
luxury coupé with the practical versatility of a large SUV. Its distinguished design is underlined by an imposing
luxury coupé with the practical versatility of a large SUV. Its distinguished design is underlined by an imposing
octagon-shaped, single-frame radiator grille, an elegant sloping roof line and up to 22-inch wheels. Audi started
octagon-shaped, single-frame radiator grille, an elegant sloping roof line and up to 22-inch wheels. Audi started
octagon-shaped, single-frame radiator grille, an elegant sloping roof line and up to 22-inch wheels. Audi started
its electrification offensive in September 2018 with the world premiere of the e-tron. The SUV is the first all-
its electrification offensive in September 2018 with the world premiere of the e-tron. The SUV is the first all-
its electrification offensive in September 2018 with the world premiere of the e-tron. The SUV is the first all-
electric production model from the brand with the four rings. Its comfort and spaciousness are equivalent to a
electric production model from the brand with the four rings. Its comfort and spaciousness are equivalent to a
electric production model from the brand with the four rings. Its comfort and spaciousness are equivalent to a
traditional premium model. At fast-charging stations, the e-tron is ready for a long-distance drive after 30
traditional premium model. At fast-charging stations, the e-tron is ready for a long-distance drive after 30
traditional premium model. At fast-charging stations, the e-tron is ready for a long-distance drive after 30
minutes. A large number of pre-orders for the e-tron had already been received by the end of the year. By 2025,
minutes. A large number of pre-orders for the e-tron had already been received by the end of the year. By 2025,
minutes. A large number of pre-orders for the e-tron had already been received by the end of the year. By 2025,
Audi plans to offer at least 20 electric models.
Audi plans to offer at least 20 electric models.
Audi plans to offer at least 20 electric models.
In the past fiscal year, Audi faced challenges from a difficult market environment and the new WLTP test
In the past fiscal year, Audi faced challenges from a difficult market environment and the new WLTP test
In the past fiscal year, Audi faced challenges from a difficult market environment and the new WLTP test
procedure. The brand delivered a total of 1.8 million vehicles, a decline of 3.4%. While unit sales in Western
procedure. The brand delivered a total of 1.8 million vehicles, a decline of 3.4%. While unit sales in Western
procedure. The brand delivered a total of 1.8 million vehicles, a decline of 3.4%. While unit sales in Western
Europe were down 13.9%, there were increases especially in China (+10.9%).
Europe were down 13.9%, there were increases especially in China (+10.9%).
Europe were down 13.9%, there were increases especially in China (+10.9%).
Audi sold 1.5 (1.5) million vehicles in 2018. Unit sales by the Chinese joint venture FAW-Volkswagen
Audi sold 1.5 (1.5) million vehicles in 2018. Unit sales by the Chinese joint venture FAW-Volkswagen
Audi sold 1.5 (1.5) million vehicles in 2018. Unit sales by the Chinese joint venture FAW-Volkswagen
amounted to a further 620 (552) thousand Audi vehicles. The Q2, Q5, A4, A7 and A8 models were especially
amounted to a further 620 (552) thousand Audi vehicles. The Q2, Q5, A4, A7 and A8 models were especially
amounted to a further 620 (552) thousand Audi vehicles. The Q2, Q5, A4, A7 and A8 models were especially
popular. Unit sales at Automobili Lamborghini S.p.A. amounted to 6,333 (3,897) vehicles. The increase was
popular. Unit sales at Automobili Lamborghini S.p.A. amounted to 6,333 (3,897) vehicles. The increase was
popular. Unit sales at Automobili Lamborghini S.p.A. amounted to 6,333 (3,897) vehicles. The increase was
mainly due to high demand for the Urus.
mainly due to high demand for the Urus.
mainly due to high demand for the Urus.
Globally, Audi produced 1.9 (1.9) million units in the reporting year. Lamborghini manufactured a total of
Globally, Audi produced 1.9 (1.9) million units in the reporting year. Lamborghini manufactured a total of
Globally, Audi produced 1.9 (1.9) million units in the reporting year. Lamborghini manufactured a total of
6,571 (4,056) vehicles in 2018.
6,571 (4,056) vehicles in 2018.
6,571 (4,056) vehicles in 2018.
S A L E S R E V E N U E A N D E A R N I N G S
S A L E S R E V E N U E A N D E A R N I N G S
S A L E S R E V E N U E A N D E A R N I N G S
Sales revenue of the Audi brand was €59.2 (59.8) billion in fiscal year 2018. Operating profit before special items
Sales revenue of the Audi brand was €59.2 (59.8) billion in fiscal year 2018. Operating profit before special items
Sales revenue of the Audi brand was €59.2 (59.8) billion in fiscal year 2018. Operating profit before special items
was 7.0% lower, at €4.7 billion. Mix improvements, positive exchange rate effects and product cost optimization
was 7.0% lower, at €4.7 billion. Mix improvements, positive exchange rate effects and product cost optimization
was 7.0% lower, at €4.7 billion. Mix improvements, positive exchange rate effects and product cost optimization
were unable to compensate for lower vehicle sales and higher sales costs, both of which primarily reflect the
were unable to compensate for lower vehicle sales and higher sales costs, both of which primarily reflect the
were unable to compensate for lower vehicle sales and higher sales costs, both of which primarily reflect the
impact of the WLTP, as well as higher depreciation and amortization charges due to the large volume of capital
impact of the WLTP, as well as higher depreciation and amortization charges due to the large volume of capital
impact of the WLTP, as well as higher depreciation and amortization charges due to the large volume of capital
expenditure. Audi generated an operating return on sales before special items of 7.9 (8.5)%. Special items
expenditure. Audi generated an operating return on sales before special items of 7.9 (8.5)%. Special items
expenditure. Audi generated an operating return on sales before special items of 7.9 (8.5)%. Special items
resulting from the diesel issue amounted to €–1.2 (–0.4) billion. The financial key performance indicators for
resulting from the diesel issue amounted to €–1.2 (–0.4) billion. The financial key performance indicators for
resulting from the diesel issue amounted to €–1.2 (–0.4) billion. The financial key performance indicators for
the Lamborghini and Ducati brands are included in the financial figures for the Audi brand.
the Lamborghini and Ducati brands are included in the financial figures for the Audi brand.
the Lamborghini and Ducati brands are included in the financial figures for the Audi brand.
1.8 million
1.8 million
1.8 million
Vehicles delivered in 2018
Vehicles delivered in 2018
Vehicles delivered in 2018
Divisions
Divisions
Divisions
Audi
Audi
Audi
27
27
27
P R O D U C T I O N
P R O D U C T I O N
P R O D U C T I O N
A U D I B R A N D
A U D I B R A N D
A U D I B R A N D
Units
Units
Units
Audi
Audi
Audi
A4
A4
A4
A3
A3
A3
Q5
Q5
Q5
A6
A6
A6
Q3
Q3
Q3
A5
A5
A5
Q7
Q7
Q7
Q2
Q2
Q2
A1
A1
A1
A8
A8
A8
Q8
Q8
Q8
A7
A7
A7
TT
TT
TT
e-tron
e-tron
e-tron
R8
R8
R8
Lamborghini
Lamborghini
Lamborghini
Urus
Urus
Urus
Huracán Coupé
Huracán Coupé
Huracán Coupé
Huracán Spyder
Huracán Spyder
Huracán Spyder
Aventador Roadster
Aventador Roadster
Aventador Roadster
Aventador Coupé
Aventador Coupé
Aventador Coupé
2018
2018
2018
2017
2017
2017
2018
2018
2018
20171
20171
20171
%
%
%
344,623
344,623
344,623
304,903
304,903
304,903
298,645
298,645
298,645
254,705
254,705
254,705
167,707
167,707
167,707
111,544
111,544
111,544
110,593
110,593
110,593
108,386
108,386
108,386
80,387
80,387
80,387
24,541
24,541
24,541
22,414
22,414
22,414
20,058
20,058
20,058
12,118
12,118
12,118
2,425
2,425
2,425
1,764
1,764
1,764
Deliveries (thousand units)
Deliveries (thousand units)
Deliveries (thousand units)
325,307
325,307
325,307
Audi
Audi
Audi
313,380
313,380
313,380
Lamborghini
Lamborghini
Lamborghini
289,959
289,959
289,959
Vehicle sales
Vehicle sales
Vehicle sales
259,618
259,618
259,618
Production
Production
Production
1,818
1,818
1,818
1,812
1,812
1,812
6
6
6
1,467
1,467
1,467
1,871
1,871
1,871
1,882
1,882
1,882
1,878
1,878
1,878
4
4
4
1,530
1,530
1,530
1,879
1,879
1,879
205,006
205,006
205,006
Sales revenue (€ million)
Sales revenue (€ million)
Sales revenue (€ million)
59,248
59,248
59,248
59,789
59,789
59,789
Operating result before
special items
Operating result before
Operating result before
special items
special items
Operating return on sales (%)
Operating return on sales (%)
Operating return on sales (%)
4,705
4,705
4,705
7.9
7.9
7.9
5,058
5,058
5,058
8.5
8.5
8.5
–3.4
–3.4
–3.4
–3.5
–3.5
–3.5
+50.7
+50.7
+50.7
–4.1
–4.1
–4.1
–0.4
–0.4
–0.4
–0.9
–0.9
–0.9
–7.0
–7.0
–7.0
1 Sales revenue adjusted; see disclosures about the application of new International
1 Sales revenue adjusted; see disclosures about the application of new International
1 Sales revenue adjusted; see disclosures about the application of new International
Financial Reporting Standards on page 114.
Financial Reporting Standards on page 114.
Financial Reporting Standards on page 114.
119,595
119,595
119,595
106,515
106,515
106,515
102,084
102,084
102,084
95,346
95,346
95,346
15,854
15,854
15,854
364
364
364
16,968
16,968
16,968
22,174
22,174
22,174
4
4
4
3,179
3,179
3,179
1,864,813
1,864,813
1,864,813
1,875,353
1,875,353
1,875,353
2,565
2,565
2,565
1,669
1,669
1,669
1,121
1,121
1,121
638
638
638
578
578
578
6,571
6,571
6,571
121
121
121
1,822
1,822
1,822
827
827
827
278
278
278
1,008
1,008
1,008
4,056
4,056
4,056
Audi brand
Audi brand
Audi brand
1,871,384
1,871,384
1,871,384
1,879,409
1,879,409
1,879,409
Ducati, motorcycles
Ducati, motorcycles
Ducati, motorcycles
53,320
53,320
53,320
56,743
56,743
56,743
A6
A6
A6
D E L I V E R I E S B Y M A R K E T
in percent
D E L I V E R I E S B Y M A R K E T
D E L I V E R I E S B Y M A R K E T
in percent
in percent
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
North America
North America
North America
North America
North America
North America
South America
South America
South America
South America
South America
South America
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
43.0 %
43.0 %
43.0 %
43.0 %
43.0 %
43.0 %
15.2 %
15.2 %
15.2 %
15.2 %
15.2 %
15.2 %
1.0 %
1.0 %
1.0 %
1.0 %
1.0 %
1.0 %
40.7 %
40.7 %
40.7 %
40.7 %
40.7 %
40.7 %
i
i
i
F U R T H E R I N F O R M A T I O N
F U R T H E R I N F O R M A T I O N www.audi.com
www.audi.com
F U R T H E R I N F O R M A T I O N www.audi.com
F U R T H E R I N F O R M A T I O N
www.audi.com
F U R T H E R I N F O R M A T I O N
F U R T H E R I N F O R M A T I O N www.audi.com
www.audi.com
28
28
28
ŠKODA
ŠKODA
ŠKODA
Divisions
Divisions
Divisions
ŠKODA presented the all-new compact Scala model in 2018. In addition to the
ŠKODA presented the all-new compact Scala model in 2018. In addition to the
ŠKODA presented the all-new compact Scala model in 2018. In addition to the
Kamiq SUV, which was launched in China, additional derivative models of the
Kamiq SUV, which was launched in China, additional derivative models of the
Kamiq SUV, which was launched in China, additional derivative models of the
Kodiaq and the upgraded Fabia were also presented.
Kodiaq and the upgraded Fabia were also presented.
Kodiaq and the upgraded Fabia were also presented.
B U S I N E S S D E V E L O P M E N T
B U S I N E S S D E V E L O P M E N T
B U S I N E S S D E V E L O P M E N T
The models offered by ŠKODA are synonymous with smart understatement, featuring a superior spacious
The models offered by ŠKODA are synonymous with smart understatement, featuring a superior spacious
The models offered by ŠKODA are synonymous with smart understatement, featuring a superior spacious
interior, highest standards of functionality, excellent value for money and a distinct design. Added to that are a
interior, highest standards of functionality, excellent value for money and a distinct design. Added to that are a
interior, highest standards of functionality, excellent value for money and a distinct design. Added to that are a
number of “Simply Clever” ideas and new digital services, all aimed at making customers’ lives easier. In 2018,
number of “Simply Clever” ideas and new digital services, all aimed at making customers’ lives easier. In 2018,
number of “Simply Clever” ideas and new digital services, all aimed at making customers’ lives easier. In 2018,
ŠKODA launched their extensively enhanced Fabia. With the world premiere of the Scala, which will celebrate its
ŠKODA launched their extensively enhanced Fabia. With the world premiere of the Scala, which will celebrate its
ŠKODA launched their extensively enhanced Fabia. With the world premiere of the Scala, which will celebrate its
market debut in 2019, ŠKODA has completely redefined its compact segment. The new compact model is the
market debut in 2019, ŠKODA has completely redefined its compact segment. The new compact model is the
market debut in 2019, ŠKODA has completely redefined its compact segment. The new compact model is the
first series-produced vehicle to reveal the next step in the development of the ŠKODA design language, which
first series-produced vehicle to reveal the next step in the development of the ŠKODA design language, which
first series-produced vehicle to reveal the next step in the development of the ŠKODA design language, which
will shape future ŠKODA models. New sculptural shapes, dynamic elements and attention to detail give the
will shape future ŠKODA models. New sculptural shapes, dynamic elements and attention to detail give the
will shape future ŠKODA models. New sculptural shapes, dynamic elements and attention to detail give the
Scala its strong identity. The Kodiaq GT is the Czech brand’s new top model in China. It is the first vehicle in
Scala its strong identity. The Kodiaq GT is the Czech brand’s new top model in China. It is the first vehicle in
Scala its strong identity. The Kodiaq GT is the Czech brand’s new top model in China. It is the first vehicle in
ŠKODA’s SUV segment that combines the robustness and versatility of an SUV with the sporty elegance and
ŠKODA’s SUV segment that combines the robustness and versatility of an SUV with the sporty elegance and
ŠKODA’s SUV segment that combines the robustness and versatility of an SUV with the sporty elegance and
dynamic features of a coupé. China also saw the launch of the Kamiq. This city SUV offers the ultimate in
dynamic features of a coupé. China also saw the launch of the Kamiq. This city SUV offers the ultimate in
dynamic features of a coupé. China also saw the launch of the Kamiq. This city SUV offers the ultimate in
connectivity for young urban customers who want to be always online even on the go. The dynamic Kodiaq RS
connectivity for young urban customers who want to be always online even on the go. The dynamic Kodiaq RS
connectivity for young urban customers who want to be always online even on the go. The dynamic Kodiaq RS
– the new top model in the brand’s SUV portfolio – is also the first SUV in the sporty RS family. Thanks to its
– the new top model in the brand’s SUV portfolio – is also the first SUV in the sporty RS family. Thanks to its
– the new top model in the brand’s SUV portfolio – is also the first SUV in the sporty RS family. Thanks to its
extraordinary on- and off-road performance and markedly powerful design, it meets all the requirements of a
extraordinary on- and off-road performance and markedly powerful design, it meets all the requirements of a
extraordinary on- and off-road performance and markedly powerful design, it meets all the requirements of a
steadily expanding target group for powerful SUVs. The VISION X and VISION RS vehicle concepts with plug-in
steadily expanding target group for powerful SUVs. The VISION X and VISION RS vehicle concepts with plug-in
steadily expanding target group for powerful SUVs. The VISION X and VISION RS vehicle concepts with plug-in
hybrid technology revealed in 2018 embody ŠKODA’s future orientation and form the basis for the series-
hybrid technology revealed in 2018 embody ŠKODA’s future orientation and form the basis for the series-
hybrid technology revealed in 2018 embody ŠKODA’s future orientation and form the basis for the series-
produced models to be launched in 2019.
produced models to be launched in 2019.
produced models to be launched in 2019.
Global deliveries by the ŠKODA brand in 2018 amounted to 1.3 million vehicles (+4.4%), thus reaching a new
Global deliveries by the ŠKODA brand in 2018 amounted to 1.3 million vehicles (+4.4%), thus reaching a new
Global deliveries by the ŠKODA brand in 2018 amounted to 1.3 million vehicles (+4.4%), thus reaching a new
record. China was once again the largest single market: deliveries there were up by 4.9%. Sales rose by 1.8% in
record. China was once again the largest single market: deliveries there were up by 4.9%. Sales rose by 1.8% in
record. China was once again the largest single market: deliveries there were up by 4.9%. Sales rose by 1.8% in
Western Europe and 9.6% in Central and Eastern Europe.
Western Europe and 9.6% in Central and Eastern Europe.
Western Europe and 9.6% in Central and Eastern Europe.
ŠKODA sold 957 (937) thousand vehicles in 2018, outperforming the previous year’s level. The Kodiaq and
ŠKODA sold 957 (937) thousand vehicles in 2018, outperforming the previous year’s level. The Kodiaq and
ŠKODA sold 957 (937) thousand vehicles in 2018, outperforming the previous year’s level. The Kodiaq and
Karoq models were particularly highly sought-after. The difference between figures for deliveries and unit sales
Karoq models were particularly highly sought-after. The difference between figures for deliveries and unit sales
Karoq models were particularly highly sought-after. The difference between figures for deliveries and unit sales
is mainly due to the fact that the vehicle-producing joint ventures in China are not attributed to ŠKODA brand
is mainly due to the fact that the vehicle-producing joint ventures in China are not attributed to ŠKODA brand
is mainly due to the fact that the vehicle-producing joint ventures in China are not attributed to ŠKODA brand
companies.
companies.
companies.
ŠKODA manufactured 1.3 (1.2) million vehicles worldwide in 2018. The one-millionth SUV was produced at
ŠKODA manufactured 1.3 (1.2) million vehicles worldwide in 2018. The one-millionth SUV was produced at
ŠKODA manufactured 1.3 (1.2) million vehicles worldwide in 2018. The one-millionth SUV was produced at
the plant in Kvasiny, Czech Republic.
the plant in Kvasiny, Czech Republic.
the plant in Kvasiny, Czech Republic.
S A L E S R E V E N U E A N D E A R N I N G S
S A L E S R E V E N U E A N D E A R N I N G S
S A L E S R E V E N U E A N D E A R N I N G S
At €17.3 billion, the ŠKODA brand’s sales revenue in 2018 was 4.4% higher than in 2017. Operating profit fell by
At €17.3 billion, the ŠKODA brand’s sales revenue in 2018 was 4.4% higher than in 2017. Operating profit fell by
At €17.3 billion, the ŠKODA brand’s sales revenue in 2018 was 4.4% higher than in 2017. Operating profit fell by
14.6% to €1.4 billion; the decline mainly resulted from negative exchange rate effects, negative impacts
14.6% to €1.4 billion; the decline mainly resulted from negative exchange rate effects, negative impacts
14.6% to €1.4 billion; the decline mainly resulted from negative exchange rate effects, negative impacts
resulting from WLTP, a rise in personnel costs and higher upfront expenditure for new products. Meanwhile,
resulting from WLTP, a rise in personnel costs and higher upfront expenditure for new products. Meanwhile,
resulting from WLTP, a rise in personnel costs and higher upfront expenditure for new products. Meanwhile,
growth in unit sales, product cost optimization and improved price positioning had a positive impact. The
growth in unit sales, product cost optimization and improved price positioning had a positive impact. The
growth in unit sales, product cost optimization and improved price positioning had a positive impact. The
operating return on sales declined from 9.7% in the previous year to 8.0%.
operating return on sales declined from 9.7% in the previous year to 8.0%.
operating return on sales declined from 9.7% in the previous year to 8.0%.
1 million
1 million
1 million
SUVs produced at the Kvasiny plant
SUVs produced at the Kvasiny plant
SUVs produced at the Kvasiny plant
Divisions
Divisions
Divisions
ŠKODA
ŠKODA
ŠKODA
29
29
29
P R O D U C T I O N
P R O D U C T I O N
P R O D U C T I O N
Š KO D A B R A N D
Š KO D A B R A N D
Š KO D A B R A N D
Units
Units
Units
Octavia
Octavia
Octavia
Rapid
Rapid
Rapid
Fabia
Fabia
Fabia
Karoq/Kamiq/Yeti
Karoq/Kamiq/Yeti
Karoq/Kamiq/Yeti
Kodiaq
Kodiaq
Kodiaq
Superb
Superb
Superb
Citigo
Citigo
Citigo
2018
2018
2018
2017
2017
2017
2018
2018
2018
2017
2017
2017
%
%
%
400,210
400,210
400,210
195,270
195,270
195,270
186,213
186,213
186,213
173,816
173,816
173,816
155,499
155,499
155,499
136,985
136,985
136,985
37,095
37,095
37,095
420,802
420,802
420,802
Deliveries (thousand units)
Deliveries (thousand units)
Deliveries (thousand units)
210,002
210,002
210,002
Vehicle sales
Vehicle sales
Vehicle sales
209,471
209,471
209,471
Production
Production
Production
81,963
81,963
81,963
Sales revenue (€ million)
Sales revenue (€ million)
Sales revenue (€ million)
123,982
123,982
123,982
Operating result
Operating result
Operating result
147,103
147,103
147,103
Operating return on sales (%)
Operating return on sales (%)
Operating return on sales (%)
38,749
38,749
38,749
1,285,088
1,285,088
1,285,088
1,232,072
1,232,072
1,232,072
1,254
1,254
1,254
957
957
957
1,285
1,285
1,285
17,293
17,293
17,293
1,377
1,377
1,377
8.0
8.0
8.0
1,201
1,201
1,201
937
937
937
1,232
1,232
1,232
16,559
16,559
16,559
1,611
1,611
1,611
9.7
9.7
9.7
+4.4
+4.4
+4.4
+2.1
+2.1
+2.1
+4.3
+4.3
+4.3
+4.4
+4.4
+4.4
–14.6
–14.6
–14.6
Kamiq
Kamiq
Kamiq
D E L I V E R I E S B Y M A R K E T
in percent
D E L I V E R I E S B Y M A R K E T
D E L I V E R I E S B Y M A R K E T
in percent
in percent
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
North America
North America
North America
North America
North America
North America
South America
South America
South America
South America
South America
South America
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
70.2 %
70.2 %
70.2 %
70.2 %
70.2 %
70.2 %
0.0 %
0.0 %
0.0 %
0.0 %
0.0 %
0.0 %
0.1 %
0.1 %
0.1 %
0.1 %
0.1 %
0.1 %
29.7 %
29.7 %
29.7 %
29.7 %
29.7 %
29.7 %
i
i
i
F U R T H E R I N F O R M A T I O N
F U R T H E R I N F O R M A T I O N www.skoda-auto.com
www.skoda-auto.com
F U R T H E R I N F O R M A T I O N www.skoda-auto.com
F U R T H E R I N F O R M A T I O N
www.skoda-auto.com
F U R T H E R I N F O R M A T I O N
F U R T H E R I N F O R M A T I O N www.skoda-auto.com
www.skoda-auto.com
30
30
30
SEAT
SEAT
SEAT
Divisions
Divisions
Divisions
SEAT celebrated the world premiere of the new Tarraco in the reporting year. In SEAT’s
SEAT celebrated the world premiere of the new Tarraco in the reporting year. In SEAT’s
SEAT celebrated the world premiere of the new Tarraco in the reporting year. In SEAT’s
SUV family, the Tarraco is the big brother of the Arona and Ateca, which contributed to
SUV family, the Tarraco is the big brother of the Arona and Ateca, which contributed to
SUV family, the Tarraco is the big brother of the Arona and Ateca, which contributed to
the good results in the reporting year.
the good results in the reporting year.
the good results in the reporting year.
B U S I N E S S D E V E L O P M E N T
B U S I N E S S D E V E L O P M E N T
B U S I N E S S D E V E L O P M E N T
SEAT delivers solutions “Created in Barcelona” to make mobility easy. The highlight in fiscal year 2018 was the
SEAT delivers solutions “Created in Barcelona” to make mobility easy. The highlight in fiscal year 2018 was the
SEAT delivers solutions “Created in Barcelona” to make mobility easy. The highlight in fiscal year 2018 was the
world premiere of the new Tarraco. The Spanish brand’s new flagship is based on the Modular Transverse
world premiere of the new Tarraco. The Spanish brand’s new flagship is based on the Modular Transverse
world premiere of the new Tarraco. The Spanish brand’s new flagship is based on the Modular Transverse
Toolkit and complements the model range. It is the largest SUV offered by SEAT, next to the Arona and Ateca.
Toolkit and complements the model range. It is the largest SUV offered by SEAT, next to the Arona and Ateca.
Toolkit and complements the model range. It is the largest SUV offered by SEAT, next to the Arona and Ateca.
The Tarraco combines elegant, progressive design with state-of-the-art technology, dynamic, agile handling,
The Tarraco combines elegant, progressive design with state-of-the-art technology, dynamic, agile handling,
The Tarraco combines elegant, progressive design with state-of-the-art technology, dynamic, agile handling,
and limitless practicality and functionality. Synonymous with the ultimate expression of SEAT sportiness, the
and limitless practicality and functionality. Synonymous with the ultimate expression of SEAT sportiness, the
and limitless practicality and functionality. Synonymous with the ultimate expression of SEAT sportiness, the
company’s CUPRA brand was presented with its own unique personality in 2018. CUPRA is designed to captivate
company’s CUPRA brand was presented with its own unique personality in 2018. CUPRA is designed to captivate
company’s CUPRA brand was presented with its own unique personality in 2018. CUPRA is designed to captivate
car lovers and stands for uniqueness, sophistication and performance. Its first model, the CUPRA Ateca, has
car lovers and stands for uniqueness, sophistication and performance. Its first model, the CUPRA Ateca, has
car lovers and stands for uniqueness, sophistication and performance. Its first model, the CUPRA Ateca, has
been on sale since October 2018. In addition, CUPRA will enter an all-electric racing car in the new eTCR
been on sale since October 2018. In addition, CUPRA will enter an all-electric racing car in the new eTCR
been on sale since October 2018. In addition, CUPRA will enter an all-electric racing car in the new eTCR
multibrand touring car competition, which is to be launched in 2020.
multibrand touring car competition, which is to be launched in 2020.
multibrand touring car competition, which is to be launched in 2020.
SEAT increased its deliveries to customers by 10.5% in fiscal year 2018 to 518 thousand vehicles. Almost all
SEAT increased its deliveries to customers by 10.5% in fiscal year 2018 to 518 thousand vehicles. Almost all
SEAT increased its deliveries to customers by 10.5% in fiscal year 2018 to 518 thousand vehicles. Almost all
markets contributed to this rise, with the most significant increases achieved in Spain (+13.3%), Germany
markets contributed to this rise, with the most significant increases achieved in Spain (+13.3%), Germany
markets contributed to this rise, with the most significant increases achieved in Spain (+13.3%), Germany
(+11.8%), France (+31.3%) and the United Kingdom (+12.0%).
(+11.8%), France (+31.3%) and the United Kingdom (+12.0%).
(+11.8%), France (+31.3%) and the United Kingdom (+12.0%).
At 608 thousand units, the SEAT brand’s unit sales were up 2.2% year-on-year in the reporting period. The
At 608 thousand units, the SEAT brand’s unit sales were up 2.2% year-on-year in the reporting period. The
At 608 thousand units, the SEAT brand’s unit sales were up 2.2% year-on-year in the reporting period. The
A1 and Q3 models produced for Audi are also included in this figure. The Arona was particularly popular.
A1 and Q3 models produced for Audi are also included in this figure. The Arona was particularly popular.
A1 and Q3 models produced for Audi are also included in this figure. The Arona was particularly popular.
SEAT produced 528 thousand vehicles in the past year. This was 10.2% more than in 2017.
SEAT produced 528 thousand vehicles in the past year. This was 10.2% more than in 2017.
SEAT produced 528 thousand vehicles in the past year. This was 10.2% more than in 2017.
S A L E S R E V E N U E A N D E A R N I N G S
S A L E S R E V E N U E A N D E A R N I N G S
S A L E S R E V E N U E A N D E A R N I N G S
SEAT continued its upward trend in the reporting year. Sales revenue was €10.2 billion, exceeding the previous
SEAT continued its upward trend in the reporting year. Sales revenue was €10.2 billion, exceeding the previous
SEAT continued its upward trend in the reporting year. Sales revenue was €10.2 billion, exceeding the previous
year’s record figure by 3.1%. Operating profit rose to €254 (191) million, which was also a new record. Positive
year’s record figure by 3.1%. Operating profit rose to €254 (191) million, which was also a new record. Positive
year’s record figure by 3.1%. Operating profit rose to €254 (191) million, which was also a new record. Positive
volume and mix effects more than offset the negative impact of cost increases and exchange rates. The Seat
volume and mix effects more than offset the negative impact of cost increases and exchange rates. The Seat
volume and mix effects more than offset the negative impact of cost increases and exchange rates. The Seat
brand’s operating return on sales improved to 2.5 (1.9)%.
brand’s operating return on sales improved to 2.5 (1.9)%.
brand’s operating return on sales improved to 2.5 (1.9)%.
33.4%
33.4%
33.4%
Increase in profit in 2018
Increase in profit in 2018
Increase in profit in 2018
Divisions
Divisions
Divisions
SEAT
SEAT
SEAT
31
31
31
P R O D U C T I O N
P R O D U C T I O N
P R O D U C T I O N
S E AT B R A N D
S E AT B R A N D
S E AT B R A N D
Units
Units
Units
Leon
Leon
Leon
Ibiza
Ibiza
Ibiza
Arona
Arona
Arona
Ateca
Ateca
Ateca
Alhambra
Alhambra
Alhambra
Mii
Mii
Mii
Toledo
Toledo
Toledo
Tarraco
Tarraco
Tarraco
2018
2018
2018
2017
2017
2017
2018
2018
2018
2017
2017
2017
%
%
%
159,486
159,486
159,486
120,287
120,287
120,287
110,926
110,926
110,926
90,824
90,824
90,824
19,588
19,588
19,588
14,369
14,369
14,369
10,151
10,151
10,151
2,398
2,398
2,398
163,306
163,306
163,306
Deliveries (thousand units)
Deliveries (thousand units)
Deliveries (thousand units)
160,377
160,377
160,377
Vehicle sales
Vehicle sales
Vehicle sales
17,527
17,527
17,527
Production
Production
Production
518
518
518
608
608
608
528
528
528
77,483
77,483
77,483
Sales revenue (€ million)
Sales revenue (€ million)
Sales revenue (€ million)
10,202
10,202
10,202
33,638
33,638
33,638
Operating result
Operating result
Operating result
13,825
13,825
13,825
Operating return on sales (%)
Operating return on sales (%)
Operating return on sales (%)
254
254
254
2.5
2.5
2.5
468
468
468
595
595
595
479
479
479
9,892
9,892
9,892
191
191
191
1.9
1.9
1.9
+10.5
+10.5
+10.5
+2.2
+2.2
+2.2
+10.2
+10.2
+10.2
+3.1
+3.1
+3.1
+33.4
+33.4
+33.4
13,146
13,146
13,146
–
–
–
528,029
528,029
528,029
479,302
479,302
479,302
Tarraco
Tarraco
Tarraco
D E L I V E R I E S B Y M A R K E T
in percent
D E L I V E R I E S B Y M A R K E T
D E L I V E R I E S B Y M A R K E T
in percent
in percent
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
North America
North America
North America
North America
North America
North America
South America
South America
South America
South America
South America
South America
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
95.3 %
95.3 %
95.3 %
95.3 %
95.3 %
95.3 %
4.5 %
4.5 %
4.5 %
4.5 %
4.5 %
4.5 %
0.2 %
0.2 %
0.2 %
0.2 %
0.2 %
0.2 %
0.1 %
0.1 %
0.1 %
0.1 %
0.1 %
0.1 %
i
i
i
F U R T H E R I N F O R M A T I O N
F U R T H E R I N F O R M A T I O N www.seat.com
www.seat.com
F U R T H E R I N F O R M A T I O N www.seat.com
F U R T H E R I N F O R M A T I O N
www.seat.com
F U R T H E R I N F O R M A T I O N
F U R T H E R I N F O R M A T I O N www.seat.com
www.seat.com
32
32
32
Bentley
Bentley
Bentley
Divisions
Divisions
Divisions
With the Bentayga Hybrid, the British luxury brand Bentley is taking the first step
With the Bentayga Hybrid, the British luxury brand Bentley is taking the first step
With the Bentayga Hybrid, the British luxury brand Bentley is taking the first step
toward a fully electric product range. Delays to the start-up of the new Continental GT
toward a fully electric product range. Delays to the start-up of the new Continental GT
toward a fully electric product range. Delays to the start-up of the new Continental GT
weighed on operating profit.
weighed on operating profit.
weighed on operating profit.
B U S I N E S S D E V E L O P M E N T
B U S I N E S S D E V E L O P M E N T
B U S I N E S S D E V E L O P M E N T
The Bentley brand is defined by exclusivity, elegance and power. Bentley presented the world’s first luxury
The Bentley brand is defined by exclusivity, elegance and power. Bentley presented the world’s first luxury
The Bentley brand is defined by exclusivity, elegance and power. Bentley presented the world’s first luxury
hybrid vehicle during the reporting year. With the Bentayga Hybrid, the British luxury brand Bentley is taking a
hybrid vehicle during the reporting year. With the Bentayga Hybrid, the British luxury brand Bentley is taking a
hybrid vehicle during the reporting year. With the Bentayga Hybrid, the British luxury brand Bentley is taking a
first step on the path toward a fully electric product range. At the heart of the plug-in hybrid model are a highly
first step on the path toward a fully electric product range. At the heart of the plug-in hybrid model are a highly
first step on the path toward a fully electric product range. At the heart of the plug-in hybrid model are a highly
efficient electric motor and a new turbocharged 3.0 l V6 petrol engine. The Bentayga Hybrid can cover approxi-
efficient electric motor and a new turbocharged 3.0 l V6 petrol engine. The Bentayga Hybrid can cover approxi-
efficient electric motor and a new turbocharged 3.0 l V6 petrol engine. The Bentayga Hybrid can cover approxi-
mately 50 km in pure electric mode. With CO2 emissions of 75 g/km, it is currently the brand’s most efficient
mately 50 km in pure electric mode. With CO2 emissions of 75 g/km, it is currently the brand’s most efficient
mately 50 km in pure electric mode. With CO2 emissions of 75 g/km, it is currently the brand’s most efficient
model. Bentley also presented the powerful Bentayga V8 for the first time in the reporting year. It combines
model. Bentley also presented the powerful Bentayga V8 for the first time in the reporting year. It combines
model. Bentley also presented the powerful Bentayga V8 for the first time in the reporting year. It combines
luxury with sharp performance and strong practicality. Its V8 twin-turbo engine with 404 kW (550 PS) of power
luxury with sharp performance and strong practicality. Its V8 twin-turbo engine with 404 kW (550 PS) of power
luxury with sharp performance and strong practicality. Its V8 twin-turbo engine with 404 kW (550 PS) of power
accelerates the vehicle from 0 to 100 km/h in 4.5 s. The new Continental GT had a very positive reception in
accelerates the vehicle from 0 to 100 km/h in 4.5 s. The new Continental GT had a very positive reception in
accelerates the vehicle from 0 to 100 km/h in 4.5 s. The new Continental GT had a very positive reception in
2018, both from its first customers and in the media. It is very popular worldwide and will be launched in the
2018, both from its first customers and in the media. It is very popular worldwide and will be launched in the
2018, both from its first customers and in the media. It is very popular worldwide and will be launched in the
USA and in China in 2019. The new Continental GT Convertible was unveiled at the end of 2018, and deliveries
USA and in China in 2019. The new Continental GT Convertible was unveiled at the end of 2018, and deliveries
USA and in China in 2019. The new Continental GT Convertible was unveiled at the end of 2018, and deliveries
will commence in spring 2019.
will commence in spring 2019.
will commence in spring 2019.
At 10,494 (11,089) vehicles, the Bentley brand’s sales in 2018 did not match the previous year’s record level.
At 10,494 (11,089) vehicles, the Bentley brand’s sales in 2018 did not match the previous year’s record level.
At 10,494 (11,089) vehicles, the Bentley brand’s sales in 2018 did not match the previous year’s record level.
While deliveries fell by 14.0% in the USA, they were up 10.9% in Asia-Pacific.
While deliveries fell by 14.0% in the USA, they were up 10.9% in Asia-Pacific.
While deliveries fell by 14.0% in the USA, they were up 10.9% in Asia-Pacific.
In the 2018 reporting year, Bentley sold 9,559 (10,566) vehicles worldwide. This was below the previous
In the 2018 reporting year, Bentley sold 9,559 (10,566) vehicles worldwide. This was below the previous
In the 2018 reporting year, Bentley sold 9,559 (10,566) vehicles worldwide. This was below the previous
year’s level, primarily as a result of the new generation of the Continental GT. The Bentayga was the most
year’s level, primarily as a result of the new generation of the Continental GT. The Bentayga was the most
year’s level, primarily as a result of the new generation of the Continental GT. The Bentayga was the most
sought-after model.
sought-after model.
sought-after model.
In 2018, the Bentley brand manufactured 9,115 vehicles. The 13.6% decline versus the prior year was mainly
In 2018, the Bentley brand manufactured 9,115 vehicles. The 13.6% decline versus the prior year was mainly
In 2018, the Bentley brand manufactured 9,115 vehicles. The 13.6% decline versus the prior year was mainly
attributable to product cycles.
attributable to product cycles.
attributable to product cycles.
S A L E S R E V E N U E A N D E A R N I N G S
S A L E S R E V E N U E A N D E A R N I N G S
S A L E S R E V E N U E A N D E A R N I N G S
The Bentley brand generated sales revenue of €1.5 billion in the reporting period, a decline of 16.0% year-on-
The Bentley brand generated sales revenue of €1.5 billion in the reporting period, a decline of 16.0% year-on-
The Bentley brand generated sales revenue of €1.5 billion in the reporting period, a decline of 16.0% year-on-
year. Operating result fell to €–288 (55) million. In particular, delays to the start-up of the new Continental GT as
year. Operating result fell to €–288 (55) million. In particular, delays to the start-up of the new Continental GT as
year. Operating result fell to €–288 (55) million. In particular, delays to the start-up of the new Continental GT as
well as exchange rate effects had a negative impact. The operating return on sales amounted to –18.6 (3.0)%.
well as exchange rate effects had a negative impact. The operating return on sales amounted to –18.6 (3.0)%.
well as exchange rate effects had a negative impact. The operating return on sales amounted to –18.6 (3.0)%.
75 g/km
75 g/km
75 g/km
The Bentayga Hybrid’s CO2 emissions
The Bentayga Hybrid’s CO2 emissions
The Bentayga Hybrid’s CO2 emissions
Divisions
Divisions
Divisions
Bentley
Bentley
Bentley
33
33
33
P R O D U C T I O N
P R O D U C T I O N
P R O D U C T I O N
B E N T L E Y B R A N D
B E N T L E Y B R A N D
B E N T L E Y B R A N D
Units
Units
Units
Bentayga
Bentayga
Bentayga
Continental GT Coupé
Continental GT Coupé
Continental GT Coupé
Flying Spur
Flying Spur
Flying Spur
Mulsanne
Mulsanne
Mulsanne
Continental GT Convertible
Continental GT Convertible
Continental GT Convertible
2018
2018
2018
2017
2017
2017
2018
2018
2018
2017
2017
2017
%
%
%
4,072
4,072
4,072
2,841
2,841
2,841
1,627
1,627
1,627
547
547
547
28
28
28
9,115
9,115
9,115
4,849
4,849
4,849
Deliveries (units)
Deliveries (units)
Deliveries (units)
1,345
1,345
1,345
Vehicle sales
Vehicle sales
Vehicle sales
2,295
2,295
2,295
Production
Production
Production
595
595
595
Sales revenue (€ million)
Sales revenue (€ million)
Sales revenue (€ million)
1,468
1,468
1,468
Operating result
Operating result
Operating result
10,552
10,552
10,552
Operating return on sales (%)
Operating return on sales (%)
Operating return on sales (%)
10,494
10,494
10,494
9,559
9,559
9,559
9,115
9,115
9,115
1,548
1,548
1,548
–288
–288
–288
–18.6
–18.6
–18.6
11,089
11,089
11,089
10,566
10,566
10,566
10,552
10,552
10,552
1,843
1,843
1,843
55
55
55
3.0
3.0
3.0
–5.4
–5.4
–5.4
–9.5
–9.5
–9.5
–13.6
–13.6
–13.6
–16.0
–16.0
–16.0
x
x
x
Bentayga Hybrid
Bentayga Hybrid
Bentayga Hybrid
D E L I V E R I E S B Y M A R K E T
in percent
D E L I V E R I E S B Y M A R K E T
D E L I V E R I E S B Y M A R K E T
in percent
in percent
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
North America
North America
North America
North America
North America
North America
South America
South America
South America
South America
South America
South America
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
46.1 %
46.1 %
46.1 %
46.1 %
46.1 %
46.1 %
21.2 %
21.2 %
21.2 %
21.2 %
21.2 %
21.2 %
0.1 %
0.1 %
0.1 %
0.1 %
0.1 %
0.1 %
32.6 %
32.6 %
32.6 %
32.6 %
32.6 %
32.6 %
i
i
i
F U R T H E R I N F O R M A T I O N
F U R T H E R I N F O R M A T I O N www.bentleymotors.com
www.bentleymotors.com
F U R T H E R I N F O R M A T I O N www.bentleymotors.com
F U R T H E R I N F O R M A T I O N
www.bentleymotors.com
F U R T H E R I N F O R M A T I O N
F U R T H E R I N F O R M A T I O N www.bentleymotors.com
www.bentleymotors.com
34
34
34
Porsche
Porsche
Porsche
Divisions
Divisions
Divisions
Porsche looks back on another successful fiscal year; sales revenue and profit
Porsche looks back on another successful fiscal year; sales revenue and profit
Porsche looks back on another successful fiscal year; sales revenue and profit
exceed the prior-year figures. The first all-electric Porsche is set to launch in 2019
exceed the prior-year figures. The first all-electric Porsche is set to launch in 2019
exceed the prior-year figures. The first all-electric Porsche is set to launch in 2019
under the name Taycan.
under the name Taycan.
under the name Taycan.
B U S I N E S S D E V E L O P M E N T
B U S I N E S S D E V E L O P M E N T
B U S I N E S S D E V E L O P M E N T
Exclusivity and social acceptance, innovation and tradition, performance and everyday usability, design and
Exclusivity and social acceptance, innovation and tradition, performance and everyday usability, design and
Exclusivity and social acceptance, innovation and tradition, performance and everyday usability, design and
functionality – these are the brand values of sports car manufacturer Porsche. The brand presented the new
functionality – these are the brand values of sports car manufacturer Porsche. The brand presented the new
functionality – these are the brand values of sports car manufacturer Porsche. The brand presented the new
generation of the Macan in 2018. The SUV has been extensively enhanced in terms of design, comfort,
generation of the Macan in 2018. The SUV has been extensively enhanced in terms of design, comfort,
generation of the Macan in 2018. The SUV has been extensively enhanced in terms of design, comfort,
connectivity and driving dynamics. The Porsche Communication Management with a 10.9-inch touchscreen
connectivity and driving dynamics. The Porsche Communication Management with a 10.9-inch touchscreen
connectivity and driving dynamics. The Porsche Communication Management with a 10.9-inch touchscreen
enables access to new digital functions, such as intelligent voice control and the online navigation provided as
enables access to new digital functions, such as intelligent voice control and the online navigation provided as
enables access to new digital functions, such as intelligent voice control and the online navigation provided as
standard. A high-performance sports car also made its debut: the Porsche 911 GT3 RS, which generates 383 kW
standard. A high-performance sports car also made its debut: the Porsche 911 GT3 RS, which generates 383 kW
standard. A high-performance sports car also made its debut: the Porsche 911 GT3 RS, which generates 383 kW
(520 PS) and accelerates from 0 to 100 km/h in 3.2 s. Its top speed is an impressive 312 km/h. The new gener-
(520 PS) and accelerates from 0 to 100 km/h in 3.2 s. Its top speed is an impressive 312 km/h. The new gener-
(520 PS) and accelerates from 0 to 100 km/h in 3.2 s. Its top speed is an impressive 312 km/h. The new gener-
ation of the 911, which was presented at the end of 2018, will launch in 2019, once again setting standards in
ation of the 911, which was presented at the end of 2018, will launch in 2019, once again setting standards in
ation of the 911, which was presented at the end of 2018, will launch in 2019, once again setting standards in
terms of exclusive sportiness. Intelligent controls and chassis elements as well as innovative assistance systems
terms of exclusive sportiness. Intelligent controls and chassis elements as well as innovative assistance systems
terms of exclusive sportiness. Intelligent controls and chassis elements as well as innovative assistance systems
combine the uncompromising dynamism of the classic rear-engine sports car with the demands of the digital
combine the uncompromising dynamism of the classic rear-engine sports car with the demands of the digital
combine the uncompromising dynamism of the classic rear-engine sports car with the demands of the digital
world. Porsche announced in 2018 that the brand’s all-electric model, previously known as the Mission E
world. Porsche announced in 2018 that the brand’s all-electric model, previously known as the Mission E
world. Porsche announced in 2018 that the brand’s all-electric model, previously known as the Mission E
concept car, will be marketed as the Porsche Taycan from the end of 2019. The brand also presented an electric-
concept car, will be marketed as the Porsche Taycan from the end of 2019. The brand also presented an electric-
concept car, will be marketed as the Porsche Taycan from the end of 2019. The brand also presented an electric-
driven crossover utility vehicle: the Mission E Cross Turismo concept study. Its strengths are the exciting
driven crossover utility vehicle: the Mission E Cross Turismo concept study. Its strengths are the exciting
driven crossover utility vehicle: the Mission E Cross Turismo concept study. Its strengths are the exciting
design, striking off-road elements, and innovative display and control interfaces with touchscreen and gaze
design, striking off-road elements, and innovative display and control interfaces with touchscreen and gaze
design, striking off-road elements, and innovative display and control interfaces with touchscreen and gaze
control.
control.
control.
In the reporting period, Porsche delivered 256 thousand sports cars, an increase of 4.0% on the previous
In the reporting period, Porsche delivered 256 thousand sports cars, an increase of 4.0% on the previous
In the reporting period, Porsche delivered 256 thousand sports cars, an increase of 4.0% on the previous
year. China remained the largest single market for Porsche with 80 thousand vehicles (+12.0%). Sales in North
year. China remained the largest single market for Porsche with 80 thousand vehicles (+12.0%). Sales in North
year. China remained the largest single market for Porsche with 80 thousand vehicles (+12.0%). Sales in North
America rose by 3.7%.
America rose by 3.7%.
America rose by 3.7%.
At 253 thousand vehicles, Porsche’s unit sales exceeded the prior-year figure by 1.9% in 2018. In particular,
At 253 thousand vehicles, Porsche’s unit sales exceeded the prior-year figure by 1.9% in 2018. In particular,
At 253 thousand vehicles, Porsche’s unit sales exceeded the prior-year figure by 1.9% in 2018. In particular,
the Panamera and Cayenne achieved impressive growth; sales of the 911 were also up.
the Panamera and Cayenne achieved impressive growth; sales of the 911 were also up.
the Panamera and Cayenne achieved impressive growth; sales of the 911 were also up.
Porsche produced 268 thousand vehicles in the reporting year. This was 5.0% more than in the previous
Porsche produced 268 thousand vehicles in the reporting year. This was 5.0% more than in the previous
Porsche produced 268 thousand vehicles in the reporting year. This was 5.0% more than in the previous
year.
year.
year.
S A L E S R E V E N U E A N D E A R N I N G S
S A L E S R E V E N U E A N D E A R N I N G S
S A L E S R E V E N U E A N D E A R N I N G S
The 2018 fiscal year was once again very successful for Porsche: Porsche Automotive’s sales revenue rose by
The 2018 fiscal year was once again very successful for Porsche: Porsche Automotive’s sales revenue rose by
The 2018 fiscal year was once again very successful for Porsche: Porsche Automotive’s sales revenue rose by
9.2% to €23.7 (21.7) billion. Operating profit increased by 2.7% year-on-year to €4.1 billion. The rise was partic-
9.2% to €23.7 (21.7) billion. Operating profit increased by 2.7% year-on-year to €4.1 billion. The rise was partic-
9.2% to €23.7 (21.7) billion. Operating profit increased by 2.7% year-on-year to €4.1 billion. The rise was partic-
ularly attributable to the increased volume and positive mix effects, while higher research and development
ularly attributable to the increased volume and positive mix effects, while higher research and development
ularly attributable to the increased volume and positive mix effects, while higher research and development
costs, particularly for e-mobility and digitalization had an offsetting effect. The operating return on sales stood
costs, particularly for e-mobility and digitalization had an offsetting effect. The operating return on sales stood
costs, particularly for e-mobility and digitalization had an offsetting effect. The operating return on sales stood
at 17.4 (18.5)%.
at 17.4 (18.5)%.
at 17.4 (18.5)%.
9.2%
9.2%
9.2%
Increase in sales revenue in 2018
Increase in sales revenue in 2018
Increase in sales revenue in 2018
Divisions
Divisions
Divisions
Porsche
Porsche
Porsche
35
35
35
P R O D U C T I O N
P R O D U C T I O N
P R O D U C T I O N
P O R S C H E A U TO M OT I V E 1
P O R S C H E A U TO M OT I V E 1
P O R S C H E A U TO M OT I V E 1
Units
Units
Units
Macan
Macan
Macan
Cayenne
Cayenne
Cayenne
911 Coupé/Cabriolet
911 Coupé/Cabriolet
911 Coupé/Cabriolet
Panamera
Panamera
Panamera
718 Boxster/Cayman
718 Boxster/Cayman
718 Boxster/Cayman
2018
2018
2018
2017
2017
2017
2018
2018
2018
2017
2017
2017
%
%
%
93,953
93,953
93,953
79,111
79,111
79,111
36,236
36,236
36,236
35,493
35,493
35,493
23,658
23,658
23,658
98,763
98,763
98,763
Deliveries (thousand units)
Deliveries (thousand units)
Deliveries (thousand units)
59,068
59,068
59,068
Vehicle sales
Vehicle sales
Vehicle sales
33,820
33,820
33,820
Production
Production
Production
256
256
256
253
253
253
268
268
268
246
246
246
248
248
248
256
256
256
37,605
37,605
37,605
Sales revenue (€ million)
Sales revenue (€ million)
Sales revenue (€ million)
23,668
23,668
23,668
21,674
21,674
21,674
26,427
26,427
26,427
Operating result
Operating result
Operating result
268,451
268,451
268,451
255,683
255,683
255,683
Operating return on sales (%)
Operating return on sales (%)
Operating return on sales (%)
4,110
4,110
4,110
17.4
17.4
17.4
4,003
4,003
4,003
18.5
18.5
18.5
+4.0
+4.0
+4.0
+1.9
+1.9
+1.9
+5.0
+5.0
+5.0
+9.2
+9.2
+9.2
+2.7
+2.7
+2.7
1 Porsche (Automotive and Financial Services): sales revenue €25,784 (23,491) million,
1 Porsche (Automotive and Financial Services): sales revenue €25,784 (23,491) million,
1 Porsche (Automotive and Financial Services): sales revenue €25,784 (23,491) million,
operating profit €4,291 (4,144) million.
operating profit €4,291 (4,144) million.
operating profit €4,291 (4,144) million.
Macan
Macan
Macan
D E L I V E R I E S B Y M A R K E T
in percent
D E L I V E R I E S B Y M A R K E T
D E L I V E R I E S B Y M A R K E T
in percent
in percent
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
North America
North America
North America
North America
North America
North America
South America
South America
South America
South America
South America
South America
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
32.8 %
32.8 %
32.8 %
32.8 %
32.8 %
32.8 %
26.4 %
26.4 %
26.4 %
26.4 %
26.4 %
26.4 %
1.1 %
1.1 %
1.1 %
1.1 %
1.1 %
1.1 %
39.7 %
39.7 %
39.7 %
39.7 %
39.7 %
39.7 %
i
i
i
F U R T H E R I N F O R M A T I O N
F U R T H E R I N F O R M A T I O N www.porsche.com
www.porsche.com
F U R T H E R I N F O R M A T I O N www.porsche.com
F U R T H E R I N F O R M A T I O N
www.porsche.com
F U R T H E R I N F O R M A T I O N
F U R T H E R I N F O R M A T I O N www.porsche.com
www.porsche.com
36
36
36
Volkswagen Commercial Vehicles
Volkswagen Commercial Vehicles
Volkswagen Commercial Vehicles
Divisions
Divisions
Divisions
At the IAA Commercial Vehicles trade fair in Hanover, Volkswagen Commercial Vehicles
At the IAA Commercial Vehicles trade fair in Hanover, Volkswagen Commercial Vehicles
At the IAA Commercial Vehicles trade fair in Hanover, Volkswagen Commercial Vehicles
impressed motor show visitors with a wealth of solutions ready for series production
impressed motor show visitors with a wealth of solutions ready for series production
impressed motor show visitors with a wealth of solutions ready for series production
for using e-mobility in commercial contexts.
for using e-mobility in commercial contexts.
for using e-mobility in commercial contexts.
B U S I N E S S D E V E L O P M E N T
B U S I N E S S D E V E L O P M E N T
B U S I N E S S D E V E L O P M E N T
As a leading manufacturer of light commercial vehicles, Volkswagen Commercial Vehicles is making funda-
As a leading manufacturer of light commercial vehicles, Volkswagen Commercial Vehicles is making funda-
As a leading manufacturer of light commercial vehicles, Volkswagen Commercial Vehicles is making funda-
mental, lasting changes to the way goods and services are distributed in cities in order to improve quality of life,
mental, lasting changes to the way goods and services are distributed in cities in order to improve quality of life,
mental, lasting changes to the way goods and services are distributed in cities in order to improve quality of life,
especially in inner city areas. At the IAA Commercial Vehicles 2018 in Hanover, the brand presented a number
especially in inner city areas. At the IAA Commercial Vehicles 2018 in Hanover, the brand presented a number
especially in inner city areas. At the IAA Commercial Vehicles 2018 in Hanover, the brand presented a number
of compelling solutions for using commercial e-mobility in urban areas on a sustainable basis. The e-Crafter
of compelling solutions for using commercial e-mobility in urban areas on a sustainable basis. The e-Crafter
of compelling solutions for using commercial e-mobility in urban areas on a sustainable basis. The e-Crafter
has now become an important component of the Hanover-based car manufacturer’s delivery range. Another
has now become an important component of the Hanover-based car manufacturer’s delivery range. Another
has now become an important component of the Hanover-based car manufacturer’s delivery range. Another
two all-electric vehicles for urban traffic – the ABT e-Caddy and ABT e-Transporter – have also been added. With
two all-electric vehicles for urban traffic – the ABT e-Caddy and ABT e-Transporter – have also been added. With
two all-electric vehicles for urban traffic – the ABT e-Caddy and ABT e-Transporter – have also been added. With
a top speed of 120 km/h, the ABT e-Caddy can cover approximately 200 km on a single battery charge. However,
a top speed of 120 km/h, the ABT e-Caddy can cover approximately 200 km on a single battery charge. However,
a top speed of 120 km/h, the ABT e-Caddy can cover approximately 200 km on a single battery charge. However,
the highlight of Volkswagen Commercial Vehicles’ presence at the IAA was the ID. BUZZ CARGO concept car. The
the highlight of Volkswagen Commercial Vehicles’ presence at the IAA was the ID. BUZZ CARGO concept car. The
the highlight of Volkswagen Commercial Vehicles’ presence at the IAA was the ID. BUZZ CARGO concept car. The
delivery van of tomorrow is all-electric, connected and automated for urban traffic. The successor of the “Bulli”
delivery van of tomorrow is all-electric, connected and automated for urban traffic. The successor of the “Bulli”
delivery van of tomorrow is all-electric, connected and automated for urban traffic. The successor of the “Bulli”
is intended to meet the need for modern, emission-free and sustainable transport of people and goods. With
is intended to meet the need for modern, emission-free and sustainable transport of people and goods. With
is intended to meet the need for modern, emission-free and sustainable transport of people and goods. With
battery ranges of 330 to more than 550 km achieved with the new Modular Electric Drive Toolkit (MEB) and a
battery ranges of 330 to more than 550 km achieved with the new Modular Electric Drive Toolkit (MEB) and a
battery ranges of 330 to more than 550 km achieved with the new Modular Electric Drive Toolkit (MEB) and a
digitalized charging system, the brand will address the future needs of its customer groups.
digitalized charging system, the brand will address the future needs of its customer groups.
digitalized charging system, the brand will address the future needs of its customer groups.
Deliveries by Volkswagen Commercial Vehicles in the past fiscal year amounted to 500 thousand vehicles,
Deliveries by Volkswagen Commercial Vehicles in the past fiscal year amounted to 500 thousand vehicles,
Deliveries by Volkswagen Commercial Vehicles in the past fiscal year amounted to 500 thousand vehicles,
representing a slight increase of 0.4% on the previous year. Sales rose by 2.0% in Europe and 7.5% in South
representing a slight increase of 0.4% on the previous year. Sales rose by 2.0% in Europe and 7.5% in South
representing a slight increase of 0.4% on the previous year. Sales rose by 2.0% in Europe and 7.5% in South
America.
America.
America.
Following Group-internal restructuring in South America, unit sales declined by 5.9% to 469 thousand
Following Group-internal restructuring in South America, unit sales declined by 5.9% to 469 thousand
Following Group-internal restructuring in South America, unit sales declined by 5.9% to 469 thousand
vehicles. The Crafter was especially sought-after.
vehicles. The Crafter was especially sought-after.
vehicles. The Crafter was especially sought-after.
The Volkswagen Commercial Vehicles brand produced 519 thousand vehicles in the reporting year. This
The Volkswagen Commercial Vehicles brand produced 519 thousand vehicles in the reporting year. This
The Volkswagen Commercial Vehicles brand produced 519 thousand vehicles in the reporting year. This
represents a year-on-year increase of 6.0%. The two-millionth Caddy rolled off the assembly line at Volkswagen
represents a year-on-year increase of 6.0%. The two-millionth Caddy rolled off the assembly line at Volkswagen
represents a year-on-year increase of 6.0%. The two-millionth Caddy rolled off the assembly line at Volkswagen
Poznan in March. The main plant in Hanover had two reasons to celebrate in 2018: the 100 thousandth
Poznan in March. The main plant in Hanover had two reasons to celebrate in 2018: the 100 thousandth
Poznan in March. The main plant in Hanover had two reasons to celebrate in 2018: the 100 thousandth
California campervan was produced at the end of May, and in early June staff completed the 500 thousandth
California campervan was produced at the end of May, and in early June staff completed the 500 thousandth
California campervan was produced at the end of May, and in early June staff completed the 500 thousandth
vehicle in the current Transporter series.
vehicle in the current Transporter series.
vehicle in the current Transporter series.
S A L E S R E V E N U E A N D E A R N I N G S
S A L E S R E V E N U E A N D E A R N I N G S
S A L E S R E V E N U E A N D E A R N I N G S
Sales revenue at Volkswagen Commercial Vehicles in fiscal year 2018 was €11.9 (11.9) billion. Despite positive
Sales revenue at Volkswagen Commercial Vehicles in fiscal year 2018 was €11.9 (11.9) billion. Despite positive
Sales revenue at Volkswagen Commercial Vehicles in fiscal year 2018 was €11.9 (11.9) billion. Despite positive
mix effects and material cost optimization, operating profit declined to €780 (853) million, primarily as a result
mix effects and material cost optimization, operating profit declined to €780 (853) million, primarily as a result
mix effects and material cost optimization, operating profit declined to €780 (853) million, primarily as a result
of higher upfront expenditure for new products, unfavorable exchange rate trends and the challenges arising
of higher upfront expenditure for new products, unfavorable exchange rate trends and the challenges arising
of higher upfront expenditure for new products, unfavorable exchange rate trends and the challenges arising
from the WLTP. The operating return on sales fell to 6.6 (7.2)%.
from the WLTP. The operating return on sales fell to 6.6 (7.2)%.
from the WLTP. The operating return on sales fell to 6.6 (7.2)%.
500 thousand
500 thousand
500 thousand
Vehicles produced in the current T series
Vehicles produced in the current T series
Vehicles produced in the current T series
Divisions
Divisions
Divisions
Volkswagen Commercial Vehicles
Volkswagen Commercial Vehicles
Volkswagen Commercial Vehicles
37
37
37
P R O D U C T I O N
P R O D U C T I O N
P R O D U C T I O N
V O L K SWA G E N C O M M E R C I A L V E H I C L E S B R A N D
V O L K SWA G E N C O M M E R C I A L V E H I C L E S B R A N D
V O L K SWA G E N C O M M E R C I A L V E H I C L E S B R A N D
Units
Units
Units
2018
2018
2018
2017
2017
2017
2018
2018
2018
2017
2017
2017
%
%
%
Caravelle/Multivan, Kombi
Caravelle/Multivan, Kombi
Caravelle/Multivan, Kombi
115,525
115,525
115,525
115,553
115,553
115,553
Deliveries (thousand units)
Deliveries (thousand units)
Deliveries (thousand units)
Caddy Kombi
Caddy Kombi
Caddy Kombi
Amarok
Amarok
Amarok
Transporter
Transporter
Transporter
Caddy
Caddy
Caddy
Crafter
Crafter
Crafter
89,154
89,154
89,154
88,950
88,950
88,950
86,286
86,286
86,286
71,881
71,881
71,881
67,151
67,151
67,151
93,167
93,167
93,167
Vehicle sales
Vehicle sales
Vehicle sales
80,328
80,328
80,328
Production
Production
Production
92,876
92,876
92,876
Sales revenue (€ million)
Sales revenue (€ million)
Sales revenue (€ million)
11,875
11,875
11,875
11,909
11,909
11,909
71,501
71,501
71,501
Operating result
Operating result
Operating result
36,313
36,313
36,313
Operating return on sales (%)
Operating return on sales (%)
Operating return on sales (%)
780
780
780
6.6
6.6
6.6
853
853
853
7.2
7.2
7.2
500
500
500
469
469
469
519
519
519
498
498
498
498
498
498
490
490
490
+0.4
+0.4
+0.4
–5.9
–5.9
–5.9
+6.0
+6.0
+6.0
–0.3
–0.3
–0.3
–8.6
–8.6
–8.6
518,947
518,947
518,947
489,738
489,738
489,738
e-Crafter
e-Crafter
e-Crafter
D E L I V E R I E S B Y M A R K E T
in percent
D E L I V E R I E S B Y M A R K E T
D E L I V E R I E S B Y M A R K E T
in percent
in percent
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
North America
North America
North America
North America
North America
North America
South America
South America
South America
South America
South America
South America
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
83.8 %
83.8 %
83.8 %
83.8 %
83.8 %
83.8 %
1.9 %
1.9 %
1.9 %
1.9 %
1.9 %
1.9 %
8.9 %
8.9 %
8.9 %
8.9 %
8.9 %
8.9 %
5.4 %
5.4 %
5.4 %
5.4 %
5.4 %
5.4 %
i
i
i
F U R T H E R I N F O R M A T I O N www.volkswagen-commercial-vehicles.com
F U R T H E R I N F O R M A T I O N
www.volkswagen-commercial-vehicles.com
F U R T H E R I N F O R M A T I O N
F U R T H E R I N F O R M A T I O N www.volkswagen-commercial-vehicles.com
www.volkswagen-commercial-vehicles.com
F U R T H E R I N F O R M A T I O N
F U R T H E R I N F O R M A T I O N www.volkswagen-commercial-vehicles.com
www.volkswagen-commercial-vehicles.com
38
38
38
TRATON GROUP
TRATON GROUP
TRATON GROUP
Divisions
Divisions
Divisions
In 2018, the TRATON GROUP continued to consistently pursue its goal of becoming a
In 2018, the TRATON GROUP continued to consistently pursue its goal of becoming a
In 2018, the TRATON GROUP continued to consistently pursue its goal of becoming a
global champion of the commercial vehicle industry. Innovative technological solutions,
global champion of the commercial vehicle industry. Innovative technological solutions,
global champion of the commercial vehicle industry. Innovative technological solutions,
sales successes and the expansion of strategic partnerships all contributed to this.
sales successes and the expansion of strategic partnerships all contributed to this.
sales successes and the expansion of strategic partnerships all contributed to this.
B U S I N E S S D E V E L O P M E N T
B U S I N E S S D E V E L O P M E N T
B U S I N E S S D E V E L O P M E N T
With its MAN, Scania, Volkswagen Caminhões e Ônibus and RIO brands, TRATON SE aims to become a global
With its MAN, Scania, Volkswagen Caminhões e Ônibus and RIO brands, TRATON SE aims to become a global
With its MAN, Scania, Volkswagen Caminhões e Ônibus and RIO brands, TRATON SE aims to become a global
champion of the commercial vehicle industry and drive the transformation of the logistics sector. Its mission is
champion of the commercial vehicle industry and drive the transformation of the logistics sector. Its mission is
champion of the commercial vehicle industry and drive the transformation of the logistics sector. Its mission is
to reinvent transport for future generations: “Transforming Transportation”. With this purpose in mind, Volks-
to reinvent transport for future generations: “Transforming Transportation”. With this purpose in mind, Volks-
to reinvent transport for future generations: “Transforming Transportation”. With this purpose in mind, Volks-
wagen Truck & Bus, as the company was known until mid-2018, has given itself the new name TRATON, which
wagen Truck & Bus, as the company was known until mid-2018, has given itself the new name TRATON, which
wagen Truck & Bus, as the company was known until mid-2018, has given itself the new name TRATON, which
stands, among other things, for tradition, transport, transformation and tonnage. Other milestones in the
stands, among other things, for tradition, transport, transformation and tonnage. Other milestones in the
stands, among other things, for tradition, transport, transformation and tonnage. Other milestones in the
reporting year were its conversion into a stock corporation and the achievement of capital market readiness.
reporting year were its conversion into a stock corporation and the achievement of capital market readiness.
reporting year were its conversion into a stock corporation and the achievement of capital market readiness.
Under the TRATON name, the group aims to become a leader in profitability. It made major progress
Under the TRATON name, the group aims to become a leader in profitability. It made major progress
Under the TRATON name, the group aims to become a leader in profitability. It made major progress
towards this objective in 2018. TRATON once again leads the truck market in the core markets of Europe and
towards this objective in 2018. TRATON once again leads the truck market in the core markets of Europe and
towards this objective in 2018. TRATON once again leads the truck market in the core markets of Europe and
Brazil and considerably increased unit sales by 13.7% in the reporting year to 233 (205) thousand vehicles
Brazil and considerably increased unit sales by 13.7% in the reporting year to 233 (205) thousand vehicles
Brazil and considerably increased unit sales by 13.7% in the reporting year to 233 (205) thousand vehicles
globally. Scania’s new generation of trucks and the newly developed MAN Lion’s City Bus both contributed to this
globally. Scania’s new generation of trucks and the newly developed MAN Lion’s City Bus both contributed to this
globally. Scania’s new generation of trucks and the newly developed MAN Lion’s City Bus both contributed to this
success.
success.
success.
TRATON reinforced its claim to innovation in 2018 with pioneering projects. These included the joint pla-
TRATON reinforced its claim to innovation in 2018 with pioneering projects. These included the joint pla-
TRATON reinforced its claim to innovation in 2018 with pioneering projects. These included the joint pla-
tooning project between MAN and DB Schenker on the A9 highway between Munich and Nuremberg and the
tooning project between MAN and DB Schenker on the A9 highway between Munich and Nuremberg and the
tooning project between MAN and DB Schenker on the A9 highway between Munich and Nuremberg and the
fully autonomous Scania tipper truck in an Australian mine. TRATON also made progress in the field of e-mobil-
fully autonomous Scania tipper truck in an Australian mine. TRATON also made progress in the field of e-mobil-
fully autonomous Scania tipper truck in an Australian mine. TRATON also made progress in the field of e-mobil-
ity: Scania has been testing electric city buses in Sweden under everyday driving conditions since March 2018.
ity: Scania has been testing electric city buses in Sweden under everyday driving conditions since March 2018.
ity: Scania has been testing electric city buses in Sweden under everyday driving conditions since March 2018.
MAN operates a test fleet of nine electric trucks for an Austrian consortium, gathering valuable experience in
MAN operates a test fleet of nine electric trucks for an Austrian consortium, gathering valuable experience in
MAN operates a test fleet of nine electric trucks for an Austrian consortium, gathering valuable experience in
urban delivery traffic. In Brazil, Volkswagen Caminhões e Ônibus agreed to supply a beverage company with
urban delivery traffic. In Brazil, Volkswagen Caminhões e Ônibus agreed to supply a beverage company with
urban delivery traffic. In Brazil, Volkswagen Caminhões e Ônibus agreed to supply a beverage company with
1,600 battery-electric trucks by 2023. All the TRATON GROUP’s electric vehicles use a common electric platform,
1,600 battery-electric trucks by 2023. All the TRATON GROUP’s electric vehicles use a common electric platform,
1,600 battery-electric trucks by 2023. All the TRATON GROUP’s electric vehicles use a common electric platform,
which is also found in the chargE school bus produced by the US alliance partner Navistar.
which is also found in the chargE school bus produced by the US alliance partner Navistar.
which is also found in the chargE school bus produced by the US alliance partner Navistar.
At the IAA Commercial Vehicles 2018, the TRATON GROUP announced a new strategic partnership with the
At the IAA Commercial Vehicles 2018, the TRATON GROUP announced a new strategic partnership with the
At the IAA Commercial Vehicles 2018, the TRATON GROUP announced a new strategic partnership with the
US company Solera. The partnership is intended to further expand TRATON’s digital capabilities and encom-
US company Solera. The partnership is intended to further expand TRATON’s digital capabilities and encom-
US company Solera. The partnership is intended to further expand TRATON’s digital capabilities and encom-
passes fleet management, driver services and digital sales solutions for the commercial vehicle industry.
passes fleet management, driver services and digital sales solutions for the commercial vehicle industry.
passes fleet management, driver services and digital sales solutions for the commercial vehicle industry.
TRATON also informed about the further development of the strategic partnership with Hino: the Japanese
TRATON also informed about the further development of the strategic partnership with Hino: the Japanese
TRATON also informed about the further development of the strategic partnership with Hino: the Japanese
commercial vehicle manufacturer and TRATON agreed to establish a joint venture for procurement and to pool
commercial vehicle manufacturer and TRATON agreed to establish a joint venture for procurement and to pool
commercial vehicle manufacturer and TRATON agreed to establish a joint venture for procurement and to pool
their energies in the field of e-mobility. A joint venture to build heavy trucks in China is also planned with the
their energies in the field of e-mobility. A joint venture to build heavy trucks in China is also planned with the
their energies in the field of e-mobility. A joint venture to build heavy trucks in China is also planned with the
Chinese truck producer Sinotruk. With its investment in the manufacturer Navistar, TRATON is working on
Chinese truck producer Sinotruk. With its investment in the manufacturer Navistar, TRATON is working on
Chinese truck producer Sinotruk. With its investment in the manufacturer Navistar, TRATON is working on
leveraging synergies in procurement and technologies in the USA. The aim of all strategic partnerships is to
leveraging synergies in procurement and technologies in the USA. The aim of all strategic partnerships is to
leveraging synergies in procurement and technologies in the USA. The aim of all strategic partnerships is to
strengthen TRATON’s global presence.
strengthen TRATON’s global presence.
strengthen TRATON’s global presence.
13.7%
13.7%
13.7%
Increase in deliveries in 2018
Increase in deliveries in 2018
Increase in deliveries in 2018
Divisions
Divisions
Divisions
TRATON GROUP
TRATON GROUP
TRATON GROUP
39
39
39
P R O D U C T I O N
P R O D U C T I O N
P R O D U C T I O N
D E L I V E R I E S
D E L I V E R I E S
D E L I V E R I E S
Units
Units
Units
Trucks
Trucks
Trucks
Buses
Buses
Buses
Light Commercial Vehicles
Light Commercial Vehicles
Light Commercial Vehicles
2018
2018
2018
2017
2017
2017
Units
Units
Units
2018
2018
2018
2017
2017
2017
207,235
207,235
207,235
188,234
188,234
188,234
Trucks
Trucks
Trucks
23,141
23,141
23,141
9,043
9,043
9,043
19,217
19,217
19,217
Buses
Buses
Buses
3,891
3,891
3,891
Light Commercial Vehicles
Light Commercial Vehicles
Light Commercial Vehicles
239,419
239,419
239,419
211,342
211,342
211,342
202,492
202,492
202,492
183,487
183,487
183,487
22,629
22,629
22,629
7,871
7,871
7,871
19,217
19,217
19,217
2,212
2,212
2,212
232,992
232,992
232,992
204,916
204,916
204,916
Strong brands
Strong brands
Strong brands
D E L I V E R I E S B Y M A R K E T
in percent
D E L I V E R I E S B Y M A R K E T
D E L I V E R I E S B Y M A R K E T
in percent
in percent
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
North America
North America
North America
North America
North America
North America
South America
South America
South America
South America
South America
South America
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
71.2 %
71.2 %
71.2 %
71.2 %
71.2 %
71.2 %
1.5 %
1.5 %
1.5 %
1.5 %
1.5 %
1.5 %
20.5 %
20.5 %
20.5 %
20.5 %
20.5 %
20.5 %
6.8 %
6.8 %
6.8 %
6.8 %
6.8 %
6.8 %
i
i
i
F U R T H E R I N F O R M A T I O N
F U R T H E R I N F O R M A T I O N www.traton.com
www.traton.com
F U R T H E R I N F O R M A T I O N www.traton.com
F U R T H E R I N F O R M A T I O N
www.traton.com
F U R T H E R I N F O R M A T I O N
F U R T H E R I N F O R M A T I O N www.traton.com
www.traton.com
40
40
40
Scania
Scania
Scania
Divisions
Divisions
Divisions
Scania focused on alternative drive systems for its vehicles in fiscal year 2018 and
Scania focused on alternative drive systems for its vehicles in fiscal year 2018 and
Scania focused on alternative drive systems for its vehicles in fiscal year 2018 and
exceeded the prior-year figures for unit sales, sales revenue and profit.
exceeded the prior-year figures for unit sales, sales revenue and profit.
exceeded the prior-year figures for unit sales, sales revenue and profit.
B U S I N E S S D E V E L O P M E N T
B U S I N E S S D E V E L O P M E N T
B U S I N E S S D E V E L O P M E N T
The Swedish brand Scania follows its values “Customer first”, “Respect for the individual”, “Elimination of
The Swedish brand Scania follows its values “Customer first”, “Respect for the individual”, “Elimination of
The Swedish brand Scania follows its values “Customer first”, “Respect for the individual”, “Elimination of
waste”, “Determination”, “Team Spirit” and “Integrity”. All the vehicles presented by Scania at the IAA Commer-
waste”, “Determination”, “Team Spirit” and “Integrity”. All the vehicles presented by Scania at the IAA Commer-
waste”, “Determination”, “Team Spirit” and “Integrity”. All the vehicles presented by Scania at the IAA Commer-
cial Vehicles in 2018 had alternative drives. Among them was a hybrid truck for urban delivery traffic that can
cial Vehicles in 2018 had alternative drives. Among them was a hybrid truck for urban delivery traffic that can
cial Vehicles in 2018 had alternative drives. Among them was a hybrid truck for urban delivery traffic that can
run on HVO (hydrotreated vegetable oil) or diesel. The model also has a 130 kW (177 PS) electric motor. Further-
run on HVO (hydrotreated vegetable oil) or diesel. The model also has a 130 kW (177 PS) electric motor. Further-
run on HVO (hydrotreated vegetable oil) or diesel. The model also has a 130 kW (177 PS) electric motor. Further-
more, Scania celebrated the world premiere of its first alternative-fuel coach. Powered by liquefied natural gas
more, Scania celebrated the world premiere of its first alternative-fuel coach. Powered by liquefied natural gas
more, Scania celebrated the world premiere of its first alternative-fuel coach. Powered by liquefied natural gas
(LNG), the Interlink MD has a range of up to 1,000 km and is therefore a modern, future-proof alternative in the
(LNG), the Interlink MD has a range of up to 1,000 km and is therefore a modern, future-proof alternative in the
(LNG), the Interlink MD has a range of up to 1,000 km and is therefore a modern, future-proof alternative in the
coach segment. Scania rounds off its modern engine range with a wide offering of fuel-efficient Euro 6 engines
coach segment. Scania rounds off its modern engine range with a wide offering of fuel-efficient Euro 6 engines
coach segment. Scania rounds off its modern engine range with a wide offering of fuel-efficient Euro 6 engines
that can run on diesel, biodiesel, biogas, bioethanol, compressed natural gas (CNG) and HVO.
that can run on diesel, biodiesel, biogas, bioethanol, compressed natural gas (CNG) and HVO.
that can run on diesel, biodiesel, biogas, bioethanol, compressed natural gas (CNG) and HVO.
The key figures presented in this chapter encompass Scania’s truck and bus, industrial and marine engines
The key figures presented in this chapter encompass Scania’s truck and bus, industrial and marine engines
The key figures presented in this chapter encompass Scania’s truck and bus, industrial and marine engines
and financial services businesses.
and financial services businesses.
and financial services businesses.
Incoming orders at the Scania brand decreased by 10.9% year-on-year in fiscal year 2018 to 97 thousand
Incoming orders at the Scania brand decreased by 10.9% year-on-year in fiscal year 2018 to 97 thousand
Incoming orders at the Scania brand decreased by 10.9% year-on-year in fiscal year 2018 to 97 thousand
vehicles. In Western Europe, incoming orders rose due to Scania’s leading position in Euro 6 engines, long
vehicles. In Western Europe, incoming orders rose due to Scania’s leading position in Euro 6 engines, long
vehicles. In Western Europe, incoming orders rose due to Scania’s leading position in Euro 6 engines, long
experience with consumption-optimized vehicles and wide range of alternative drive systems. Deliveries by the
experience with consumption-optimized vehicles and wide range of alternative drive systems. Deliveries by the
experience with consumption-optimized vehicles and wide range of alternative drive systems. Deliveries by the
Scania brand increased in 2018 to 96 (91) thousand vehicles globally. In Europe, sales considerably outper-
Scania brand increased in 2018 to 96 (91) thousand vehicles globally. In Europe, sales considerably outper-
Scania brand increased in 2018 to 96 (91) thousand vehicles globally. In Europe, sales considerably outper-
formed the previous year’s figures, and encouraging increases were also seen in Brazil. At 8 (8) thousand units,
formed the previous year’s figures, and encouraging increases were also seen in Brazil. At 8 (8) thousand units,
formed the previous year’s figures, and encouraging increases were also seen in Brazil. At 8 (8) thousand units,
the number of buses delivered in 2018 remained at the prior-year level. Demand for services and replacement
the number of buses delivered in 2018 remained at the prior-year level. Demand for services and replacement
the number of buses delivered in 2018 remained at the prior-year level. Demand for services and replacement
parts as well as for Scania Financial Services was again higher in the reporting period than in the previous year.
parts as well as for Scania Financial Services was again higher in the reporting period than in the previous year.
parts as well as for Scania Financial Services was again higher in the reporting period than in the previous year.
Scania manufactured 101 (96) thousand commercial vehicles in fiscal year 2018 (+5.8%), of which 9 (8) thou-
Scania manufactured 101 (96) thousand commercial vehicles in fiscal year 2018 (+5.8%), of which 9 (8) thou-
Scania manufactured 101 (96) thousand commercial vehicles in fiscal year 2018 (+5.8%), of which 9 (8) thou-
sand were buses.
sand were buses.
sand were buses.
S A L E S R E V E N U E A N D E A R N I N G S
S A L E S R E V E N U E A N D E A R N I N G S
S A L E S R E V E N U E A N D E A R N I N G S
The Scania brand generated sales revenue of €13.4 (12.8) billion in fiscal year 2018. Operating profit improved
The Scania brand generated sales revenue of €13.4 (12.8) billion in fiscal year 2018. Operating profit improved
The Scania brand generated sales revenue of €13.4 (12.8) billion in fiscal year 2018. Operating profit improved
by 4.4% to €1.3 billion, particularly as a result of the higher volume, positive mix effects, favorable exchange
by 4.4% to €1.3 billion, particularly as a result of the higher volume, positive mix effects, favorable exchange
by 4.4% to €1.3 billion, particularly as a result of the higher volume, positive mix effects, favorable exchange
rate trends and a better financial services business. Meanwhile, cost increases had a negative impact. The
rate trends and a better financial services business. Meanwhile, cost increases had a negative impact. The
rate trends and a better financial services business. Meanwhile, cost increases had a negative impact. The
operating return on sales amounted to 10.1 (10.1)% in the reporting period.
operating return on sales amounted to 10.1 (10.1)% in the reporting period.
operating return on sales amounted to 10.1 (10.1)% in the reporting period.
10.1%
10.1%
10.1%
Operating return on sales
Operating return on sales
Operating return on sales
Divisions
Divisions
Divisions
Scania
Scania
Scania
41
41
41
P R O D U C T I O N
P R O D U C T I O N
P R O D U C T I O N
S C A N I A B R A N D
S C A N I A B R A N D
S C A N I A B R A N D
Units
Units
Units
Trucks
Trucks
Trucks
Buses
Buses
Buses
2018
2018
2018
2017
2017
2017
2018
2018
2018
2017
2017
2017
%
%
%
92,679
92,679
92,679
8,696
8,696
8,696
101,375
101,375
101,375
87,454
87,454
87,454
8,327
8,327
8,327
95,781
95,781
95,781
Orders received
Orders received
Orders received
(thousand units)
(thousand units)
(thousand units)
Deliveries
Deliveries
Deliveries
Vehicle sales
Vehicle sales
Vehicle sales
Production
Production
Production
Sales revenue (€ million)
Sales revenue (€ million)
Sales revenue (€ million)
Operating result
Operating result
Operating result
Operating return on sales (%)
Operating return on sales (%)
Operating return on sales (%)
97
97
97
96
96
96
97
97
97
101
101
101
13,360
13,360
13,360
1,346
1,346
1,346
10.1
10.1
10.1
109
109
109
91
91
91
92
92
92
96
96
96
12,789
12,789
12,789
1,289
1,289
1,289
10.1
10.1
10.1
–10.9
–10.9
–10.9
+6.3
+6.3
+6.3
+6.1
+6.1
+6.1
+5.8
+5.8
+5.8
+4.5
+4.5
+4.5
+4.4
+4.4
+4.4
Interlink MD LNG
Interlink MD LNG
Interlink MD LNG
D E L I V E R I E S B Y M A R K E T
in percent
D E L I V E R I E S B Y M A R K E T
D E L I V E R I E S B Y M A R K E T
in percent
in percent
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
North America
North America
North America
North America
North America
North America
South America
South America
South America
South America
South America
South America
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
74.0 %
74.0 %
74.0 %
74.0 %
74.0 %
74.0 %
0.8 %
0.8 %
0.8 %
0.8 %
0.8 %
0.8 %
15.3 %
15.3 %
15.3 %
15.3 %
15.3 %
15.3 %
9.9 %
9.9 %
9.9 %
9.9 %
9.9 %
9.9 %
i
i
i
F U R T H E R I N F O R M A T I O N
F U R T H E R I N F O R M A T I O N www.scania.com
www.scania.com
F U R T H E R I N F O R M A T I O N www.scania.com
F U R T H E R I N F O R M A T I O N
www.scania.com
F U R T H E R I N F O R M A T I O N
F U R T H E R I N F O R M A T I O N www.scania.com
www.scania.com
42
42
42
MAN
MAN
MAN
Divisions
Divisions
Divisions
With its impressive vehicles, MAN provided straightforward answers to complex
With its impressive vehicles, MAN provided straightforward answers to complex
With its impressive vehicles, MAN provided straightforward answers to complex
questions about e-mobility and digitalization in 2018.
questions about e-mobility and digitalization in 2018.
questions about e-mobility and digitalization in 2018.
B U S I N E S S D E V E L O P M E N T
B U S I N E S S D E V E L O P M E N T
B U S I N E S S D E V E L O P M E N T
Customer focus, enthusiasm for the product and efficiency are the core values at MAN. In the past fiscal year,
Customer focus, enthusiasm for the product and efficiency are the core values at MAN. In the past fiscal year,
Customer focus, enthusiasm for the product and efficiency are the core values at MAN. In the past fiscal year,
the company put the MAN eTGM distribution truck on the road and presented the eTGE van as a series-
the company put the MAN eTGM distribution truck on the road and presented the eTGE van as a series-
the company put the MAN eTGM distribution truck on the road and presented the eTGE van as a series-
produced vehicle. Both vehicles are designed for urban use. The long-established, Munich-based company is
produced vehicle. Both vehicles are designed for urban use. The long-established, Munich-based company is
produced vehicle. Both vehicles are designed for urban use. The long-established, Munich-based company is
using them to provide straightforward answers to multiple complex questions surrounding e-mobility and
using them to provide straightforward answers to multiple complex questions surrounding e-mobility and
using them to provide straightforward answers to multiple complex questions surrounding e-mobility and
digitalization: The models are fully electric-powered and emission-free, and therefore contribute to improving
digitalization: The models are fully electric-powered and emission-free, and therefore contribute to improving
digitalization: The models are fully electric-powered and emission-free, and therefore contribute to improving
urban air quality. Their low noise level also enables increased use at night. MAN is taking one step further with
urban air quality. Their low noise level also enables increased use at night. MAN is taking one step further with
urban air quality. Their low noise level also enables increased use at night. MAN is taking one step further with
the MAN CitE concept, an electric-powered truck full of creative solutions for urban delivery traffic. Its inno-
the MAN CitE concept, an electric-powered truck full of creative solutions for urban delivery traffic. Its inno-
the MAN CitE concept, an electric-powered truck full of creative solutions for urban delivery traffic. Its inno-
vative equipment, including the 360-degree camera system, means drivers can work safely and comfortably day
vative equipment, including the 360-degree camera system, means drivers can work safely and comfortably day
vative equipment, including the 360-degree camera system, means drivers can work safely and comfortably day
in, day out. The CitE has a range of up to 100 km – more than enough for deliveries in cities. From its bus range,
in, day out. The CitE has a range of up to 100 km – more than enough for deliveries in cities. From its bus range,
in, day out. The CitE has a range of up to 100 km – more than enough for deliveries in cities. From its bus range,
MAN presented the MAN Lion’s City E prototype, which is close to production. Its batteries are crash-safe and
MAN presented the MAN Lion’s City E prototype, which is close to production. Its batteries are crash-safe and
MAN presented the MAN Lion’s City E prototype, which is close to production. Its batteries are crash-safe and
located on the roof to save space. They enable a range of up to 270 km. In 2018, MAN also presented new tailor-
located on the roof to save space. They enable a range of up to 270 km. In 2018, MAN also presented new tailor-
located on the roof to save space. They enable a range of up to 270 km. In 2018, MAN also presented new tailor-
made solutions from MAN DigitalServices.
made solutions from MAN DigitalServices.
made solutions from MAN DigitalServices.
In South America, MAN Commercial Vehicles, through its Volkswagen Caminhões e Ônibus brand, recorded
In South America, MAN Commercial Vehicles, through its Volkswagen Caminhões e Ônibus brand, recorded
In South America, MAN Commercial Vehicles, through its Volkswagen Caminhões e Ônibus brand, recorded
rising demand in the reporting year, driven by the improved economic environment. In Europe, demand was
rising demand in the reporting year, driven by the improved economic environment. In Europe, demand was
rising demand in the reporting year, driven by the improved economic environment. In Europe, demand was
up, too. Orders received increased by 22.2% to 146 thousand vehicles. MAN delivered 137 (114) thousand com-
up, too. Orders received increased by 22.2% to 146 thousand vehicles. MAN delivered 137 (114) thousand com-
up, too. Orders received increased by 22.2% to 146 thousand vehicles. MAN delivered 137 (114) thousand com-
mercial vehicles to customers in the past fiscal year, of which 14 (11) thousand were buses.
mercial vehicles to customers in the past fiscal year, of which 14 (11) thousand were buses.
mercial vehicles to customers in the past fiscal year, of which 14 (11) thousand were buses.
MAN produced a total of 138 (116) thousand commercial vehicles in 2018, including 14 (11) thousand buses.
MAN produced a total of 138 (116) thousand commercial vehicles in 2018, including 14 (11) thousand buses.
MAN produced a total of 138 (116) thousand commercial vehicles in 2018, including 14 (11) thousand buses.
Incoming orders in the Power Engineering Business Area amounted to €4.0 (3.7) billion despite the
Incoming orders in the Power Engineering Business Area amounted to €4.0 (3.7) billion despite the
Incoming orders in the Power Engineering Business Area amounted to €4.0 (3.7) billion despite the
continued difficult situation in the shipping industry and economic difficulties in emerging markets.
continued difficult situation in the shipping industry and economic difficulties in emerging markets.
continued difficult situation in the shipping industry and economic difficulties in emerging markets.
S A L E S R E V E N U E A N D E A R N I N G S
S A L E S R E V E N U E A N D E A R N I N G S
S A L E S R E V E N U E A N D E A R N I N G S
Driven by higher volumes, sales revenue at MAN Commercial Vehicles climbed to €12.1 billion in 2018, exceeding
Driven by higher volumes, sales revenue at MAN Commercial Vehicles climbed to €12.1 billion in 2018, exceeding
Driven by higher volumes, sales revenue at MAN Commercial Vehicles climbed to €12.1 billion in 2018, exceeding
the prior-year figure by 9.2%. As a result of the expenditure associated with the restructuring activities in India,
the prior-year figure by 9.2%. As a result of the expenditure associated with the restructuring activities in India,
the prior-year figure by 9.2%. As a result of the expenditure associated with the restructuring activities in India,
operating profit declined to €332 (362) million. The operating return on sales was 2.7 (3.3)%.
operating profit declined to €332 (362) million. The operating return on sales was 2.7 (3.3)%.
operating profit declined to €332 (362) million. The operating return on sales was 2.7 (3.3)%.
In the power engineering segment, MAN recorded an increase in sales revenue to €3.6 (3.3) billion. The
In the power engineering segment, MAN recorded an increase in sales revenue to €3.6 (3.3) billion. The
In the power engineering segment, MAN recorded an increase in sales revenue to €3.6 (3.3) billion. The
operating profit for 2018 was €193 (193) million; positive volume effects were offset by a deterioration in the
operating profit for 2018 was €193 (193) million; positive volume effects were offset by a deterioration in the
operating profit for 2018 was €193 (193) million; positive volume effects were offset by a deterioration in the
mix. The operating return on sales stood at 5.3 (5.9)%.
mix. The operating return on sales stood at 5.3 (5.9)%.
mix. The operating return on sales stood at 5.3 (5.9)%.
137 thousand
137 thousand
137 thousand
Commercial vehicles sold in 2018
Commercial vehicles sold in 2018
Commercial vehicles sold in 2018
Divisions
Divisions
Divisions
MAN
MAN
MAN
43
43
43
P R O D U C T I O N
P R O D U C T I O N
P R O D U C T I O N
M A N
M A N
M A N
Units
Units
Units
Trucks
Trucks
Trucks
Buses
Buses
Buses
Light Commercial Vehicles
Light Commercial Vehicles
Light Commercial Vehicles
2018
2018
2018
2017
2017
2017
2018
2018
2018
2017
2017
2017
%
%
%
114,556
114,556
114,556
100,780
100,780
100,780
Commercial Vehicles
Commercial Vehicles
Commercial Vehicles
14,445
14,445
14,445
9,043
9,043
9,043
10,890
10,890
10,890
3,891
3,891
3,891
Orders received
Orders received
Orders received
(thousand units)
(thousand units)
(thousand units)
138,044
138,044
138,044
115,561
115,561
115,561
Deliveries
Deliveries
Deliveries
Vehicle sales
Vehicle sales
Vehicle sales
Production
Production
Production
146
146
146
137
137
137
137
137
137
138
138
138
120
120
120
114
114
114
114
114
114
116
116
116
Sales revenue (€ million)
Sales revenue (€ million)
Sales revenue (€ million)
12,104
12,104
12,104
11,087
11,087
11,087
Operating result
Operating result
Operating result
Operating return on sales (%)
Operating return on sales (%)
Operating return on sales (%)
332
332
332
2.7
2.7
2.7
362
362
362
3.3
3.3
3.3
Power Engineering
Power Engineering
Power Engineering
Sales revenue (€ million)
Sales revenue (€ million)
Sales revenue (€ million)
3,608
3,608
3,608
3,283
3,283
3,283
Operating result
Operating result
Operating result
Operating return on sales (%)
Operating return on sales (%)
Operating return on sales (%)
193
193
193
5.3
5.3
5.3
193
193
193
5.9
5.9
5.9
+22.2
+22.2
+22.2
+19.6
+19.6
+19.6
+19.6
+19.6
+19.6
+19.5
+19.5
+19.5
+9.2
+9.2
+9.2
–8.3
–8.3
–8.3
+9.9
+9.9
+9.9
+0.1
+0.1
+0.1
eTGM
eTGM
eTGM
D E L I V E R I E S B Y M A R K E T
in percent
D E L I V E R I E S B Y M A R K E T
D E L I V E R I E S B Y M A R K E T
in percent
in percent
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
Europe/Other markets
North America
North America
North America
North America
North America
North America
South America
South America
South America
South America
South America
South America
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
Asia-Pacific
69.3 %
69.3 %
69.3 %
69.3 %
69.3 %
69.3 %
2.0 %
2.0 %
2.0 %
2.0 %
2.0 %
2.0 %
24.2 %
24.2 %
24.2 %
24.2 %
24.2 %
24.2 %
4.5 %
4.5 %
4.5 %
4.5 %
4.5 %
4.5 %
i
i
i
F U R T H E R I N F O R M A T I O N
F U R T H E R I N F O R M A T I O N
F U R T H E R I N F O R M A T I O N
www.man.eu
www.man.eu
www.man.eu
www.man.eu
www.man.eu
www.man.eu
44
44
44
Volkswagen Group China
Volkswagen Group China
Volkswagen Group China
Divisions
Divisions
Divisions
Volkswagen Group China
Volkswagen Group China
Volkswagen Group China
Volkswagen Group China
We pushed ahead with our product and technology initiative in China in 2018, and
We pushed ahead with our product and technology initiative in China in 2018, and
We pushed ahead with our product and technology initiative in China in 2018, and
further investments in e-mobility and digitalization are planned. We have expanded
further investments in e-mobility and digitalization are planned. We have expanded
further investments in e-mobility and digitalization are planned. We have expanded
our production network with new manufacturing sites.
our production network with new manufacturing sites.
our production network with new manufacturing sites.
B U S I N E S S D E V E L O P M E N T
B U S I N E S S D E V E L O P M E N T
B U S I N E S S D E V E L O P M E N T
Volkswagen continued its product and technology initiative in its biggest single market over the past year. The
Volkswagen continued its product and technology initiative in its biggest single market over the past year. The
Volkswagen continued its product and technology initiative in its biggest single market over the past year. The
new Touareg, which celebrated its world premiere in Beijing, represents our ambitions in the important SUV
new Touareg, which celebrated its world premiere in Beijing, represents our ambitions in the important SUV
new Touareg, which celebrated its world premiere in Beijing, represents our ambitions in the important SUV
segment. In China, this segment now makes up 44% of the market volume of passenger cars. Alongside the
segment. In China, this segment now makes up 44% of the market volume of passenger cars. Alongside the
segment. In China, this segment now makes up 44% of the market volume of passenger cars. Alongside the
Touareg, the following models also debuted: the extended-wheelbase Chinese version of the T-Roc, the new
Touareg, the following models also debuted: the extended-wheelbase Chinese version of the T-Roc, the new
Touareg, the following models also debuted: the extended-wheelbase Chinese version of the T-Roc, the new
Tayron and Tharu models, the Audi Q5L, the locally produced Q2L and the ŠKODA Kodiaq GT. The updated
Tayron and Tharu models, the Audi Q5L, the locally produced Q2L and the ŠKODA Kodiaq GT. The updated
Tayron and Tharu models, the Audi Q5L, the locally produced Q2L and the ŠKODA Kodiaq GT. The updated
Volkswagen Lavida and Bora models were introduced, in addition to the new CC. With the ID. VIZZION concept
Volkswagen Lavida and Bora models were introduced, in addition to the new CC. With the ID. VIZZION concept
Volkswagen Lavida and Bora models were introduced, in addition to the new CC. With the ID. VIZZION concept
vehicle, the future flagship of the all-electric ID. family, we looked ahead to the sustainable mobility of
vehicle, the future flagship of the all-electric ID. family, we looked ahead to the sustainable mobility of
vehicle, the future flagship of the all-electric ID. family, we looked ahead to the sustainable mobility of
tomorrow and beyond. Together with our partners, we plan to invest over €4 billion during 2019 in e-mobility
tomorrow and beyond. Together with our partners, we plan to invest over €4 billion during 2019 in e-mobility
tomorrow and beyond. Together with our partners, we plan to invest over €4 billion during 2019 in e-mobility
and the digitalization of the model range, in new technologies and mobility services, in strengthening develop-
and the digitalization of the model range, in new technologies and mobility services, in strengthening develop-
and the digitalization of the model range, in new technologies and mobility services, in strengthening develop-
ment and production capacity and in new products. We aim to largely extend our range of electric models on
ment and production capacity and in new products. We aim to largely extend our range of electric models on
ment and production capacity and in new products. We aim to largely extend our range of electric models on
the Chinese market by 2020. To do so, we will introduce 30 new models – half of which will be locally produced.
the Chinese market by 2020. To do so, we will introduce 30 new models – half of which will be locally produced.
the Chinese market by 2020. To do so, we will introduce 30 new models – half of which will be locally produced.
We are preparing to enable delivery of approximately 400,000 New Energy Vehicles to customers in China in
We are preparing to enable delivery of approximately 400,000 New Energy Vehicles to customers in China in
We are preparing to enable delivery of approximately 400,000 New Energy Vehicles to customers in China in
2020 and approximately 1.5 million in 2025.
2020 and approximately 1.5 million in 2025.
2020 and approximately 1.5 million in 2025.
We currently manufacture vehicles and components at 23 sites in China. As part of our localization strategy
We currently manufacture vehicles and components at 23 sites in China. As part of our localization strategy
We currently manufacture vehicles and components at 23 sites in China. As part of our localization strategy
for China, we opened new vehicle plants and one component plant in 2018. At the Tianjin plant, 300,000 SUV
for China, we opened new vehicle plants and one component plant in 2018. At the Tianjin plant, 300,000 SUV
for China, we opened new vehicle plants and one component plant in 2018. At the Tianjin plant, 300,000 SUV
models are to roll off the assembly line each year, forming the basis for an SUV campaign. The opening of the
models are to roll off the assembly line each year, forming the basis for an SUV campaign. The opening of the
models are to roll off the assembly line each year, forming the basis for an SUV campaign. The opening of the
second vehicle-manufacturing plant in Foshan, taking total capacity there to 600,000 vehicles a year, plays a
second vehicle-manufacturing plant in Foshan, taking total capacity there to 600,000 vehicles a year, plays a
second vehicle-manufacturing plant in Foshan, taking total capacity there to 600,000 vehicles a year, plays a
pioneering role in our “Roadmap E” electrification strategy. In 2020, we plan to begin manufacturing vehicles
pioneering role in our “Roadmap E” electrification strategy. In 2020, we plan to begin manufacturing vehicles
pioneering role in our “Roadmap E” electrification strategy. In 2020, we plan to begin manufacturing vehicles
based on the Modular Electric Drive Toolkit (MEB) and MEB battery systems at this location. In Qingdao, electric
based on the Modular Electric Drive Toolkit (MEB) and MEB battery systems at this location. In Qingdao, electric
based on the Modular Electric Drive Toolkit (MEB) and MEB battery systems at this location. In Qingdao, electric
vehicles will also be built alongside models with combustion engines in future. In addition, the production of
vehicles will also be built alongside models with combustion engines in future. In addition, the production of
vehicles will also be built alongside models with combustion engines in future. In addition, the production of
battery systems for the MQB platform will be located there. The Group’s first production site specially designed
battery systems for the MQB platform will be located there. The Group’s first production site specially designed
battery systems for the MQB platform will be located there. The Group’s first production site specially designed
to produce MEB vehicles is scheduled to begin operation in Anting near Shanghai in 2020. Foshan and Anting
to produce MEB vehicles is scheduled to begin operation in Anting near Shanghai in 2020. Foshan and Anting
to produce MEB vehicles is scheduled to begin operation in Anting near Shanghai in 2020. Foshan and Anting
will therefore follow closely behind the global MEB production launch in Zwickau in 2019.
will therefore follow closely behind the global MEB production launch in Zwickau in 2019.
will therefore follow closely behind the global MEB production launch in Zwickau in 2019.
On the Chinese market, the Volkswagen Group offers more than 180 imported and locally produced models
On the Chinese market, the Volkswagen Group offers more than 180 imported and locally produced models
On the Chinese market, the Volkswagen Group offers more than 180 imported and locally produced models
from the Volkswagen Passenger Cars, Audi, ŠKODA, Porsche, Bentley, Lamborghini, Volkswagen Commercial
from the Volkswagen Passenger Cars, Audi, ŠKODA, Porsche, Bentley, Lamborghini, Volkswagen Commercial
from the Volkswagen Passenger Cars, Audi, ŠKODA, Porsche, Bentley, Lamborghini, Volkswagen Commercial
Vehicles, MAN, Scania and Ducati brands. We delivered 4.2 (4.2) million vehicles (including imports) to customers
Vehicles, MAN, Scania and Ducati brands. We delivered 4.2 (4.2) million vehicles (including imports) to customers
Vehicles, MAN, Scania and Ducati brands. We delivered 4.2 (4.2) million vehicles (including imports) to customers
in China in the reporting period. The Tiguan, Teramont, Magotan, New Bora, Audi A4 L, Audi A5, ŠKODA Kodiaq,
in China in the reporting period. The Tiguan, Teramont, Magotan, New Bora, Audi A4 L, Audi A5, ŠKODA Kodiaq,
in China in the reporting period. The Tiguan, Teramont, Magotan, New Bora, Audi A4 L, Audi A5, ŠKODA Kodiaq,
Porsche Cayenne and Panamera models were especially popular. In November, the Volkswagen Passenger Cars
Porsche Cayenne and Panamera models were especially popular. In November, the Volkswagen Passenger Cars
Porsche Cayenne and Panamera models were especially popular. In November, the Volkswagen Passenger Cars
brand celebrated the 30 millionth delivery in China since production began there in 1983.
brand celebrated the 30 millionth delivery in China since production began there in 1983.
brand celebrated the 30 millionth delivery in China since production began there in 1983.
30 million
30 million
30 million
Volkswagen models delivered since 1983
Volkswagen models delivered since 1983
Volkswagen models delivered since 1983
Divisions
Divisions
Divisions
Divisions
Volkswagen Group China
Volkswagen Group China
Volkswagen Group China
45
45
45
E A R N I N G S
E A R N I N G S
E A R N I N G S
E A R N I N G S
Thousand units
Thousand units
Thousand units
2018
2018
2018
2017
2017
2017
%
%
%
Thousand units
€ million
€ million
€ million
2018
2017
2018
2018
2018
%
2017
2017
2017
€ million
Deliveries
Deliveries
Deliveries
Vehicle sales1
Vehicle sales1
Vehicle sales1
Production
Production
Production
1 Produced locally.
1 Produced locally.
1 Produced locally.
4,207
4,207
4,207
4,101
4,101
4,101
4,116
4,116
4,116
4,184
4,184
4,184
4,020
4,020
4,020
4,041
4,041
4,041
+0.5
+0.5
+0.5
+2.0
+2.0
+2.0
+1.9
+1.9
+1.9
Operating result (100%)
Deliveries
Operating result (100%)
Operating result (100%)
Vehicle sales1
Operating result (proportionate)
Operating result (proportionate)
Operating result (proportionate)
Production
1 Produced locally.
4,207
4,101
4,116
4,184
11,427
11,427
11,427
4,627
4,020
4,627
4,627
4,041
+0.5
11,191
11,191
11,191
4,746
+2.0
4,746
4,746
+1.9
Our two joint ventures, SAIC VOLKSWAGEN and FAW-Volks-
Our two joint ventures, SAIC VOLKSWAGEN and FAW-Volks-
Our two joint ventures, SAIC VOLKSWAGEN and FAW-Volks-
wagen, produced a total of 4.1 million vehicles in fiscal year
wagen, produced a total of 4.1 million vehicles in fiscal year
wagen, produced a total of 4.1 million vehicles in fiscal year
2018. This was 1.9% more than in the previous year. The joint
2018. This was 1.9% more than in the previous year. The joint
2018. This was 1.9% more than in the previous year. The joint
ventures produce both established Group models and those
ventures produce both established Group models and those
ventures produce both established Group models and those
specially modified for Chinese customers (e.g. with length-
specially modified for Chinese customers (e.g. with length-
specially modified for Chinese customers (e.g. with length-
ened wheelbases), as well as vehicles developed exclusively
ened wheelbases), as well as vehicles developed exclusively
ened wheelbases), as well as vehicles developed exclusively
for the Chinese market (such as the Volkswagen Lamando,
for the Chinese market (such as the Volkswagen Lamando,
for the Chinese market (such as the Volkswagen Lamando,
Lavida, New Bora, New Jetta, New Santana and Teramont).
Lavida, New Bora, New Jetta, New Santana and Teramont).
Lavida, New Bora, New Jetta, New Santana and Teramont).
The proportionate operating result of the joint ventures in
Our two joint ventures, SAIC VOLKSWAGEN and FAW-Volks-
The proportionate operating result of the joint ventures in
The proportionate operating result of the joint ventures in
the reporting year stood at €4.6 billion. The negative impact
wagen, produced a total of 4.1 million vehicles in fiscal year
the reporting year stood at €4.6 billion. The negative impact
the reporting year stood at €4.6 billion. The negative impact
of more intense market competition, adverse exchange rate
2018. This was 1.9% more than in the previous year. The joint
of more intense market competition, adverse exchange rate
of more intense market competition, adverse exchange rate
effects as well as the increase in research and development
ventures produce both established Group models and those
effects as well as the increase in research and development
effects as well as the increase in research and development
costs were offset by improvements in the mix, higher
specially modified for Chinese customers (e.g. with length-
costs were offset by improvements in the mix, higher
costs were offset by improvements in the mix, higher
volumes and product cost optimization.
ened wheelbases), as well as vehicles developed exclusively
volumes and product cost optimization.
volumes and product cost optimization.
The figures of the Chinese joint venture companies are
for the Chinese market (such as the Volkswagen Lamando,
The figures of the Chinese joint venture companies are
The figures of the Chinese joint venture companies are
not included in the operating profit of the Group as they are
Lavida, New Bora, New Jetta, New Santana and Teramont).
not included in the operating profit of the Group as they are
not included in the operating profit of the Group as they are
accounted for using the equity method. Their profits are
accounted for using the equity method. Their profits are
accounted for using the equity method. Their profits are
included solely in the Group’s financial result on a propor-
included solely in the Group’s financial result on a propor-
included solely in the Group’s financial result on a propor-
tionate basis.
tionate basis.
tionate basis.
Tharu
Tharu
Tharu
Tharu
L O C A L P R O D U C T I O N
L O C A L P R O D U C T I O N
L O C A L P R O D U C T I O N
Units
Units
Units
2018
2018
2018
2017
2017
2017
Units
Volkswagen Passenger Cars
Volkswagen Passenger Cars
Volkswagen Passenger Cars
3,145,141
3,145,141
3,145,141
3,156,352
3,156,352
3,156,352
Audi
Audi
Audi
ŠKODA
ŠKODA
ŠKODA
Total
Total
Total
617,472
617,472
617,472
353,829
353,829
353,829
552,744
552,744
552,744
Audi
332,168
332,168
332,168
ŠKODA
4,116,442
4,116,442
4,116,442
4,041,264
4,041,264
4,041,264
Total
46
46
46
Volkswagen Financial Services
Volkswagen Financial Services
Volkswagen Financial Services
Divisions
Divisions
Divisions
Growth in business enabled Volkswagen Financial Services to increase its earnings in
Growth in business enabled Volkswagen Financial Services to increase its earnings in
Growth in business enabled Volkswagen Financial Services to increase its earnings in
2018. The digitalization of financial services was expanded further.
2018. The digitalization of financial services was expanded further.
2018. The digitalization of financial services was expanded further.
ST R U C T U R E O F V O L K SWA G E N F I N A N C I A L S E R V I C E S
ST R U C T U R E O F V O L K SWA G E N F I N A N C I A L S E R V I C E S
ST R U C T U R E O F V O L K SWA G E N F I N A N C I A L S E R V I C E S
Volkswagen Financial Services comprises dealer and customer financing, leasing, direct banking and insurance
Volkswagen Financial Services comprises dealer and customer financing, leasing, direct banking and insurance
Volkswagen Financial Services comprises dealer and customer financing, leasing, direct banking and insurance
activities, fleet management and mobility services in 48 countries. Volkswagen Financial Services AG is respon-
activities, fleet management and mobility services in 48 countries. Volkswagen Financial Services AG is respon-
activities, fleet management and mobility services in 48 countries. Volkswagen Financial Services AG is respon-
sible for global coordination of the Group’s financial services activities, the only exceptions being the financial
sible for global coordination of the Group’s financial services activities, the only exceptions being the financial
sible for global coordination of the Group’s financial services activities, the only exceptions being the financial
services business of the Scania brand and of Porsche Holding Salzburg. In Europe, the principal companies are
services business of the Scania brand and of Porsche Holding Salzburg. In Europe, the principal companies are
services business of the Scania brand and of Porsche Holding Salzburg. In Europe, the principal companies are
Volkswagen Bank GmbH, Volkswagen Leasing GmbH and Volkswagen Versicherungsdienst GmbH. VW CREDIT, INC.
Volkswagen Bank GmbH, Volkswagen Leasing GmbH and Volkswagen Versicherungsdienst GmbH. VW CREDIT, INC.
Volkswagen Bank GmbH, Volkswagen Leasing GmbH and Volkswagen Versicherungsdienst GmbH. VW CREDIT, INC.
operates financial services activities in North America.
operates financial services activities in North America.
operates financial services activities in North America.
B U S I N E S S D E V E L O P M E N T
B U S I N E S S D E V E L O P M E N T
B U S I N E S S D E V E L O P M E N T
In 2018, Volkswagen Financial Services continued the digitalization of its business and concluded a three-year
In 2018, Volkswagen Financial Services continued the digitalization of its business and concluded a three-year
In 2018, Volkswagen Financial Services continued the digitalization of its business and concluded a three-year
cooperation agreement with the University of Hildesheim. In addition to promoting knowledge transfer and
cooperation agreement with the University of Hildesheim. In addition to promoting knowledge transfer and
cooperation agreement with the University of Hildesheim. In addition to promoting knowledge transfer and
developing joint research projects in the future field of big data analytics, the university and Europe’s largest
developing joint research projects in the future field of big data analytics, the university and Europe’s largest
developing joint research projects in the future field of big data analytics, the university and Europe’s largest
automotive financial services provider also intend to strengthen contacts at the graduate level.
automotive financial services provider also intend to strengthen contacts at the graduate level.
automotive financial services provider also intend to strengthen contacts at the graduate level.
Furthermore, Volkswagen Financial Services is involved in the Hafven Smart City Hub in Hanover, a Lower
Furthermore, Volkswagen Financial Services is involved in the Hafven Smart City Hub in Hanover, a Lower
Furthermore, Volkswagen Financial Services is involved in the Hafven Smart City Hub in Hanover, a Lower
Saxony-based founders’ initiative for smart cities. This was established as an organization for start-ups and
Saxony-based founders’ initiative for smart cities. This was established as an organization for start-ups and
Saxony-based founders’ initiative for smart cities. This was established as an organization for start-ups and
young people wishing to share their ideas with others and advance them together in networks. The potential
young people wishing to share their ideas with others and advance them together in networks. The potential
young people wishing to share their ideas with others and advance them together in networks. The potential
founders receive coaching and mentoring from the company on selected ideas in areas such as artificial
founders receive coaching and mentoring from the company on selected ideas in areas such as artificial
founders receive coaching and mentoring from the company on selected ideas in areas such as artificial
intelligence, augmented and virtual reality or the Internet of things.
intelligence, augmented and virtual reality or the Internet of things.
intelligence, augmented and virtual reality or the Internet of things.
In 2018, Volkswagen Financial Services invested in Verimi, a European, cross-industry identity platform
In 2018, Volkswagen Financial Services invested in Verimi, a European, cross-industry identity platform
In 2018, Volkswagen Financial Services invested in Verimi, a European, cross-industry identity platform
combining a central login and high security and data protection standards. An overarching identity platform
combining a central login and high security and data protection standards. An overarching identity platform
combining a central login and high security and data protection standards. An overarching identity platform
with a simplified customer login enhances the digital ecosystems at the Volkswagen Group, opens the door to
with a simplified customer login enhances the digital ecosystems at the Volkswagen Group, opens the door to
with a simplified customer login enhances the digital ecosystems at the Volkswagen Group, opens the door to
diverse service offerings and generates real added value at a central interface for our clients – e.g. in relation to
diverse service offerings and generates real added value at a central interface for our clients – e.g. in relation to
diverse service offerings and generates real added value at a central interface for our clients – e.g. in relation to
e-government activities and the digital vehicle file.
e-government activities and the digital vehicle file.
e-government activities and the digital vehicle file.
According to a study commissioned by the Focus Money magazine, the TraviPay parking app developed by
According to a study commissioned by the Focus Money magazine, the TraviPay parking app developed by
According to a study commissioned by the Focus Money magazine, the TraviPay parking app developed by
sunhill technologies GmbH, Volkswagen Financial Services’ smart parking service provider is one of the best
sunhill technologies GmbH, Volkswagen Financial Services’ smart parking service provider is one of the best
sunhill technologies GmbH, Volkswagen Financial Services’ smart parking service provider is one of the best
smartphone apps in Germany. A total of 375 apps from 45 industries were rated. TraviPay beat its competitors
smartphone apps in Germany. A total of 375 apps from 45 industries were rated. TraviPay beat its competitors
smartphone apps in Germany. A total of 375 apps from 45 industries were rated. TraviPay beat its competitors
in the mobility category, in the subcategory for finding a parking space.
in the mobility category, in the subcategory for finding a parking space.
in the mobility category, in the subcategory for finding a parking space.
6.2%
6.2%
6.2%
Increase in profit in 2018
Increase in profit in 2018
Increase in profit in 2018
Divisions
Divisions
Volkswagen Financial Services
Volkswagen Financial Services
47
47
The main refinancing sources for Volkswagen Financial Services are money market and capital market instru-
The main refinancing sources for Volkswagen Financial Services are money market and capital market instru-
ments, asset-backed securities (ABS) transactions and customer deposits from the direct banking business.
ments, asset-backed securities (ABS) transactions and customer deposits from the direct banking business.
In April 2018, Volkswagen Financial Services AG issued three bonds with a total volume of €2.25 billion and
In April 2018, Volkswagen Financial Services AG issued three bonds with a total volume of €2.25 billion and
terms of one and a half, three and five years. In October, it placed three further bonds with a total volume of
terms of one and a half, three and five years. In October, it placed three further bonds with a total volume of
€2.6 billion and terms of two, five and eight years. Volkswagen Leasing GmbH placed three bonds on the capital
€2.6 billion and terms of two, five and eight years. Volkswagen Leasing GmbH placed three bonds on the capital
market for a total of €2.5 billion in August. In June, Volkswagen Bank GmbH also issued a euro benchmark bond
market for a total of €2.5 billion in August. In June, Volkswagen Bank GmbH also issued a euro benchmark bond
in three tranches for a total of €2.0 billion.
in three tranches for a total of €2.0 billion.
Numerous notes transactions were conducted internationally too, including in Norway, Australia, Sweden,
Numerous notes transactions were conducted internationally too, including in Norway, Australia, Sweden,
Mexico, Brazil, the UK and Russia.
Mexico, Brazil, the UK and Russia.
Volkswagen Leasing GmbH was once again active on the market with its ABS transactions in fiscal year
Volkswagen Leasing GmbH was once again active on the market with its ABS transactions in fiscal year
2018. The existing “Volkswagen Car Lease 26” program, consisting of securitized German leasing receivables,
2018. The existing “Volkswagen Car Lease 26” program, consisting of securitized German leasing receivables,
has a volume of approximately €1.5 billion. In the “Volkswagen Car Lease 27” program, receivables of approxi-
has a volume of approximately €1.5 billion. In the “Volkswagen Car Lease 27” program, receivables of approxi-
mately €1.0 billion are securitized.
mately €1.0 billion are securitized.
Volkswagen Bank GmbH securitized loan receivables totaling approximately €1.65 billion in the reporting
Volkswagen Bank GmbH securitized loan receivables totaling approximately €1.65 billion in the reporting
year with the Driver fourteen and Driver fifteen transactions.
year with the Driver fourteen and Driver fifteen transactions.
Outside Germany, Volkswagen Financial Services issued various ABS transactions on the market, including
Outside Germany, Volkswagen Financial Services issued various ABS transactions on the market, including
in Australia, Japan, Spain and Turkey. In Italy, an ABS transaction was placed for the first time with a volume of
in Australia, Japan, Spain and Turkey. In Italy, an ABS transaction was placed for the first time with a volume of
€500 million. A total of ten bonds were issued.
€500 million. A total of ten bonds were issued.
Other instruments used as part of the diversified funding strategy are customer deposits, commercial paper
Other instruments used as part of the diversified funding strategy are customer deposits, commercial paper
and credit lines.
and credit lines.
TraviPay
TraviPay
48
Volkswagen Financial Services
Divisions
6.9 million new financing, leasing, service and insurance contracts were signed in fiscal year 2018, 2.3% more
than in the previous year. The total number of contracts stood at a new record high of 17.8 million (+3.3%) as of
December 31, 2018. The customer financing/leasing area accounted for 10.1 million contracts, up 5.1% year-on-
year. In the service/insurance area, the number of contracts increased by 1.0% to 7.7 million. Starting on
January 1, 2019, contracts entered into by our international joint ventures will also be included, whereby the
new number of contracts would have amounted to 20.3 million contracts on December 31, 2018. With credit
eligibility criteria remaining unchanged, the penetration rate, expressed as the ratio of financed or leased
vehicles to relevant Group delivery volumes – including the Chinese joint ventures – was steady at 33.3 (33.1)%.
As of December 31, 2018, Volkswagen Bank managed around 1.4 (1.5) million deposit accounts. Volks-
wagen Financial Services employed 14,048 people worldwide as of that date, 7,010 of them in Germany.
S A L E S R E V E N U E A N D E A R N I N G S
Volkswagen Financial Services’ sales revenue amounted to €32.8 billion in the reporting period, thus exceeding
the prior-year figure by €2.9%. Operating profit rose by 6.2% to €2.6 billion – a new record. The increase was
mainly attributable to business growth.
V O L K SWA G E N F I N A N C I A L S E R V I C E S
2018
2017
%
thousands
€ million
€ million
€ million
€ million
€ million
€ million
%
%
€ million
€ million
17,801
5,935
4,149
7,717
40,317
63,690
20,529
41,838
28,926
207,629
26,298
174,255
12.7
10.0
6.6
2,612
2,600
14,048
17,234
5,672
3,921
7,641
36,422
58,125
19,614
39,553
30,408
186,917
25,634
154,410
13.7
9.8
6.0
2,460
2,299
13,955
+3.3
+4.6
+5.8
+1.0
+10.7
+9.6
+4.7
+5.8
–4.9
+11.1
+2.6
+12.9
+6.2
+13.1
+0.7
Number of contracts
Customer financing
Leasing
Service/Insurance
Lease assets
Receivables from
Customer financing
Dealer financing
Leasing agreements
Direct banking deposits
Total assets
Equity
Liabilities1
Equity ratio
Return on equity before tax2
Leverage3
Operating result
Earnings before tax
Employees at Dec. 31
1 Excluding provisions and deferred tax liabilities.
2 Earnings before tax as a percentage of average equity (continuing operations).
3 Liabilities as a percentage of equity.
A D D I T I O N A L I N F O R M AT I O N
www.vwfsag.com
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Group Management
Report
(Combined Management Re por t o f th e Vo lkswage n G ro u p an d Vo lkswa gen AG)
Inhalt nicht aktuell
GROUP MANAGEMENT REPORT
51
54
56
59
68
86
90
92
95
Goals and Strategies
Internal Management System and
Key Performance Indicators
Structure and Business Activities
Corporate Governance Report
Remuneration Report
Executive Bodies
Disclosures Required Under Takeover Law
Diesel Issue
Business Development
108 Shares and Bonds
114
Results of Operations,
Financial Position and Net Assets
129
Volkswagen AG (condensed, in accordance
with the German Commercial Code)
133 Sustainable Value Enhancement
156 Report on Expected Developments
163 Report on Risks and Opportunities
188 Prospects for 2019
Group Management Report
Goals and Strategies
51
Goals and Strategies
We are striving for lasting success in tomorrow’s world of mobility and intend to be one of the
world’s leading providers of sustainable mobility. This is the reason we have anchored the
future program TOGETHER – Strategy 2025 in the Group.
With the future program TOGETHER – Strategy 2025
announced in 2016, we aim to make the Volkswagen Group
F U T U R E P R O G R A M T O G E T H E R – S T R A T E G Y 2 0 2 5
Excited
customers
Excellent
employer
Sustainable
growth
Competitive
profitability
Role model for
environment, safety
and integrity
more focused, efficient, innovative, customer-oriented and
sustainable, and systematically geared towards generating
profitable growth. The program creates the framework and
lays the cornerstones for us to achieve our vision of being
one of the world’s leading providers of sustainable mobility.
The time horizon until 2025 shows that our thoughts
and actions are long-term and future-oriented. The term
TOGETHER describes the mindset that will be even more vital
to the Volkswagen Group’s long-term success going forward.
Our intention with the new Group strategy is for everyone in
the Volkswagen Group to join us in producing exciting vehi-
cles and forward-looking, tailor-made mobility solutions that
will continue to inspire our customers, meeting their diverse
needs with a portfolio of strong brands. Every day, we actively
assume and exercise responsibility in relation to the environ-
ment, safety and society, and we wish to be a role model in
these areas. Integrity, reliability, quality and passion thus
form the basis for our work. In this way, we will aim for
technological leadership in the industry, ensure our com-
petitive profitability and remain an excellent, reliable and
secure employer at the same time.
The Code of Collaboration formulated as part of the
future program is the foundation on which the Group
strategy rests. This Code describes how collaboration is to
take place within the Group and between individuals in their
day-to-day work. Its core values are encapsulated in the terms
“genuine”, “straightforward”, “open-minded”, “as equals” and
“united”.
52
Goals and Strategies
Group Management Report
F O U R B U I L D I N G B L O C K S O F T H E F U T U R E P R O G R A M
TO G E T H E R – ST R AT E G Y 2 0 2 5
Our Group strategy comprises a raft of far-reaching strategic
decisions and specific initiatives aimed at safeguarding the
long-term future and generating profitable growth. It is
composed of four building blocks which cover strategic
Group initiatives. We regularly review the progress of these
initiatives so as to analyze the significance, suitability and
target achievement of the measures defined. We are thus able
to adjust the Group initiatives specifically according to the
dynamic changes occurring within our Company.
The first of these is the transformation of the core auto-
motive business. Developing, building and selling vehicles
will remain essential for the Volkswagen Group going for-
ward. However, there will be far-reaching and lasting changes
to this business in the future. That is the reason why we are
comprehensively restructuring our core business to face this
new era of mobility.
The second key building block in our Group strategy is
establishing a new mobility solutions business. In this busi-
ness, we are developing innovative and efficient, attractive
yet profitable mobility services that are tailored to customer
requirements with the goal of being one of the leading
providers in this growth market in the future.
of the new mobility solutions business. To this end, we are
pushing ahead with the digital transformation in all parts of
the Company.
Becoming one of the world’s leading providers of sus-
tainable mobility calls for substantial capital expenditure.
This will be financed in particular through efficiency gains
along the entire value chain – from product development and
procurement through to production and distribution as well
as in the central supporting areas. Additional funds for future
investments can also be generated by optimizing the existing
portfolio of brands and equity investments. Through the
fourth key building block of the Group strategy we will
safeguard the financing of the Volkswagen Group and place it
on a solid basis.
G O A L S A N D K E Y P E R F O R M A N C E I N D I C ATO R S O F T H E G R O U P ’ S
S T R AT E G Y
The strategic initiatives describe how we intend to achieve
our vision of being one of the world’s leading providers of
sustainable mobility. For this purpose, we have defined four
target dimensions – excited customers, excellent employer,
role model for the environment, safety and integrity, and
competitive profitability – which are designed to help us
grow sustainably.
With the third key building block, we are intensifying our
traditionally excellent innovative strength and placing it on
an even broader footing. This is necessary both for the trans-
formation of our core business and for the establishment
Although these target dimensions apply throughout the
Group, the strategic KPIs that we will use in the future to
measure how well we have implemented our Group strategy,
depend on the respective business model. After all, the busi-
B U I L D I N G B L O C K S A N D S T R A T E G I C G R O U P I N I T I A T I V E S
T R A N S F O RM
C O R E B U S I N E S S
· Sharpen positioning of brands
· Develop successful vehicle and drivetrain portfolio
· Partner with regional players to win in economy segment
· Streamline modular toolkits
· Implement model line organization
· Realign “Components” business
· Develop battery technology as new core competency
· Develop self-driving system for autonomous vehicles and artificial intelligence
· Develop best-in-class user experience across brands and customer touchpoints
S T R E N G T H E N
I N N O V A T I O N P O W E R
· Drive digital transformation
· Create organization 4.0
B U I LD
M O B I L I T Y S O L U T I O NS
B U S I N E S S
· Establish mobility
solutions business
· Develop and expand
attractive and profitable
smart mobility offering
S E C U R E
F U N D I N G
· Improve
operational excellence
· Optimize
business portfolio
· Integrate strategy
and planning process
Group Management Report
Goals and Strategies
53
ness model for our passenger car-producing brands is
different from that for trucks and buses and also from that of
our Power Engineering Business Area and our services
business.
sites and plants, with the goal of continuously improving our
carbon footprint and lowering pollutant emissions. Through
innovations and outstanding quality, we aim for maximum
product safety.
In the following, we describe the Group’s strategic goals
attached to these target dimensions.
The strategic KPIs of the competitive profitability target
dimension have been defined and anchored uniformly in the
Group. As the new Group strategy has yet to be specified in
detail, the content of some strategic KPIs in the other target
dimensions is still being determined. The relevance of the
KPIs is reviewed at Group level and their focus continuously
monitored and adjusted as necessary. We report on the
defined nonfinancial strategic KPIs
in the “Corporate
Governance Report” and “Sustainable Value Enhancement”
sections.
Target dimension: excited customers
This target dimension focuses on the diverse needs of our
customers and on tailor-made mobility solutions. We aspire
to exceed our customers’ expectations, generating maximum
benefit for them. That calls not only for the best products, the
most efficient solutions and the best service, but also for
flawless quality and an outstanding image. We want to excite
our existing customers, win over new ones and retain their
loyalty in the long term – because only loyal and faithful
customers will recommend us to others.
The strategic KPIs consist of the conquest rate and KPIs
pertaining to loyalty, customer satisfaction and quality.
Target dimension: excellent employer
Skilled and dedicated employees are one of the keys to
sustainable success. We wish to promote their satisfaction
and motivation by means of equal opportunities, an
attractive and modern working environment, and a forward-
looking organization of work. Exemplary leadership and
corporate culture forms the foundation for this, enabling us
to retain our core workforce and attract new talent.
The strategic KPIs of this target dimension cover internal
employer attractiveness determined by means of the opinion
survey, external employer attractiveness, an external
employer ranking as well as a KPI pertaining to cross-brand
exchange and rotation and the diversity index.
Target dimension: role model for environment, safety and integrity
Every day, we at the Volkswagen Group assume and exercise
responsibility in relation to the environment, safety and
society. This is reflected in our thoughts and actions and in all
our decisions in equal measure.
We pay particular attention to the use of resources and
the emissions of our product portfolio as well as those of our
The most important principles in this process include
compliance with laws and regulations, the establishment of
secure processes, and dealing openly with mistakes so that
they can be avoided or rectified in the future. In terms of
integrity, Volkswagen aims to become a role model for a
modern, transparent and successful enterprise.
The strategic KPIs of this target dimension include the
decarbonization index and KPIs pertaining to emissions
figures, compliance, a culture of dealing openly with mis-
takes, and integrity.
Target dimension: competitive profitability
Investors judge us by whether we are able to meet our
obligations as regards interest payments and debt repay-
ments. As equity holders, they expect appropriate dividends
and a long-term increase in the value of their shares.
We make investments with a view to achieving profitable
growth and strengthening our competitiveness, thus keeping
the Volkswagen Group on a firm footing and ensuring it
remains an attractive investment option.
The goals we have set ourselves are operational excellence
in all business processes and becoming the benchmark for
the entire industry.
The strategic KPIs are operationalized for internal man-
agement purposes: target and actual data are derived from
Volkswagen Group figures.
ST R AT E G I C K P I S : C O M P E T I T I V E P R O F I TA B I L I T Y
Operating return on sales1
Research and development ratio
(R&D ratio) in the Automotive
Division
Capex/sales revenue in the
Automotive Division
Net cash flow in the
Automotive Division
Payout ratio
2015
6.0%
7.4%
6.9%
2025
7 to 8%
~6%
~6%
€8,887 million
>€10 billion
negative
30%
Net liquidity in the Automotive
Division
€24,522 million,
11.5%
Return on investment (ROI) in the
~10% of
consolidated
sales revenue
Automotive Division
–0.2%
>15%
1 2015 before special items.
54
Internal Management System and Key Performance Indicators
Group Management Report
Internal Management System and
Key Performance Indicators
This chapter describes, on the basis of the Group strategy, how the Volkswagen Group is managed
and the key performance indicators used for this purpose. In addition to financial measures, our
management system also contains nonfinancial key performance indicators.
The Volkswagen Group’s performance and success can be
measured by both financial and nonfinancial key perfor-
mance indicators. With the Operational Excellence Group
initiative, we aim to improve these indicators throughout all
areas and along the entire value chain.
In the following, we first describe the internal manage-
ment process and then explain the Volkswagen Group’s core
performance indicators.
I N T E R N A L M A N A G E M E N T P R O C E S S I N T H E V O L K S WA G E N G R O U P
The Integrate Strategy and Planning Process Group initiative
is focused on continuity and even closer dovetailing of the
Group and brand strategies with the operational planning
process. This enhances transparency when it comes to the
financial assessment and the evaluation of directional deci-
sions. The operational medium-term planning that is con-
ducted once a year and generally covers a period of five years
is incorporated into the strategic planning as a key man-
agement element of the Group.
Medium-term planning forms the core of our operational
planning and is used to formulate and safeguard the
requirements for realizing strategic projects designed to meet
Group targets in both technical and economic terms – and
particularly in relation to earnings, cash flow and liquidity
effects. In addition, it is used to coordinate all business areas
with respect to the strategic action areas concerned: func-
tions/processes, products and markets.
When planning the Company’s future, the individual plan-
ning components are determined on the basis of the time-
scale involved:
> the long-term unit sales plan, which sets out market and
segment growth and then derives the Volkswagen Group’s
delivery volumes from them,
> the product program as the strategic, long-term factor
determining corporate policy,
> capacity and utilization planning for the individual sites.
The coordinated results of the upstream planning processes
are used as the basis for the medium-term financial planning:
the Group’s financial planning, including the brands and
business fields, comprises the income statement, cash flow
and balance sheet planning, profitability and liquidity, as well
as the upfront investments needed for alternative products
and the implementation of strategic options. The first year of
the medium-term planning period is fixed and a budget
drawn up for the individual months. This is planned in detail
down to the level of the operating cost centers.
The budget is reviewed each month throughout the year
to establish the target achievement level. Key internal man-
agement instruments comprise target/actual comparisons,
prior-year comparisons, variance analyses and, where neces-
sary, action plans to ensure targets are met. For the current
fiscal year, detailed revolving monthly forecasts are prepared
for the coming three months and the full year, taking into
account the current risks and opportunities. The focus of
intrayear internal management is therefore on adapting
ongoing operations. At the same time, the current forecast
serves as a potential, ongoing corrective to the medium-term
and budget planning that follows on from it.
Group Management Report
Internal Management System and Key Performance Indicators
55
C O R E P E R F O R M A N C E I N D I C AT O R S I N T H E V O L K SWA G E N G R O U P
The Volkswagen Group’s internal management system is
based on nine core performance indicators, which are derived
from our strategic goals:
> Deliveries to customers
> Sales revenue
> Operating result
> Operating return on sales
> Research and development ratio (R&D ratio) in the Auto-
motive Division
> Capex/sales revenue in the Automotive Division
> Net cash flow in the Automotive Division
> Net liquidity in the Automotive Division
> Return on investment (ROI) in the Automotive Division
Deliveries to customers are defined as handovers of new
vehicles to the end customer. This figure shows the popu-
larity of our products and is the measure we use to determine
our competitive position in the various markets. Deliveries
are closely related to our targets of exciting our customers,
being a role model in terms of the environment, safety and
integrity, and being an excellent employer. One of the most
important prerequisites for the Company’s long-term success
is a strong brand portfolio that – on the basis of outstanding
quality – offers tailor-made mobility solutions with safe,
resource-efficient vehicles, thus meeting the diverse needs of
customers. Demand for our products guarantees not only
unit sales and production, but also full utilization of our sites
and the jobs of our employees. The goals we are striving for
cannot be achieved without a skilled, dedicated workforce
and a consensus on shared values.
Sales revenue, which does not include the figures for our
equity-accounted Chinese joint ventures, reflects our market
success in financial terms. Following adjustment for our use
of resources, the operating result reflects the Company’s
actual business activity and documents the economic success
of our core business. The operating return on sales is the ratio
of the operating result to sales revenue.
The research and development ratio (R&D ratio) in the
Automotive Division shows total research and development
costs in relation to sales revenue. Research and development
costs comprise a range of expenses, from futurology through
to the development of marketable products. Particular empha-
sis is placed on the environmentally friendly orientation of
our product portfolio, digitalization and new technologies.
The R&D ratio underscores the efforts made to ensure the
Company’s future viability: the goal of competitive profit-
ability geared to sustainable growth.
investment property and
The ratio of capex (investments in property, plant and
intangible assets,
equipment,
excluding capitalized development costs) to sales revenue in
the Automotive Division reflects both our innovative power
and our future competitiveness. It shows our capital expen-
diture – largely for modernizing, expanding and digitalizing
friendly
our product range and
drivetrains, as well as for adjusting production capacities and
improving production processes – in relation to the Auto-
motive Division’s sales revenue.
for environmentally
Net cash flow in the Automotive Division represents the
excess funds from operating activities available for dividend
payments, for example. It is calculated as cash flows from
operating activities less cash flows from investing activities
attributable to operating activities.
Net liquidity in the Automotive Division is the total of
cash, cash equivalents, securities, loans and time deposits not
financed by third-party borrowings. To safeguard our busi-
ness activities, we have formulated the strategic target that
net liquidity in the Automotive Division should amount to
approximately 10% of the consolidated sales revenue.
We use the return on investment (ROI) to calculate the
return on invested capital for a particular period in the Auto-
motive Division, including the Chinese joint ventures on a
proportionate basis, by calculating the ratio of the operating
result after tax to average invested capital. If the return on
investment (ROI) exceeds the market cost of capital, the value
of the Company has increased. This is how we measure the
financial success of our brands, locations and vehicle
projects.
You can find information on and explanations of the sales
figures and the Volkswagen Group’s financial key perfor-
mance indicators on pages 101 to 107 and on pages 114 to
128, respectively.
Detailed descriptions of our activities and additional
nonfinancial key performance indicators in the areas of sus-
tainability, research and development, procurement, pro-
duction, sales and marketing, quality assurance, employees,
information technology and the environment can be found
in the chapter entitled “Sustainable Value Enhancement”
beginning on page 133 of this annual report. Nonfinancial
key performance
indicators related to compliance are
described in the “Corporate Governance Report” on page 65.
56
Structure and Business Activities
Group Management Report
Structure and Business Activities
This chapter describes the legal and organizational structure of the Volkswagen Group
and explains the material changes in 2018 with respect to equity investments.
O U T L I N E O F T H E L E G A L ST R U C T U R E O F T H E G R O U P
Volkswagen AG is the parent company of the Volkswagen
Group. It develops vehicles and components for the Group’s
brands, but also produces and sells vehicles, in particular
passenger cars and light commercial vehicles for the Volks-
wagen Passenger Cars and Volkswagen Commercial Vehicles
brands. In its capacity as parent company, Volkswagen AG
holds indirect or direct interests in AUDI AG, SEAT S.A.,
ŠKODA AUTO a.s., Dr. Ing. h.c. F. Porsche AG, Scania AB,
MAN SE, Volkswagen Financial Services AG, Volkswagen Bank
GmbH and a large number of other companies in Germany
and abroad. More detailed disclosures are contained in
the list of shareholdings in accordance with sections 285 and
313 of the Handelsgesetzbuch (HGB – German Commercial
Code), which can be accessed at www.volkswagenag.com/en/
InvestorRelations.html and is part of the annual financial
statements.
Volkswagen AG is a vertically integrated energy supply
company as defined by section 3 no. 38 of the Energie-
wirtschaftsgesetz (EnWG – German Energy Industry Act) and
is therefore subject to the provisions of the EnWG. In the elec-
tricity sector, Volkswagen AG generates, sells and distributes
electricity together with a Group subsidiary.
Volkswagen AG’s Board of Management is the ultimate
body responsible for managing the Group. The Supervisory
Board appoints, monitors and advises the Board of Manage-
ment; it is consulted directly on decisions that are of funda-
mental significance for the Company.
O R G A N I Z AT I O N A L ST R U C T U R E O F T H E G R O U P
The Volkswagen Group is one of the leading multibrand
groups in the automotive industry. The Company’s business
activities comprise the Automotive and Financial Services
divisions. All brands within the Automotive Division – with
the exception of the Volkswagen Passenger Cars and Volks-
wagen Commercial Vehicles brands – are independent legal
entities.
The Automotive Division comprises the Passenger Cars,
Commercial Vehicles and Power Engineering business areas.
The Passenger Cars Business Area essentially consolidates the
Volkswagen Group’s passenger car brands. Activities focus on
the development of vehicles and engines, the production and
sale of passenger cars, and the genuine parts business. The
product portfolio ranges from fuel-efficient compact cars to
luxury vehicles and also includes motorcycles, and will
gradually be supplemented by mobility solutions.
The Commercial Vehicles Business Area primarily com-
prises the development, production and sale of light com-
mercial vehicles, trucks and buses from the Volkswagen
Commercial Vehicles, Scania and MAN brands, the corre-
sponding genuine parts business and related services. The
collaboration between the MAN and Scania commercial
vehicle brands is coordinated within the TRATON GROUP. The
commercial vehicles portfolio ranges from pickups to heavy
trucks and buses.
The Power Engineering Business Area combines the large-
bore diesel engines, turbomachinery, special gear units,
propulsion components and testing systems businesses.
The activities of the Financial Services Division comprise
dealer and customer financing, vehicle leasing, direct banking
and insurance activities, as well as fleet management and
mobility offerings.
With its brands, the Volkswagen Group is present in all
relevant markets around the world. The Group’s key sales
markets currently include Western Europe, China, the USA,
Brazil, Russia and Mexico.
Volkswagen AG and the Volkswagen Group are managed
by the Volkswagen AG Board of Management in accordance
with the Volkswagen AG Articles of Association and the rules
of procedure for Volkswagen AG’s Board of Management
issued by the Supervisory Board.
Group Management Report
Structure and Business Activities
57
To further enhance its leadership and management model,
the Volkswagen Group introduced an additional internal
operational structure in spring 2018. Volkswagen is con-
vinced that this will allow better use of existing competences
and economies of scale, make it possible to leverage synergies
more systematically and accelerate decision making.
In addition to the Finance & IT, Human Resources and
Integrity and Legal Affairs divisions, the Volkswagen Group
collaborates across six operating units and the China region,
these being the “Volume”, “Premium”, “Sport & Luxury”,
“Truck & Bus” brand groups, as well as the Components &
Procurement and Financial Services operating units. The
“Volume” brand group comprises the Volkswagen Passenger
Cars, SEAT, ŠKODA and Volkswagen Commercial Vehicles
brands. The Audi, Lamborghini and Ducati brands are
brought together in the “Premium” brand group. “Sport &
Luxury” is comprised of the Porsche, Bentley and Bugatti
brands. The “Truck & Bus” brand group is the umbrella for
the Scania and MAN brands. Components & Procurement will
function as one unit spanning all of the brands and sup-
porting them. The Financial Services business has been
combined into a single unit.
This prepares the Volkswagen Group for a management
structure that is simpler, leaner and more effective, and
strengthens the brands, giving them more autonomy. In line
with the principle of subsidiarity, decisions will be taken at
the lowest competent level, close to business operations.
At the same time, spreading the Group’s management
duties more broadly means that responsibility is assigned
more clearly and definitively. Every member of the Board of
Management has assumed additional higher-level duties for
the Group. At the same time, the members of the Board of
Management of Volkswagen AG have responsibility for a
brand group or operating unit, improving collaboration
between the brands and the Group as a whole and ensuring
that management of the Group is a shared undertaking.
Each brand in the Volkswagen Group is managed by a
brand board of management, which ensures its independent
and self-contained development and business operations. To
the extent permitted by law, the board adheres to the Group
targets and requirements laid down by the Board of
Management of Volkswagen AG, as well as with the agree-
ments in the brand groups. This allows Group-wide interests
to be pursued, while at the same time safeguarding and
reinforcing each brand’s specific characteristics. Matters that
are of importance to the Group as a whole are submitted to
the Group Board of Management in order to reach agreement
between the parties involved, to the extent permitted by law.
The rights and obligations of the statutory bodies of the
relevant brand company remain unaffected.
The companies of the Volkswagen Group are managed by
their respective managements on their own responsibility. In
addition to the interests of their own companies, the
management of each individual company takes into account
the interests of the Group, the relevant brand group and the
individual brands in accordance with the framework laid
down by law.
At Group level, committees also address key strategic
issues, for example relating to product planning, invest-
ments, risks management and management issues. The
portfolio of these committees and the regulation landscape
at Group level was revised in the reporting year and, in the
course of this, a committee was established to manage the
technology strategy. This has reduced complexity and rein-
forced governance within the Group.
Within our future program TOGETHER – Strategy 2025,
the Organization 4.0 Group initiative is also supporting the
Company’s transformation. The aim of this initiative is to
connect activities across divisions, initiate new organiza-
tional approaches and anchor these in the Group for the long
term. This will not only enable but actively create holistic
stimulus for innovation, entrepreneurship and change.
M AT E R I A L C H A N G E S I N E Q U I T Y I N V E ST M E N T S
The control and profit and loss transfer agreement between
MAN SE, as the controlled company, and TRATON SE (at that
time Volkswagen Truck & Bus AG), a wholly owned subsidiary
of Volkswagen AG, as the controlling company, came into
force upon its entry in the commercial register on July 16,
2013. The conclusion of the control and profit and loss
transfer agreement replaced, the group based on the de facto
exercise of management control with a contractual group,
permitting considerably more efficient and less bureaucratic
cooperation between the MAN Group and the rest of the
Volkswagen Group. In the summer of 2018, the Higher
Regional Court in Munich made a final decision in the award
proceedings regarding the appropriateness of the cash
settlement and the right to compensation for the non-
controlling interest shareholders of MAN SE, ruling that the
cash settlement amount set out in the contract should be
increased to €90.29 per share and the annual compensation
to €5.47 gross per share. Following the entry of the final
decisions in the commercial register in August 2018, the
noncontrolling interest shareholders were entitled to tender
their shares in accordance with section 305 of the Aktien-
gesetz (AktG – German Stock Corporation Act) within a two-
month period. The decision in the award proceedings
resulted in a significant increase in the annual compensation
to be paid to noncontrolling interest shareholders of MAN SE.
In the opinion of the Board of Management at TRATON SE (at
58
Structure and Business Activities
Group Management Report
L E G A L F A C TO R S I N F L U E N C I N G B U S I N E S S
Like other international companies, the business of Volks-
wagen companies is affected by numerous laws in Germany
and abroad. In particular, there are legal requirements
relating to development, products, production and distri-
bution, as well as supervisory, data protection, financial, com-
pany, commercial, capital market, anti-trust and tax regula-
tions and regulations relating to labor, banking, state aid,
energy, environmental and insurance law.
VO L KSWAG E N A G S H A R E H O L D I N G S
www.volkswagenag.com/en/InvestorRelations.html
that time TRATON AG), this was no longer proportionate to
the profit transfer from MAN SE and other benefits stipulated
in the control and profit and loss transfer agreement;
TRATON SE therefore exercised its right to extraordinary
termination in accordance with section 304(4) of the German
Stock Corporation Act on August 22, 2018 and terminated the
control and profit and loss transfer agreement effective
January 1, 2019. As of year-end 2018, TRATON SE held
87.04 (75.73)% of the ordinary shares and 83.05 (46.95)% of
the preferred shares in MAN SE. Following the announcement
of the termination of the control and profit and loss transfer
agreement and the recording thereof in the commercial
register on January 3, 2019, the noncontrolling shareholders
of MAN SE once again had the right to tender their shares to
TRATON SE, pursuant to the provisions of the control and
profit and loss transfer agreement, within a two-month
period at a cash settlement price of €90.29.
With the Optimize business portfolio Group initiative, the
Board of Management intends to ensure the Volkswagen
Group’s competitiveness and financial performance as a
forward-looking mobility provider by focusing on its core
business. To this end, we are continuously monitoring and
analyzing our portfolio and can respond in a timely manner
by making any necessary purchases or sales.
Group Management Report
Corporate Governance Report
59
Corporate Governance Report
Corporate governance is defined as responsible, transparent corporate management and
supervision that aim to add long-term value. For us, good corporate governance not only
forms the basis for lasting success; it is also an important prerequisite for strengthening
the trust of our stakeholders in our work.
T H E G E R M A N C O R P O R AT E G O V E R N A N C E C O D E – A B L U E P R I N T
F O R S U C C E S S F U L C O R P O R AT E G O V E R N A N C E
Corporate governance provides the regulatory framework for
corporate management and supervision. This includes a
company’s organization and values, and the principles and
guidelines for its business policy. The German Corporate
Governance Code (the Code) contains recommendations and
suggestions for sound, responsible corporate management
and supervision. It was prepared by a dedicated government
commission on the basis of the material provisions and
nationally and internationally accepted standards of corpo-
rate governance. The government commission regularly
reviews the Code in light of current developments and
updates it as necessary. The Board of Management and the
Supervisory Board of Volkswagen AG base their work on the
recommendations and suggestions of the German Corporate
Governance Code. We consider good corporate governance to
be a key prerequisite for achieving a lasting increase in the
Company’s value. It helps strengthen the trust of our share-
holders, customers, employees, business partners and
investors in our work and enables us to meet the steadily
increasing demand for information from national and inter-
national stakeholders.
D E C L A R AT I O N S O F C O N F O R M I T Y
( VA L I D A S O F T H E D AT E O F T H E D E C L A R AT I O N )
The Board of Management and the Supervisory Board of
Volkswagen AG issued the annual declaration of conformity
with the Code as required by section 161 of the Aktiengesetz
(AktG – German Stock Corporation Act) on November 16,
2018 with the following wording:
“The Board of Management and the Supervisory Board
declare the following:
The recommendations of the Government Commission of
the German Corporate Governance Code in the version dated
7 February 2017 (the Code) that was published by the German
Ministry of Justice in the official section of the Federal
Gazette (Bundesanzeiger) on 24 April 2017 was complied with
in the period from the last Declaration of Conformity dated
17 November 2017 and will continue to be complied with,
with the exception of the numbers listed below and their
stated reasons listed below.
> a) 4.2.3(4) (severance payment cap)
A severance payment cap will be included in new contracts
concluded with members of the Board of Management, but
not in contracts concluded with Board of Management
members entering their third term of office or beyond,
provided a cap did not form part of the initial contract.
Grandfather rights have been applied accordingly.
> b) 5.3.2(3) sentence 2 (independence of the chair of the
Audit Committee)
It is unclear from the wording of this recommendation
whether the Chairman of the Audit Committee is “inde-
pendent” within the meaning of number 5.3.2(3) sentence
2 of the Code. Such independence could be considered
lacking in view of his seat on the Supervisory Board of
Porsche Automobil Holding SE, kinship with other mem-
bers of the Supervisory Board of the company and of
Porsche Automobil Holding SE, his
indirect minority
interest in Porsche Automobil Holding SE, and business
relations with other members of the Porsche and Piëch
families who also have an indirect interest in Porsche
Automobil Holding SE. However, in the opinion of the
Supervisory Board and the Board of Management, these
relationships do not constitute a conflict of interest nor do
they interfere with his duties as the Chairman of the Audit
Committee. This deviation is therefore being declared
purely as a precautionary measure.
> c) 5.4.1(6 to 8) (disclosure regarding election recommen-
dations)
With regard to the recommendation under number 5.4.1(6-
8) of the Code stating that certain circumstances disclosed
by the Supervisory Board when making election recom-
mendations to the Annual General Meeting, the stipula-
60
Corporate Governance Report
Group Management Report
tions of the Code are vague and the definitions unclear.
Purely as a precautionary measure, the Board of Manage-
ment and the Supervisory Board therefore declare a
deviation from the Code in this respect. Notwithstanding
this, the Supervisory Board will make every effort to satisfy
the requirements of the recommendation.”
The current declaration of conformity is also published on
our website, http://www.volkswagenag.com/en/InvestorRela-
tions/corporate-governance/declaration-of-conformity.html.
With the exception of number 4.2.3(2) sentence 9 (no early
disbursements of variable remuneration components) and
number 5.1.2(2) sentence 1 (duration of first-time appoint-
ments to the Board of Management), the suggestions in the
current version of the Code have been complied with. The
general compensation clauses in the contracts with members
of the Board of Management may, if applied accordingly, result
in early disbursement of multi-year variable remuneration
components. The Supervisory Board will decide the duration
of each first-time appointment to the Board of Management
on an individual basis, taking the best interests of the Com-
pany into account. The suggestion made in number 2.3.2
sentence 2 (accessibility of the voting proxy during the Annual
General Meeting) was implemented at the 2018 Annual
General Meeting in such a manner that the shareholders were
able to reach the voting proxies named by the Company to
exercise their voting rights until 1:00 pm, also by electronic
means. The suggestion made in number 2.3.3 (broadcast of
the Annual General Meeting) was implemented at the 2018
Annual General Meeting so that the introductory remarks by
the Chairman of the Supervisory Board and the speech of the
Chairman of the Board of Management were broadcast.
Our listed subsidiaries AUDI AG, MAN SE and RENK AG
have also each issued declarations of conformity with the
German Corporate Governance Code. The declarations of
conformity of our listed subsidiaries can be accessed at the
websites shown on this page.
C O O P E R AT I O N B E T W E E N T H E B O A R D O F M A N A G E M E N T A N D T H E
S U P E R V I S O R Y B O A R D
The Supervisory Board advises and monitors the Board of
Management with regard to the management of the Com-
D E C L A R AT I O N O F CO N F O R M I T Y O F VO L K SWA G E N AG
www.volkswagenag.com/en/InvestorRelations/corporate-governance/declaration-
of-conformity.html
D E C L A R AT I O N O F CO N F O R M I T Y O F AU D I A G
www.audi.com/cgk-declaration
D E C L A R AT I O N O F CO N F O R M I T Y O F M A N S E
www.corporate.man.eu/en/investor-relations/corporate-governance/corporate-
governance-at-man/Corporate-Governance-at-MAN.html
D E C L A R AT I O N O F CO N F O R M I T Y O F R E N K A G
www.renk-ag.com/en/investor-relations/financial reports
pany and is directly involved in decisions of fundamental
importance to the Company. The Board of Management and
the Supervisory Board of Volkswagen AG consult closely on
the strategic orientation of the Volkswagen Group. The two
bodies jointly assess, at regular intervals, the progress made
in implementing the corporate strategy. The Board of Man-
agement reports to the Supervisory Board regularly, promptly
and comprehensively in both written and oral form on all
issues of relevance for the Company with regard to strategy,
planning and the situation of the Company, the development
of the business, the risk situation, risk management and
compliance.
More information on the cooperation between the Board
of Management and the Supervisory Board of Volkswagen AG
and on the work and structure of the committees of the
Supervisory Board can be found in the Report of the Super-
visory Board on pages 12 to 17 of this annual report.
Information on the members of the Board of Manage-
ment and Supervisory Board, as well as on the Supervisory
Board committees can be found on pages 86 to 89.
O B J E C T I V E S F O R T H E C O M P O S I T I O N O F T H E S U P E R V I S O R Y B O A R D
A N D B O A R D O F M A N A G E M E N T A S W E L L A S T H E S E N I O R
E X E C U T I V E P O S I T I O N S
In view of the Company’s specific situation, its purpose, its
size and the extent of its international activities, the Super-
visory Board of Volkswagen AG strives to achieve a compo-
sition that takes the Company's ownership structure and the
following aspects into account:
> At least three members of the Supervisory Board should be
persons who embody the criterion of internationality to a
particularly high degree.
> At least four members of the Supervisory Board should be
shareholder representatives with no potential conflicts of
interest, particularly conflicts of interest that could arise
from an advisory or board position at customers, suppliers,
lenders, or other third parties.
> In addition, at least four of the shareholder representatives
on the Supervisory Board must be persons who are
independent as defined in number 5.4.2 of the Code.
> At least three of the seats on the Supervisory Board should
be held by people who make a special contribution to the
diversity of the Board.
> Furthermore, proposals for elections should not normally
include persons who will have reached the age of 75 on the
date of the election or who will have been members of the
Supervisory Board for more than 15 years on the date of
the election.
The above criteria have been met. The independent members
of the Supervisory Board within the meaning of number 5.4.2
of the Code are or were as follows: Ms. Hessa Sultan Al-Jaber,
Ms. Louise Kiesling, Mr. Hussain Ali Al-Abdulla, Mr. Bernd
Althusmann and Mr. Stephan Weil, as well as Ms. Annika
Group Management Report
Corporate Governance Report
61
Falkengren, who left the Supervisory Board during the
reporting year.
In addition, the Supervisory Board has decided on the
following profile of skills and expertise for the full Board:
The Supervisory Board as a whole must collectively have
the knowledge, skills and professional expertise required to
properly perform its supervisory function and assess and
monitor the business that the Company conducts. For this,
the members of the Supervisory Board must collectively be
familiar with the sector in which the Company operates. The
key skills and requirements of the Supervisory Board as a
whole include, in particular:
> Knowledge of or experience in the manufacture and sale of
all types of vehicles and engines or other technical prod-
ucts,
> Knowledge of the automotive industry, the business model
and the market, as well as product expertise,
> Knowledge in the field of research and development, par-
ticularly of technologies with relevance for the Company,
> Experience in corporate leadership positions or in the
supervisory bodies of large companies,
> Knowledge in the areas of governance, law or compliance,
> detailed knowledge in the areas of finance, accounting, or
auditing,
> Knowledge of the capital markets,
> Knowledge in the areas of controlling/risk management
and the internal control system,
> Human resources expertise (particularly the search for and
selection of members of the Board of Management, and the
succession process) and knowledge of incentive and remu-
neration systems for the Board of Management,
> detailed knowledge or experience in the areas of codeter-
mination, employee matters and the working environment
in the Company.
The current composition of the Supervisory Board is also
in line with this profile of skills and expertise. The curriculum
vitae of the members of the Supervisory Board are avail-
able online at www.volkswagenag.com/en/group/executive-
bodies.html.
The statutory quota of at least 30% women and at least
30% men has applied to new appointments to the Super-
visory Board of Volkswagen AG since January 1, 2016 as
required by the Gesetz für die gleichberechtigte Teilhabe von
Frauen und Männern an Führungspositionen in der Privat-
wirtschaft und im öffentlichen Dienst (FührposGleichberG –
German Act on the Equal Participation of Women and Men in
Leadership Positions in the Private and Public Sectors). Share-
holder and employee representatives have resolved that each
side will meet this quota separately. The shareholder repre-
sentatives have met the quota of at least 30% women and at
least 30% men since the 56th Annual General Meeting on
June 22, 2016. The employee representatives have met the
quota since the end of the 57th Annual General Meeting on
May 10, 2017. Both the shareholder and the employee repre-
sentatives fulfilled the quota on December 31, 2018.
The Supervisory Board set a target quota of 11.1% for the
period after December 31, 2016 for the proportion of female
members on the Board of Management as required in
accordance with the FührposGleichberG. The new deadline
set for achievement of this target is December 31, 2021. The
proportion of female members on the Group Board of Man-
agement as of December 31, 2018 was 12.5%, thus meeting
the target quota.
For the proportion of women in management in accor-
dance with the FührposGleichberG, Volkswagen AG has set
itself the target of 13.0% women in the first level of man-
agement and 16.9% women in the second level of manage-
ment for the period up to the end of 2021. As of December 31,
2018, the proportion of women in the active workforce at the
first level of management was 10.7 (10.4)% and at the second
level of management it was 15.4 (14.0)%.
R E M U N E R AT I O N R E P O R T
Extensive explanations of the remuneration system and the
individual remuneration of the members of the Board of
Management and Supervisory Board can be found in the
Remuneration Report starting on page 68 of the combined
management report, in the notes to Volkswagen’s consoli-
dated financial statements on page 329, and on page 62
of the notes to the annual financial statements of Volks-
wagen AG.
G R O U P C O R P O R AT E G O V E R N A N C E D E C L A R AT I O N
The Group corporate governance declaration forms part of
the combined management report and is permanently avail-
able at www.volkswagenag.com/en/InvestorRelations/corpo-
rate-governance/declaration-of-conformity.html. It also con-
tains the description of the diversity concepts for the Board
of Management and Supervisory Board of Volkswagen AG.
G R O U P CO R P O R AT E G OV E R N A N C E D E C L A R AT I O N
www.volkswagenag.com/en/InvestorRelations/corporate-governance/declaration-
of-conformity.html
62
Corporate Governance Report
Group Management Report
T O G E T H E R 4 I N T E G R I T Y
2
Integrity and compliance risks are identified,
owned, managed and mitigated
4
We encourage, protect and value the reporting of
concerns and suspected wrongdoing
1
Integrity and compliance are central
to our business strategy
Together4Integrity
We keep our word
3
Our leaders at all levels across our organization
build and sustain a culture of integrity
5
We take action and hold ourselves accountable
when wrongdoing occurs
I N T E G R I T Y
Volkswagen is undergoing one of the furthest-reaching pro-
cesses of change in the Company’s history. A strategic objec-
tive as part of TOGETHER – Strategy 2025 is to make Volks-
wagen a role model of a modern, transparent and successful
company when it comes to integrity.
With the Board of Management position for Integrity and
Legal Affairs, the Group has put in place the organizational
prerequisites for centralized integrity management. This
Group function is responsible for planning, preparing and
implementing programs and projects aimed at raising aware-
ness, providing information and reinforcing a shared aware-
ness of integrity.
Integrity at Volkswagen is defined as acting out of con-
viction, with responsibility and steadfastness. Integrity is an
inner disposition that acts as an internal moral compass for
doing the right thing in gray areas, in the absence of explicit
rules or in the event of conflicting objectives. This means
complying with our Group principles and the ethical
principles established therein and behaving correctly in
accordance with rules. This also includes the steadfastness
needed to adhere to these principles – regardless of economic
and social pressure.
Already in 2016, we launched a comprehensive integrity
program with information campaigns, opportunities for
dialog and initiatives aimed at all employees. This encom-
passes measures such as international get-togethers for man-
agers and integrity workshops for team spokespeople in
production. In addition, we have launched an ambassador
program that helps multipliers to make integrity a visible and
practical part of everyday working life. We have also worked
intensively to create an integrity index. This is due to be
piloted in 2019 at the German locations of the Volkswagen
Passenger Cars and Audi brands as a joined-up approach to
measuring integrity.
We firmly believe: only with lasting, dependable integrity
will our Company gain and strengthen the trust of its staff,
customers, shareholders, business partners and the general
public. The Group Board of Management therefore resolved
in April 2018 to combine the programs and initiatives on
integrity, compliance, risk management and culture under
the umbrella program “Together4Integrity”, and thus to
reinforce them.
With “Together4Integrity” (T4I), the Board of Manage-
ment of Volkswagen AG has initiated an umbrella program
with which to embed excellence in integrity and compliance
throughout the Group – in all brands, regions and companies
and in respect of processes, structures, attitudes and behav-
ior. The program plays an integral and central role at Volks-
wagen. It consolidates, combines and coordinates the Group-
wide initiatives that are led by the responsible divisions. It
learning, thus
also encourages discussion and mutual
ensuring continuous improvement. Uniform and consistent
implementation according to a firm schedule is planned for
all Group companies, prioritized by their size and risk profile.
T4I is based on the five principles of the internationally
recognized Ethics & Compliance
(ECI). These
principles relate to strategy, risk management, culture of
integrity, speak-up environment and resolute accountability.
They are codified as the Group’s aspiration level and are
implemented through T4I. The Board of Management posi-
tions for Integrity and Legal Affairs and for Human Resources
are responsible for the program. The other Board of Man-
agement positions act as sponsors, thus ensuring that T4I is
successfully implemented in their area of responsibility.
Initiative
Group Management Report
Corporate Governance Report
63
C O M P L I A N C E
Acting with integrity, compliance and honesty is an essential
prerequisite for the success of the Volkswagen Group. For this
reason, compliance with national and international laws and
regulations, internal rules and voluntary commitments is
among our Company’s most important principles. We are
striving to strengthen the trust of our customers, our busi-
ness partners and stakeholders in our Group through fair
treatment. Compliant behavior is the basis for this and must
be a matter of course for all Group employees. One of our
Company’s main tasks is to further enhance awareness of
this.
Commitment to compliance at the highest level
At the Global Management Meeting in June 2018, Herbert
Diess, Chairman of the Board of Management of Volks-
wagen AG, underlined that integrity and compliant behavior
are the responsibility of each individual in the Group: “We
need dependable structures and work processes that ensure
impeccable, compliant behavior. But we also need a firmly
rooted sense of right and wrong, a better way of handling
mistakes, a culture of constructive dissent and a stronger
sense of responsibility in the management team.”
In an interview in August 2018, Hiltrud Dorothea Werner,
member of the Board of Management responsible for
Integrity and Legal Affairs, explained the importance of
dealing thoroughly and quickly with cases of suspicion and
compliance violations in the Company: “The nearer Com-
pliance is to people and processes, the better, because pre-
venting a problem from becoming a scandal also means
acting with speed and investigating thoroughly.”
Compliance organization
The Group Compliance Committee at top management level
is chaired by the member of the Board of Management
responsible for Integrity and Legal Affairs and met regularly
in the reporting year. This committee ensures that com-
pliance and integrity standards are uniformly developed,
applied and communicated on a cross-divisional and cross-
brand basis.
Central divisions within the Group are supported and
advised by their own compliance contacts. Additional centers
of competence are responsible for the overall direction of
compliance work and develop compliance instruments and
program components with which the companies can imple-
ment the compliance requirements themselves across the
Group. During the reporting period, additional resources are
set aside for these tasks.
The global compliance organization at the Volkswagen Group
comprises divisional and regional compliance offices. It
supports and advises the respective Group and brand
companies with an effective, risk-based, Group-wide com-
pliance management system, helping them to conduct their
business activities in accordance with the rules and to con-
sistently adhere to relevant laws and internal regulations. It
also helps companies to identify, evaluate, manage and
monitor potential compliance risks. Additional compliance
resources were provided across the Group on a risk-oriented
basis in the reporting year. Higher-level compliance func-
tions are involved in the appointment of new compliance
officers and conduct a standardized appointment and induc-
tion process.
In the reporting period, there was direct communication
on compliance issues at meetings of the Supervisory Board,
the Board of Management and the Works Council, partic-
ularly by the member of the Board of Management respon-
sible for Integrity and Legal Affairs and the Group Chief Com-
pliance Officer.
The Group Chief Compliance Officer reports directly to
the member of the Board of Management responsible for
Integrity and Legal Affairs and also to the Audit Committee of
the Supervisory Board of Volkswagen AG.
The heads of the centers of competence report to the
Group Chief Compliance Officer on disciplinary and func-
tional matters. The compliance officers of the brand com-
panies and the head of the regional compliance office for
China report to the Group Chief Compliance Officer on
functional matters. Meetings and conferences ensure that
those responsible for compliance at Group and brand level
are connected and communicate regularly.
Compliance management system
Our compliance management system is aligned with national
and international laws and standards. Its objective is to
encourage, reinforce and ensure compliant behavior in the
Company in a lasting manner. The focus of our compliance
organization is on preventing corruption, breaches of trust,
embezzlement, fraud and money laundering and thereby on
reducing the risk of unlawful actions. The Code of Conduct is
the key element for raising awareness among staff of correct
behavior and finding the right contact person in cases of
doubt.
Where laws and regulations have been violated, our
whistleblower system is a suitable tool for taking appropriate
action. We enhanced the whistleblower system in 2018: mem-
bers of management are obligated to report every indication
64
Corporate Governance Report
Group Management Report
of serious rule-breaking. Failure to do so is itself a serious
infringement. The accessibility of the whistleblower system
has been further improved with a 24-hour hotline.
We place value on communication and training seminars
to permanently anchor compliance-related content among
the workforce.
Compliance work in the Volkswagen Group is based on a
systematic process of risk identification and reporting in
accordance with the IDW standard AsS 980. We used 2018 to
review the content of and the process for the existing com-
pliance risk analysis. The objective is to obtain transparency
at Group level of the risk exposure of all Group companies
included in the compliance scope.
However, we are also aware that even the best compliance
management system can never entirely prevent the criminal
actions of individuals.
Code of Conduct and guidelines
The Volkswagen Group’s Code of Conduct is established
throughout the Group. It is permanently available to all
employees on the intranet and also to third parties on the
internet and is continually communicated via digital and
print media and at events within the Company.
The Code of Conduct is a significant part of the com-
pliance training completed by all staff, from the Board of
Management to employees. Both face-to-face and online
training are used. The Code of Conduct is also integrated into
operational processes. For example, employment contracts
for employees of Volkswagen AG generally include a reference
to the Code of Conduct and the obligation to comply with it.
Furthermore, compliance with the Code of Conduct remained
a component of our employees’ annual reviews in the
reporting period and was thus taken into account when
calculating their variable, performance-related remuneration.
In addition to the Volkswagen Group Code of Conduct,
there are various Group policies and guidelines on specific
compliance issues. Organizational instructions on dealing
with gifts and invitations as well as on making donations also
apply across the Group.
Employees have access to the compliance rules and regu-
lations in particular via the compliance pages on the Com-
pany intranet.
Whistleblower system
In the Volkswagen Group, the whistleblower system refers to
the internal and external contact points where employees
and third parties can report potential violations of laws and
internal regulations by employees of the Volkswagen Group.
It also refers to the committees that support and monitor the
work of these contact points.
The Company has had a system for reporting breaches of
the law or regulations since 2006. In 2017, the whistleblower
system was improved and partially reorganized. Processes
were further optimized to enable reports to be followed up on
even more quickly, fairly and transparently. Among other
things, a central investigative office has been set up in the
Compliance department. It is responsible for coordinating
the whistleblower system within the Volkswagen Group and
for processing information concerning Volkswagen AG and
its subsidiaries – with the exception of AUDI AG, Dr. Ing. h.c. F.
Porsche AG and TRATON SE. These companies each have
separate
investigative offices for themselves and their
subsidiaries.
The whistleblower system uses defined processes to
investigate reports on breaches and to penalize misconduct
where appropriate. Protection of both the whistleblower and
the party affected has top priority in the applicable pro-
cedural principles and guarantees. In addition, a Group
Guideline sets out the responsibilities in the Group and the
specific procedure for the processing of reports. The aim of
the whistleblower system is to protect our company and
employees from harm using firm principles and a clearly
governed, transparent and fair process. Moreover, experience
with violations of laws and regulations also helps us to con-
stantly enhance our compliance management and prevent
similar incidents in future.
Information on misconduct can be submitted in any of
the major languages used by the Group and is treated
confidentially. The people providing the information need
not fear any sanctions from the Company for providing the
information. In principle, they can decide for themselves
whether they wish to give their names. For this reason, a
specially protected online reporting channel was additionally
set up in 2017, which whistleblowers can use anonymously.
We also continue to rely on existing tried-and-tested chan-
nels such as ombudspersons (counsels of trust).
CO D E O F CO N D U C T O F T H E VO L KSWAG E N G R O U P
www.volkswagenag.com/presence/konzern/documents/Code_of_Conduct_2017_
VW_Group_english.pdf
W H I ST L E B LOW E R SY ST E M
www.volkswagenag.com/en/group/compliance-and-risk-management/whistle-
blowersystem.html
Phone: +49 5361 9 46300
E-mail: io@volkswagen.de
Group Management Report
Corporate Governance Report
65
Since August 1, 2018, information on possible rule-breaking
has also been reportable via a telephone hotline in addition
to the existing reporting channels. Employees, business
partners and customers worldwide can submit information
24 hours a day, 365 days a year. Callers are put through to a
specially trained contact person with access to an interpreter
if required. In addition, a revised Group policy was adopted in
August 2018. This enhances the whistleblower system, partic-
ularly with its expanded communication options. It was also
decided to provide additional resources for the expansion of
the whistleblower system.
The Compliance organization registered a total of 2,920
reports throughout the Group in 2018. All substantiated
reports have been, or will be, investigated, and any miscon-
duct penalized.
Communication, training and advice
Providing information to employees at all levels on com-
pliance, raising their awareness of compliant behavior and
offering them advice as partners within the Company is a
core component of our compliance activities.
We use all of our internal communication channels to
communicate compliance-related content. These include
online and offline media as well as event and training
formats.
Online communication is primarily via the compliance
organization’s own sites on the Volkswagen intranet and via
the in-house, Group-wide communication platform “Group
Connect”, which is also used for direct dialog with the target
groups. There are also articles, interviews and other publi-
cations in cross-brand and specific divisions’ media. In the
reporting year, compliance-related topics were also featured
at various information events for employees and at works
meetings at several locations. Communication regarding the
whistleblower system was integrated into an event on corpo-
rate culture that took place across multiple locations.
Following a risk-based approach, mandatory compliance
training is conducted for specific target groups. In addition to
traditional lectures and online tutorials, case studies, role-
playing games and other interactive formats form part of the
training provided to employees and managers.
In the reporting year, the focus was on enhancing Code of
Conduct training and, in particular, on commencing the intro-
duction of compulsory training regarding the Code of Conduct
for all employees in the Group.
Employees can also use special e-mail addresses to solicit
advice on compliance issues.
Compliance key performance indicators
To measure the level of target achievement, we defined a
strategic indicator for the major brands that manufacture
passenger cars:
> Compliance, a culture of error management and behaving
with integrity. This is based on an evaluation of the
answers to three questions in the opinion survey relating
to compliance with regulations and processes, dealing with
risks and errors and behaving with integrity. In the case of
negative deviations, the affected departments develop and
implement measures. In the reporting year, the figure
further improved on the already good basis.
Strengthening compliance in company processes
The act implementing the Fourth EU Money Laundering
Directive into German law presented new requirements for
Volkswagen AG as a company that is bound by the Gesetz
über das Aufspüren von Gewinnen aus schweren Straftaten
(GWG – Law on Tracing Profits from Serious Criminal
Offences). The Group policy adopted and published in this
context by the Board of Management in 2018 defines the
minimum standard to be implemented by all Group com-
panies.
In 2018, we designed and developed a new IT tool for a
risk-based business partner selection process at the Volks-
wagen Group. We began pilot testing of the tool at the end of
the reporting year. This business partner selection process
will be gradually introduced in the Group from 2019. A key
objective of this new process is the creation of transparency
within the Volkswagen Group to prevent Group companies
from entering into business relationships with business
partners which other Group companies have previously clas-
sified as not acting with integrity.
New business models are constantly being considered in
the Volkswagen Group as part of the TOGETHER – Strategy
2025 program. These business models focus particularly on
digitalization, automation and electrification, but also on the
development of and involvement in mobility concepts. The
66
Corporate Governance Report
Group Management Report
compliance organization helps the strategic business units to
implement their forward-looking projects through individual
risk assessments and recommendations based on these.
In addition, compliance will become more firmly embed-
ded in mergers and acquisitions and real estate transactions.
Effectiveness review
Independent reviews by Group Internal Audit in the corpo-
rate units and the regular exchange of information with
external bodies help ensure continuous improvement of the
compliance management system. There are no indications
that our current compliance management system was inef-
fective in 2018.
I N D E P E N D E N T M O N I TO R
In June 2017, in connection with the diesel issue, Larry D.
Thompson was appointed as the Independent Compliance
Monitor at Volkswagen under the terms of the Plea
Agreement with the United States Department of Justice
announced on January 11, 2017 and confirmed by a US
federal court on April 21, 2017. He also works as Independent
Compliance Auditor under the Third Partial Consent Decree
concluded separately with the US Department of Justice and
the US Environmental Protection Agency (EPA) and the Third
California Partial Consent Decree agreed with the US State of
California and the environmental authority California Air
Resources Board, CARB (for more information on these
agreements, please see the Litigation section starting on
page 177). Mr. Thompson will perform his duties under the
Plea Agreement and Third Partial Consent Decrees for a
period of three years, which also includes taking measures to
further strengthen the Company’s compliance, reporting and
monitoring mechanisms and the implementation of an
enhanced compliance and ethics program.
Mr. Thompson submitted a report on March 30, 2018 in
his capacity as the Independent Compliance Monitor on the
basis of the Plea Agreement; in accordance with the pro-
visions of the Plea Agreement, the report will not be pub-
lished. In addition, in his capacity as the Independent Com-
pliance Auditor under the terms of the Third Partial Consent
Decrees, Mr. Thompson prepared his first annual report,
published on August 27, 2018.
R I S K M A N A G E M E N T, A U D I T
Carefully managing potential risks to the Company is a key
component of our daily work. The Volkswagen Group’s risk
management system is oriented toward identifying, assess-
ing, communicating and managing risks at an early stage.
This system is reviewed on an ongoing basis and adjusted if
and when conditions change. A detailed description of the
risk management system and our accounting-related internal
control system can be found in the Risk Report on pages 163
to 166 of this annual report.
The Supervisory Board has established an Audit Commit-
tee that in particular monitors the financial accounting, the
financial accounting process, the effectiveness of the internal
control system, the risk management system and the internal
audit system, the audit of the financial statements and com-
pliance. Furthermore, the Audit Committee makes a well-
founded recommendation for the election of the auditor to
the Supervisory Board, obtains a declaration of independence
from the auditor, supervises the additional services provided
by the auditor and prepares the audit engagement resolution.
It also discusses the annual audit planning, the determi-
nation of areas of emphasis for the audit, the agreed fee and
the auditor’s obligation to provide information.
Group Management Report
Corporate Governance Report
67
C O M M U N I C AT I O N A N D T R A N S PA R E N C Y
The Volkswagen Group publishes a financial calendar listing
all the relevant dates for its shareholders in its annual
report and interim reports as well as on its website at
www.volkswagenag.com/en/InvestorRelations.html. Among
other things, invitations to the shareholders’ meetings as well
as agendas for these meetings and any motions to be added
to the agenda or countermotions received are also available
on this website. At the shareholders’ meetings, shareholders
may exercise their voting rights themselves, have this right
exercised on their behalf by a third-party proxy whom they
have appointed, or use a proxy designated by the Company
who votes on their behalf in accordance with their voting
instructions. We also give our shareholders the opportunity
to watch the introductory remarks of the Chairman of the
Supervisory Board and the speech of the Chairman of the
Board of Management on the internet. In addition, news and
information on the Volkswagen Group are available on this
website. The press releases and other information are pub-
lished in both English and German.
Immediately after their publication in accordance with legal
requirements, the Company’s ad-hoc releases are also pub-
lished on the same website under the heading “Financial
News, Ad-hoc Releases & Publications”.
We publish managers’ transactions pursuant to Article 19
of the Market Abuse Regulation or section 15a of the Wert-
papierhandelsgesetz (WpHG – German Securities Trading Act)
under the heading “Corporate Governance”, menu item
“Directors’ Dealings”. On the same web page – under the
heading “Financial News, Ad-hoc Releases & Publications”,
menu item “Voting Rights” – you can also access details of the
notifications filed in the reporting period in compliance with
sections 33 ff. of the WpHG as well as notifications relating to
other legal issues.
The supervisory body appointments held by Board of
Management members and Supervisory Board members can
be found on pages 86 to 89 of this annual report. The share-
holder structure is presented on page 110.
M A N DATO RY P U B L I C AT I O N S O F VO L KSWAG E N A G
www.volkswagenag.com/en/InvestorRelations/news-and-publications.html
68
Remuneration Report
Group Management Report
Remuneration Report
The Remuneration Report details the individualized remuneration of the Board of Management
and the Supervisory Board of Volkswagen AG, broken down into components, as well as
individualized pension provision disclosures for the members of the Board of Management. In
addition, we explain in this chapter the main elements of the remuneration system for the Board of
Management.
P R I N C I P L E S O F B O A R D O F M A N A G E M E N T R E M U N E R AT I O N
Matters involving the remuneration system and the total
remuneration of each individual member of the Volks-
wagen AG Board of Management are decided on by the Super-
visory Board on the basis of the Executive Committee’s
recommendations. The remuneration system implements
the requirements of the Aktiengesetz (AktG – German Stock
Corporation Act) and the recommendations of the German
Corporate Governance Code (the Code). In particular, the
remuneration structure is focused on ensuring sustainable
business development in accordance with the Gesetz zur
Angemessenheit der Vorstandsvergütung (VorstAG – German
Act on the Appropriateness of Executive Board Remuner-
ation) and section 87(1) of the AktG.
At the beginning of 2017, the Supervisory Board of Volks-
wagen AG resolved to adjust the remuneration system of the
Board of Management with effect from January 1, 2017. The
system for remuneration of the Board of Management was
approved by the Annual General Meeting on May 10, 2017
with 80.96% of the votes cast. The adjustment, in which the
Supervisory Board was assisted by renowned, independent
external remuneration and legal consultants, resulted in an
alignment with the Group strategy TOGETHER – Strategy 2025.
The level of the Board of Management remuneration
should be appropriate and attractive in the context of the
Company’s national and international peer group. Criteria
include the tasks of the individual Board of Management
member, their personal performance, the economic situ-
ation, and the performance of and outlook for the Company,
as well as how customary the remuneration is when measured
against the peer group and the remuneration structure that
applies to other areas of Volkswagen. In this context, com-
parative studies on remuneration are conducted on a regular
basis.
C O M P O N E N T S O F B O A R D O F M A N A G E M E N T R E M U N E R AT I O N
In this section, we provide an overview of the Board of
Management’s remuneration system before going into the
components of the remuneration for the reporting period.
Overview of the remuneration system
The remuneration system of the Board of Management com-
prises non-performance-related and performance-related
components. The performance-related remuneration consists
of an annual bonus with a one-year assessment period and a
long-term incentive (LTI) in the form of a performance share
plan with a forward-looking three-year term. The perfor-
mance share plan is linked to business development in the
next three years and is thus based on a multiyear, forward-
looking assessment that reflects both positive and negative
developments. The non-performance-related component
creates an incentive for individual members of the Board of
Management to perform their duties in the best interests of
the Company and to fulfill their obligation to act with proper
business prudence without needing to focus on merely short-
term performance targets. The performance-related com-
ponents, dependent among other criteria on the financial
performance of the Company, serve to ensure the long-term
impact of behavioral incentives.
If 100% of the respectively agreed targets are achieved, the
annual target remuneration for each member of the Board of
Management will amount to a total of €4,500,000 (corres-
ponding to a fixed remuneration of €1,350,000, a target
amount from the annual bonus of €1,350,000 and a target
amount from the performance share plan of €1,800,000). The
annual target remuneration for the Chairman of the Board of
Group Management Report
Remuneration Report
69
Management amounts to a total of €9,000,000 (fixed remu-
neration of €2,125,000, a target amount from the annual
bonus of €3,045,000, and a target amount from the perfor-
mance share plan of €3,830,000).
year term (long-term incentive components) and phantom
preferred shares. The components of performance-related/
variable remuneration reflect both positive and negative
developments.
Annual minimum remuneration of €3.5 million (sum of
fixed remuneration, annual bonus, LTI and any special pay-
ments) was contractually agreed with Mr. Sommer. Annual
minimum remuneration of €3.5 million (sum of fixed and
variable remuneration) was contractually agreed with
Mr. Blessing.
Non-performance-related remuneration
The non-performance-related remuneration comprises fixed
remuneration and fringe benefits. Since 2018, separate
remuneration is no longer provided for appointments
assumed at Group companies, but is covered by the fixed
remuneration. The fringe benefits result from noncash
benefits and include in particular the use of operating assets
such as company cars and the payment of insurance
premiums. Taxes due on these noncash benefits are mainly
borne by Volkswagen AG.
The fixed level of remuneration is reviewed regularly and
adjusted if necessary.
Performance-related remuneration
The performance-related/variable remuneration consists of
an annual performance-related bonus with a one-year
assessment period and a long-term incentive (LTI) in the form
of a performance share plan with a forward-looking three-
The Supervisory Board may cap the performance-related/
variable remuneration components in the event of extra-
ordinary developments.
Annual bonus
The annual bonus is based upon the result for the respective
fiscal year. Operating profit achieved by the Volkswagen
Group plus the proportionate operating profit of the Chinese
joint ventures form half of the basis for the annual bonus,
with operating return on sales achieved by the Volkswagen
Group making up the second half. Each of the two com-
ponents of the annual bonus will only be payable if certain
thresholds are exceeded or reached.
The calculated payment amount may be individually
reduced (multiplier of 0.8) or increased (multiplier of 1.2) by
up to 20% by the Supervisory Board, taking into account the
degree of achievement of individual targets agreed between
the Supervisory Board and the respective member of the
Board of Management, as well as the success of the full Board
of Management in transforming the Volkswagen Group by
transferring employees to new areas of activity.
The payment amount for the annual bonus is capped at
180% of the target amount for the annual bonus. The cap
arises from 150% of the maximum financial target achieve-
ment and a performance factor of a maximum of 1.2.
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Remuneration Report
Group Management Report
C A L C U L A T I O N O F T H E P A Y M E N T A M O U N T F O R T H E A N N U A L B O N US
T A R G E T
×
T A R G E T A C H I E V E M E N T
=
A N N U A L B O N US
Company bonus
Performance factor
Operational KPIs
(0 – 150% target achievement)
×
Multiplier
(0.8 – 1.2)
Payment amount
5 0 P E R C E N T C O M P O N E N T 1
Target achievement in percent
5 0 P E R C E N T C O M P O N E N T 2
Target achievement in percent
150
100
50
150
100
50
0
5
10
15
20
25
30
35
0
1
2
3
4
5
6
7
8
9
10
Operating result including Chinese joint
ventures (proportionate) in € billion
Operating return on sales in percent
C O M P O N E N T 1 : O P E R AT I N G R E S U LT I N C L U D I N G
C H I N E S E J O I N T V E N T U R E S ( P R O P O R T I O N AT E )
C O M P O N E N T 2 : O P E R AT I N G R E T U R N O N S A L E S
€ billion
2017
2018
%
2017
2018
Maximum threshold
100% level of target
Minimum threshold
Actual
Target achievement (in %)
25.0
17.0
9.0
18.6
110
25.0
17.0
Maximum threshold
100% level of target
9.0
Minimum threshold
18.5
110
Actual
Target achievement (in %)
8.0
6.0
4.0
6.0
100
8.0
6.0
4.0
5.9
98
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71
71
71
71
Performance share plan – long-term incentive (LTI)
Performance share plan – long-term incentive (LTI)
Performance share plan – long-term incentive (LTI)
Performance share plan – long-term incentive (LTI)
The LTI is granted to the Board of Management annually in
The LTI is granted to the Board of Management annually in
The LTI is granted to the Board of Management annually in
The LTI is granted to the Board of Management annually in
the form of a performance share plan. Each performance
the form of a performance share plan. Each performance
the form of a performance share plan. Each performance
the form of a performance share plan. Each performance
period of the performance share plan has a term of three
period of the performance share plan has a term of three
period of the performance share plan has a term of three
period of the performance share plan has a term of three
years. At the time the LTI is granted, the annual target
years. At the time the LTI is granted, the annual target
years. At the time the LTI is granted, the annual target
years. At the time the LTI is granted, the annual target
amount under the LTI is converted on the basis of the initial
amount under the LTI is converted on the basis of the initial
amount under the LTI is converted on the basis of the initial
amount under the LTI is converted on the basis of the initial
into
reference price of Volkswagen’s preferred shares
into
reference price of Volkswagen’s preferred shares
into
reference price of Volkswagen’s preferred shares
into
reference price of Volkswagen’s preferred shares
performance shares of Volkswagen AG, which are allocated to
performance shares of Volkswagen AG, which are allocated to
performance shares of Volkswagen AG, which are allocated to
performance shares of Volkswagen AG, which are allocated to
the respective member of the Board of Management purely
the respective member of the Board of Management purely
the respective member of the Board of Management purely
the respective member of the Board of Management purely
for calculation purposes. The conversion is performed based
for calculation purposes. The conversion is performed based
for calculation purposes. The conversion is performed based
for calculation purposes. The conversion is performed based
on the unweighted average of the closing prices of Volks-
on the unweighted average of the closing prices of Volks-
on the unweighted average of the closing prices of Volks-
on the unweighted average of the closing prices of Volks-
wagen’s preferred shares for the last 30 trading days
wagen’s preferred shares for the last 30 trading days
wagen’s preferred shares for the last 30 trading days
wagen’s preferred shares for the last 30 trading days
preceding January 1 of a given fiscal year. At the end of each
preceding January 1 of a given fiscal year. At the end of each
preceding January 1 of a given fiscal year. At the end of each
preceding January 1 of a given fiscal year. At the end of each
year, the number of performance shares is determined
year, the number of performance shares is determined
year, the number of performance shares is determined
year, the number of performance shares is determined
definitively for one-third of the three-year performance
definitively for one-third of the three-year performance
definitively for one-third of the three-year performance
definitively for one-third of the three-year performance
period based on the degree of target achievement for the
period based on the degree of target achievement for the
period based on the degree of target achievement for the
period based on the degree of target achievement for the
annual earnings per Volkswagen preferred share (EPS –
annual earnings per Volkswagen preferred share (EPS –
annual earnings per Volkswagen preferred share (EPS –
annual earnings per Volkswagen preferred share (EPS –
earnings per share per preferred share in €). A prerequisite for
earnings per share per preferred share in €). A prerequisite for
earnings per share per preferred share in €). A prerequisite for
earnings per share per preferred share in €). A prerequisite for
this is that a threshold is reached.
this is that a threshold is reached.
this is that a threshold is reached.
this is that a threshold is reached.
E P S P E R F O R M A N C E M E A S U R E M E N T
Target achievement in percent
150
100
50
0
5
10
15
20
25
30
35
40
EPS per preferred share in euros
P E R F O R M A N C E P E R I O D 2 0 1 7 – 2 0 1 9
P E R F O R M A N C E P E R I O D 2 0 1 7 – 2 0 1 9
P E R F O R M A N C E P E R I O D 2 0 1 7 – 2 0 1 9
P E R F O R M A N C E P E R I O D 2 0 1 7 – 2 0 1 9
€
€
€
€
Maximum threshold
Maximum threshold
Maximum threshold
Maximum threshold
100% level of target
100% level of target
100% level of target
100% level of target
Minimum threshold
Minimum threshold
Minimum threshold
Minimum threshold
Actual
Actual
Actual
Actual
Target achievement (in %)
Target achievement (in %)
Target achievement (in %)
Target achievement (in %)
P E R F O R M A N C E P E R I O D 2 0 1 8 – 2 0 2 0
P E R F O R M A N C E P E R I O D 2 0 1 8 – 2 0 2 0
P E R F O R M A N C E P E R I O D 2 0 1 8 – 2 0 2 0
P E R F O R M A N C E P E R I O D 2 0 1 8 – 2 0 2 0
2017
2017
2017
2017
30.00
30.00
30.00
30.00
20.00
20.00
20.00
20.00
10.00
10.00
10.00
10.00
22.69
22.69
22.69
22.69
113
113
113
113
€
€
€
€
Maximum threshold
Maximum threshold
Maximum threshold
Maximum threshold
100% level of target
100% level of target
100% level of target
100% level of target
Minimum threshold
Minimum threshold
Minimum threshold
Minimum threshold
Actual
Actual
Actual
Actual
Target achievement (in %)
Target achievement (in %)
Target achievement (in %)
Target achievement (in %)
2018
2018
2018
2018
30.0
30.0
30.0
30.0
20.0
20.0
20.0
20.0
10.0
10.0
10.0
10.0
23.82
23.82
23.82
23.82
119
119
119
119
2018
2018
2018
2018
30.0
30.0
30.0
30.0
20.0
20.0
20.0
20.0
10.0
10.0
10.0
10.0
23.82
23.82
23.82
23.82
119
119
119
119
A cash settlement is made at the end of the three-year term of
A cash settlement is made at the end of the three-year term of
A cash settlement is made at the end of the three-year term of
A cash settlement is made at the end of the three-year term of
the performance share plan. The payment amount
the performance share plan. The payment amount
the performance share plan. The payment amount
the performance share plan. The payment amount
corresponds to the final number of determined performance
corresponds to the final number of determined performance
corresponds to the final number of determined performance
corresponds to the final number of determined performance
shares, multiplied by the closing reference price at the end of
shares, multiplied by the closing reference price at the end of
shares, multiplied by the closing reference price at the end of
shares, multiplied by the closing reference price at the end of
the three-year period plus a dividend equivalent for the
the three-year period plus a dividend equivalent for the
the three-year period plus a dividend equivalent for the
the three-year period plus a dividend equivalent for the
relevant term. The closing reference price is the unweighted
relevant term. The closing reference price is the unweighted
relevant term. The closing reference price is the unweighted
relevant term. The closing reference price is the unweighted
average of the closing prices for Volkswagen’s preferred
average of the closing prices for Volkswagen’s preferred
average of the closing prices for Volkswagen’s preferred
average of the closing prices for Volkswagen’s preferred
shares for the 30 trading days preceding the last day of the
shares for the 30 trading days preceding the last day of the
shares for the 30 trading days preceding the last day of the
shares for the 30 trading days preceding the last day of the
three-year performance period.
three-year performance period.
three-year performance period.
three-year performance period.
€
€
€
€
Initial reference price
Initial reference price
Initial reference price
Initial reference price
Closing reference price
Closing reference price
Closing reference price
Closing reference price
Dividend equivalent
Dividend equivalent
Dividend equivalent
Dividend equivalent
1 Determined at the end of the performance period.
1 Determined at the end of the performance period.
1 Determined at the end of the performance period.
1 Determined at the end of the performance period.
2017
2017
2017
2017
127.84
127.84
127.84
127.84
1
1
1
–
–
–
1
–
2.06
2.06
2.06
2.06
2018
2018
2018
2018
169.42
169.42
169.42
169.42
1
1
1
–
–
–
1
–
3.96
3.96
3.96
3.96
The payment amount under the performance share plan is
The payment amount under the performance share plan is
The payment amount under the performance share plan is
The payment amount under the performance share plan is
limited to 200% of the target amount. An advance of 20% on
limited to 200% of the target amount. An advance of 20% on
limited to 200% of the target amount. An advance of 20% on
limited to 200% of the target amount. An advance of 20% on
the payment amount is paid if the average ratio of capex to
the payment amount is paid if the average ratio of capex to
the payment amount is paid if the average ratio of capex to
the payment amount is paid if the average ratio of capex to
sales revenue in the Automotive Division or the R&D ratio of
sales revenue in the Automotive Division or the R&D ratio of
sales revenue in the Automotive Division or the R&D ratio of
sales revenue in the Automotive Division or the R&D ratio of
the last three years is smaller than 5%.
the last three years is smaller than 5%.
the last three years is smaller than 5%.
the last three years is smaller than 5%.
If the employment contract of a member of the Board of
If the employment contract of a member of the Board of
If the employment contract of a member of the Board of
If the employment contract of a member of the Board of
Management concludes prior to the end of the performance
Management concludes prior to the end of the performance
Management concludes prior to the end of the performance
Management concludes prior to the end of the performance
period due to extraordinary termination based on good
period due to extraordinary termination based on good
period due to extraordinary termination based on good
period due to extraordinary termination based on good
cause, or if the member of the Board of Management starts
cause, or if the member of the Board of Management starts
cause, or if the member of the Board of Management starts
cause, or if the member of the Board of Management starts
working for a competitor, (also referred to as “bad-leaver
working for a competitor, (also referred to as “bad-leaver
working for a competitor, (also referred to as “bad-leaver
working for a competitor, (also referred to as “bad-leaver
cases”), the unpaid performance shares will expire. For
cases”), the unpaid performance shares will expire. For
cases”), the unpaid performance shares will expire. For
cases”), the unpaid performance shares will expire. For
members of the Board of Management who held their seat as
members of the Board of Management who held their seat as
members of the Board of Management who held their seat as
members of the Board of Management who held their seat as
of December 31, 2016, this rule only applies in the event of a
of December 31, 2016, this rule only applies in the event of a
of December 31, 2016, this rule only applies in the event of a
of December 31, 2016, this rule only applies in the event of a
reappointment or new appointment.
reappointment or new appointment.
reappointment or new appointment.
reappointment or new appointment.
In connection with the appointment of the Chairman of
In connection with the appointment of the Chairman of
In connection with the appointment of the Chairman of
In connection with the appointment of the Chairman of
the Board of Management, the employment contract of
the Board of Management, the employment contract of
the Board of Management, the employment contract of
the Board of Management, the employment contract of
Mr. Diess was terminated by mutual agreement in 2018 and a
Mr. Diess was terminated by mutual agreement in 2018 and a
Mr. Diess was terminated by mutual agreement in 2018 and a
Mr. Diess was terminated by mutual agreement in 2018 and a
new employment contract was entered into, although the
new employment contract was entered into, although the
new employment contract was entered into, although the
new employment contract was entered into, although the
expiry rule described above applies from the 2018 –2020
expiry rule described above applies from the 2018 –2020
expiry rule described above applies from the 2018 –2020
expiry rule described above applies from the 2018 –2020
performance period onwards.
performance period onwards.
performance period onwards.
performance period onwards.
Ms. Werner was appointed as a member of the Board of
Ms. Werner was appointed as a member of the Board of
Ms. Werner was appointed as a member of the Board of
Ms. Werner was appointed as a member of the Board of
Management in 2017. Mr. Blume, Mr. Kilian and Mr. Sommer
Management in 2017. Mr. Blume, Mr. Kilian and Mr. Sommer
Management in 2017. Mr. Blume, Mr. Kilian and Mr. Sommer
Management in 2017. Mr. Blume, Mr. Kilian and Mr. Sommer
were newly appointed to the Board of Management in 2018.
were newly appointed to the Board of Management in 2018.
were newly appointed to the Board of Management in 2018.
were newly appointed to the Board of Management in 2018.
In the introductory phase of the performance share plan
In the introductory phase of the performance share plan
In the introductory phase of the performance share plan
In the introductory phase of the performance share plan
(2017–2018), the members of the Board of Management who
(2017–2018), the members of the Board of Management who
(2017–2018), the members of the Board of Management who
(2017–2018), the members of the Board of Management who
were Board members as of December 31, 2016 will generally
were Board members as of December 31, 2016 will generally
were Board members as of December 31, 2016 will generally
were Board members as of December 31, 2016 will generally
receive advances of 80% of their target amount. Mr. Stadler
receive advances of 80% of their target amount. Mr. Stadler
receive advances of 80% of their target amount. Mr. Stadler
receive advances of 80% of their target amount. Mr. Stadler
did not receive an advance payment for the performance
did not receive an advance payment for the performance
did not receive an advance payment for the performance
did not receive an advance payment for the performance
period 2018–2020. Mr. Blume will receive corresponding
period 2018–2020. Mr. Blume will receive corresponding
period 2018–2020. Mr. Blume will receive corresponding
period 2018–2020. Mr. Blume will receive corresponding
advances for the performance periods 2018–2020 (propor-
advances for the performance periods 2018–2020 (propor-
advances for the performance periods 2018–2020 (propor-
advances for the performance periods 2018–2020 (propor-
tionate) and 2019–2021. The two advances will each be paid
tionate) and 2019–2021. The two advances will each be paid
tionate) and 2019–2021. The two advances will each be paid
tionate) and 2019–2021. The two advances will each be paid
after the first year of the performance period. A settlement is
after the first year of the performance period. A settlement is
after the first year of the performance period. A settlement is
after the first year of the performance period. A settlement is
made based on actual achievement of targets at the end of
made based on actual achievement of targets at the end of
made based on actual achievement of targets at the end of
made based on actual achievement of targets at the end of
the relevant three-year performance period.
the relevant three-year performance period.
the relevant three-year performance period.
the relevant three-year performance period.
72
Remuneration Report
Group Management Report
C A L C U L A T I O N O F T H E P A Y M E N T A M O U N T F R O M T H E P E R F O R M A N C E S H A R E P L A N
T A R G E T
÷
Initial
reference price
P E R F O R M A N C E M E A S U R E M E N T
P R I C E P E R F O R M A N C E
A N D D I V I D E N DS
L TI
Provisional
performance shares
(number)
Final number determined for ⅓
of provisional performance shares
multiplied by annual target achievement EPS
per preferred share
Final
performance shares
(number)
×
Closing reference price
plus dividend
over term
=
Payment
amount
⅓
×
⅓
×
Target achievement EPS per preferred share
Fiscal year 2
⅓
×
Fiscal year 3
Fiscal year 1
I N F O R M AT I O N O N T H E P E R F O R M A N C E S H A R E S
€
Herbert Diess
Karlheinz Blessing (until April 12, 2018)
Oliver Blume (since April 13, 2018)
Francisco Javier Garcia Sanz (until April 12, 2018)
Jochem Heizmann
Gunnar Kilian (since April 13, 2018)
Matthias Müller (until April 12, 2018)
Andreas Renschler
Stefan Sommer (since September 1, 2018)
Rupert Stadler (until October 2, 2018)
Hiltrud Dorothea Werner (since February 1, 2017)
Frank Witter
Total
P E R F O R M A N C E P E R I O D 2 0 1 7 – 2 0 1 9
P E R F O R M A N C E P E R I O D 2 0 1 8 – 2 0 2 0
Number of performance
shares allocated
at the grant date
Fair value
at the grant date
Number of performance
shares allocated
at the grant date
Fair value
at the grant date
14,080
14,080
–
14,080
14,080
–
29,959
14,080
–
14,080
12,907
14,080
141,426
2,048,640
2,025,408
–
1,890,944
2,031,040
–
4,309,602
1,891,648
–
2,025,408
1,856,672
2,025,408
20,104,770
19,212
10,624
7,614
10,624
10,624
7,614
22,607
10,624
3,541
10,6241
10,624
10,624
134,956
1 In connection with Mr. Stadler’s departure, the number of performance shares allocated to him was reduced to 4,890 (fair value: €828,464).
€
Herbert Diess
Karlheinz Blessing (until April 12, 2018)
Oliver Blume (since April 13, 2018)
Francisco Javier Garcia Sanz (until April 12, 2018)
Jochem Heizmann
Gunnar Kilian (since April 13, 2018)
Matthias Müller (until April 12, 2018)
Andreas Renschler
Stefan Sommer (since September 1, 2018)
Rupert Stadler (until October 2, 2018)
Hiltrud Dorothea Werner (since February 1, 2017)
Frank Witter
Total
Provision as of
Dec. 31, 2018
Intrinsic value as of
Dec. 31, 2018
2,617,527
6,573,347
401,323
4,141,211
3,422,628
401,323
10,770,485
5,298,813
97,766
2,658,630
2,166,448
6,366,831
3,056,319
3,802,998
–
3,802,898
3,802,898
–
8,091,750
3,802,898
–
3,531,782
–
3,802,898
Comprehensive
income 2018
arising from
performance
shares
1,547,771
796,447
401,323
49,867
759,638
401,323
1,246,413
1,991,565
97,766
– 938,995
1,542,922
2,678,125
Provision as of
Dec. 31, 2017
Intrinsic value as of
Dec. 31, 2017
3,673,623
5,202,356
–
5,405,211
4,102,990
–
10,201,381
4,747,249
–
4,698,709
623,526
5,128,707
2,222,245
2,222,245
–
2,222,245
2,222,245
–
4,728,427
2,222,245
–
2,222,245
–
2,222,245
44,916,334
33,694,440
10,574,164
43,783,751
20,284,141
43,783,751
2,840,468
1,799,918
1,349,810
1,799,918
1,799,918
1,349,810
3,829,909
1,799,918
488,446
1,799,9181
1,799,918
1,799,918
22,457,869
Comprehensive
income 2017
arising from
performance
shares
3,673,623
5,202,356
–
5,405,211
4,102,990
–
10,201,381
4,747,249
–
4,698,709
623,526
5,128,707
Group Management Report
Remuneration Report
73
The number of performance shares includes the provisional
performance shares allocated at the grant date of the perfor-
mance share plan. The fair value as at the grant date was
determined using a recognized valuation technique.
The provision recognized as of December 31, 2018 reflects
the obligation to the members of the Board of Management.
To determine its amount, the performance shares expected
for future performance periods were taken into account in
addition to the provisional performance shares determined
or allocated for the performance periods 2017–2019 and
2018–2020. The amount therefore depends on the individual
contract term and the relevant vesting arrangements for the
performance shares. The intrinsic value was calculated in
accordance with IFRS 2 and corresponds to the amount that
the members of the Board of Management would have
received if they had stepped down on December 31, 2018.
Only the nonforfeitable (vested) performance shares at the
reporting date are included in the calculation. The intrinsic
value was calculated based on the unweighted average share
price for the 30 trading days (Xetra closing prices of Volks-
wagen’s preferred shares) preceding December 31, 2018,
taking the dividends paid per preferred share during the per-
formance period into account. The net value of all amounts
recognized in income for the performance shares in fiscal
year 2018 is recorded in comprehensive income 2018 arising
from performance shares according to the IFRSs.
Phantom preferred shares
The phantom preferred shares for the remuneration withheld
for 2015 will form part of the Board of Management remu-
neration until they are paid out in 2019.
Total remuneration cap
In addition to the cap on the individual variable components
of the remuneration for the members of the Board of Man-
agement, the annual benefits received according to the Code,
consisting of fixed remuneration and the variable remuner-
ation components (i.e. annual bonus and performance share
plan) for one fiscal year may not exceed an amount of
€10,000,000 for the Chairman of the Board of Management
and €5,500,000 for each member of the Board of Manage-
ment. If the total remuneration cap is exceeded, the variable
components will be reduced proportionately.
Regular review and adjustment
The Supervisory Board regularly reviews and, if necessary,
adjusts the level of the total remuneration cap and the
individual targets.
Other agreements
Members of the Board of Management with contracts entered
into on or after January 1, 2010 are entitled to payment of
their normal remuneration for six to twelve months in the
event of illness. Contracts entered into before that date grant
remuneration for six months. In the event of disability, they
are entitled to the retirement pension.
Surviving dependents receive a widow’s pension of 66 ⅔%
and orphans’ benefits of 20% of the former member of the
Board of Management’s pension. Contracts with members of
the Board of Management whose first term of office began
after April 1, 2015, provide for an entitlement – in line with
the principles of the works agreement that also applies to
employees of Volkswagen AG covered by collective agree-
ments – to a widow’s pension of 60%, an orphan’s benefit of
10% for half-orphans and an orphan’s benefit of 20% for full
orphans, based in each case on the former member of the
Board of Management’s pension.
74
Remuneration Report
Group Management Report
B E N E F I T S B A S E D O N P H A N TO M P R E F E R R E D S H A R E S F R O M T H E
R E M U N E R AT I O N W I T H H E L D F O R F I S C A L Y E A R 2 0 1 5
At its meeting on April 22, 2016, Volkswagen AG’s Super-
visory Board accepted the offer made by the members of the
Board of Management to withhold 30% of the variable remu-
neration for fiscal year 2015 for the Board of Management
members active on the date of the resolution and to make its
disposal subject to future share price performance.
This is being effected by first converting the amount
withheld based on the average share price for the 30 trading
days preceding April 22, 2016 (initial reference price) into
phantom preferred shares of Volkswagen AG with a three-
year holding period and, at the same time, defining a target
reference price corresponding to 125% of the initial reference
price. During the holding period, the phantom preferred
shares are entitled to dividend equivalents in the amount of
the dividends paid on real preferred shares.
The shares will generally be reconverted and paid out
when the three-year holding period has expired or – in the
event that members retire from office early – at the time they
do so.
To determine the payment amount, the average share
price for the 30 trading days preceding the last day of the
holding period, i.e. April 22, 2019, or the date upon which
members leave the company, will be calculated (closing
reference price). The difference between the target reference
price and the initial reference price will be deducted from the
closing reference price, and the dividends distributed on one
real Volkswagen preferred share during the holding period
(dividend equivalent) will be added to the closing reference
price. The figure thus calculated will be multiplied by the
number of phantom preferred shares so as to calculate the
amount to be paid to each Board of Management member.
This will ensure that – excluding any dividend equivalents
accrued – the amount withheld is only paid out in full if the
initial reference price of the preferred share has increased by
at least 25%. Otherwise, the amount will be reduced accor-
dingly to a minimum of €0. The amount disbursed may not
be more than twice the amount originally withheld.
In fiscal year 2018, Mr. Garcia Sanz and Mr. Müller – Board
members participating in the amount withheld – retired
from the Board of Management of Volkswagen AG, while
their contract of service remained in place. Therefore, they
did not receive any early disbursement. Moreover, the three-
year holding period still applies. Due to early termination of
the contract of service in 2018, Mr. Stadler received a pay-
ment from the amount withheld.
The number of phantom preferred shares granted on
April 22, 2016 to the members of the Board of Management
who were in office at that time did not change in fiscal year
2018. The fair value as of December 31, 2018 was determined
using a recognized valuation technique. The intrinsic value
was calculated in accordance with IFRS 2 and corresponds to
the amount that the members of the Board of Management
would have received if they had stepped down on December
31, 2018. The intrinsic value was calculated based on the
unweighted average share price for the 30 trading days (Xetra
closing prices of Volkswagen’s preferred shares) preceding
December 31, 2018, taking the initial reference price and the
dividends for the relevant fiscal years into account. The net
value of all amounts recognized in income for the phantom
shares in fiscal year 2018 is recorded in comprehensive
income 2018 arising
from phantom preferred shares
according to the IFRSs.
I N F O R M AT I O N O N T H E P H A N TO M P R E F E R R E D S H A R E S H E L D I N 2 0 1 8
€
Number of
phantom shares
Provision
Dec. 31, 2018
Provision
Dec. 31, 2017
Intrinsic value
Dec. 31, 2018
Intrinsic value
Dec. 31, 2017
Comprehensive
income 2018
arising from
phantom
preferred shares
Comprehensive
income 2017
arising from
phantom
preferred shares
Herbert Diess
4,317
512,740
596,428
540,704
620,051
– 83,688
169,732
Francisco Javier Garcia Sanz
(until April 12, 2018)
Jochem Heizmann
Matthias Müller
(until April 12, 2018)
Andreas Renschler
Rupert Stadler
(until October 2, 2018)
Frank Witter
Total
8,633
8,633
10,583
7,914
8,633
1,990
1,025,361
1,025,361
1,256,967
939,964
1,192,718
1,192,718
1,462,126
1,093,382
1,081,283
1,081,283
1,325,521
991,229
1,239,958
1,239,958
1,520,036
1,136,688
–
1,192,718
–
1,239,958
236,357
274,934
249,248
285,824
– 47,418
– 167,356
– 58,128
– 153,418
– 68,178
– 38,577
339,425
339,425
416,094
311,156
339,425
78,241
50,703
4,996,750
7,005,022
5,269,268
7,282,472
– 616,764
1,993,496
Group Management Report
Remuneration Report
75
R E M U N E R AT I O N O F T H E M E M B E R S O F T H E B O A R D O F M A N A G E M E N T I N A C C O R D A N C E W I T H T H E G E R M A N C O M M E R C I A L C O D E
€
Herbert Diess
Karlheinz Blessing (until April 12, 2018)
Oliver Blume (since April 13, 2018)
Francisco Javier Garcia Sanz (until April 12, 2018)
Jochem Heizmann
Gunnar Kilian (since April 13, 2018)
Matthias Müller (until April 12, 2018)
Andreas Renschler
Stefan Sommer (since September 1, 2018)
Rupert Stadler (until October 2, 2018)
Hiltrud Dorothea Werner (since February 1, 2017)
Frank Witter
Members of the Board of Management who left in the
previous year
2 0 1 8
2 0 1 7
Non-performance-
Performance-
related
related
Long-term
incentive
Total
Total
component
component
component
remuneration
remuneration
1,982,182
483,329
1,013,499
469,821
1,605,076
1,027,207
672,083
1,596,305
579,020
687,284
1,522,095
1,413,363
3,055,182
435,831
1,152,506
435,831
1,608,147
1,152,506
983,042
1,608,147
536,049
643,642
1,608,147
1,608,147
2,840,468
1,799,918
1,349,810
1,799,918
1,799,918
1,349,810
3,829,909
1,799,918
488,446
1,799,9181
1,799,918
1,799,918
7,877,832
2,719,078
3,515,815
2,705,570
5,013,141
3,529,523
5,485,033
5,004,370
1,603,515
3,130,844
4,930,160
4,821,428
5,034,323
5,193,502
–
5,009,209
5,139,764
–
10,140,544
5,025,264
–
5,002,721
4,626,272
5,004,967
–
–
–
–
109,361
Total
13,051,264
14,827,178
22,457,869
50,336,310
50,285,927
1 In connection with Mr. Stadler’s departure, the number of performance shares allocated to him was reduced to 4,890 (fair value: €828,464).
R E M U N E R AT I O N O F T H E M E M B E R S O F T H E B O A R D O F
M A N A G E M E N T I N A C C O R D A N C E W I T H T H E G E R M A N C O R P O R AT E
G O V E R N A N C E C O D E
The amounts shown as benefits received in the Board of
Management remuneration tables in accordance with the
Code correspond, in principle, to the amounts paid out for
the fiscal year in question.
In the introductory phase of the performance share plan
(2017 to 2018), the members of the Board of Management
who were Board members as of December 31, 2016 generally
received advances on the target amount, which in accordance
with the Code are reported in the tables as benefits received
for the fiscal year in which the performance shares under the
plan were allocated; Mr. Stadler did not receive an advance
for the 2018–2020 performance period. Mr. Blume will
receive corresponding advances for the performance period
2018–2020 (proportionate) and 2019–2021.
The amounts shown as benefits granted in the Board of
Management remuneration tables in accordance with the
Code are based on 100% of the targets for the annual bonus
and on the fair value at the grant date for the performance
share plan. Since the new members of the Board of Manage-
ment were appointed on different dates throughout 2018,
there is an individual grant date for these Board members
and, consequently, a different fair value.
In the Board of Management remuneration tables in
accordance with the Code showing benefits received, entries
for the phantom preferred shares from the amount withheld
for fiscal year 2015 are only included for Mr. Stadler. No other
payments for the phantom preferred shares were made in
financial year 2018.
76
Remuneration Report
Group Management Report
R E M U N E R AT I O N O F T H E M E M B E R S O F T H E B O A R D O F M A N A G E M E N T ( B E N E F I T S R E C E I V E D A N D B E N E F I T S G R A N T E D ) I N A C C O R D A N C E
W I T H T H E G E R M A N C O R P O R AT E G O V E R N A N C E C O D E
H E R B E R T D I E S S
Chairman of the Board of Management of Volkswagen AG,
Chairman of the Brand Board of Management of Volkswagen Passenger Cars,
Volume brand group
€
Fixed remuneration
Fringe benefits
Total
One-year performance-related remuneration
Multiyear performance-related remuneration
LTI (performance share plan 2017–2019)
LTI (performance share plan 2018–2020)
Total1
Pension expense
Total remuneration
Benefits received
Benefits granted
2018
2017
2017
2018
2018 (minimum)
2018 (maximum)
1,905,414
1,350,000
1,350,000
1,905,414
1,905,414
1,905,414
76,768
1,982,182
3,055,182
2,603,867
–
2,603,867
7,641,230
850,620
78,104
1,428,104
1,557,579
1,440,000
1,440,000
–
78,104
1,428,104
1,350,000
2,048,640
2,048,640
–
4,425,683
4,826,744
814,654
814,654
76,768
1,982,182
2,564,750
2,840,468
–
2,840,468
7,387,400
850,620
76,768
1,982,182
0
0
–
0
76,768
1,982,182
4,616,550
6,509,667
–
6,509,667
1,982,182
13,108,398
850,620
850,620
8,491,850
5,240,337
5,641,398
8,238,020
2,832,802
13,959,018
1 The fixed remuneration agreed with Mr. Diess for fiscal year 2018 is €1,905,414, while the target amount for the annual bonus is €2,564,750, the target amount for the performance
share plan is €3,254,833 and the total remuneration cap is €8,725,000. The values were calculated pro rata for the term of office as a full member of the Board of Management up until
April 12, 2018 and for the term of office as Chairman of the Board of Management starting April 13, 2018.
K A R L H E I N Z B L E S S I N G
Human Resources and Organization
Left: April 12, 2018
€
Fixed remuneration
Fringe benefits
Total
One-year performance-related remuneration
Multiyear performance-related remuneration
LTI (performance share plan 2017–2019)
LTI (performance share plan 2018–2020)
Total1
Pension expense
Total remuneration
Benefits received
Benefits granted
2018
2017
2017
2018
2018 (minimum)
2018 (maximum)
382,500
100,829
483,329
435,831
408,000
–
408,000
1,350,000
1,350,000
260,515
1,610,515
1,557,579
1,440,000
1,440,000
–
260,515
1,610,515
1,350,000
2,025,408
2,025,408
–
1,327,160
4,608,094
4,985,923
236,664
686,413
686,413
382,500
100,829
483,329
382,500
1,799,918
–
1,799,918
2,665,747
236,664
382,500
100,829
483,329
0
0
–
0
1,092,496
236,664
382,500
100,829
483,329
688,500
3,600,000
–
3,600,000
4,771,829
236,664
1,563,824
5,294,507
5,672,336
2,902,411
1,329,159
5,008,493
1 Minimum amount for 2018 includes a prorated top-up amount on minimum remuneration of €3.5 million.
Group Management Report
Remuneration Report
77
R E M U N E R AT I O N O F T H E M E M B E R S O F T H E B O A R D O F M A N A G E M E N T ( B E N E F I T S R E C E I V E D A N D B E N E F I T S G R A N T E D ) I N A C C O R D A N C E
W I T H T H E G E R M A N C O R P O R AT E G O V E R N A N C E C O D E
O L I V E R B L U M E
Chairman of the Board of Management of Dr. Ing. h.c. F. Porsche AG,
Sport & Luxury brand group
Joined: April 13, 2018
€
Fixed remuneration
Fringe benefits
Total
One-year performance-related remuneration
Multiyear performance-related remuneration
LTI (performance share plan 2018–2020)
Total
Pension expense
Total remuneration
Benefits received
Benefits granted
2018
2017
2017
2018
2018 (minimum)
2018 (maximum)
967,500
45,999
1,013,499
1,152,506
1,032,000
1,032,000
3,198,005
588,354
3,786,359
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
967,500
45,999
967,500
45,999
1,013,499
1,013,499
967,500
1,349,810
1,349,810
3,330,809
588,354
0
0
0
1,013,499
588,354
967,500
45,999
1,013,499
1,741,500
2,580,000
2,580,000
5,334,999
588,354
3,919,163
1,601,853
5,923,353
F R A N C I S C O J A V I E R G A R C I A S A N Z
Procurement
Left: April 12, 2018
€
Fixed remuneration
Fringe benefits
Total
One-year performance-related remuneration
Multiyear performance-related remuneration
LTI (performance share plan 2017–2019)
LTI (performance share plan 2018–2020)
Total
Pension expense
Total remuneration
Benefits received
Benefits granted
2018
2017
2017
2018
2018 (minimum)
2018 (maximum)
382,500
87,321
469,821
435,831
408,000
–
408,000
1,350,000
1,350,000
210,686
1,560,686
1,557,579
1,440,000
1,440,000
–
210,686
1,560,686
1,350,000
1,890,944
1,890,944
–
1,313,652
4,558,265
4,801,631
250,087
889,410
889,410
382,500
87,321
469,821
382,500
1,799,918
–
1,799,918
2,652,239
250,087
1,563,740
5,447,675
5,691,041
2,902,326
382,500
87,321
469,821
0
0
–
0
469,821
250,087
719,908
382,500
87,321
469,821
688,500
3,600,000
–
3,600,000
4,758,321
250,087
5,008,408
78
Remuneration Report
Group Management Report
R E M U N E R AT I O N O F T H E M E M B E R S O F T H E B O A R D O F M A N A G E M E N T ( B E N E F I T S R E C E I V E D A N D B E N E F I T S G R A N T E D ) I N A C C O R D A N C E
W I T H T H E G E R M A N C O R P O R AT E G O V E R N A N C E C O D E
J O C H E M H E I Z M A N N
China
€
Fixed remuneration
Fringe benefits
Total
One-year performance-related remuneration
Multiyear performance-related remuneration
LTI (performance share plan 2017–2019)
LTI (performance share plan 2018–2020)
Total
Pension expense
Total remuneration
Benefits received
Benefits granted
2018
2017
2017
2018
2018 (minimum)
2018 (maximum)
1,350,000
1,351,278
1,351,278
1,350,000
1,350,000
1,350,000
255,076
1,605,076
1,608,147
1,440,000
–
1,440,000
4,653,223
–
199,867
1,551,145
1,557,579
1,440,000
1,440,000
–
199,867
1,551,145
1,350,000
2,031,040
2,031,040
–
4,548,724
4,932,185
–
–
255,076
1,605,076
1,350,000
1,799,918
–
1,799,918
4,754,994
–
255,076
1,605,076
0
0
–
0
1,605,076
–
255,076
1,605,076
2,430,000
3,600,000
–
3,600,000
7,635,076
–
4,653,223
4,548,724
4,932,185
4,754,994
1,605,076
7,635,076
G U N N A R K I L I A N
Human Resources
Joined: April 13, 2018
€
Fixed remuneration
Fringe benefits
Total
One-year performance-related remuneration
Multiyear performance-related remuneration
LTI (performance share plan 2018–2020)
Total
Pension expense
Total remuneration
Benefits received
Benefits granted
2018
2017
2017
2018
2018 (minimum)
2018 (maximum)
967,500
59,707
1,027,207
1,152,506
–
–
2,179,713
703,228
2,882,941
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
967,500
59,707
967,500
59,707
1,027,207
1,027,207
967,500
1,349,810
1,349,810
3,344,517
703,228
0
0
0
1,027,207
703,228
967,500
59,707
1,027,207
1,741,500
2,580,000
2,580,000
5,348,707
703,228
4,047,745
1,730,435
6,051,935
Group Management Report
Remuneration Report
79
R E M U N E R AT I O N O F T H E M E M B E R S O F T H E B O A R D O F M A N A G E M E N T ( B E N E F I T S R E C E I V E D A N D B E N E F I T S G R A N T E D ) I N A C C O R D A N C E
W I T H T H E G E R M A N C O R P O R AT E G O V E R N A N C E C O D E
M A T T H I A S M Ü L L E R
Chairman of the Board of Management
Left: April 12, 2018
€
Fixed remuneration
Fringe benefits
Total
One-year performance-related remuneration
Multiyear performance-related remuneration
LTI (performance share plan 2017–2019)1
LTI (performance share plan 2018–2020)1
Total
Pension expense
Total remuneration
Benefits received
Benefits granted
2018
2017
2017
2018
2018 (minimum)
2018 (maximum)
602,083
70,000
672,083
983,042
1,085,167
–
1,085,167
2,740,292
187,207
2,125,000
2,125,000
192,735
2,317,735
3,513,207
3,830,000
3,830,000
–
192,735
2,317,735
3,045,000
4,309,602
4,309,602
–
9,660,942
9,672,337
612,807
612,807
602,083
70,000
672,083
862,750
3,829,909
–
3,829,909
5,364,742
187,207
2,927,498
10,273,749
10,285,144
5,551,949
602,083
70,000
672,083
0
0
–
0
672,083
187,207
859,290
602,083
70,000
672,083
1,552,950
7,660,000
–
7,660,000
9,885,033
187,207
10,072,240
1 Advance of 100% in the introductory phase of the performance share plan, pro rata for 2018.
A N D R E A S R E N S C H L E R
Chairman of the Board of Management of TRATON SE,
Truck & Bus brand group
€
Fixed remuneration
Fringe benefits
Total
One-year performance-related remuneration
Multiyear performance-related remuneration
LTI (performance share plan 2017–2019)
LTI (performance share plan 2018–2020)
Total
Pension expense
Total remuneration
Benefits received
Benefits granted
2018
2017
2017
2018
2018 (minimum)
2018 (maximum)
1,350,000
1,350,000
1,350,000
1,350,000
1,350,000
1,350,000
246,305
1,596,305
1,608,147
1,440,000
–
1,440,000
4,644,452
5,249,526
9,893,978
226,037
1,576,037
1,557,579
1,440,000
1,440,000
–
4,573,616
5,361,551
9,935,167
226,037
1,576,037
1,350,000
1,891,648
1,891,648
–
4,817,685
5,361,551
10,179,236
246,305
1,596,305
1,350,000
1,799,918
–
1,799,918
4,746,223
5,249,526
9,995,749
246,305
1,596,305
0
0
–
0
1,596,305
5,249,526
6,845,831
246,305
1,596,305
2,430,000
3,600,000
–
3,600,000
7,626,305
5,249,526
12,875,831
80
Remuneration Report
Group Management Report
R E M U N E R AT I O N O F T H E M E M B E R S O F T H E B O A R D O F M A N A G E M E N T ( B E N E F I T S R E C E I V E D A N D B E N E F I T S G R A N T E D ) I N A C C O R D A N C E
W I T H T H E G E R M A N C O R P O R AT E G O V E R N A N C E C O D E
S T E F A N S O M M E R
Components & Procurement
Joined: September 1, 2018
€
Fixed remuneration
Fringe benefits
Total
One-year performance-related remuneration
Multiyear performance-related remuneration
LTI (performance share plan 2018–2020)
Total1
Pension expense
Total remuneration
Benefits received
Benefits granted
2018
2017
2017
2018
2018 (minimum)
2018 (maximum)
450,000
129,020
579,020
536,049
–
–
1,295,687
270,997
1,566,684
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
450,000
129,020
579,020
450,000
488,446
488,446
450,000
129,020
579,020
0
0
0
1,517,466
1,295,687
270,997
270,997
450,000
129,020
579,020
810,000
1,200,000
1,200,000
2,589,020
270,997
1,788,463
1,566,684
2,860,017
1 Benefits received and the minimum amount for 2018 include a prorated top-up amount on minimum remuneration of €3.5 million.
R U P E R T S T A D L E R
Chairman of the Board of Management of AUDI AG,
Premium brand group
Left: October 2, 2018
Benefits received
Benefits granted
2018
2017
2017
2018
2018 (minimum)
2018 (maximum)
621,370
65,914
687,284
643,642
–
–
1,044,593
2,375,519
379,726
1,350,000
1,350,000
69,734
1,419,734
1,557,579
1,440,000
1,440,000
–
–
69,734
1,419,734
1,350,000
2,025,408
2,025,408
–
–
621,370
65,914
687,284
621,370
1,799,918
–
1,799,9181
–
621,370
65,914
687,284
0
0
–
0
–
4,417,313
4,795,142
3,108,572
829,730
829,730
379,726
687,284
379,726
621,370
65,914
687,284
1,118,466
3,600,000
–
3,600,000
–
5,405,750
379,726
2,755,245
5,247,043
5,624,872
3,488,298
1,067,010
5,785,476
Multiyear performance-related remuneration
1,044,593
€
Fixed remuneration
Fringe benefits
Total
One-year performance-related remuneration
LTI (performance share plan 2017–2019)
LTI (performance share plan 2018–2020)
Phantom shares
Total
Pension expense
Total remuneration
1 In connection with Mr. Stadler’s departure, the number of performance shares allocated to him was reduced to 4,890 (fair value: €828,464).
Group Management Report
Remuneration Report
81
R E M U N E R AT I O N O F T H E M E M B E R S O F T H E B O A R D O F M A N A G E M E N T ( B E N E F I T S R E C E I V E D A N D B E N E F I T S G R A N T E D ) I N A C C O R D A N C E
W I T H T H E G E R M A N C O R P O R AT E G O V E R N A N C E C O D E
H I L T R U D D O R O T H E A W E R N E R
Integrity and Legal Affairs
Joined: February 1, 2017
€
Fixed remuneration
Fringe benefits
Total
One-year performance-related remuneration
Multiyear performance-related remuneration
LTI (performance share plan 2017–2019)
LTI (performance share plan 2018–2020)
Total
Pension expense
Total remuneration
Benefits received
Benefits granted
2018
2017
2017
2018
2018 (Minimum)
2018 (Maximum)
1,350,000
1,237,500
1,237,500
1,350,000
1,350,000
1,350,000
172,095
1,522,095
1,608,147
104,319
1,341,819
1,427,781
–
–
–
–
–
–
104,319
1,341,819
1,237,500
1,856,672
1,856,672
–
3,130,242
2,769,600
4,435,991
953,404
930,689
930,689
172,095
1,522,095
1,350,000
1,799,918
–
1,799,918
4,672,013
953,404
172,095
1,522,095
0
0
–
0
1,522,095
953,404
172,095
1,522,095
2,430,000
3,600,000
–
3,600,000
7,552,095
953,404
4,083,646
3,700,289
5,366,680
5,625,417
2,475,499
8,505,499
F R A N K W I T T E R
Finance & IT
€
Fixed remuneration
Fringe benefits
Total
One-year performance-related remuneration
Multiyear performance-related remuneration
LTI (performance share plan 2017–2019)
LTI (performance share plan 2018–2020)
Total
Pension expense
Total remuneration
Benefits received
Benefits granted
2018
2017
2017
2018
2018 (Minimum)
2018 (Maximum)
1,350,000
1,350,000
1,350,000
1,350,000
1,350,000
1,350,000
63,363
1,413,363
1,608,147
1,440,000
–
1,440,000
4,461,510
849,556
71,980
1,421,980
1,557,579
1,440,000
1,440,000
–
71,980
1,421,980
1,350,000
2,025,408
2,025,408
–
4,419,559
4,797,388
692,743
692,743
63,363
1,413,363
1,350,000
1,799,918
–
1,799,918
4,563,281
849,556
63,363
1,413,363
0
0
–
0
1,413,363
849,556
63,363
1,413,363
2,430,000
3,600,000
–
3,600,000
7,443,363
849,556
5,311,066
5,112,302
5,490,131
5,412,837
2,262,919
8,292,919
82
Remuneration Report
Group Management Report
P O ST - E M P L OYM E N T B E N E F I T S
In the event of regular termination of their service on the
Board of Management, the members of the Board of Man-
agement are entitled to a pension, including a surviving
dependents’ pension, as well as the use of company cars for
the period in which they receive their pension. The agreed
benefits are paid or made available when the Board of
Management member reaches the age of 63. As a departure
from this principle, Mr. Renschler is able to start drawing his
pension when he reaches the age of 62.
The retirement provision for members of the Board of
Management with an existing occupational pension based on
final remuneration is calculated as a percentage of the fixed
remuneration, starting from 50%. For Mr. Garcia Sanz,
Mr. Heizmann, Mr. Renschler and Mr. Stadler, the individual
percentages rise by two percentage points for every year of
service. For Mr. Müller, the percentage increases by 4.5% as of
March 1, 2017 and 2018. In specific cases, credit is given
for previous employment periods and retirement pensions
earned. In a departure from this rule, a retirement pension
entitlement of 62% of the fixed level of remuneration was set
for Mr. Renschler on his appointment. The Supervisory Board
has capped the percentage at 70%. These benefits are not
broken down any further into performance-related compo-
nents and long-term incentive components. Mr. Heizmann
reached a retirement pension entitlement of 70% of his fixed
level of remuneration at the end of 2018; the entitlement for
Mr. Renschler is 68%. The increase in the fixed remuneration
as a consequence of the remuneration system in place from
fiscal year 2017 is therefore not taken into account for the
incumbent members of the Board of Management of Volks-
wagen AG with an existing occupational pension based on
final remuneration. Current pensions are index-linked in
accordance with the index-linking of the highest collectively
agreed salary insofar as the application of section 16 of the
Gesetz zur Verbesserung der betrieblichen Altersversorgung
(BetrAVG – German Company Pension Act) does not lead to a
larger increase.
For the members of the Board of Management of Volks-
wagen AG appointed before February 24, 2017 with a defined
contribution pension scheme, a contribution rate of 50% of
the fixed remuneration applies. For the members of the
Board of Management of Volkswagen AG appointed after
February 24, 2017 with a defined contribution pension
scheme, a contribution rate of 40% of the fixed remuneration
applies. The resulting amount will be credited to the pension
account.
Ms. Werner, Mr. Blessing, Mr. Blume, Mr. Diess, Mr. Kilian,
Mr. Sommer and Mr. Witter received a defined contribution
plan, which is based in principle on a works agreement that
also applies to the employees of Volkswagen AG covered by
collective agreements and includes retirement, invalidity and
surviving dependents’ benefits. A pension contribution in
the amount of 50% of the fixed level of remuneration for
Ms. Werner, Mr. Blessing, Mr. Diess and Mr. Witter and in the
amount of 40% of the fixed level of remuneration for
Mr. Blume, Mr. Kilian and Mr. Sommer is paid to Volkswagen
Pension Trust e.V. at the end of the calendar year for each year
they are appointed to the Board of Management. The annual
pension contributions result in modules of what is, in
principle, a lifelong pension in line with the arrangements
that also apply to employees covered by collective agree-
ments. The individual pension modules vest immediately
upon payment to Volkswagen Pension Trust e.V. Instead of a
lifelong pension, benefits can optionally be paid out as a
lump sum or in installments when the beneficiary reaches
retirement age – currently 63 at the earliest. Volkswagen AG
has assumed responsibility for pension entitlements due to
Mr. Witter from the time before his service with the Com-
pany, although these cannot be claimed before he reaches the
age of 60.
On December 31, 2018, the pension obligations for
members of the Board of Management in accordance with
IAS 19 amounted to €55.8 (125.4) million. €11.9 (12.9) million
was added to the provision in the reporting period in
accordance with IAS 19. Other benefits such as surviving
dependents’ pensions and the use of company cars are also
factored into the measurement of pension provisions. The
pension obligations measured in accordance with German
GAAP amounted to €45.9 (92.4) million. Measured in accor-
dance with German GAAP, €9.5 (15.8) million was added to
the provision in the reporting period.
Retired members of the Board of Management and their
surviving dependents received €44.0 (19.9) million, or €44.0
(19.9) million measured in accordance with German GAAP, in
the past year. Obligations for pensions for this group of
persons measured in accordance with IAS 19 amounted to
€324.0 (269.0) million, or €276.2 (214.9) million measured in
accordance with German GAAP.
The following rule applies to Board of Management con-
tracts entered into for the first term of office before August 5,
2009: the retirement pension to be granted after a member of
the Board of Management leaves the Company is payable
immediately if the member’s contract is not renewed by the
Company, or when the member reaches the age of 63. Any
remuneration received from other sources until the age of 63
is deductible from the benefit entitlement up to a certain
fixed amount.
The following general rule applies to contracts for the first
term of office of members of the Board of Management
entered into after August 5, 2009: the retirement pension to
be granted after a member of the Board of Management
leaves the Company is payable when the member reaches the
age of 63.
Group Management Report
Remuneration Report
83
E A R LY T E R M I N AT I O N B E N E F I T S
If the appointment to the Board of Management is termi-
nated for cause through no fault of the Board of Management
member, the claims under Board of Management contracts
entered into since November 20, 2009 are limited to a maxi-
mum of two years’ remuneration, in accordance with the
recommendation in section 4.2.3(4) of the Code (severance
payment cap). For Board of Management members who are
commencing their third or later term of office, existing rights
under contracts entered into before November 20, 2009 are
grandfathered.
No severance payment is made if the appointment to the
Board of Management is terminated for good reason for
which the Board of Management member is responsible. The
members of the Board of Management are also entitled to a
pension and to a surviving dependents’ pension as well as the
use of company cars for the period in which they receive their
pension in the event of early termination of their service on
the Board of Management.
Please refer to notes 43 and 46 to the consolidated finan-
cial statements and the notes to the annual financial
statements of Volkswagen AG for more detailed individual
disclosures relating to members of the Board of Management
who left the Company in fiscal year 2018.
P E N S I O N S O F T H E M E M B E R S O F T H E B O A R D O F M A N A G E M E N T I N 2 0 1 8 ( P R I O R - Y E A R F I G U R E S I N B R A C K E T S )
€
Herbert Diess
Karlheinz Blessing (until April 12, 2018)
Oliver Blume (since April 13, 2018)
Francisco Javier Garcia Sanz (until April 12, 2018)
Jochem Heizmann
Gunnar Kilian (since April 13, 2018)
Matthias Müller (until April 12, 2018)
Andreas Renschler
Stefan Sommer (since September 1, 2018)
Rupert Stadler (until October 2, 2018)
Hiltrud Dorothea Werner (since February 1, 2017)
Frank Witter
Pension expense
Present values as of
December 311
850,620
(814,654)
236,664
(686,413)
588,354
–
250,087
(889,410)
–
–
703,228
–
187,207
(612,807)
5,249,526
(5,361,551)
270,997
–
379,726
(829,730)
953,404
(930,689)
849,556
(692,743)
3,410,933
(2,169,255)
–
(1,623,275)
588,354
–
–
(22,544,823)
18,098,438
(19,254,055)
703,228
–
–
(30,065,068)
20,109,236
(16,278,653)
270,997
–
–
(22,262,176)
1,872,035
(975,823)
10,765,942
(10,214,190)
Members of the Board of Management who left in the previous year
Total
(54,091)
10,519,369
(10,872,088)
–
55,819,163
(125,387,318)
1 The amount is reported in the total amount for defined benefit plans reported in the balance sheet (see note 29 to the consolidated financial statements).
84
Remuneration Report
Group Management Report
> Committee chairpersons receive double this amount, while
deputy chairpersons receive one-and-a-half times the com-
mittee remuneration listed above.
> Membership of no more than two committees is taken into
account, whereby the two functions with the highest
remuneration are counted if this maximum number is
exceeded.
> Supervisory Board members who belonged to the Super-
visory Board or one of its committees for only part of the
fiscal year receive proportionate remuneration.
> Supervisory Board members receive an attendance fee of
€1,000 for attending a meeting of the Supervisory Board or
one of its committees; if several meetings are held on one
day, the attendance fee is paid only once.
> The remuneration and attendance fees are each payable
after the end of the fiscal year.
In fiscal year 2018, the members of the Supervisory Board
received €4,538,986 (3,786,839). Of this figure, €2,297,500
related to the work of the Supervisory Board and €936,389
related to the work in the committees.
S U P E R V I S O R Y B O A R D R E M U N E R AT I O N
Following its regular review of Supervisory Board remu-
neration, the Supervisory Board proposed a reorganization of
the system of Supervisory Board remuneration to the 2017
Annual General Meeting, which was approved on May 10,
2017 with 99.98% of the votes cast. The remuneration of the
members of the Supervisory Board of Volkswagen AG is
comprised entirely of non-performance-related remunera-
tion components. Remuneration for supervisory board work
at subsidiaries continues in part to comprise a mix of non-
performance-related and performance- related components.
The following applies to members of the Supervisory
Board of Volkswagen AG with effect from January 1, 2017:
> Members of the Supervisory Board receive fixed remu-
neration of €100,000 per fiscal year.
> The Chairman of the Supervisory Board receives fixed
remuneration of €300,000, while the Deputy Chairman
receives remuneration of €200,000.
> For their work in the Supervisory Board committees, the
members of the Supervisory Board also receive additional
fixed remuneration of €50,000 per committee per fiscal
year provided the committee met at least once per year for
the performance of its duties. Memberships of the Nomi-
nation and Mediation Committees established in accor-
dance with section 27(3) of the Mitbestimmungsgesetz
(MitbestG – German Codetermination Act) are not taken
into account.
Group Management Report
Remuneration Report
85
R E M U N E R AT I O N O F T H E M E M B E R S O F T H E S U P E R V I S O R Y B O A R D
€
Hans Dieter Pötsch
Jörg Hofmann3
Hussain Ali Al-Abdulla
Hessa Sultan Al-Jaber
Bernd Althusmann4 (since December 14, 2017)
Birgit Dietze3
Annika Falkengren (until February 5, 2018)
Hans-Peter Fischer3
Marianne Heiß (since February 14, 2018)
Uwe Hück3
Johan Järvklo3
Ulrike Jakob3 (since May 10, 2017)
Louise Kiesling
Peter Mosch3
Bertina Murkovic3 (since May 10, 2017)
Bernd Osterloh3
Hans Michel Piëch
Ferdinand Oliver Porsche
Wolfgang Porsche
Athanasios Stimoniaris3 (since May 10, 2017)
Stephan Weil4
Members of the Supervisory Board who left in the previous year
F I X E D
R E M U N E R A -
W O R K I N T H E
T I O N
C O M M I T T E E S
O T H E R 1
T O T A L
T O T A L
300,000
200,000
100,000
100,000
100,000
100,000
9,444
100,000
88,056
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
–
100,000
75,000
–
–
43,194
50,000
–
–
43,194
–
–
–
–
100,000
50,000
125,000
–
150,000
150,000
–
50,000
–
184,500
19,000
8,000
11,000
12,000
17,000
–
14,000
67,050
84,500
14,000
12,000
11,000
146,589
14,000
39,233
172,000
162,500
172,500
130,225
14,000
–
2018
584,500
294,000
108,000
111,000
155,194
167,000
9,444
114,000
198,300
184,500
114,000
112,000
111,000
346,589
164,000
264,233
272,000
412,500
422,500
230,225
164,000
–
2017
–2
295,000
107,000
111,000
4,583
163,000
150,750
109,000
–
180,500
110,000
68,028
111,000
293,107
102,042
226,021
250,600
397,100
411,400
170,778
174,000
351,931
Total
2,297,500
936,389
1,305,097
4,538,986
3,786,839
1 Attendance fees, membership of other Group bodies (non-performance-related: €355,483; performance-related: €534,614).
2 Mr. Pötsch waived his remuneration for fiscal year 2017 in full.
3 These employee representatives have stated that they will transfer their Supervisory Board remuneration to the Hans Böckler Foundation in accordance with the guidelines issued by
the German Confederation of Trade Unions (DGB).
4 Under section 5(3) of the Niedersächsisches Ministergesetz (German Act Governing Ministers of the State of Lower Saxony), these members of the Supervisory Board are obliged to
transfer their Supervisory Board remuneration to the State of Lower Saxony as soon as and to the extent that it exceeds €6,200 per annum. Remuneration is defined for this purpose as
Supervisory Board remuneration and attendance fees exceeding the amount of €200.
86
Executive Bodies
Group Management Report
Executive Bodies
Members of the Board of Management and their appointments
Appointments: as of December 31, 2018 or the leaving date from the Board of Management of Volkswagen AG
DR.-ING. HERBERT DIESS (60)
DR. RER. POL. H.C.
Chairman (since April 13, 2018)
FRANCISCO JAVIER GARCIA SANZ (61)
ANDREAS RENSCHLER (60)
Chairman of the Board of Management of TRATON AG2,
Chairman of the Brand Board of Management
Procurement
of Volkswagen Passenger Cars,
Volume brand group,
China (since January 11, 2019)
July 1, 20151
Appointments:
July 1, 2001 – April 12, 20181
Appointments (as of April 12, 2018):
Hochtief AG, Essen
Criteria CaixaHolding S.A., Barcelona
Truck & Bus brand group
February 1, 20151
Appointments:
Deutsche Messe AG, Hanover
ABRAHAM SCHOT (57)
FC Bayern München AG, Munich
PROF. DR. RER. POL. DR.-ING. E.H.
Chairman of the Board of Management of AUDI AG,
Infineon Technologies AG, Neubiberg
JOCHEM HEIZMANN (66)
DR. RER. SOC. KARLHEINZ BLESSING (61)
January 11, 2007 – January 10, 20191
China
Premium brand group
January 1, 20191
Human Resources and Organization
January 1, 2016 – April 12, 20181
Appointments (as of April 12, 2018):
Wolfsburg AG, Wolfsburg
OLIVER BLUME (50)
Chairman of the Executive Board of
Dr. Ing. h.c. F. Porsche AG,
Sport & Luxury brand group
April 13, 20181
Appointments (as of January 10, 2019):
DR.-ING. STEFAN SOMMER (55)
Lufthansa Technik AG, Hamburg
Components & Procurement
OBO Bettermann Holding GmbH Co. KG, Menden
September 1, 20181
GUNNAR KILIAN (43)
RUPERT STADLER (55)
Human Resources
April 13, 20181
Appointments:
Wolfsburg AG, Wolfsburg
MATTHIAS MÜLLER (65)
Chairman
March 1, 2015 – April 12, 20181
Chairman of the Board of Management of AUDI AG,
Premium brand group
January 1, 2010 – October 2, 20181
Appointments (as of October 2, 2018):
FC Bayern München AG, Munich
HILTRUD DOROTHEA WERNER (52)
Integrity and Legal Affairs
February 1, 20171
FRANK WITTER (59)
Finance & IT
October 7, 20151
As part of their duty to manage and supervise the
Membership of statutory supervisory boards in
1 Beginning or period of membership of the Board of
Group’s business, the members of the Board of
Germany.
Management.
Management hold other offices on the supervisory
Comparable appointments in Germany and abroad.
2 Formerly Volkswagen Truck & Bus GmbH or
boards of consolidated Group companies and other
significant investees.
Volkswagen Truck & Bus AG; now TRATON SE.
Group Management Report
Executive Bodies
87
Executive Bodies
Members of the Supervisory Board and their appointments
Appointments: as of December 31, 2018 or the leaving date from the Supervisory Board of Volkswagen AG
HANS DIETER PÖTSCH (67)
DR. HUSSAIN ALI AL-ABDULLA (61)
DR. BERND ALTHUSMANN (52)
Chairman (since October 7, 2015)
Minister of State, Qatar
Minister of Economic Affairs, Labor, Transport and
Chairman of the Executive Board and
April 22, 20101
Chief Financial Officer of Porsche Automobil Holding SE
Appointments:
Digitalization for the Federal State of Lower Saxony
December 14, 20171
October 7, 20151
Appointments:
AUDI AG, Ingolstadt
Gulf Investment Corporation, Safat/Kuwait
Appointments:
Masraf Al Rayan, Doha (Chairman)
Qatar Investment Authority, Doha
Deutsche Messe AG, Hanover (Chairman)
Container Terminal Wilhelmshaven JadeWeserPort-
Autostadt GmbH, Wolfsburg
Qatar Supreme Council for Economic Affairs
Marketing GmbH & Co. KG, Wilhelmshaven
Bertelsmann Management SE, Gütersloh
and Investment, Doha
(Chairman)
Bertelsmann SE & Co. KGaA, Gütersloh
Dr. Ing. h.c. F. Porsche AG, Stuttgart
TRATON AG2, Munich (Chairman)
Wolfsburg AG, Wolfsburg
DR. HESSA SULTAN AL-JABER (59)
Wilhelmshaven (Chairman)
Chairwoman of the Supervisory Board of
JadeWeserPort Realisierungs-Beteiligungs GmbH,
Malomatia Qatar, Doha
Wilhelmshaven (Chairman)
JadeWeserPort Realisierungs GmbH & Co. KG,
Porsche Austria Gesellschaft m.b.H., Salzburg
Chairwoman of the Supervisory Board of
Niedersachsen Ports GmbH & Co. KG, Oldenburg
(Chairman)
Qatar Satellite Company (Es'hailSat), Doha
(Chairman)
Porsche Holding Gesellschaft m.b.H., Salzburg
Member of the Consultative Assembly (Shura Council)
(Chairman)
of the state Qatar, Doha
BIRGIT DIETZE (45)
Porsche Retail GmbH, Salzburg (Chairman)
VfL Wolfsburg-Fußball GmbH, Wolfsburg
June 22, 20161
Appointments:
First authorized representative of IG Metall Berlin
June 1, 20161
(Deputy Chairman)
Malomatia, Doha (Chairwoman)
Appointments:
Qatar Satellite Company (Es'hailSat), Doha
Volkswagen Bank GmbH, Braunschweig
JÖRG HOFMANN (63)
(Chairwoman)
Deputy Chairman (since November 20, 2015)
Trio Investment, Doha (Chairwoman)
ANNIKA FALKENGREN (56)
First Chairman of IG Metall
November 20, 20151
Appointments:
Robert Bosch GmbH, Stuttgart
Managing Partner of
Compagnie Lombard Odier SCmA
May 3, 2011 – February 5, 20181
DR. JUR. HANS-PETER FISCHER (59)
Chairman of the Board of Management of
Volkswagen Management Association
January 1, 20131
Appointments:
Volkswagen Pension Trust e.V., Wolfsburg
Membership of statutory supervisory boards in
1 Beginning or period of membership of the
Germany.
Supervisory Board.
Comparable appointments in Germany and abroad.
2 Formerly Volkswagen Truck & Bus GmbH or
Volkswagen Truck & Bus AG; now TRATON SE.
88
Executive Bodies
Group Management Report
MARIANNE HEIß (46)
BERTINA MURKOVIC (61)
DR. JUR. FERDINAND OLIVER PORSCHE (57)
Chief Financial Officer of BBDO Group
Chairwoman of the Works Council of
Member of the Board of Management of Familie
Germany GmbH, Düsseldorf
Volkswagen Commercial Vehicles
Porsche AG Beteiligungsgesellschaft
February 14, 20181
Appointments:
AUDI AG, Ingolstadt
Porsche Automobil Holding SE, Stuttgart
May 10, 20171
Appointments:
MOIA GmbH, Berlin
BERND OSTERLOH (62)
UWE HÜCK (56)
Chairman of the General and Group Works Councils of
Chairman of the General and Group Works Councils of
Volkswagen AG
Dr. Ing. h.c. F. Porsche AG
July 1, 2015 – February 8, 20191
Appointments (as of February 8, 2019):
Dr. Ing. h.c. F. Porsche AG, Stuttgart
(Deputy Chairman)
January 1, 20051
Appointments:
Autostadt GmbH, Wolfsburg
TRATON AG2, Munich
Wolfsburg AG, Wolfsburg
August 7, 20091
Appointments:
AUDI AG, Ingolstadt
Dr. Ing. h.c. F. Porsche AG, Stuttgart
Porsche Automobil Holding SE, Stuttgart
TRATON AG2, Munich
Porsche Holding Gesellschaft m.b.H., Salzburg
Porsche Lizenz- und
Handelsgesellschaft mbH & Co. KG, Ludwigsburg
DR. RER. COMM. WOLFGANG PORSCHE (75)
Chairman of the Supervisory Board of
JOHAN JÄRVKLO (45)
Porsche Holding Gesellschaft m.b.H., Salzburg
Chairman of the Supervisory Board of
Secretary-General of the European and Global Group
SEAT, S.A., Martorell
Dr. Ing. h.c. F. Porsche AG
Allianz für die Region GmbH, Braunschweig
Porsche Automobil Holding SE;
Works Council of Volkswagen AG
November 22, 20151
ULRIKE JAKOB (58)
ŠKODA Auto a.s., Mladá Boleslav
VfL Wolfsburg-Fußball GmbH, Wolfsburg
April 24, 20081
Appointments:
Volkswagen Immobilien GmbH, Wolfsburg
AUDI AG, Ingolstadt
Dr. Ing. h.c. F. Porsche AG, Stuttgart (Chairman)
Porsche Automobil Holding SE, Stuttgart
Deputy Chairwoman of the Works Council of
DR. JUR. HANS MICHEL PIËCH (76)
Volkswagen AG, Kassel plant
Lawyer in private practice
(Chairman)
May 10, 20171
DR. LOUISE KIESLING (61)
Businesswoman
April 30, 20151
August 7, 20091
Appointments:
AUDI AG, Ingolstadt
Familie Porsche AG Beteiligungsgesellschaft,
Salzburg (Chairman)
Porsche Cars Great Britain Ltd., Reading
Dr. Ing. h.c. F. Porsche AG, Stuttgart
Porsche Cars North America Inc., Atlanta
Porsche Automobil Holding SE, Stuttgart
Porsche Holding Gesellschaft m.b.H., Salzburg
(Deputy Chairman)
Porsche Ibérica S.A., Madrid
PETER MOSCH (46)
Porsche Cars Great Britain Ltd., Reading
Porsche Italia S.p.A., Padua
Chairman of the General Works Council of AUDI AG
January 18, 20061
Appointments:
Porsche Cars North America Inc., Atlanta
Schmittenhöhebahn AG, Zell am See
Porsche Holding Gesellschaft m.b.H., Salzburg
Porsche Ibérica S.A., Madrid
AUDI AG, Ingolstadt (Deputy Chairman)
Porsche Italia S.p.A., Padua
Audi Pensionskasse – Altersversorgung der
Schmittenhöhebahn AG, Zell am See
AUTO UNION GmbH, VVaG, Ingolstadt
Volksoper Wien GmbH, Vienna
Membership of statutory supervisory boards in
1 Beginning or period of membership of the
Germany.
Supervisory Board.
Comparable appointments in Germany and abroad.
2 Formerly Volkswagen Truck & Bus GmbH or
Volkswagen Truck & Bus AG; now TRATON SE.
Group Management Report
Executive Bodies
89
ATHANASIOS STIMONIARIS (47)
COMMITTEES OF THE SUPERVISORY BOARD
Chairman of the Group Works Council of MAN SE
AS OF DECEMBER 31, 2018
and of the SE Works Council
May 10, 20171
Appointments:
MAN SE, Munich
Members of the Executive Committee
Hans Dieter Pötsch (Chairman)
Jörg Hofmann (Deputy Chairman)
MAN Truck & Bus AG, Munich (Deputy Chairman)
Peter Mosch
Rheinmetall MAN Military Vehicles GmbH, Munich
TRATON AG2, Munich (Deputy Chairman)
Bernd Osterloh
Dr. Wolfgang Porsche
Stephan Weil
STEPHAN WEIL (60)
Minister-President of the Federal State of
Members of the Mediation Committee established in
Lower Saxony
February 19, 20131
accordance with section 27(3) of the
Mitbestimmungsgesetz (German
Codetermination Act)
WERNER WERESCH (57)
Hans Dieter Pötsch (Chairman)
Chairman of the General and Group Works Councils of
Jörg Hofmann (Deputy Chairman)
Dr. Ing. h.c. F. Porsche AG
February 21, 20191
Appointments (as of February 21, 2019):
Bernd Osterloh
Stephan Weil
Dr. Ing. h.c. F. Porsche AG, Stuttgart
Members of the Audit Committee
Dr. Ferdinand Oliver Porsche (Chairman)
Bernd Osterloh (Deputy Chairman)
Birgit Dietze
Marianne Heiß
Members of the Nomination Committee
Hans Dieter Pötsch (Chairman)
Dr. Wolfgang Porsche
Stephan Weil
Special Committee on Diesel Engines
Dr. Wolfgang Porsche (Chairman)
Dr. Bernd Althusmann
Peter Mosch
Bertina Murkovic
Bernd Osterloh
Dr. Ferdinand Oliver Porsche
Membership of statutory supervisory boards in
1 Beginning or period of membership of the
Germany.
Supervisory Board.
Comparable appointments in Germany and abroad.
2 Formerly Volkswagen Truck & Bus GmbH or
Volkswagen Truck & Bus AG; now TRATON SE.
90
Disclosures Required Under Takeover Law
Group Management Report
Disclosures Required Under
Takeover Law
This section contains the Volkswagen Group’s disclosures relating to takeover law
required by sections 289a(1) and 315a(1) of the HGB.
C A P I TA L ST R U C T U R E
Volkswagen AG’s share capital amounted to €1,283,315,873.28
(€1,283,315,873.28) on December 31, 2018. It was composed
of 295,089,818 ordinary shares and 206,205,445 preferred
shares. Each share conveys a notional interest of €2.56 in the
share capital.
S H A R E H O L D E R R I G H T S A N D O B L I G AT I O N S
The shares convey pecuniary and administrative rights. The
pecuniary rights include in particular the shareholders’ right
to participate in profits (section 58(4) of the Aktiengesetz
(AktG – German Stock Corporation Act)), the right to
participate in liquidation proceeds (section 271 of the AktG)
and preemptive rights to shares in the event of capital
increases (section 186 of the AktG) that can be disapplied by
the Annual General Meeting with the approval of the Special
Meeting of Preferred Shareholders, where appropriate.
Administrative rights include the right to attend the Annual
General Meeting to speak there, to ask questions, to propose
motions and to exercise voting rights. Shareholders can
enforce these rights in particular through actions seeking
disclosure and actions for avoidance.
Each ordinary share grants the holder one vote at the
Annual General Meeting. The Annual General Meeting elects
shareholder representatives to the Supervisory Board and
elects the auditors;
it resolves on the
in particular,
appropriation of net profit, formally approves the actions of
the Board of Management and the Supervisory Board, and
resolves on amendments to the Articles of Association of
Volkswagen AG, capitalization measures and authorizations
to purchase treasury shares; if required, it also resolves on the
performance of a special audit, the removal before the end of
their term of office of Supervisory Board members elected at
the Annual General Meeting and the winding-up of the
Company.
Preferred shareholders generally have no voting rights.
However, in the exceptional case that they are granted voting
rights by law (for example, when preferred share dividends
were not paid in one year and not compensated for in full in
the following year), each preferred share also grants the
holder one vote at the Annual General Meeting. Furthermore,
preferred shares entitle the holder to a €0.06 higher dividend
than ordinary shares (further details on this right to preferred
and additional dividends are specified in Article 27(2) of the
Articles of Association of Volkswagen AG).
The Gesetz über die Überführung der Anteilsrechte an der
Volkswagenwerk Gesellschaft mit beschränkter Haftung in
private Hand (VW-Gesetz – Act on the Privatization of Shares
of Volkswagenwerk Gesellschaft mit beschränkter Haftung) of
July 21, 1960, as amended on July 30, 2009, includes various
provisions in derogation of the German Stock Corporation
Act, for example on the exercise of voting rights by proxy
(section 3 of the VW-Gesetz) and on majority voting require-
ments at the Annual General Meeting (section 4(3) of the VW-
Gesetz).
In accordance with the Volkswagen AG Articles of Asso-
ciation (Article 11(1)), the State of Lower Saxony is entitled to
appoint two members of the Supervisory Board of Volks-
wagen AG for as long as it directly or indirectly holds at least
15% of Volkswagen AG’s ordinary shares. In addition, reso-
lutions by the Annual General Meeting that are required by
law to be adopted by a qualified majority require a majority
of more than four-fifths of the share capital of the Company
represented when the resolution is adopted (Article 25(2)),
regardless of the provisions of the VW-Gesetz.
S H A R E H O L D I N G S E XC E E D I N G 1 0 % O F V O T I N G R I G H T S
Shareholdings in Volkswagen AG that exceed 10% of voting
rights are shown in the notes to the annual financial
statements of Volkswagen AG, which are available online at
https://www.volkswagenag.com/en/InvestorRelations.html.
The current notifications regarding changes in voting rights
in accordance with the Wertpapierhandelsgesetz (WpHG –
German Securities Trading Act) are also published on this
website.
Group Management Report
Disclosures Required Under Takeover Law
91
C O M P O S I T I O N O F T H E S U P E R V I S O R Y B O A R D
The Supervisory Board consists of 20 members, half of whom
are shareholder representatives. In accordance with Article
11(1) of the Articles of Association of Volkswagen AG, the
State of Lower Saxony is entitled to appoint two of these
shareholder representatives for as long as it directly or indi-
rectly holds at least 15% of the Company’s ordinary shares.
The remaining shareholder representatives on the Super-
visory Board are elected by the Annual General Meeting.
The other half of the Supervisory Board consists of
employee representatives elected by the employees in accor-
dance with the Mitbestimmungsgesetz (MitbestG – German
Codetermination Act). A total of seven of these employee
representatives are Company employees elected by the work-
force; the other three employee representatives are trade
union representatives elected by the workforce.
The Chairman of the Supervisory Board is generally a
shareholder representative elected by the other members of
the Supervisory Board. In the event that a Supervisory Board
vote is tied, the Chairman of the Supervisory Board has a
casting vote in accordance with the MitbestG.
The goals for the composition of the Supervisory Board
are described on page 60 of the Corporate Governance Report.
Information about the composition of the Supervisory Board
at the end of the reporting period can be found on pages 87
to 89 of this annual report.
STAT U TO R Y R E Q U I R E M E N T S A N D R E Q U I R E M E N T S O F T H E A R T I -
C L E S O F A S S O C I AT I O N W I T H R E G A R D TO T H E A P P O I N T M E N T A N D
R E M O VA L O F B O A R D O F M A N A G E M E N T M E M B E R S A N D TO
A M E N D M E N T S T O T H E A R T I C L E S O F A S S O C I AT I O N
The appointment and removal of members of the Board of
Management are governed by sections 84 and 85 of the AktG,
which specify that members of the Board of Management are
appointed by the Supervisory Board for a maximum of five
years. Board of Management members may be reappointed
or have their term of office extended for a maximum of five
years in each case. In addition, Article 6 of the Articles of
Association of Volkswagen AG states that the number of
Board of Management members is stipulated by the Super-
visory Board and that the Board of Management must consist
of at least three persons.
The Annual General Meeting resolves amendments to the
Articles of Association (section 119(1) of the AktG). In accor-
dance with section 4(3) of the VW-Gesetz as amended on
July 30, 2009 and Article 25(2) of the Articles of Association of
Volkswagen AG, Annual General Meeting resolutions to
amend the Articles of Association require a majority of more
than four-fifths of the share capital represented.
P O W E R S O F T H E B O A R D O F M A N A G E M E N T, I N PA R T I C U L A R C O N -
C E R N I N G T H E I S S U E O F N E W S H A R E S A N D T H E R E P U R C H A S E O F
T R E A S U R Y S H A R E S
According to German stock corporation law, the Annual
General Meeting can authorize the Board of Management, for
a maximum period of five years, to issue new shares. It can
also authorize the Board of Management, for a maximum
period of five years, to issue bonds on the basis of which new
shares are to be issued. The Annual General Meeting also
decides the extent to which shareholders have preemptive
rights to the new shares or bonds. The maximum amount of
authorized share capital or contingent capital available for
these purposes is determined by Article 4 of the Articles of
Association of Volkswagen AG, as amended.
At the Annual General Meeting on May 5, 2015, a reso-
lution was passed authorizing the Board of Management,
with the consent of the Supervisory Board, to increase the
Company’s share capital by a total of up to €179.2 million
(corresponding to 70 million shares) on one or more occa-
sions up to May 4, 2020 by issuing new nonvoting preferred
shares against cash contributions.
Further details of the authorization to issue new shares
and their permitted uses may be found in the notes to the
consolidated financial statements on page 261.
M AT E R I A L A G R E E M E N T S O F T H E PA R E N T C O M PA N Y I N T H E E V E N T
O F A C H A N G E O F C O N T R O L F O L L O W I N G A TA K E O V E R B I D
A banking syndicate granted Volkswagen AG a syndicated line
of credit amounting to €5.0 billion that runs until April 2020.
The syndicate members were granted the right to call their
portion of the syndicated line of credit if Volkswagen AG is
merged with a third party or becomes a subsidiary of another
company. However, this call right does not apply in the event
of a merger by absorption of Porsche Holding SE, one of its
subsidiaries, or one of its holding companies and Volkswagen
AG in which Volkswagen AG is the acquiring legal entity.
92
Diesel Issue
Group Management Report
Diesel Issue
In agreement with the respective responsible authorities, the Volkswagen Group is making
technical measures available worldwide for virtually all diesel vehicles with type EA 189 engines.
The regulatory offense proceedings of the public prosecutor’s office in Braunschweig against
Volkswagen AG, which began in April 2016, and that of the Munich II public prosecutor’s office
against AUDI AG have both been concluded with orders imposing administrative fines.
Special items totaling €–3.2 billion had to be accounted for in fiscal year 2018.
I R R E G U L A R I T I E S C O N C E R N I N G N O X E M I S S I O N S
On September 18, 2015, the US Environmental Protection
Agency (EPA) publicly announced in a “Notice of Violation”
that irregularities in relation to nitrogen oxide (NOx) emis-
sions had been discovered in emissions tests on certain
vehicles of Volkswagen Group with type 2.0 l diesel engines in
the USA. In this context, Volkswagen AG announced that
noticeable discrepancies between the figures achieved in
testing and in actual road use had been identified in around
eleven million vehicles worldwide with type EA 189 diesel
engines. On November 2, 2015, the EPA issued a “Notice of
Violation” alleging that irregularities had also been discov-
ered in the software installed in US vehicles with type V6 3.0 l
diesel engines.
Numerous court and governmental proceedings were
subsequently initiated in the USA and the rest of the world.
We have since succeeded in making substantial progress and
ending a great number of these proceedings. Detailed infor-
mation on the pending court and governmental proceedings
can be found in the Report on Risks and Opportunities,
starting on page 177.
E X T E N S I V E I N V E ST I G AT I O N S I N I T I AT E D B Y T H E
V O L K SWA G E N G R O U P
After the first “Notice of Violation” was issued, Volkswagen AG
immediately initiated its own internal as well as external
investigations; both have since been concluded for the most
part.
The Supervisory Board of Volkswagen AG formed a special
committee that coordinates this board’s activities relating to
the diesel issue on its behalf.
Furthermore, in September 2015 Volkswagen AG and AUDI AG
filed a criminal complaint in Germany against unknown
persons. Volkswagen AG and AUDI AG are cooperating with
all relevant authorities.
The regulatory offense proceedings of the public prose-
cutor’s office in Braunschweig against Volkswagen AG, which
began in April 2016, and the regulatory offense proceedings
of the Munich II public prosecutor’s office against AUDI AG
have both been concluded with administrative fine orders.
Work in respect of the legal proceedings that are still
pending in the USA and the rest of the world is ongoing, still
requires considerable efforts, and will continue for some
time. Volkswagen AG is being advised by a number of
external law firms in this connection.
The diesel issue is rooted in a modification of parts of the
software of the relevant engine’s control units – which,
according to Volkswagen AG’s legal position, is only unlawful
under US law – for the type EA 189 diesel engines that
Volkswagen AG was developing at that time. The decision to
develop and install this software function was taken in late
2006 below Board of Management level. None of the
members of the Board of Management had, at that time and
for many years to follow, knowledge of the development and
implementation of this software function.
In the months following publication of a study by the
International Council on Clean Transportation in May 2014,
Volkswagen AG’s Powertrain Development department
checked the test set-ups on which the study was based for
plausibility, confirming the unusually high NOx emissions
from certain US vehicles with type EA 189 2.0 l diesel engines.
The California Air Resources Board (CARB) – a part of the
environmental regulatory authority of California – was
informed of this result, and, at the same time, an offer was
made to recalibrate the engine control unit software of type
Group Management Report
Diesel Issue
93
EA 189 diesel engines in the USA as part of a service measure
that was already planned in the USA. This measure was
evaluated and adopted by the Ausschuss für Produkt-
sicherheit (APS – Product Safety Committee), which initiates
necessary and appropriate measures to ensure the safety and
conformity of Volkswagen AG’s products that are placed in
the market. There are no findings that an unlawful “defeat
device” under US law was disclosed to the APS as the cause of
the discrepancies or to the persons responsible for preparing
the 2014 annual and consolidated financial statements.
Instead, at the time the 2014 annual and consolidated finan-
cial statements were being prepared, the persons responsible
for preparing the 2014 annual and consolidated financial
statements remained under the impression that the issue
could be solved with comparatively little effort as part of a
service measure.
In the course of the summer of 2015, however, it became
successively apparent to individual members of Volks-
wagen AG’s Board of Management that the cause of the
discrepancies in the USA was a modification of parts of the
software of the engine control unit, which was later identified
as an unlawful “defeat device” as defined by US law. This
culminated in the disclosure of a “defeat device” to EPA and
CARB on September 3, 2015. According to the assessment at
that time of the responsible persons dealing with the matter,
the scope of the costs expected by the Volkswagen Group
(recall costs, retrofitting costs and financial penalties) was not
fundamentally dissimilar to that of previous cases involving
other vehicle manufacturers, and, therefore, appeared to be
controllable overall with a view to the business activities of
the Volkswagen Group. This assessment by the Volkswagen
Group was based, among other things, on the advice of a law
firm engaged in the USA for approval issues, according to
which similar cases in the past were resolved amicably with
the US authorities. The publication of the “Notice of Vio-
lation” by the EPA on September 18, 2015, which, especially at
that time, came unexpectedly to the Board of Management,
then presented the situation in an entirely different light.
Extensive inquiries were also conducted at AUDI AG in
relation to the potential use of unlawful “defeat devices”
under US law in the type V6 3.0 l diesel engines and con-
cluded for the most part.
The AUDI AG Board of Management members in office back
at the relevant time have stated that they had no knowledge
of the use of unlawful “defeat device” software under US law
in the type V6 3.0 l TDI engines until they were informed by
the EPA in November 2015.
Within the Volkswagen Group, Volkswagen AG has devel-
opment responsibility for the four-cylinder diesel engines
such as the type EA 189, and AUDI AG has development
responsibility for the six- and eight-cylinder diesel engines
such as the type V6 3.0 l and V8 diesel engines.
A F F E C T E D V E H I C L E S I N T H E E U / R E ST O F W O R L D
With the exception of the USA and Canada, around ten mil-
lion vehicles with type EA 189 diesel engines were affected
worldwide.
In agreement with the respective responsible authorities,
the Volkswagen Group is making technical measures avail-
able worldwide for virtually all diesel vehicles with type
EA 189 engines.
AUDI AG has worked intensively for many months to
check all relevant diesel concepts for possible discrepancies
and retrofit potentials. The measures proposed by AUDI AG
have been adopted and mandated in various recall notices
issued by the Kraftfahrt-Bundesamt (KBA – German Federal
Motor Transport Authority) for vehicle models with V6 and
V8 TDI engines.
A F F E C T E D V E H I C L E S I N T H E U S A / C A N A D A
In the USA and Canada three generations of certain vehicles
with 2.0 l TDI engines and two generations of certain vehicles
with the type V6 3.0 l TDI engines are affected, which come to
a total of approximately 700 thousand vehicles. Due to NOx
limits that are considerably stricter than in the EU and the
rest of the world, it is a greater technical challenge here to
retrofit the vehicles so that the emission standards defined in
the settlement agreements for these vehicles can be achieved.
In the USA, in fiscal year 2018, the EPA and CARB issued
the outstanding official approvals needed for the technical
solutions for the affected vehicles with 2.0 l TDI and with V6
3.0 l TDI engines. In the case of 2.0 l Generation 2 diesel
vehicles with manual transmissions, Volkswagen Group of
America, Inc. elected to withdraw the approved emissions
modification proposal, whereby owners were given the
option of a buyback and lessees were given the option of
early lease termination.
94
Diesel Issue
Group Management Report
L E G A L R I S K S
Various legal risks are associated with the diesel issue. The
provisions recognized for the diesel issue and the contingent
liabilities disclosed as well as the other latent legal risks are in
part subject to substantial estimation risks given that the fact
finding efforts have not yet been concluded, the complexity
of the individual relevant factors and the ongoing coordi-
nation with the authorities. Should these legal or estimation
risks materialize, this could result in further considerable
financial charges.
There are no conclusive findings or assessments of facts
available to the Board of Management of Volkswagen AG that
would suggest that a different assessment of the associated
risks (e.g. investor lawsuits) should have been made. A detailed
description of these and other risks arising from the diesel
issue can be found in the Report on Risks and Opportunities
starting on page 177.
O P E R AT I N G R E S U LT
Special items recognized in operating profit relating to the
diesel issue amounted to €–3.2 (–3.2) billion in fiscal year
2018 and were mainly attributable to the legally final
administrative fine orders imposed by the public prosecutor’s
office in Braunschweig against Volkswagen AG (€1.0 billion)
and by the Munich II public prosecutor’s office against AUDI AG
(€0.8 billion), higher legal risks and legal defense costs, as well
as higher expenses for technical measures.
The diesel issue led to total special items of €–29.0 billion
in the years 2015 to 2018.
Group Management Report
Business Development
95
Business Development
The robust growth of the global economy continued in fiscal year 2018 with a slight decrease in
momentum. Global demand for vehicles was somewhat lower than in the previous year. Amid
persistently challenging market conditions, the Volkswagen Group delivered 10.8 million vehicles
to customers.
D E V E L O P M E N T S I N T H E G L O B A L E C O N O MY
The global economy sustained its robust growth in 2018 with
a slight decrease in momentum: global gross domestic prod-
uct (GDP) rose by 3.2 (3.3)%. Economic momentum nearly
matched the prior-year level both in advanced economies
and emerging markets. With interest rates remaining com-
paratively low and prices for energy and other commodities
rising year-on-year on the whole, consumer prices continued
to increase worldwide. Growing upheaval in trade policy at
international level and geopolitical tensions led to much
greater uncertainty.
Europe/Other Markets
The solid GDP growth in Western Europe slowed to 1.8 (2.3)%
as the year went on. The rate of change in the majority of
countries in this region decreased compared with the
previous year. The Brexit negotiations between the United
Kingdom and the European Union (EU), which continued for
the entire year, generated uncertainty, as did the related
question of what form this relationship would take in the
future. The unemployment rate in the eurozone continued to
decrease, falling to an average of 8.1 (9.0)%, though rates
remained considerably higher in Greece and Spain.
At 2.9 (4.0)%, the Central and Eastern Europe region also
recorded a slower growth rate in the reporting period than in
the previous year. While the comparatively high level of GDP
growth in Central Europe slowed down on the whole,
economic growth in Eastern Europe remained unchanged.
Higher prices for energy and other commodities led to
further stabilization of the economic situation in the
countries from this region that export raw materials. Russia’s
economy improved somewhat with a growth rate of 1.6 (1.5)%.
Growth in the Turkish economy slumped substantially to
2.5 (7.3)% after the first half of 2018. South Africa’s GDP rose
by just 0.7 (1.3)% in the reporting period, down on the already
low figure for the previous year. Ongoing structural deficits,
social unrest and political challenges weighed on the
economy.
Germany
Germany’s GDP continued to grow in 2018 on the back of the
good labor market, however, momentum diminished year-
on-year to 1.5 (2.5)%. Both company and consumer senti-
ment darkened as the year progressed.
North America
Economic growth in the USA picked up in the reporting
period, reaching 2.9 (2.2)%. The economy was supported
mainly by domestic consumer demand. The unemployment
rate in the United States in 2018 was at 3.9 (4.3)%. Based on
the stable situation in the labor market and the expected
inflation trend, the US Federal Reserve successively raised its
key interest rate. The US dollar gained strength against the
euro in the course of the year. In neighboring Canada and
Mexico, GDP grew at a slower rate than in the previous year,
at 2.1 (3.0)% and 2.2 (2.3)%, respectively.
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Business Development
Group Management Report
E C O N O M I C G R O W T H
Percentage change in GDP
9
9
8
8
7
7
6
6
5
5
4
4
3
3
2
2
1
1
0
0
–1
–1
Global economy
Western Europe
Germany
USA
China
2014
2015
2016
2017
2018
South America
Brazil’s economy once again recorded slight growth, at
1.4 (1.1)%. However, the situation in South America’s largest
economy remained tense due to political uncertainty, among
other factors. The economic situation in Argentina deteri-
orated increasingly as the year went on. The country was in
recession amid persistently high inflation: GDP fell by
1.7 (+2.9)%. In view of this difficult situation, the Argentine
government requested financial aid from the International
Monetary Fund.
Asia-Pacific
China’s economy recorded a growth rate of 6.6 (6.9)% in 2018,
but its rate of expansion was not quite as strong as in the
previous year. The Chinese government responded to the
trade disputes with the United States by stepping up state
support measures. The Indian economy continued its posi-
tive trend, with growth in the reporting period of 7.2 (6.7)%.
However, the pace of growth tapered off in the course of the
year. Japan’s GDP grew by only 0.8 (1.9)%.
T R E N D S I N T H E PA S S E N G E R C A R M A R K E T S
In fiscal year 2018, the global market volume of passenger
cars fell slightly below the prior-year level to 82.8 million
vehicles (–1.2%) after increasing for eight years in a row. This
decrease was attributable in particular to weaker perfor-
mance in the Western Europe and Asia-Pacific regions in the
fourth quarter. In the reporting period, stronger demand in
Central and Eastern Europe as well as in South America was
offset by declining volumes in the Asia-Pacific, Middle East,
North America and Western Europe regions.
Sector-specific environment
The sector-specific environment was influenced significantly
by fiscal policy measures, which contributed considerably to
the mixed trends in sales volumes in the markets last year.
These measures included tax cuts or increases, incentive
programs and sales incentives, as well as import duties.
In addition, non-tariff trade barriers to protect the respec-
tive domestic automotive industry made the movement of
vehicles, parts and components more difficult.
Europe/Other Markets
In Western Europe, the total number of new passenger car
registrations in the reporting period was down 0.7% in total
on the prior-year figure, at 14.2 million. The continuing
strong macroeconomic environment, positive consumer
sentiment and low interest rates generated a slight increase
in the first half of the year. The changeover to the new WLTP
(Worldwide Harmonized Light-Duty Vehicles Test Procedure)
as of September 1, 2018 led to pull-forward effects in the
months of July and August and to significant declines from
September until December in some cases. New vehicle
registrations were mixed in the largest single markets. Spain
(+7.0%) and France (+3.0%) continued to record increases.
Both countries benefited from a buoyant macroeconomic
Group Management Report
Business Development
97
E X C H A N G E R A T E M O V E M E N T S F R O M D E C E M B E R 2 0 1 7 T O D E C E M B E R 2 0 1 8
Index based on month-end prices: as of December 31, 2017= 100
EUR to GBP
EUR to USD
EUR to CNY
EUR to JPY
105
105
100
100
95
95
90
90
D
J
F
M
A
M
J
J
A
S
O
N
D
environment. In Italy, falling demand from both private and
commercial customers put a damper on market development
(–3.1%), among other things, as a consequence of the political
uncertainty during and after the formation of government.
The UK passenger car market saw a continuation of the
negative trend from the previous year (–6.8%). This was due,
among other things, to the uncertain outcome of the Brexit
negotiations with the EU. The share of diesel vehicles
(passenger cars) in Western Europe slipped to 36.4 (44.4)% in
the reporting year.
In the Central and Eastern Europe region, the market
volume of passenger cars in fiscal year 2018 rose markedly by
11.0% year-on-year to 3.4 million vehicles. New passenger car
registrations in the EU member states of Central Europe
increased further by 8.0% to 1.4 million units. Passenger car
sales in Eastern Europe also achieved a double-digit growth
rate (+13.1%), starting from a low level. The Russian market
was the main growth driver in the region with an increase of
13.2%. This was mainly attributable to government programs
to promote sales as well as to pull-forward effects resulting
from a value-added tax increase entering into force on
January 1, 2019.
The Turkish passenger car market recorded a substantial
drop in demand of 32.7%, largely due to the rapidly deteri-
orating macroeconomic situation. In South Africa (–0.1%),
the number of new passenger car registrations in the
reporting period stayed at the comparatively low level seen in
recent years. The change in political environment as a result
of the new presidency had little positive impact on the overall
economy and the automotive market.
Germany
Amounting to 3.4 million units (–0.2%) in the reporting
period, passenger car registrations in Germany sustained the
previous year’s high level. This was attributable not only to
the buoyant macroeconomic environment but also to manu-
facturer discounts in the form of trade-in and scrapping
bonuses for older diesel models as well as to an environ-
mental bonus for electric-powered vehicles (all-electric and
plug-in hybrid drives). The changeover to the WLTP test
procedure as of September 1, 2018, which limited model
availability in some cases, in total led to a slightly declining
overall market, whereas the rise in new registrations for
private customers (+2.0%) in particular had a positive effect.
Domestic production and exports once again fell short of
the comparable prior-year figures in 2018: passenger car
production decreased by 9.3% to 5.1 million vehicles, while
passenger car exports fell by 8.9% to 4.0 million units. This
was primarily caused by declining volumes in Europe
resulting to some extent from the changeover to the WLTP.
98
Business Development
Group Management Report
North America
At 20.7 million vehicles, sales of passenger cars and light
commercial vehicles (up to 6.35 tonnes) in the North America
region in fiscal year 2018 did not match the high prior-year
figure (–0.6%). In the US market, demand was almost flat on
the 2017 level at 17.3 million units (+0.2%). A favorable labor
market and the greater purchasing power of consumers
largely compensated for increased financing costs resulting
from higher interest rates. The shift in demand from
traditional passenger cars (–13.5%) to light commercial vehi-
cles such as SUVs and pickup models (+8.1%) also continued
in the reporting period. Due to sales figures, which had
declined since the second quarter, the Canadian automotive
market remained below the record figure of the previous year
(–2.6%). In Mexico, sales of passenger cars and light com-
mercial vehicles fell short of the prior-year figure (–6.6%) for
the second year in a row.
South America
In the markets of the South America region, the recovery
continued in the reporting period – starting from a low
level – with demand for passenger cars and light commercial
vehicles rising by 6.2% to 4.5 million units. The main driver
was the Brazilian automotive market, whose 13.8% growth
outperformed the strong momentum of the preceding year.
However, the market volume was still around a third lower
than the record figure for 2012. Brazil’s vehicle exports
declined to 629 thousand units in the course of 2018, a
decrease of 17.9% on the previous year’s record high. Particu-
larly from mid-year onwards, exports were impacted by the
market trend in Argentina, where demand slumped on
account of the progressive deterioration of the macroeco-
nomic situation (–10.4%).
T R E N D S I N T H E M A R K E T S F O R C O M M E R C I A L V E H I C L E S
Overall demand for light commercial vehicles in fiscal year
2018 was slightly lower than in the previous year. A total of
9.0 (9.2) million vehicles were registered worldwide.
Despite the uncertain outcome of the Brexit negotiations
between the EU and the UK, new registrations in Western
Europe were up 2.8% to 2.0 million units. In Germany, the
comparative figure for 2017 was exceeded by 6.0%. The
market in Spain grew distinctly and the market in France
recorded moderate growth, while Italy and the United King-
dom registered a decline.
The markets in Central and Eastern Europe grew notice-
ably on the whole, with 352 (324) thousand light commercial
vehicle registrations including 130 (124) thousand in Russia
alone. Most of the markets in this region succeeded in
maintaining or exceeding their prior-year results.
In North and South America, the light vehicle market is
reported as part of the passenger car market, which includes
both passenger cars and light commercial vehicles.
Registration volumes of light commercial vehicles in the
Asia-Pacific region decreased to 6.0 million units (–2.7%) in
the reporting period. In China, the region’s dominant market
and the largest market worldwide, demand for light com-
mercial vehicles of 3.0 million units was down 12.0% on the
prior-year figure. This decline is mainly due to the shift in
demand for micro vans towards more cost-effective MPVs
and SUVs. As a consequence of the sustained economic
growth, new registrations in India increased sharply com-
pared to 2017; here, 710 (575) thousand new units were
registered. The market volume in Japan rose by 3.2% to
770 thousand vehicles. The number of new vehicle regis-
trations in Thailand and Indonesia saw a significant increase
versus the previous year.
Asia-Pacific
After many years of uninterrupted growth, the market
volume in the Asia-Pacific region decreased by 2.3% in fiscal
year 2018 to 36.1 million units. This was mainly due to the
weakness of the Chinese passenger car market (–4.6%). The
trade dispute between China and the United States of
America in the reporting period weighed on business and
consumer confidence, among other things, and led to a
marked decline in demand, especially in the second half of
the year. By contrast, the Indian market continued growing
and achieved a new record with a 4.8% increase in passenger
car sales year-on-year. Alongside attractive financing prod-
ucts, the positive trend continued to profit from the goods
and services tax introduced on July 1, 2017, which resulted in
part in improved purchasing conditions for the consumer.
The Japanese passenger car market almost matched the
volumes recorded in the previous year (–0.4%).
Global demand for mid-sized and heavy trucks with a gross
weight of more than six tonnes in the markets that are rele-
vant for the Volkswagen Group was higher in fiscal year 2018
than in the previous year, with 591 thousand new vehicle
registrations (+6.6%).
In Western Europe, the number of new truck registrations
exceeded the prior-year figure by 2.2% at a total of 297 thou-
sand vehicles. In Germany, Western Europe’s largest market,
the previous year’s level was also exceeded slightly. While
demand in the United Kingdom and in Spain witnessed a
decline, it rose in France and Italy.
The Central and Eastern Europe region saw demand rise
by 6.0% to 169 thousand units on the back of the positive
economic performance. The Russian market deteriorated as
the year progressed and recorded only slight year-on-year
growth over the year as a whole. New registrations there
increased by 2.6% to 78 thousand vehicles.
Group Management Report
Business Development
99
In fiscal year 2018, the market volume in South America rose
compared with the previous year. Here, the number of new
vehicle registrations rose by 19.5% to 125 thousand units. In
Brazil, the region’s largest market, demand for trucks grew
very sharply compared with the relatively low figure for the
prior-year period as a consequence of the economic recovery.
By contrast, Argentina saw new registrations fall by more
than a quarter. This was due to weak economic performance
with a related weakening of the peso and rising interest rates.
Demand for buses in the markets that are relevant for the
Volkswagen Group was slightly higher than in the previous
year. The markets in Brazil as well as in Central and Eastern
Europe contributed in particular to this growth. Demand in
Western Europe was slightly down on the previous year’s level.
T R E N D S I N T H E M A R K E T S F O R P O W E R E N G I N E E R I N G
The markets for power engineering are subject to differing
regional and economic factors. Consequently, their business
growth trends are mostly independent of each other.
The marine market remained at the previous year’s low
level in 2018. Steady demand in merchant shipping was
largely based on orders of container ships and LNG carriers.
Demand for cruise ships, passenger ferries, fishing vessels
and dredgers also remained steady. The special market for
government vessels also continued on a stable trajectory. The
existing overcapacity in the market continued to curb invest-
ment in offshore oil production and thus in new ship
construction in this segment. Planned tighter emission
standards resulted in a positive trend toward gas-powered or
dual fuel-engined ships. China, South Korea and Japan
remained the dominant shipbuilding countries, accounting
for a global market share of more than 85% measured in
terms of the number of ships. Because market volumes are
still low, all segments in the marine market are continuing to
experience significant competitive pressure and a sharp drop
in prices as a result.
The market for power generation showed a slight
recovery compared with the previous year. Higher demand
was registered in all areas of application, for gas in particular.
This confirms the shift away from oil-fired power plants
towards dual-fuel and gas-fired power plants. Demand for
energy solutions remained high, with a strong trend towards
greater flexibility and decentralized availability. The econ-
omies of key emerging markets recovered somewhat. How-
ever, continued strong pressure from competition and
pricing was discernible in all projects, having a negative
impact on the earnings quality of orders. Furthermore, order
placement was often delayed due to persistently difficult
financing conditions for customers, particularly on larger
projects.
In 2018, the market for turbomachinery improved some-
what year-on-year. Demand for turbo compressors in the raw
materials, oil, gas and processing industry increased slightly
but remained volatile owing to political uncertainty. The
steam and gas turbine business continued to be dominated
by overcapacity on the part of electricity producers; however,
signs pointed towards a slight recovery, especially in regions
with a low level of electrification. Although pressure from
competition and pricing was somewhat lower than in the
prior-year period, the overall level remained high due to
existing overcapacity and market volatility.
The marine and power plant after-sales business for diesel
engines performed positively overall and benefited from a
continued increase in interest in long-term maintenance
contracts and retrofit solutions. The after-sales market for
turbomachinery remained under pressure, impacted by a price
war and competition to improve efficiency. It is recovering,
but only slowly.
T R E N D S I N T H E M A R K E T F O R F I N A N C I A L S E R V I C E S
Demand for automotive financial services was once again
high in 2018 in a slightly shrinking overall market. Service
products such as maintenance and servicing agreements or
insurance were especially popular, as customers in more
advanced automotive financial services markets are putting
their focus on optimizing total cost of ownership. In the fleet
segment, some customers elicited the support of automotive
financial service providers in order to optimize their entire
mobility management beyond mere fleet operation. There
was also increased demand from both private and business
customers for mobility services centered on vehicle usage
rather than on ownership.
In Europe, sales of financial services climbed further in
the reporting period, strengthened by higher vehicle sales
and strong growth in financing agreements and leases. The
used-vehicle market expanded, particularly in Western and
Central Europe. Demand for after-sales products such as
servicing, maintenance and spare parts agreements as well as
automotive-related
insurance also developed positively.
financial services products enjoyed rising
Automotive
popularity, particularly in Spain and Italy, while in the United
Kingdom and France demand for financial services remained
high.
In the German market, the share of loan-financed or
leased vehicles remained stable at a high level in 2018. Along-
100
Business Development
Group Management Report
side traditional products, integrated mobility services in the
business customer segment and after-sales products were
particularly popular.
In South Africa, demand for automotive financial services
products was stable.
Sales of automotive financial services in North America
remained at a high level in the past fiscal year. In the USA, the
overall market for financial services products once again
performed well; above all, demand for leasing through
captive financial services products was consistently high.
Automotive financial services products were also popular in
Mexico.
Brazil continued to witness a recovery in 2018 despite the
political tensions. Sales of vehicle financing arrangements
and the country-specific financial services product Consorcio,
a lottery-style savings plan, as well as of insurance and other
services rose in the reporting period. The current economic
crisis in Argentina brought the positive trend seen in 2017 to
a halt. Due to the sharp rise in interest rates, sales of finan-
cing and leasing products proved challenging in 2018, though
the situation stabilized somewhat at the end of the year.
The markets in the Asia-Pacific region turned in a mixed
performance during the reporting period. In China, the pro-
portion of loan-financed vehicle purchases rose. Despite
increasing restrictions on registrations in metropolitan areas,
there is considerable potential to acquire new customers for
automotive-related financial services, particularly in the
interior of the country. Demand for automotive financial
services rose in the Indian market. It was stable on the whole
in Japan and South Korea. In Australia, amid a slight down-
turn in the vehicle market, demand for financial services
products remained high.
In the commercial vehicles segment, the European
market for financial services again performed well; demand
for these products was also high in China. The economic
situation in Brazil stabilized and the truck and bus business
and the related financial services market developed encour-
agingly.
N E W G R O U P M O D E L S I N 2 0 1 8
The Volkswagen Group launched a large number of attractive
new models on the market in fiscal year 2018. The current
product portfolio comprises 365 models. It covers almost all
key segments and body types, with offerings from small cars
to super sports cars in the passenger car segment, and from
pickups to heavy trucks and buses in the commercial vehicles
segment, as well as motorcycles.
The Volkswagen Passenger Cars brand continued its
global product initiative in the past year. The new Touareg
plays a leading role in the premium SUV segment with its
expressive design, its equipment and the high-quality mate-
rials and craftsmanship. The rollout of the new Polo GTI and
the up! GTI put two models on the market that are distin-
guished in particular by their driving dynamics and sporti-
ness. In China, a total of four new SUV models were launched,
including the compact, sporty T-Roc. Further successors to
important volume models were also introduced: the Lavida,
Bora and Passat NMS. Added to these were other plug-in
hybrid models brought out to meet the growing demand for
new energy vehicles in China. In the USA, the new Jetta came
on the market. The latest generation of the US bestseller,
which is now also based on the Modular Transverse Toolkit, is
quite different from its predecessor, both visually and from a
technological perspective. South America celebrated the
rollout of the Virtus, a notchback saloon based on the Polo;
the further rejuvenation and expansion of the product range
is an important element of the brand’s realignment in this
region.
The Audi brand launched a successor model in each of its
A6 and A7 premium series. Since 2018, the sporty Q8 SUV has
been the top model in the Q family. The second model
generations of the compact A1 and Q3 model series each
celebrated their premieres. All vehicles are winning over cus-
tomers in their respective segments with a brand-new virtual
cockpit architecture, a large number of innovative driver
assistance systems and Audi’s characteristic dynamism.
ŠKODA launched its revamped compact Fabia model in
the reporting period, which impresses in particular with a
more modern exterior. In China, the brand rolled out its third
SUV, the Kamiq. It features a spacious interior, emotional
design and connectivity solutions. With the Kodiaq GT, the
dynamic coupé version of the popular SUV, ŠKODA is pres-
enting its new flagship, which will be offered exclusively in
the Chinese market.
The SEAT brand continued its SUV product initiative in
2018 and unveiled the seven-seater Tarraco. The model fits
perfectly into the Spanish brand’s SUV model range alongside
the smaller Arona and Ateca models. In addition, SEAT
established the new sporty CUPRA line and included the
dynamic CUPRA Ateca in its range at the end of the year.
After rolling out the new Cayenne in the European market
in 2017, Porsche launched this model in the United States,
China and other countries during the reporting period. In
addition, the product range was supplemented by the
Cayenne E-Hybrid. The GTS models of the 718 Boxster and
Cayman were also delivered to overseas markets in 2018 for
the first time. The 911 GT3 RS, which was likewise launched in
2018, impressed customers with its dynamics. The new
Macan came on the Chinese market in the fall and sub-
sequently on the European market at the end of the year.
Group Management Report
Business Development
101
Furthermore, the Panamera model range was expanded by
the addition of the GTS models.
In 2018, Bentley again set standards in the luxury grand
tourer segment with the third generation of the Continental
GT. Moreover, the brand expanded its successful Bentayga
series by adding the powerful Bentayga V8.
Lamborghini established a third series with the Urus
super-SUV, significantly expanding its customer base. The
Huracán Performante Spyder was also introduced to the mar-
ket.
Bugatti offered additional options for its super sports car,
the Chiron, including the Sky View glass roof.
Since 2018, Volkswagen Commercial Vehicles has been
offering the Amarok with a new top-of-the-range V6 TDI
engine. The battery-electric e-Crafter is the brand’s first zero-
emission van and has been specially designed for couriers,
express and parcel delivery services.
In the reporting period, Scania presented a plug-in hybrid
drive that allows fuel savings of up to 15% for its latest gener-
ation of trucks. Furthermore, the first long-distance truck
with an efficient LNG drive and a range of up to 1,000 km was
unveiled.
MAN celebrated the rollout of its fully electric eTGE in
2018. The van has a range of around 160 km, which makes it
particularly suitable for inner-city distribution logistics. With
the XLION special edition, MAN introduced special equip-
ment packages for long-distance, distribution and traction
trucks. In the bus sector, MAN presented the new Lion’s City G
city bus with a newly developed CNG gas-powered engine.
In 2018, Ducati launched numerous new models on the
market, including the Scrambler 1100, the Monster 821, the
Multistrada 1260, the 959 Panigale Corse and the Panigale V4.
V O L K SWA G E N G R O U P D E L I V E R I E S
In fiscal year 2018, the Volkswagen Group increased its
deliveries to customers worldwide by 0.9% year-on-year and
achieved a new record of 10,834,012 vehicles. The chart on the
next page shows how deliveries changed from month to
month and compares each monthly figure to the same
month of the previous year. Deliveries of passenger cars and
commercial vehicles are reported separately in the following.
PA S S E N G E R C A R D E L I V E R I E S W O R L D W I D E
With its passenger car brands, the Volkswagen Group is pres-
ent in all relevant automotive markets around the world. The
key sales markets currently include Western Europe, China,
the USA, Brazil, Russia and Mexico. The Group recorded
encouraging growth in many key markets.
V O L K SWA G E N G R O U P D E L I V E R I E S 1
2018
2017
Passenger Cars
10,101,297
10,038,756
Commercial Vehicles
732,715
702,778
Total
10,834,012
10,741,534
%
+0.6
+4.3
+0.9
1 Deliveries for 2017 have been updated to reflect subsequent statistical trends. The
figures include the Chinese joint ventures.
During the reporting period, deliveries of passenger cars to
Volkswagen Group customers worldwide rose to 10,101,297
units amid difficult conditions in some countries in Western
Europe – mainly as a result of the changeover to the WLTP –
and in the Chinese market, which was impacted by macro-
economic uncertainty. This was an increase of 62,541 vehicles
or 0.6% on the previous year. The Group’s new SUV models
made a particular contribution to this rise. As the passenger
car market as a whole declined by 1.2% in the same period,
the Volkswagen Group’s share of the global market rose to
12.3 (12.0)%. The largest increases in volume in absolute
terms were seen in Brazil and Russia. Sales figures were down
on the previous year in Germany, the United Kingdom,
Mexico and Turkey, among other countries. The Volkswagen
Passenger Cars, ŠKODA, SEAT, Porsche and Lamborghini
brands delivered record numbers of vehicles. The brands that
experienced the largest growth in absolute terms were ŠKODA
and SEAT; Audi and Bentley fell short of the respective prior-
year levels.
The table on page 104 gives an overview of passenger car
deliveries to customers of the Volkswagen Group in the
regions and the key individual markets. The demand trends
for Group models in these markets and regions are described
in the following sections.
Deliveries in Europe/Other markets
In the reporting period, the passenger car market as a whole
in Western Europe fell 0.7% short of the prior-year figure.
With 3,138,419 vehicles delivered to customers, the Volks-
wagen Group reached the level seen in the previous year
(–0.6%) despite a considerable drop in the second half of the
year resulting from the changeover to the WLTP. Other
adverse effects were attributable to the fact that customer
confidence has not yet been fully restored following the
diesel issue and to customer uncertainty generated by the
public discussion on driving bans for diesel vehicles. The
ŠKODA Kodiaq, Porsche 911 and Porsche Cayenne saw
102
Business Development
Group Management Report
V O L K S W A G E N G R O U P D E L I V E R I E S B Y M O N T H
Vehicles in thousands
2018
2018
2017
2017
1,100
1,100
1,000
1,000
900
900
800
800
700
700
600
600
J
F
M
A
M
J
J
A
S
O
N
D
encouraging growth. Furthermore, the new Polo, T-Roc,
Tiguan Allspace and Arteon models from the Volkswagen
Passenger Cars brand, the ŠKODA Karoq and SEAT Arona were
very popular. The Touareg from Volkswagen Passenger Cars
was successfully launched in the market along with the Audi
A1 Sportback, Audi Q3, Audi A6, Audi A7 Sportback, Audi Q8
and ŠKODA Fabia. The Group’s share of the passenger car
market in Western Europe was 22.0 (22.0)%.
In the significantly growing passenger car markets in the
Central and Eastern Europe region, the number of deliveries
to Volkswagen Group customers in fiscal year 2018 rose by
6.8% year-on-year. Whereas in Russia and Poland demand for
Group models grew strongly in some cases, the number of
vehicles sold in the Czech Republic saw a decline. The Polo
and the Tiguan from Volkswagen Passenger Cars along with
the ŠKODA Rapid and Octavia were the models most in
demand. The new T-Roc from Volkswagen Passenger Cars, the
ŠKODA Karoq and the SEAT Arona were also very popular SUV
models. The Volkswagen Group’s share of the passenger car
market in Central and Eastern Europe was 21.2 (22.0)%.
In Turkey, the Volkswagen Group delivered 40.5% fewer
vehicles than in the previous year in a substantially weaker
overall market. In South Africa’s passenger car market, which
was almost on a level with the previous year, demand for
Volkswagen Group vehicles rose by 3.5%. The best-selling
Group model in South Africa was the Polo.
Deliveries in Germany
In the reporting period, the German passenger car market
matched the high prior-year level (–0.2%). The Volkswagen
Group delivered 1,121,289 vehicles to customers in its home
market, a slight decrease on the prior-year level (–0.9%). In
addition to the decreases in the second half of the year
caused by the changeover to the WLTP, the fact that customer
confidence has not yet been fully restored following the
diesel issue weighed on demand, as did customer uncertainty
generated by the public discussion on driving bans for diesel
vehicles. The Golf continued to top the list of the most
popular passenger cars in Germany in terms of registrations.
The Polo, Tiguan and Passat Estate from Volkswagen Pas-
senger Cars were among the most popular Group models, as
were the ŠKODA Kodiaq, ŠKODA Octavia Combi and Audi A4
Avant. The new Polo, T-Roc, Tiguan Allspace and Arteon
models from the Volkswagen Passenger Cars brand, the
ŠKODA Karoq and the SEAT Arona were also in high demand
among customers. In the registration statistics of the Kraft-
fahrt-Bundesamt (KBA – German Federal Motor Transport
Authority), seven Group models led their respective segments
at the end of 2018: the up!, Polo, Golf, Tiguan, Touran, Passat,
and Porsche 911.
Deliveries in North America
Demand for Volkswagen Group models in North America in
the reporting period was 2.0% lower than the prior-year
figure at 943,621 vehicles in a slightly declining overall pas-
senger car and light commercial vehicle market. The Group’s
market share was 4.6 (4.7)%. The new Jetta was successfully
rolled out. Moreover, the Tiguan Allspace was the most
sought-after Group model in North America.
Group Management Report
Business Development
103
W O R L D W I D E D E L I V E R I E S O F T H E M O S T S U C C E S S F U L G R O U P M O D E L R A N G E S I N 2 0 1 8
Vehicles in thousands
Polo
Golf
Jetta
Tiguan
Passat
Lavida
ŠKODA Octavia
Audi A4
835
832
803
795
655
505
388
345
In the US market, demand for Volkswagen Group models rose
by 2.1% in fiscal year 2018 compared with the previous year.
In this period, the market as a whole matched the prior-year
level. Demand remained higher for models in the SUV and
pickup segments than for conventional passenger cars. The
Group models achieving the largest increases in absolute
terms were the Audi Q5 and Audi A5 Sportback. In addition,
the Jetta and the Porsche Macan as well as the new Tiguan
Allspace and Atlas SUVs from the Volkswagen Passenger Cars
brand were very popular among customers.
In Canada, demand for Group models in the reporting
period increased by 3.7% year-on-year in a shrinking overall
market. The Golf saloon, Jetta and Audi Q5 models and the
new Tiguan Allspace and Atlas SUVs from the Volkswagen
Passenger Cars brand were particularly popular.
In the Mexican market, which was declining on the whole,
the Volkswagen Group delivered 16.4% fewer vehicles to
customers compared with the previous year. The Vento, Jetta
and Tiguan Allspace models recorded the highest demand.
Deliveries in South America
The South American market for passenger cars and light
commercial vehicles continued its recovery path overall in
the reporting year. In this region we delivered 497,820 vehi-
cles to customers, 11.7% more than a year before. Among
others, the Virtus, Jetta and Touareg from the Volkswagen
Passenger Cars brand were successfully launched in the
market along with the Audi Q3, Audi Q8 and Porsche Boxster.
The Volkswagen Group’s share of the passenger car market in
South America rose to 11.9 (11.4)%.
The Brazilian market also recovered further in the
reporting period. The Volkswagen Group benefited from this
development and delivered 27.1% more vehicles to customers
there than in the previous year. Above all, demand was
particularly high for the new Polo and Virtus models from
the Volkswagen Passenger Cars brand. Demand for the Gol
and Amarok models also developed encouragingly.
In Argentina, the Group recorded a 22.3% decline in sales
year-on-year amid a considerably weaker overall market. The
Gol and Amarok recorded the highest demand among Group
models. The new Polo, Virtus and Tiguan Allspace models
were also well received by customers.
Deliveries in the Asia-Pacific region
In 2018, the passenger car markets in the Asia-Pacific region
registered their first decline in many years. Despite adverse
effects from the Chinese market in particular, the Volkswagen
Group handed over 4,503,791 units to customers here, 0.9%
more vehicles than a year before. The Volkswagen Group’s
market share in the Asia-Pacific region rose to 12.5 (12.1)%.
China, the world’s largest single market and the main
growth driver of the Asia-Pacific region for many years,
experienced a downturn in the reporting period. The Volks-
wagen Group increased sales here and delivered 0.5% more
vehicles to customers in China than in the prior year. The
models that achieved the largest growth in absolute terms
were the Magotan from Volkswagen Passenger Cars, the Audi
A4 and the Porsche Panamera. In addition, the new Phideon
from Volkswagen Passenger Cars and the ŠKODA Octavia
Combi were highly sought-after. The new Teramont and
Tiguan Allspace SUVs from the Volkswagen Passenger Cars
brand, the Audi Q5 and the ŠKODA Kodiaq were also very
popular. The T-Roc, Tayron, Tharu, Bora, Lavida, Gran Lavida,
Passat and Touareg models from Volkswagen Passenger Cars
104
Business Development
Group Management Report
as well as the Audi Q2 and ŠKODA’s Karoq and Kamiq models
were successfully launched in the market.
The Indian passenger car market continued its growth in
the reporting period. Demand for models from the Volks-
wagen Group fell by 15.4% in this period compared with the
previous year. The Polo was the Group’s most sought-after
model in India.
In Japan, the number of passenger cars delivered to Volks-
wagen Group customers exceeded the prior-year figure by
1.8%, while the total market volume remained on the prior-
year level. The Polo and Audi Q2 models recorded promising
increases in demand.
PA S S E N G E R C A R D E L I V E R I E S TO C U ST O M E R S B Y M A R K E T 1
Europe/Other markets
Western Europe
of which: Germany
United Kingdom
Spain
Italy
France
Central and Eastern Europe
of which: Russia
Poland
Czech Republic
Other markets
of which: Turkey
South Africa
North America
of which: USA
Mexico
Canada
South America
of which: Brazil
Argentina
Asia-Pacific
of which: China
Japan
India
Worldwide
Volkswagen Passenger Cars
Audi
ŠKODA
SEAT
Bentley
Lamborghini
Porsche
Bugatti
1 Deliveries for 2017 have been updated to reflect subsequent statistical trends. The figures include the Chinese joint ventures.
D E L I V E R I E S ( U N I T S )
C H A N G E
2018
2017
4,156,065
3,138,419
1,121,289
4,167,753
3,157,107
1,131,417
493,768
291,407
273,548
259,468
713,799
209,261
152,720
131,761
303,847
94,335
82,744
943,621
638,274
186,864
118,483
497,820
346,025
97,224
531,592
270,640
259,920
256,716
668,629
173,491
145,024
142,842
342,017
158,523
79,968
962,980
625,128
223,548
114,304
445,636
272,231
125,153
4,503,791
4,196,702
86,356
61,277
4,462,387
4,173,834
84,827
72,467
10,101,297
10,038,756
6,244,869
1,812,485
1,253,741
517,627
10,494
5,750
256,255
76
6,230,335
1,878,105
1,200,535
468,431
11,089
3,815
246,375
71
(%)
–0.3
–0.6
–0.9
–7.1
+7.7
+5.2
+1.1
+6.8
+20.6
+5.3
–7.8
–11.2
–40.5
+3.5
–2.0
+2.1
–16.4
+3.7
+11.7
+27.1
–22.3
+0.9
+0.5
+1.8
–15.4
+0.6
+0.2
–3.5
+4.4
+10.5
–5.4
+50.7
+4.0
+7.0
Group Management Report
Business Development
105
C O M M E R C I A L V E H I C L E D E L I V E R I E S
The Volkswagen Group delivered a total of 732,715 commer-
cial vehicles to customers worldwide in 2018 (+4.3%). Trucks
accounted for 202,492 (+10.4%) units and buses for 22,629
(+17.8%) units. Sales of light commercial vehicles increased
by 1.5% year-on-year to 507,594 units.
In Western Europe, deliveries were up by 4.3% on the
previous year at 445,081 vehicles; of this total, 344,034 were
light commercial vehicles, 95,299 were trucks and 5,748 were
buses. The Transporter and Caddy were the most sought-after
Group models in the Western European markets.
We handed over 83,365 vehicles to customers in the
markets in Central and Eastern Europe in the period from
January to December 2018 (+9.6%); of this figure, 44,530 were
light commercial vehicles, 37,400 were trucks and 1,435 were
buses. The Transporter and the Caddy were the Group models
experiencing the highest demand. In Russia, the region’s
largest market, sales climbed in the wake of economic recov-
ery by 12.4% year-on-year to 20,567 units.
In the Other markets, particularly in Turkey, deliveries of
Volkswagen Group commercial vehicles fell by 15.8% to a
total of 56,514 units: 38,271 light commercial vehicles, 14,491
trucks and 3,752 buses.
Deliveries in North America amounted to 13,074 vehicles
(–2.5%), which were handed over almost exclusively to custom-
ers in Mexico. In this region, we handed over 9,567 light com-
mercial vehicles, 1,256 trucks and 2,251 buses to customers.
The Volkswagen Group sold a total of 92,161 units (+21.3%)
in South America. Of the units delivered, 44,417 were light
commercial vehicles, 40,451 were trucks and 7,293 were buses.
The Amarok was particularly popular. Following continued
improvement in the economic climate, deliveries rose by
55.7% in Brazil; 17,739 light commercial vehicles, 32,903 trucks
and 5,081 buses were handed over to customers here.
In the Asia-Pacific region, the Volkswagen Group sold
42,520 vehicles in the reporting period: 26,775 light com-
mercial vehicles, 13,595 trucks and 2,150 buses. In total this
was 2.2% less than in the previous year. The Transporter and
the Amarok were the most popular Group models. In China,
sales were on a level with the previous year at 10,353 vehicles
(–0.5%). Of this total, 5,695 were light commercial vehicles,
4,247 were trucks and 411 were buses.
C O M M E R C I A L V E H I C L E D E L I V E R I E S TO C U STO M E R S B Y M A R K E T 1
Europe/Other markets
Western Europe
Central and Eastern Europe
Other markets
North America
South America
of which: Brazil
Asia-Pacific
of which: China
Worldwide
Volkswagen Commercial Vehicles
Scania
MAN
1 Deliveries for 2017 have been updated to reflect subsequent statistical trends.
D E L I V E R I E S ( U N I T S )
C H A N G E
2018
2017
584,960
445,081
83,365
56,514
13,074
92,161
55,723
42,520
10,353
732,715
499,723
96,475
136,517
569,962
426,773
76,031
67,158
13,410
75,949
35,781
43,457
10,408
702,778
497,862
90,782
114,134
(%)
+2.6
+4.3
+9.6
–15.8
–2.5
+21.3
+55.7
–2.2
–0.5
+4.3
+0.4
+6.3
+19.6
106
Business Development
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D E L I V E R I E S I N T H E P O W E R E N G I N E E R I N G S E G M E N T
Orders in the Power Engineering segment are usually part of
major investment projects. Lead times typically range from
just under one year to several years, and partial deliveries as
construction progresses are common. Accordingly, there is a
time lag between incoming orders and sales revenue from the
new construction business.
V O L K SWA G E N G R O U P F I N A N C I A L S E R V I C E S
The Financial Services Division includes the Volkswagen
Group’s dealer and customer financing, leasing, banking and
insurance activities, fleet management and mobility offerings.
The division comprises Volkswagen Financial Services and
the financial services activities of Scania and Porsche Holding
Salzburg.
Sales revenue in the Power Engineering segment was
largely driven by Engines & Marine Systems and Turboma-
chinery, which together generated two-thirds of overall sales
revenue.
O R D E R S R E C E I V E D I N T H E PA S S E N G E R C A R S S E G M E N T I N
W E ST E R N E U R O P E
The temporary restrictions on the range of models on sale
attributable to the introduction of the WLTP with effect from
September 1, 2018 had a negative impact on the order situ-
ation in Western Europe in fiscal year 2018. Incoming orders
in the reporting period were down 5.9% year-on-year. Devel-
opments in the key markets were mixed: while especially
Germany and the United Kingdom registered a larger decline,
incoming orders rose in Spain, France and Italy.
O R D E R S R E C E I V E D F O R C O M M E R C I A L V E H I C L E S
Orders received for light commercial vehicles of the Volks-
wagen Group in Western Europe were 1.6% lower than in the
previous year at 342,386 units.
Orders received for mid-sized and heavy trucks and buses
increased by 3.5% year-on-year to 233,627 vehicles in 2018. In
Western Europe, our main sales market, ongoing positive
economic stimulus gave a boost to incoming orders. Orders
received in South America were up in response to the eco-
nomic recovery in Brazil.
O R D E R S R E C E I V E D I N T H E P O W E R E N G I N E E R I N G S E G M E N T
The long-term performance of the Power Engineering busi-
ness is determined by the macroeconomic environment.
Individual major orders lead to fluctuations in incoming
orders during the year that do not correlate with these long-
term trends.
Orders received in the Power Engineering segment in 2018
amounted to €4.0 (3.7) billion. Engines & Marine Systems and
Turbomachinery generated more than two-thirds of the order
volume in a persistently difficult market environment. In the
marine business, for example, orders came in for the supply
of engines and exhaust gas treatment systems for seven new
cruise ships with an aggregate output of 290 MW. In the
power plant business, orders were won in Bangladesh for 36
engines with an aggregate output of 724 MW. In the area of
turbomachinery, we received a follow-up order for the expan-
sion of an underwater compressor station in the North Sea.
The Financial Services Division’s products and services
remained very popular in fiscal year 2018. At 7.6 (7.3) million,
the number of new financing, leasing, service and insurance
contracts signed worldwide exceeded the comparable prior-
year figure. The ratio of leased or financed vehicles to Group
deliveries (penetration rate) in the Financial Services Divi-
sion’s markets was 33.7 (33.4)% in the reporting period. As of
December 31, 2018, the total number of contracts was
19.6 million, up 6.4% from the year before. The number of
contracts in the customer financing/leasing area climbed
5.4% to 10.6 million, while it increased by 7.6% to 9.0 million
in the service/insurance area.
In the Europe/Other markets region, the number of new
contracts signed between January and December 2018
increased by 3.9% to 5.6 million. The penetration rate rose to
48.4 (47.6)%. At the end of the reporting period, the total
number of contracts was 14.2 million, an increase of 6.0% as
against December 31, 2017. The customer financing/leasing
area accounted for 6.7 million contracts (+5.6%).
The number of contracts in North America as of
December 31, 2018 increased to 2.9 million, 6.0% more than
in the previous year. The customer financing/leasing area
accounted for 1.9 million contracts (+5.6%). The number of
new contracts signed amounted to 935 thousand, an increase
of 7.0% versus the previous year. The ratio of leased or
financed vehicles to Group deliveries in North America was
66.3 (60.5)%.
In South America, 236 (205) thousand new contracts were
signed in the past fiscal year. The penetration rate increased
to 29.1 (26.6)%. At the end of the reporting period, the total
number of contracts was 487 thousand, 9.4% fewer than at
the end of 2017. The contracts mainly related to the customer
financing/leasing area.
In the Asia-Pacific region, the number of new contracts
signed rose by 6.7% to 889 thousand units in 2018. The ratio
of leased or financed vehicles to Group deliveries was
14.8 (16.1)%. On December 31, 2018, the total number of con-
tracts amounted to 2.1 million, up 14.6% on the previous
year. The customer financing/leasing area accounted for
1.6 million contracts (+8.3%).
Group Management Report
Business Development
107
S A L E S T O T H E D E A L E R O R G A N I Z AT I O N
The Volkswagen Group’s sales to the dealer organization
increased by 1.1% to 10,899,869 units (including the Chinese
joint ventures) in the reporting year. This was due to higher
demand in Brazil, China and Central and Eastern Europe.
Outside Germany, the unit sales volumes rose by 1.6%. Owing
to the changeover to the WLTP test procedure, which took
place in the third quarter of 2018, unit sales in Germany
decreased by 2.2%. At 11.3 (11.7%), the proportion of the
Group’s total sales accounted for by Germany was lower than
in 2017.
The Polo, Tiguan, Golf, Lavida and Jetta were our biggest
sellers last year. The largest increases in demand were
recorded by the Polo, Tiguan, Atlas/Teramont and Phideon
models from the Volkswagen Passenger Cars brand, the Audi
Q5 and A8, as well as the ŠKODA Kodiaq and Karoq/Kamiq
and the SEAT Arona. The Porsche Cayenne and the Crafter
from the Volkswagen Commercial Vehicles brand also achieved
a strong growth rate.
P R O D U C T I O N
The Volkswagen Group produced 11,017,621 vehicles world-
wide in fiscal year 2018, 1.3% more than in the previous year.
In total, our Chinese joint ventures manufactured 1.9% more
units than in the year before. In the German market, the
production declined by 10.7%, which was largely WLTP-
related. The percentage of the Group’s total production
accounted for by Germany was lower than in 2017, at
20.9 (23.7)%.
I N V E N T O R I E S
Global inventories at Group companies and in the dealer
organization were higher at the end of the reporting period
than at year-end 2017.
E M P L OY E E S
Including the Chinese joint ventures, the Volkswagen Group
employed an average of 655,722 people in fiscal year 2018, an
increase of 3.4% year-on-year. In Germany, we employed
290,757 people on average in 2018; at 44.3 (44.9)%, their share
of the total headcount was slightly below the level of the
previous year.
The Volkswagen Group had 636,156 active employees
(+3.4%) as of December 31, 2018. In addition, 9,096 employ-
ees were in the passive phase of their partial retirement and
19,244 young people were in vocational traineeships. The
Volkswagen Group’s headcount was 664,496 employees (+3.5%)
at the end of the reporting period. The main contributors to
this were the volume-related expansion, the recruitment of
specialists inside and outside Germany and the expansion of
the workforce at our new plants in China. A total of 292,729
people were employed in Germany (+1.8%), while 371,767
were employed abroad (+4.8%).
E M P L O Y E E S B Y D I V I S I O N / B U S I N E S S A R E A
as of December 31, 2018
Passenger Cars
Passenger Cars
Commercial Vehicles
Commercial Vehicles
Power Engineering
Power Engineering
Financial Services
Financial Services
521,735
521,735
109,246
109,246
17,046
17,046
16,469
16,469
108
Shares and Bonds
Group Management Report
Shares and Bonds
Volkswagen AG’s ordinary and preferred shares underperformed the market as a whole amid
volatility in 2018. The Company successfully reentered the US capital market for the first time since
the emergence of the diesel issue.
E Q U I T Y M A R K E T S A N D P E R F O R M A N C E O F T H E P R I C E O F
V O L K SWA G E N ’ S S H A R E S
In the period from January to December 2018, declining
prices overall were seen on the international equity markets
amid volatile trading.
The DAX recorded a drop compared with the end of 2017.
Uncertainty regarding the economic policy of the US govern-
ment, the monetary policy of the US Federal Reserve as well
as the European Central Bank and the economic risks of some
countries had a lasting negative impact on share prices. The
promising economic performance of important industri-
alized nations and the formation of governments in the
individual EU countries had a positive effect.
Throughout 2018, Volkswagen AG’s preferred and ordi-
nary share prices followed the decreasing market trend amid
high volatility. Strong liquidity and the enhancement of the
management structure at the Volkswagen Group provided a
positive impetus. Share prices were negatively impacted, in
particular by uncertainty about the future regulatory frame-
work for diesel and electric vehicles, the diesel issue, the US
tariff policy and the WLTP test procedure for determining
pollutant and CO2 emissions and fuel consumption for pas-
senger cars and light commercial vehicles.
V O L K SWA G E N K E Y S H A R E F I G U R E S A N D M A R K E T I N D I C E S
F R O M J A N U A R Y 1 TO D E C E M B E R 3 1 , 2 0 1 8
Ordinary share
Price (€)
Date
Preferred share
Price (€)
DAX
Date
Points
Date
ESTX Auto & Parts
Points
Date
High
Low
Closing
188.00
Jan. 22
188.50
Jan. 22
13,560
Jan. 23
656
Jan. 22
131.10
Oct. 24
133.70
Oct. 24
10,382
Dec. 27
415
139.10
Dec. 28
138.92
Dec. 28
10,559
Dec. 28
420
Dec. 27
Dec. 28
Group Management Report
Shares and Bonds
109
P R I C E A N D I N D E X D E V E L O P M E N T F R O M D E C E M B E R 2 0 1 7 T O D E C E M B E R 2 0 1 8
Index based on month-end prices: December 31, 2017 = 100
Volkswagen ordinary shares –17.5%
Volkswagen preferred shares –16.5%
DAX –18.3%
EURO STOXX Automobiles & Parts –29.2%
110
110
100
100
90
90
80
80
70
70
60
60
D
J
F
M
A
M
J
J
A
S
O
N
D
D I V I D E N D P O L I C Y
Our dividend policy matches our financial strategy. In the
interests of all stakeholders, we aim for continuous dividend
growth so that our shareholders can participate appro-
priately in our business success. The proposed dividend
amount therefore reflects our financial management objec-
tives – in particular, ensuring a solid financial foundation as
part of the implementation of our strategy.
The Board of Management and Supervisory Board of
Volkswagen AG are proposing a dividend of €4.80 per ordi-
nary share and €4.86 per preferred share for fiscal year 2018.
On this basis, the total dividend amounts to €2.4 (2.0) billion.
The distribution ratio is based on the Group’s earnings after
tax attributable to Volkswagen AG shareholders. This
amounts to 20.4% for the reporting period and stood at
17.6% in the previous year. In our Group strategy, we aim to
achieve a distribution ratio of 30%.
F U RT H E R I N F O R M AT I O N O N VO L K SWA G E N S H A R E S
www.volkswagenag.com/en/InvestorRelations.html
D I V I D E N D Y I E L D
Based on the dividend proposal for the reporting period, the
dividend yield on Volkswagen ordinary shares is 3.5 (2.3)%,
measured by the closing price on the last trading day in 2018.
The dividend yield on preferred shares is 3.5 (2.4)%.
The current dividend proposal can be found in the chapter
entitled “Volkswagen AG (condensed in accordance with the
German Commercial Code)”, on page 130 of this annual
report.
E A R N I N G S P E R S H A R E
Basic earnings per ordinary share were €23.57 (22.28) in fis-
cal year 2018. Basic earnings per preferred share were €23.63
(22.34). In accordance with IAS 33, the calculation is based on
the weighted average number of ordinary and preferred
shares outstanding in the reporting period. Since the num-
ber of basic and diluted shares is identical, basic earnings per
share correspond to diluted earnings per share.
See also note 11 to the Volkswagen consolidated financial
statements for the calculation of earnings per share.
110
Shares and Bonds
Group Management Report
S H A R E H O L D E R S T R U C T U R E A S O F D E C E M B E R 3 1 , 2 0 1 8
as a percentage of subscribed capital
V O L K SWA G E N S H A R E D ATA
Ordinary shares
Preferred shares
ISIN
WKN
Deutsche Börse/Bloomberg
DE0007664005
DE0007664039
766400
VOW
766403
VOW3
Reuters
VOWG.DE
VOWG_p.DE
DAX, CDAX,
EURO STOXX,
EURO STOXX 50,
EURO STOXX
Automobiles & Parts,
Prime All Share,
MSCI Euro
CDAX, Prime All
Share, MSCI Euro,
S&P Global 100 Index
Berlin, Dusseldorf, Frankfurt, Hamburg,
Hanover, Munich, Stuttgart, Xetra,
Luxembourg, SIX Swiss Exchange
Primary market indices
Exchanges
Once the approved issue volume of the American Depositary Receipt (ADR) programs had
been reached, Volkswagen AG decided not to renew its “level 1 sponsored ADR” programs
and notified the custodian bank, JPMorgan Chase Bank, that the programs were being
terminated effective August 13, 2018.
Porsche Automobil Holding SE
Porsche Automobil Holding SE
Foreign institutional investors
Foreign institutional investors
Qatar Holding LLC
Qatar Holding LLC
State of Lower Saxony
State of Lower Saxony
Private shareholders/Others
Private shareholders/Others
German institutional investors
German institutional investors
30.8
30.8
25.3
25.3
14.6
14.6
11.8
11.8
15.1
15.1
2.5
2.5
S H A R E H O L D E R ST R U C T U R E A S O F D E C E M B E R 3 1 , 2 0 1 8
At the end of the reporting period, Volkswagen AG’s sub-
scribed capital amounted to €1,283,315,873.28. The share-
holder structure of Volkswagen AG as of December 31, 2018
is shown in the chart on this page.
The distribution of voting rights for the 295,089,818 ordi-
nary shares was as follows at the reporting date: Porsche Auto-
mobil Holding SE, Stuttgart, held 52.2% of the voting rights.
The second-largest shareholder was the State of Lower Saxony,
which held 20.0% of the voting rights. Qatar Holding LLC was
the third-largest shareholder, with 17.0%. The remaining 10.8%
of ordinary shares were attributable to other shareholders.
Notifications of changes in voting rights in accor-
dance with the Wertpapierhandelsgesetz (WpHG – German
Securities Trading Act) are published on our website at
www.volkswagenag.com/en/InvestorRelations/news-and-
publications.html.
O U R I N V E STO R R E L AT I O N S T E A M I S AVA I L A B L E F O R Q U E R I E S A N D
CO M M E N T S :
W O L F S B U R G O F F I C E ( VO L K SWAG E N A G )
Phone
Fax
E-mail
Internet
+49 (0) 5361 9-00
+49 (0) 5361 9-30411
investor.relations@volkswagen.de
www.volkswagenag.com/en/InvestorRelations.html
LO N D O N O F F I C E
Phone
+44 20 3705 2045
B E I J I N G O F F I C E
Phone
+86 106 531 4132
Group Management Report
Shares and Bonds
111
V O L K SWA G E N S H A R E K E Y F I G U R E S
Dividend development
2018
2017
2016
2015
2014
Number of no-par value shares at Dec. 31
thousands
thousands
295,090
206,205
295,090
206,205
295,090
206,205
295,090
206,205
295,090
180,641
Ordinary shares
Preferred shares
Dividend1
per ordinary share
per preferred share
Dividend paid1
on ordinary shares
on preferred shares
Share price development2
Ordinary share
Closing
Price performance
Annual high
Annual low
Preferred share
Closing
Price performance
Annual high
Annual low
Beta factor3
Market capitalization at Dec. 31
Equity attributable to Volkswagen AG share-
holders and hybrid capital investors at Dec. 31
Ratio of market capitalization to equity
Key figures per share
Earnings per ordinary share4
basic
diluted
Equity attributable to Volkswagen AG share-
holders and hybrid capital investors at Dec. 315
Price/earnings ratio6
Ordinary share
Preferred share
Dividend yield7
Ordinary share
Preferred share
Stock exchange turnover8
€
€
€ million
€ million
€ million
€
%
€
€
€
%
€
€
factor
€ billion
€ billion
factor
€
€
€
factor
factor
%
%
Turnover of Volkswagen ordinary shares
Turnover of Volkswagen preferred shares
Volkswagen share of total DAX turnover
€ billion
million shares
€ billion
million shares
%
4.80
4.86
2,419
1,416
1,002
3.90
3.96
1,967
1,151
817
2.00
2.06
1,015
590
425
2018
2017
2016
139.10
–17.5
188.00
131.10
138.92
–16.5
188.50
133.70
1.17
69.7
117.1
0.60
168.70
+23.4
173.95
128.70
166.45
+24.8
178.10
125.35
1.12
84.1
108.8
0.77
2018
2017
23.57
23.57
22.28
22.28
136.75
–3.9
144.20
108.95
133.35
–0.3
138.80
94.00
1.22
67.9
92.7
0.73
2016
10.24
10.24
0.11
0.17
68
32
35
2015
142.30
–21.0
247.55
101.15
133.75
–27.6
255.20
92.36
1.28
69.6
88.1
0.79
2015
–3.20
–3.20
4.80
4.86
2,294
1,416
878
2014
180.10
–8.5
197.35
150.70
184.65
–9.6
203.35
150.25
1.38
86.5
90.0
0.96
2014
21.82
21.82
233.63
217.13
184.90
175.67
189.16
5.9
5.9
3.5
3.5
2018
4.3
28.0
54.1
346.6
5.4
7.5
7.3
2.3
2.4
2017
3.5
23.6
45.1
312.3
5.4
13.4
13.0
1.5
1.5
2016
3.3
25.4
41.1
347.0
5.0
x
x
0.1
0.1
2015
6.9
45.4
72.4
444.4
7.1
8.2
8.4
2.7
2.6
2014
3.2
17.8
45.1
248.3
5.4
1 Figures for the years 2014 to 2017 relate to dividends paid in the following year. For
5 Based on the total number of ordinary and preferred shares on December 31 (excluding
2018, the figures relate to the proposed dividend.
potential shares from the mandatory convertible note).
2 Xetra prices.
3 See page 126 for the calculation.
4 See note 11 to the consolidated financial statements (Earnings per share) for the
6 Ratio of year-end-closing price to earnings per share.
7 Dividend per share based on the year-end-closing price.
8 Order book turnover on the Xetra electronic trading platform (Deutsche Börse).
calculation. 2017 figure adjusted (IFRS 9).
112
Shares and Bonds
Group Management Report
R E F I N A N C I N G S T R U C T U R E O F T H E V O L K S W A G E N G R O U P
as of December 31, 2018
Commercial paper
Commercial paper
10%
10%
Bonds
Bonds
60%
60%
Asset-backed securities
Asset-backed securities
30%
30%
Money and capital
market instruments
Maturities
Currencies
≤ 1 year
≤ 1 year
27%
27%
> 1 to < 5 years
> 1 to < 5 years
47%
47%
EUR
EUR
65%
65%
USD
USD
15%
15%
≥ 5 years
≥ 5 years
26%
26%
Others
Others
20%
20%
0
10
20
30
40
50
60
70
80
90
100
R E F I N A N C I N G
In 2018, the Volkswagen Group focused its refinancing activ-
ities on diversifying instruments and markets.
A further focus of refinancing was the continued issue of
commercial paper, especially in the European region and in
euros, as well as in the United States.
In June 2018, we boosted net liquidity by placing unse-
cured, subordinated hybrid notes with an aggregate principal
amount of €2.75 billion. The perpetual notes were issued in
two tranches and can only be called by the issuer. One
tranche with a volume of €1.25 billion has a first call date
after six years, while the other tranche of €1.5 billion has a
first call date after ten years. The transaction also served to
refinance a tranche with a principal amount of €1.25 billion
from the hybrid notes issued in 2013; the tranche was
terminated in September 2018.
Furthermore, a senior, unsecured benchmark bond for the
Automotive Division was issued in Europe in four tranches
with a volume of €4.25 billion and in two GBP 800 million
tranches. Four benchmark bonds with an aggregate volume
of €9.35 billion were issued for the Financial Services Divi-
sion. In addition to this, private placements were issued in
various currencies.
Outside the European refinancing market, the Volks-
wagen Group was active in the North American capital mar-
ket. With an aggregate issue volume of USD 8.0 billion, we
succesfully reentered the US capital market for the first time
since the emergence of the diesel issue.
Notes with a volume of around CAD 2.25 billion were
issued in the Canadian refinancing market.
Asset-backed securities (ABS) transactions were another
important element of our refinancing activities. ABS trans-
actions in excess of €7.1 billion were placed in Europe. In
addition, ABS transactions were issued in Australia, Japan,
Turkey and the USA among other countries.
The proportion of fixed-rate instruments in the past year
was roughly three times as high as the proportion of variable-
rate instruments.
In all refinancing arrangements, we aim to exclude inter-
est rate and currency risk with the simultaneous use of
derivatives.
The table below shows how our money and capital
market programs were utilized as of December 31, 2018 and
illustrates the financial flexibility of the Volkswagen Group:
PROGRAMS
Commercial paper
Bonds
of which hybrid issues
Asset-backed securities
Authorized
volume
€ billion
Amount utilized
on Dec. 31, 2018
€ billion
35.4
139.6
69.8
13.5
80.1
12.5
40.4
Group Management Report
Shares and Bonds
113
R AT I N G S
Standard & Poor’s
short-term
long-term
outlook
Moody’s Investors Service
short-term
long-term
outlook
V O L K S W A G E N A G
V O L K S W A G E N F I N A N C I A L S E R V I C E S A G
V O L K S W A G E N B A N K G M B H
2018
2017
2016
2018
2017
2016
2018
2017
2016
A–2
BBB+
stable
P–2
A3
A–2
BBB+
A–2
BBB+
stable
negative
P–2
A3
P–2
A3
A–2
BBB+
stable
P–2
A3
A–2
BBB+
A–2
BBB+
A–2
A–
A–2
A–
A–2
A–
stable
negative
negative
negative
negative
P–2
A3
P–1
A2
P–1
A1
P–1
A3
P–1
Aa3
stable
negative
negative
stable
negative
negative
stable
negative
negative
Volkswagen AG’s syndicated credit line of €5.0 billion agreed
in July 2011 was extended in 2015 to April 2020 by exercising
an extension option. This credit facility remained unused as
of the end of 2018.
Of the syndicated credit lines worth a total of €7.6 billion
at other Group companies, €1.8 billion has been drawn down.
In addition, Group companies had arranged bilateral,
confirmed credit lines with national and international banks
in various other countries for a total of €4.2 billion, of which
€1.8 billion was drawn down.
R AT I N G S
In 2018, the rating agencies Standard & Poor’s and Moody’s
Investors Service conducted the regular update of their credit
ratings for Volkswagen AG, Volkswagen Financial Services AG
and Volkswagen Bank GmbH.
In November and December 2018, Standard & Poor’s con-
firmed its short-term and long-term ratings of A–2 and BBB+
for Volkswagen AG and Volkswagen Financial Services AG,
and of A–2 and A– for Volkswagen Bank GmbH. The outlook
for Volkswagen AG and Volkswagen Financial Services AG was
left at “stable” and that for Volkswagen Bank GmbH at
“negative”.
Moody’s Investors Service left its short-term and long-
term ratings for Volkswagen AG and Volkswagen Financial
Services AG unchanged at P–2 and A3. In April 2018, the
outlook was raised in each case from “negative” to “stable”
based on better-than-expected operating performance. In
August 2018, the long-term rating for Volkswagen Bank
GmbH was raised by two notches from A3 to A1 on the back
of changes to German banking law. The short-term rating was
left at P–1. The outlook was also raised to “stable”.
S U STA I N A B I L I T Y R AT I N G S
Analysts and investors are referring increasingly to company
sustainability profiles when making their recommendations
and decisions. They draw primarily on sustainability ratings
to evaluate a company’s environmental, social and gover-
nance performance. At the same time, sustainability ratings
are instrumental in determining whether we are meeting our
goal of being one of the world’s leading providers of sus-
tainable mobility. Furthermore, they provide the basis for
implementing internal measures.
After the diesel issue became public knowledge, the
Volkswagen Group was downgraded significantly in the MSCI,
RobecoSAM, Sustainalytics, oekomISS, VigeoEiris, EcoVadis
and RepRisk sustainability
indices and consequently
removed from sustainability indices such as the Dow Jones
Sustainability Index and the FTSE4Good Index. In fiscal year
2018, Volkswagen continued to have a score of A– in the CDP
and also an A– rating in the Water Disclosure Project (WDP).
114
Results of Operations, Financial Position and Net Assets
Group Management Report
Results of Operations, Financial
Position and Net Assets
The Volkswagen Group’s sales revenue increased in fiscal year 2018 compared with the previous
year. Despite further charges and cash outflows in connection with the diesel issue, operating
profit was on a level with the previous year, and net liquidity in the Automotive Division
continued at a solid level.
The Volkswagen Group’s segment reporting comprises the
four reportable segments Passenger Cars, Commercial Vehi-
cles, Power Engineering and Financial Services, in compliance
with IFRS 8 and in line with the Group’s internal manage-
ment and reporting.
At Volkswagen, the segment result is measured on the
basis of the operating result.
The reconciliation column contains activities and other
operations that do not by definition constitute segments.
These include the unallocated Group financing activities. The
reconciliation also contains consolidation adjustments
between the segments (including the holding company func-
tions). Purchase price allocation for Porsche Holding Salzburg
and Porsche, Scania and MAN reflects their accounting treat-
ment in the segments.
The Automotive Division comprises the Passenger Cars,
Commercial Vehicles and Power Engineering segments, as
well as the figures from the reconciliation. The Passenger
Cars segment and the reconciliation are combined to form
the Passenger Cars Business Area; for Commercial Vehicles
and Power Engineering, the segment is the same as the busi-
K E Y F I G U R E S F O R 2 0 1 8 B Y S E G M E N T
ness area. The Financial Services Division corresponds to the
Financial Services segment.
A P P L I C AT I O N O F N E W I N T E R N AT I O N A L F I N A N C I A L R E P O R T I N G
STA N D A R D S
The application of IFRS 9 “Financial Instruments” and IFRS 15
“Revenue from Contracts with Customers” became manda-
tory as of January 1, 2018.
IFRS 9 changes the accounting requirements for classi-
fying and measuring financial assets, for impairment of finan-
cial assets, and for hedge accounting. Some of the fair value
measurement gains and losses on certain derivatives, which
were previously reported under the financial result, are now
reported directly in sales revenue and other operating income.
This will have a more significant impact on operating profit.
IFRS 15 specifies new accounting rules for revenue recog-
nition. In this context, the way income from the reversal of
provisions and accrued liabilities is reported has also been
adjusted; these items are now allocated to the functions in
which they were originally recognized.
€ million
Passenger Cars
Vehicles Power Engineering
Financial Services
Total segments
Reconciliation
Commercial
Volkswagen
Group
Sales revenue
Segment result
(operating result)
as a percentage of sales
revenue
Capex, including capitalized
development costs
188,088
36,656
3,608
34,782
263,134
–27,285
235,849
12,245
1,971
6.5
5.4
15,599
2,491
–64
–1.8
176
2,793
16,945
–3,025
13,920
8.0
510
5.9
18,776
187
18,962
Group Management Report
Results of Operations, Financial Position and Net Assets
115
In addition, expenses for certain sales programs had to be
reclassified.
The situation described has led, among other things, to
adjustments to prior-year figures in the income statement.
Cost of sales, distribution and administrative expenses, and
the net other operating result required adjustments in
connection with the change in the way reversals of provisions
are reported; the reclassification of expenses for certain sales
programs led to a decrease in sales revenue and distribution
expenses. The operating profit was unchanged. The applica-
tion of IFRS 9 led to minor adjustments to the financial result
and consequently also to profit before tax, income tax
expense and profit after tax.
S P E C I A L I T E M S
Special items consist of certain items in the financial state-
ments whose separate disclosure the Board of Management
believes can enable a better assessment of our economic
performance.
In the reporting period, negative special items in connec-
tion with the diesel issue amounting to €–3.2 (–3.2) billion
affected operating profit in the Passenger Cars Business Area.
These were mainly attributable to the fines resulting from the
final administrative fine orders issued by the Braunschweig
public prosecutor’s office (€1.0 billion) and the Munich II
public prosecutor’s office (€0.8 billion), to higher legal risks
and legal defense costs and an increase in expenses for
technical measures.
C O M P E N S AT I O N PA I D T O T H E N O N C O N T R O L L I N G I N T E R E ST
S H A R E H O L D E R S O F M A N S E
In the award proceedings regarding the appropriateness of
the cash settlement and the right to compensation for the
noncontrolling interest shareholders of MAN SE, the Higher
Regional Court in Munich made a final decision at the end of
June 2018, ruling that the right to annual compensation per
share must be increased. The cash settlement per share,
raised in a first instance ruling by the First Regional Court in
Munich, was confirmed.
In August 2018, the control and profit and loss transfer
agreement with MAN SE was terminated by extraordinary
notice as of January 1, 2019.
Cash outflows for compensation payments and the
acquisition of shares tendered amounted to €2.1 billion in
the period to December 31, 2018. The “Put options and
compensation rights granted to noncontrolling interest
shareholders” item reported in the balance sheet was reduced
accordingly.
I N C O M E STAT E M E N T B Y D I V I S I O N
€ million
Sales revenue
Cost of sales
Gross profit
Distribution expenses
Administrative expenses
Net other operating result
Operating result
Operating return on sales (%)
Share of the result of equity-accounted
investments
Interest result and Other financial result
Financial result
Earnings before tax
Income tax expense
Earnings after tax
Noncontrolling interests
Earnings attributable to Volkswagen AG hybrid
capital investors
Earnings attributable to Volkswagen AG
shareholders
V O L K S W A G E N G R O U P
A U T O M O T I V E 1
F I N A N C I A L S E R V I C E S
2018
20172
2018
20172
2018
20172
235,849
–189,500
46,350
–20,510
229,550
–186,001
43,549
–20,859
201,067
–161,298
39,769
–19,039
195,817
–158,534
37,283
–19,510
–8,819
–3,100
13,920
5.9
3,369
–1,646
1,723
15,643
–3,489
12,153
17
309
–8,126
–745
13,818
6.0
3,482
–3,628
–146
13,673
–2,210
11,463
10
274
–7,105
–2,497
11,127
5.5
3,310
–1,576
1,734
12,861
–2,657
10,203
–32
309
–6,434
–194
11,146
5.7
3,473
–3,448
25
11,171
–3,230
7,941
–257
274
34,782
–28,201
6,581
–1,471
–1,714
–603
2,793
8.0
58
–70
–12
2,782
–832
1,950
49
–
33,733
–27,467
6,265
–1,349
–1,692
–552
2,673
7.9
9
–180
–171
2,502
1,020
3,522
267
–
11,827
11,179
9,926
7,924
1,900
3,255
1 Including allocation of consolidation adjustments between the Automotive and Financial Services divisions.
2 Adjusted
116
Results of Operations, Financial Position and Net Assets
Group Management Report
S H A R E O F S A L E S R E V E N U E B Y M A R K E T 2 0 1 8
in percent
S H A R E O F S A L E S R E V E N U E B Y D I V I S I O N / B U S I N E S S A R E A 2 0 1 8
in percent
Europe (excluding Germany)/
Europe (excluding Germany)/
Other markets
Other markets
Germany
Germany
North America
North America
South America
South America
Asia-Pacific
Asia-Pacific
42%
42%
18%
18%
16%
16%
4 %
4 %
18%
18%
Passenger Cars
Passenger Cars
Commercial Vehicles
Commercial Vehicles
Power Engineering
Power Engineering
Financial Services
Financial Services
68%
68%
16%
16%
2 %
2 %
15%
15%
R E S U LT S O F O P E R AT I O N S
Results of operations of the Group
The Volkswagen Group recorded sales revenue of €235.8 bil-
lion in fiscal year 2018, thus exceeding the prior-year figure
by €6.3 billion. Improvements in volumes and in the mix,
and the healthy business performance in the Financial
Services Division were offset by negative exchange rate
effects. The effects of applying the new International Finan-
cial Reporting Standards resulted in an overall increase in
sales revenue. The Volkswagen Group generated 81.4 (80.7)%
of its sales revenue abroad.
Gross profit was up on 2017 at €46.3 (43.5) billion.
Adjusted for special items recorded under this item in both
periods, gross profit amounted to €46.6 (45.8) billion. The
gross margin rose to 19.7 (19.0)%; excluding special items it
was 19.8 (19.9)%.
At €17.1 (17.0) billion, the Volkswagen Group’s operating
profit before special items was on a level with the previous
year. The operating return on sales before special items
amounted to 7.3 (7.4)%. Positive factors included primarily
volume improvements, although higher depreciation and
amortization charges due to the large volume of capital
expenditure, increased research and development costs, and
fair value measurement gains and losses on certain deriva-
tives, which have had to be reported here since the beginning
of the year, had a negative impact. Special items in connec-
tion with the diesel issue weighed on operating profit,
reducing this item by €–3.2 (–3.2) billion. The Volkswagen
Group’s operating profit was €13.9 (13.8) billion and the
operating return on sales stood at 5.9 (6.0)%.
The financial result increased by €1.9 billion to €1.7 bil-
lion. Foreign currency measurement, lower interest expenses
and lower expenses from the measurement on the reporting
date of derivative financial instruments, which are used to
hedge financing transactions, had a positive impact. The
effect of the remeasurement of put options and com-
pensation rights in connection with the control and profit
and loss transfer agreement with MAN SE was negative. The
share of profits of equity-accounted investments decreased
year-on-year, while there was a rise in the profits generated
by the Chinese joint ventures. In the prior-year period, the
remeasurement of the interest in HERE following the
acquisition of shares by additional investors had a positive
impact.
The Volkswagen Group’s profit before taxes increased to
€15.6 billion in the reporting period; this was 14.4% higher
than in the previous year. The return on sales before tax
improved to 6.6 (6.0)%. Income taxes resulted in an expense
of €3.5 (2.2) billion, which in turn led to a tax rate of
22.3 (16.2)% in fiscal year 2018. In the previous year, the tax
reform in the USA passed at the end of 2017 had a non-
recurring positive non-cash measurement effect. Profit after
tax was €12.2 billion, an improvement of €0.7 billion com-
pared with 2017.
Results of operations in the Automotive Division
Sales revenue in the Automotive Division rose by €5.2 billion
to €201.1 billion in the reporting period. Improvements in
volumes and in the mix had a positive impact, while the
effect of exchange rates was negative. In the second half of
the year, the changeover to WLTP (Worldwide Harmonized
Light-Duty Vehicles Test Procedure) weighed on performance.
As our Chinese joint ventures are accounted for using the
equity method, the Group’s performance in the Chinese
passenger car market is mainly reflected in consolidated sales
revenue only through deliveries of vehicles and vehicle parts.
Group Management Report
Results of Operations, Financial Position and Net Assets
117
Cost of sales was up, mainly as a result of expansion and due
to higher depreciation and amortization charges and
research and development costs recognized in profit or loss.
Special items recognized here in the reporting period were
down on the previous year. Expressed as a percentage of sales
revenue, cost of sales before special items was up slightly.
Total research and development costs as a percentage of the
Automotive Division’s sales revenue (research and develop-
ment ratio or R&D ratio) amounted to 6.8 (6.7)% in fiscal year
2018. In addition to new models, our activities focused above
all on the electrification of our vehicle portfolio, a more
efficient range of engines, digitalization and new technol-
ogies.
Distribution expenses and their ratio to sales revenue
were down on the previous year. This was attributable to
reclassifications of expenses to sales revenue as a conse-
quence of the new IFRS 15, the sale of the PGA Group in
June 2017, as well as exchange rate effects. Administrative
expenses and their ratio to sales revenue increased compared
with 2017. The main factors contributing to the €2.3 billion
decline in other operating income to €–2.5 billion in fiscal
year 2018 included an increase in special items recognized in
connection with the diesel issue, negative exchange rate
effects, and the fair value measurement of gains and losses
on certain derivatives to which hedge accounting is not
applied, and which have had to be reported here since the
beginning of the year.
The operating profit of the Automotive Division was at
the prior-year level at €11.1 (11.1) billion. Special items
recognized in the reporting period, higher depreciation and
amortization charges, higher research and development costs
recognized in profit or loss and the fair value measurement
of gains and losses on certain derivatives that have had to be
reported here since the beginning of the year weighed on
operating profit. Volume improvements had a positive
impact. The operating return on sales amounted to 5.5 (5.7)%.
The negative special items of €–3.2 (–3.2) billion included in
operating profit are attributable to the diesel issue. Excluding
special items, the Automotive Division’s operating profit was
€14.3 (14.4) billion and thus on a level with the previous year;
the operating return on sales before special items declined
slightly to 7.1 (7.3)%. Since the results recorded by the joint
ventures are accounted for in the financial result using the
equity method, the business growth of our Chinese joint
ventures is primarily reflected in the operating profit only
through deliveries of vehicles and vehicle parts, and through
license income.
R E S U LT S O F O P E R AT I O N S I N T H E PA S S E N G E R C A R S
B U S I N E S S A R E A
€ million
Sales revenue1
Operating result
Operating return on sales (%)1
1 Prior-year figures adjusted.
2018
2017
160,802
157,334
9,220
5.7
9,309
5.9
The Passenger Cars Business Area recorded sales revenue of
€160.8 billion in the reporting period, €3.5 billion more than
in the previous year; this increase was driven mainly by
volume and mix improvements, while exchange rates had a
negative effect. At €9.2 (9.3) billion, operating profit was in
line with the previous year. Special items in connection with
the diesel issue weighed on profit, reducing this item by
€–3.2 (–3.2) billion. Moreover, an increase in depreciation and
amortization charges, higher research and development costs
recognized in profit or loss, and the fair value measurement
of gains and losses on certain derivatives, which have had to
be reported in operating profit since the beginning of the
year, had a negative impact, while the effect of volume
improvements was positive. The operating return on sales
amounted to 5.7 (5.9)%.
R E S U LT S O F O P E R AT I O N S I N T H E C O M M E R C I A L V E H I C L E S
B U S I N E S S A R E A
€ million
Sales revenue
Operating result
Operating return on sales (%)
2018
2017
36,656
1,971
5.4
35,200
1,892
5.4
The Commercial Vehicles Business Area reported sales reve-
nue of €36.7 (35.2) billion in fiscal year 2018. At €2.0 billion,
its operating profit was €0.1 billion higher than in the
previous year; the operating return on sales was unchanged
at 5.4 (5.4)%. The year-on-year increase was mostly driven by
higher volumes, positive mix and exchange rate effects, while
cost increases had a negative impact.
118
Results of Operations, Financial Position and Net Assets
Group Management Report
R E S U LT S O F O P E R AT I O N S I N T H E P O W E R E N G I N E E R I N G
B U S I N E S S A R E A
€ million
Sales revenue
Operating result
Operating return on sales (%)
2018
2017
3,608
–64
–1.8
3,283
–55
–1.7
Sales revenue in the Power Engineering Business Area
increased by 9.9% year-on-year to €3.6 billion in 2018.
The operating loss amounted to €–0.1 (–0.1) billion. Volume
improvements were offset by a deterioration in the mix. The
operating return on sales stood at –1.8 (–1.7)%.
Results of operations in the Financial Services Division
The Financial Services Division generated sales revenue of
€34.8 billion in the reporting period; the 3.1% rise compared
with the previous year was mainly due to higher business
volume.
Cost of sales rose slightly slower than sales revenue,
increasing by €0.7 billion to €28.2 billion. Distribution
expenses and their ratio to sales revenue were both higher.
Administrative expenses rose slightly, while their ratio to
sales revenue was virtually unchanged year-on-year. The
growth in volumes and higher IT costs were the main factors
in the overall increase in expenses compared with the pre-
vious year.
The Financial Services Division’s operating profit improved
by 4.5% compared with the previous year, increasing to
€2.8 billion and thus contributing significantly to consoli-
dated net profit. The operating return on sales amounted to
8.0 (7.9)%. At 9.9 (9.8)%, the return on equity before tax was
on a level with the previous year.
Principles and goals of financial management
Financial management in the Volkswagen Group covers
liquidity management, the management of currency, interest
rate and commodity risks, as well as credit and country risk
management. It is performed centrally for all Group com-
panies by Group Treasury, based on internal directives and
risk parameters. The main areas of the MAN and Porsche
Holding Salzburg subgroups are integrated into the financial
management of the Group while Scania is included to a
limited extent. Additionally, these subgroups have their own
financial management structures.
The goal of financial management is to ensure that the
Volkswagen Group remains solvent at all times and at the
same time to generate an adequate return from the invest-
ment of surplus funds. We use cash pooling to optimize the
use of existing liquidity between the significant companies in
Europe. In this system, the balances, either positive or nega-
tive, accumulating in the cash pooling accounts are swept
daily into a target account at Group Treasury and thus
pooled. The aim of currency, interest rate and commodity
risk management is to hedge the prices on which investment,
production and sales plans are based using derivative
financial instruments and commodity forwards, and to
mitigate interest rate risks incurred in financing transactions.
Credit and country risk management uses diversification to
limit the Volkswagen Group’s exposure to counterparty risk.
To achieve this, counterparty risk management imposes
internal limits on the volume of business per counterparty
when financial transactions are entered into. Various credit
rating criteria are used in this process. These focus primarily
on the capital resources of potential counterparties, as well as
the ratings awarded by independent agencies. The relevant
risk limits and the authorized financial instruments, hedging
methods and hedging horizons are approved by the Group
Board of Management Committee for Risk Management. For
additional information on the principles and goals of
financial management, please refer to page 185 and to the
notes to the 2018 consolidated financial statements on pages
289 to 310.
F I N A N C I A L P O S I T I O N
Financial position of the Group
The Volkswagen Group’s gross cash flow was €35.6 billion in
fiscal year 2018, an increase of 9.1% compared with the prior-
year figure. Administrative fines imposed after regulatory
offense proceedings, which were recognized as special items
in connection with the diesel issue in the reporting period,
led to cash outflows. The rise in working capital led to tied-up
funds in the amount of €–28.3 (–33.8) billion. The €5.5 billion
change reflects the significant decrease in cash outflows
attributable to the diesel issue in the reporting period, set
against a WLTP-related increase in inventories. As a result,
cash flows from operating activities were up by €8.5 billion to
€7.3 billion.
The Volkswagen Group’s investing activities attributable
to operating activities stood at €19.4 billion, 6.4% more than
in the previous year.
Cash inflows from financing activities amounted to
€24.6 (17.6) billion. The figure mainly comprises the issuance
and redemption of bonds and other financial liabilities.
Financing activities also include the dividends paid to the
shareholders of Volkswagen AG, the acquisition of MAN
shares tendered following the ruling in the award pro-
Group Management Report
Results of Operations, Financial Position and Net Assets
119
C A S H F L O W STAT E M E N T B Y D I V I S I O N
€ million
Cash and cash equivalents at beginning of period
Earnings before tax
Income taxes paid
Depreciation and amortization expense3
Change in pension provisions
Share of the result of equity-accounted investments
Other noncash income/expense and reclassifications4
Gross cash flow
Change in working capital
Change in inventories
Change in receivables
Change in liabilities
Change in other provisions
Change in lease assets (excluding depreciation)
Change in financial services receivables
Cash flows from operating activities
Cash flows from investing activities
attributable to operating activities
of which: investments in property, plant and equipment,
investment property and intangible assets, excluding
capitalized development costs
capitalized development costs
acquisition and disposal of equity investments
Net cash flow 5
Change in investments in securities, loans and time deposits
Cash flows from investing activities
Cash flows from financing activities
of which: capital transactions with
noncontrolling interests
Capital contributions/capital redemptions
MAN noncontrolling interest shareholders: compen-
sation payments and acquisition of shares tendered
Effect of exchange rate changes on cash and cash equivalents
Change of loss allowance within cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents at Dec. 316
Securities, loans and time deposits
Gross liquidity
Total third-party borrowings
Net liquidity7
V O L K S W A G E N G R O U P
A U T O M O T I V E 1
FINANCIAL SERVICES
2018
20172
2018
20172
2018
20172
18,038
15,643
–3,804
22,561
524
244
445
35,613
–28,341
–5,372
–6,400
3,645
–1,286
–11,647
–7,282
7,272
18,833
13,673
–3,664
22,165
468
274
–265
32,651
–33,836
–4,198
–1,660
5,302
–9,910
–11,478
–11,891
–1,185
13,428
12,861
–3,786
15,581
503
303
502
25,964
–7,433
–5,337
–1,800
2,793
–1,306
–1,590
–191
18,531
14,125
11,171
–3,514
14,948
452
159
202
23,418
–11,732
–3,784
–937
4,168
–10,079
–1,115
15
11,686
4,609
2,782
–19
6,980
21
–58
–56
9,650
4,709
2,502
–149
7,218
15
115
–467
9,233
–20,908
–22,104
–34
–4,600
853
20
–10,056
–7,090
–11,258
–414
–724
1,134
169
–10,363
–11,906
–12,871
–19,386
–18,218
–18,837
–17,636
–549
–583
–12,631
–5,260
–124
–510
–
–111
–421
–
–193
–5,950
–11,807
–13,454
–13,729
–13,052
–5,234
–705
–5,260
–317
–12,113
–19,404
–2,204
–21,590
24,566
1,710
–16,508
17,625
–28
1,491
–2,117
–173
–1
10,075
28,113
28,036
56,148
–
3,473
–118
–727
–
–796
18,038
26,291
44,329
–190,883
–163,472
–134,735
–119,143
–13,218
–5,234
–594
–306
6,129
2,333
–12,708
–15,303
4,274
3,562
–28
1,418
–2,117
–171
–1
9,925
23,354
8,697
32,051
–12,683
19,368
–
2,400
–118
–641
–
–696
13,428
15,201
28,630
–6,251
22,378
–8,332
–8,882
20,292
–
73
–
–2
0
150
4,759
19,339
24,098
–622
–1,205
14,063
–
1,073
–
–86
–
–99
4,609
11,090
15,699
–178,200
–157,221
–154,103
–141,522
1 Including allocation of consolidation adjustments between the Automotive and Financial Services divisions.
2 Adjusted
3 Net of impairment reversals.
4 These relate mainly to the fair value measurement of financial instruments and the reclassification of gains/losses on disposal of noncurrent assets and equity investments to
investing activities.
5 Net cash flow: cash flows from operating activities net of cash flows from investing activities attributable to operating activities (investing activities excluding change in investments in
securities, loans and time deposits).
6 Cash and cash equivalents comprise cash at banks, checks, cash-in-hand and call deposits.
7 The total of cash, cash equivalents, securities, loans to affiliates and joint ventures and time deposits net of third-party borrowings (noncurrent and current financial liabilities).
120
Results of Operations, Financial Position and Net Assets
Group Management Report
A U T O M O T I V E D I V I S I O N N E T C A S H F L O W 2 0 1 8
€ billion
26.0
–7.4
25
20
15
10
5
0
–13.2
–5.2
Gross cash flow
Change in
working capital
Capex
Capitalized
development costs
–0.4
Other
–0.3
Net cash flow
ceedings, the successful placement of dual-tranche hybrid
notes in June 2018, and the redemption of the hybrid notes
terminated in the third quarter of 2018.
At the end of the reporting period, the Volkswagen
Group’s cash and cash equivalents as reported in the cash
flow statement amounted to €28.1 (18.0) billion and were
thus significantly up on the prior-year reporting date.
On December 31, 2018, the Volkswagen Group’s net
liquidity was €–134.7 billion, compared with €–119.1 billion
at the end of 2017.
Financial position of the Automotive Division
The Automotive Division’s gross cash flow amounted to
€26.0 billion in fiscal year 2018, €2.5 billion more than a year
earlier. The increase was mainly due to healthy earnings
growth. Special items recognized in the reporting period,
most of which have already led to cash outflows, and a year-
on-year decline in dividends from the Chinese joint ventures
had a negative impact. The change in working capital of
€–7.4 (–11.7) billion was €4.3 billion lower than in the pre-
vious year; it mainly reflects the significant decrease in cash
outflows attributable to the diesel issue in the reporting
period set against a WLTP-related increase in inventories. As a
result, cash flows from operating activities rose by €6.8 bil-
lion to €18.5 billion.
Investing activities attributable to operating activities
increased by €1.2 billion to €18.8 billion. Investments in
property, plant and equipment, investment property and
intangible assets, excluding capitalized development costs
(capex), were 4.6% higher, at €13.2 billion. The ratio of capex
to sales revenue was 6.6 (6.5)%. We invested mainly in our
production facilities and in models that we launched in the
reporting period or are planning to launch next year. These
are primarily the Touareg, T-Cross, Audi e-tron, Audi Q3,
Audi A6, Porsche 911 and Porsche Taycan model series, and
the Bentley Continental family. Other investment priorities
included the ecological focus of our model range, product
electrification and digitalization, and our modular toolkits.
Capitalized development costs of €5.2 (5.3) billion were in
line with 2017 levels. Within the “Acquisition and disposal of
equity investments” item, the sale of a part of the shares in
There Holding was offset mainly by the investment in the
Jianghuai
newly established
Automobile (JAC) and the acquisition of additional shares in
Quantum Scape. The prior-year figure had included the
acquisition of the shares in Navistar and the disposal of part
of the PGA Group.
joint venture with Anhui
Due mainly to markedly lower cash outflows attributable
to the diesel issue, net cash flow in the Automotive Division
improved by €5.6 billion to €–0.3 (–6.0) billion compared with
the previous year.
Cash inflows from financing activities amounted to
€4.3 (3.6) billion in fiscal year 2018. In May 2018, a dividend
totaling €2.0 billion was distributed to the shareholders of
Volkswagen AG, €1.0 billion more than in the previous year.
The successful placement of dual-tranche hybrid notes with
an aggregate principal amount of €2.75 billion via Volks-
wagen International Finance N.V. in June 2018 resulted in a
cash inflow. The notes consist of a €1.25 billion note that
carries a coupon of 3.375% and has a first call date after six
years, and a €1.5 billion note that carries a coupon of 4.625%
and has a first call date after ten years. Both tranches are
Group Management Report
Results of Operations, Financial Position and Net Assets
121
perpetual and, net of transaction costs and other factors,
increase equity. €2.75 billion of the hybrid notes were classi-
fied as a capital contribution, which increased net liquidity.
The redemption of the hybrid notes terminated in the third
quarter of 2018 caused a cash outflow of €1.25 billion in the
reporting period. Financing activities also include the issu-
ance and redemption of bonds and other financial liabilities,
as well as the MAN shares tendered as a result of the award
proceedings and shares in AUDI AG acquired in the fiscal year.
The Automotive Division’s net liquidity was €19.4 billion
on December 31, 2018, €3.0 billion lower than at the end of
fiscal year 2017. The Automotive Division’s net liquidity
stood at 8.2 (9.7)% of consolidated sales revenue in fiscal year
2018.
F I N A N C I A L P O S I T I O N I N T H E PA S S E N G E R C A R S
B U S I N E S S A R E A
€ million
2018
2017
Gross cash flow
Change in working capital
Cash flows from operating activities
Cash flows from investing activities
attributable to operating activities
Net cash flow
21,808
–5,938
15,870
–16,194
–325
19,410
–10,122
9,289
–15,337
–6,048
In fiscal year 2018, the Passenger Cars Business Area’s gross
cash flow improved by €2.4 billion to €21.8 billion. The
increase was mainly due to healthy earnings growth; cash
outflows associated with special items recognized in the
reporting period had an offsetting effect. At €–5.9 (–10.1) bil-
lion, the negative impact on the change in working capital
was less than in the year before, especially because of sig-
nificantly lower cash outflows attributable to the diesel issue;
this was set against a WLTP-related increase in inventories.
Consequently, cash flows from operating activities went up
by €6.6 billion to €15.9 billion. Investing activities attri-
butable to operating activities of €16.2 (15.3) billion were up
on 2017 levels. Capex grew, while capitalized development
costs declined. In the reporting period, the sale of some of the
shares in There Holding was offset by the investment in the
joint venture with Anhui Jianghuai Automobile (JAC) and the
acquisition of additional shares in Quantum Scape. In the
prior-year period, the sale of part of the PGA Group had a
positive effect on this item. Net cash flow increased to
€–0.3 (–6.0) billion.
F I N A N C I A L P O S I T I O N I N T H E C O M M E R C I A L V E H I C L E S
B U S I N E S S A R E A
€ million
2018
2017
Gross cash flow
Change in working capital
Cash flows from operating activities
Cash flows from investing activities
attributable to operating activities
Net cash flow
3,847
–1,234
2,613
–2,480
132
3,739
–1,320
2,419
–2,122
297
The Commercial Vehicles Business Area’s gross cash flow was
€3.8 (3.7) billion in fiscal year 2018; the slight increase over
the previous year was due to higher earnings. The change of
funds tied up in working capital decreased by €0.1 billion to
€–1.2 billion. As a result, cash flows from operating activities
were up on the 2017 figure, increasing to €2.6 (2.4) billion.
Investing activities attributable to operating activities stood
at €2.5 (2.1) billion. This figure comprises increased capex
and higher capitalized development costs mainly for the T7
and Caddy models. The prior-year figure included the
acquisition of the shares in Navistar. Net cash flow amounted
to €0.1 billion, €0.2 billion lower than a year earlier.
F I N A N C I A L P O S I T I O N I N T H E P O W E R E N G I N E E R I N G
B U S I N E S S A R E A
€ million
Gross cash flow
Change in working capital
Cash flows from operating activities
Cash flows from investing activities
attributable to operating activities
Net cash flow
2018
309
–260
49
–162
–113
2017
268
–290
–22
–177
–199
The Power Engineering Business Area generated a gross cash
flow of €0.3 (0.3) billion in the reporting period. Funds tied
up in working capital amounted to €–0.3 (–0.3) billion. Cash
flows from operating activities were slightly higher than in
the previous year.
Investing activities attributable to
operating activities stood at €0.2 (0.2) billion. Net cash flow
improved by €0.1 billion to €–0.1 billion.
122
Results of Operations, Financial Position and Net Assets
Group Management Report
C O N S O L I D AT E D B A L A N C E S H E E T B Y D I V I S I O N A S O F D E C E M B E R 3 1
€ million
Assets
Noncurrent assets
Intangible assets
Property, plant and equipment
Lease assets
Financial services receivables
Investments, equity-accounted investments and
other equity investments, other receivables and
financial assets
Current assets
Inventories
Financial services receivables
Other receivables and financial assets
Marketable securities
Cash, cash equivalents and time deposits
Assets held for sale
Total assets
Equity and liabilities
Equity
Equity attributable to Volkswagen AG
shareholders
Equity attributable to Volkswagen AG hybrid
capital investors
Equity attributable to Volkswagen AG
shareholders and hybrid capital investors
Noncontrolling interests
Noncurrent liabilities
Financial liabilities
Provisions for pensions
Other liabilities
Current liabilities
Put options and compensation rights granted to
noncontrolling interest shareholders
Financial liabilities
Trade payables
Other liabilities
V O L K S W A G E N G R O U P
A U T O M O T I V E 1
F I N A N C I A L S E R V I C E S
2018
2017
2018
2017
2018
2017
274,620
262,081
143,153
140,912
131,467
121,169
64,613
57,630
43,545
78,692
30,140
183,536
45,745
54,216
37,557
17,080
28,938
–
63,419
55,243
39,254
73,249
30,916
160,112
40,415
53,145
32,040
15,939
18,457
115
64,404
54,619
5,297
9
18,824
91,371
41,302
–510
13,033
13,376
24,169
–
63,211
52,503
3,140
–7
22,065
80,210
36,113
–686
17,354
13,512
13,826
90
209
3,010
38,249
78,684
11,315
92,165
4,443
54,726
24,524
3,703
4,769
–
208
2,739
36,114
73,256
8,851
79,902
4,302
53,832
14,686
2,427
4,632
24
458,156
422,193
234,524
221,121
223,632
201,071
117,342
109,077
88,850
81,605
28,492
27,472
104,522
97,761
76,624
70,857
27,898
26,904
12,596
11,088
12,596
11,088
–
–
117,117
225
172,846
101,126
33,097
38,623
167,968
1,853
89,757
23,607
52,750
108,849
229
152,726
81,628
32,730
38,368
160,389
3,795
81,844
23,046
51,705
89,219
–369
77,692
14,187
32,535
30,970
67,982
1,853
–1,504
20,962
46,671
81,945
–339
69,805
6,709
32,189
30,906
69,711
3,795
–458
20,497
45,877
27,898
594
95,154
86,939
563
7,652
99,986
–
91,261
2,645
6,079
26,904
568
82,921
74,919
540
7,462
90,678
–
82,302
2,548
5,828
Total equity and liabilities
458,156
422,193
234,524
221,121
223,632
201,071
1 Including allocation of consolidation adjustments between the Automotive and Financial Services divisions, primarily intragroup loans.
Group Management Report
Results of Operations, Financial Position and Net Assets
123
C O N S O L I D A T E D B A L A N C E S H E E T S T R U C T U R E 2 0 1 8
in percent
Noncurrent assets
Noncurrent assets
59.9 (62.1)
59.9 (62.1)
Current assets
Current assets
40.1 (37.9)
40.1 (37.9)
Equity
Equity
25.6 (25.8)
25.6 (25.8)
Noncurrent liabilities
Noncurrent liabilities
37.7 (36.2)
37.7 (36.2)
Current liabilites
Current liabilites
36.7 (38.0)
36.7 (38.0)
Total assets
Total equity
and liabilities
0
10
20
30
40
50
60
70
80
90
100
Financial position in the Financial Services Division
In the reporting period, the Financial Services Division’s gross
cash flow was €9.6 (9.2) billion. The change in working capital
declined by €1.2 billion year-on-year to €–20.9 billion. Cash
flows from operating activities amounted to €–11.3 (–12.9) bil-
lion.
At €0.5 (0.6) billion, investing activities attributable to
operating activities were in line with the previous year.
The Financial Services Division’s financing activities
relate primarily to the issuance and redemption of bonds and
other financial liabilities; the total cash inflow to refinance
the business volume was €20.3 (14.1) billion.
The Financial Services Division’s negative net liquidity,
which is common in the industry, stood at €–154.1 billion at
the end of the reporting period; at the end of December 2017
it had amounted to €–141.5 billion.
N E T A S S E T S
Consolidated balance sheet structure
The Volkswagen Group’s total assets amounted to €458.2 bil-
lion at the end of fiscal year 2018, 8.5% more than at the end
of the previous year; the main contributing factor was the
increased business volume in the Financial Services Division.
The structure of the consolidated balance sheet as of the
reporting date is shown in the chart on this page. The Volks-
wagen Group’s equity was €117.3 (109.1) billion on Decem-
ber 31, 2018. The equity ratio was virtually unchanged from
the previous year, at 25.6 (25.8)%.
The implementation of the new International Financial
Reporting Standards led to adjustments to the opening
balance sheet of the Volkswagen Group as of January 1, 2018.
The amounts as of December 31, 2017 were unchanged, apart
from movements within equity.
As of the end of fiscal year 2018, the Group had off-balance-
sheet commitments in the form of contingent liabilities in
the amount of €9.3 (8.4) billion, financial guarantees in the
amount of €0.3 (0.3) billion and other financial obligations in
the amount of €26.6 (23.5) billion. Contingent liabilities relate
primarily to legal risks in connection with the diesel issue as
well as potential liabilities from tax risks in the Commercial
Vehicles Business Area in Brazil. The other financial obli-
gations primarily result from purchase commitments for
property, plant and equipment, obligations under long-term
leasing and rental contracts and irrevocable credit commit-
ments to customers. In addition, they include investments to
which the Group has committed itself in the infrastructure
for zero-emission vehicles and in initiatives to promote
access to and awareness of this technology. These commit-
ments were made as part of the settlement agreements in the
USA in connection with the diesel issue. Other financial obli-
gations include an amount of €1.3 billion for this purpose.
Automotive Division balance sheet structure
As of December 31, 2018, the Automotive Division’s intan-
gible assets and property, plant and equipment were both up
year-on-year. Equity-accounted investments rose slightly. The
dividend distributions resolved by the Chinese joint ventures
were set against positive business results of the Chinese joint
ventures and the acquisition of the shares in Quantum Scape.
The decrease in noncurrent other receivables and financial
assets was due among other factors to the negative impact
from the measurement of derivatives. Overall, there was a
slight increase in noncurrent assets, to €143.2 (140.9) billion,
compared with the previous balance sheet date.
124
Results of Operations, Financial Position and Net Assets
Group Management Report
At €91.4 (80.2) billion, current assets were up significantly
compared with the end of 2017; the inventories included in
this figure increased by 14.4%, mainly for production-related
reasons and because of the changeover to the WLTP test
procedure. The decrease in current other receivables and
financial assets was due mainly to the negative impact from
the measurement of derivatives. Cash and cash equivalents
were significantly higher than on December 31, 2017, rising
to €24.2 (13.8) billion.
Equity in the Automotive Division amounted to €88.9 bil-
lion at the end of 2018. This 8.9% incease on the previous
year’s balance sheet date was mainly a result of the healthy
earnings growth and the hybrid notes issued in June 2018.
The negative effects from the measurement of derivatives
recognized outside profit or loss and currency translation,
the dividends paid to the shareholders of Volkswagen AG, the
redemption of the hybrid notes terminated in the third
quarter of 2018 and the non-recurring impact of the first-
time application of the new International Financial Reporting
Standards reduced equity in the Automotive Division. The
noncontrolling interests are mainly attributable to RENK AG
and AUDI AG. As these were lower overall than the noncon-
trolling interests attributable to the Financial Services Divi-
sion, the figure for the Automotive Division, where the
deduction was recognized, was negative. The equity ratio was
37.9 (36.9)%, up on the figure as of December 31, 2017.
Noncurrent liabilities went up to €77.7 (69.8) billion,
driven mainly by the rise in the noncurrent financial lia-
bilities included in this item.
Current liabilities declined to €68.0 billion, in total 2.5%
down on the end of 2017. The item “Put options and compen-
sation rights granted to noncontrolling interest share-
holders” primarily comprises the liability for the obligation
to acquire the shares held by the remaining free float
shareholders of MAN; following the ruling in the award pro-
ceedings, the extraordinary notice of termination of the
control and profit and loss transfer agreement, and the cash
outflows for the cash compensation and the acquisition of
shares tendered, this item was adjusted accordingly to
€1.9 (3.8) billion. Reclassifications from noncurrent to current
liabilities due to shorter remaining maturities were among
the factors that led to a rise in current financial liabilities
compared with the end of 2017. The figures for the Auto-
motive Division also contain the elimination of intragroup
transactions between the Automotive and Financial Services
divisions. As the current financial liabilities for the primary
Automotive Division were lower than the loans granted to the
Financial Services Division, a negative amount was disclosed
in both periods. Current other provisions included in current
other liabilities declined due to their use in connection with
the diesel issue.
On December 31, 2018, total assets in the Automotive
Division amounted to €234.5 billion, 6.1% more than at the
end of 2017.
PA S S E N G E R C A R S B U S I N E S S A R E A B A L A N C E S H E E T ST R U C T U R E
€ million
Dec. 31, 2018
Dec. 31, 2017
Noncurrent assets
Current assets
Total assets
Equity
Noncurrent liabilities
Current liabilities
112,796
65,882
178,678
70,817
62,445
45,415
111,277
60,052
171,329
66,449
55,118
49,762
Intangible assets and property plant and equipment in the
Passenger Cars Business Area were higher than in the pre-
vious year. The decrease in noncurrent other receivables and
financial assets was due to factors such as the negative
impact from the measurement of derivatives. Overall, non-
current assets grew by €1.5 billion to €112.8 billion. Current
assets increased by a total of €5.8 billion to €65.9 billion; the
inventories included in this figure grew for production-
related reasons and because of the changeover to the WLTP
test procedure. There was a threefold year-on-year increase in
cash and cash equivalents to €18.1 (6.1) billion. Total assets
stood at €178.7 (171.3) billion at the end of 2018.
At €70.8 billion, the Passenger Cars Business Area’s equity
exceeded the prior-year figure by 6.6%, due mainly to
earnings-related factors and the hybrid notes issued in the
reporting period.
Noncurrent liabilities were 13.3% higher than at the end
of 2017; the financial liabilities included in this item were up
significantly. Current liabilities decreased by a total of 8.7%.
Current other liabilities and current other provisions were
down on the prior-year figure.
Group Management Report
Results of Operations, Financial Position and Net Assets
125
C O M M E R C I A L V E H I C L E S B U S I N E S S A R E A
P O W E R E N G I N E E R I N G B U S I N E S S A R E A
B A L A N C E S H E E T ST R U C T U R E
B A L A N C E S H E E T ST R U C T U R E
€ million
Dec. 31, 2018
Dec. 31, 2017
€ million
Dec. 31, 2018
Dec. 31, 2017
Noncurrent assets
Current assets
Total assets
Equity
Noncurrent liabilities
Current liabilities
27,858
21,892
49,750
15,081
14,493
20,176
27,005
Noncurrent assets
16,908
Current assets
43,913
Total assets
12,194
Equity
13,975
Noncurrent liabilities
17,744
Current liabilities
2,499
3,597
6,097
2,953
754
2,391
2,629
3,250
5,879
2,963
711
2,205
On December 31, 2018, the Commercial Vehicles Business
Area’s intangible assets and property, plant and equipment
were higher than at the end of 2017. Equity-accounted invest-
ments were up, while other equity investments decreased as a
result of an intragroup sale (power engineering business).
Overall, noncurrent assets grew by €0.9 billion to €27.9 bil-
lion. Current assets amounted to €21.9 (16.9) billion, signifi-
cantly up on the previous year’s balance sheet date. The
current other receivables and financial assets included in this
item increased, while cash and cash equivalents declined; the
payments in connection with the intragroup sale of the
power engineering business will become due in the first quar-
ter of 2019. Total assets climbed by 13.3% to €49.7 billion.
Equity in the Commercial Vehicles Business Area stood at
€15.1 billion at the end of 2018, 23.7% more than a year
earlier. In addition to healthy earnings, this increase was
attributable to the intragroup sale of the power engineering
business. The item “Put options and compensation rights
granted to noncontrolling interest shareholders” fell sharply:
the item was adjusted to reflect the ruling in the award
proceedings and the extraordinary termination of the control
and profit and loss transfer agreement, as well as the cash
outflows for the cash compensation and the acquisition of
shares tendered. Noncurrent liabilities rose by 3.7%; the
noncurrent financial liabilities included in this item were
down on the previous year, while noncurrent other liabilities
increased. Current liabilities were 13.7% higher than on
December 31, 2017. Current other liabilities were signifi-
cantly higher.
In the Power Engineering Business Area, the decline in non-
current assets was mainly attributable to a year-on-year
decrease in intangible assets. Higher inventories and receiv-
ables led to a 10.7% rise in current assets compared with the
previous balance sheet date. At the end of 2018, the Power
Engineering Business Area recorded a 3.7% year-on-year
increase in total assets to €6.1 billion.
On December 31, 2018, equity stood at €3.0 (3.0) billion,
and thus on a level with the previous year. Both noncurrent
and current liabilities were up in the reporting period com-
pared with the 2017 balance sheet date.
Financial Services Division balance sheet structure
On December 31, 2018, total assets in the Financial Services
Division amounted to €223.6 billion, 11.2% more than at the
end of 2017.
There was a significant rise in both lease assets and non-
current receivables, tracking the growth in business. Noncur-
rent assets were up by 8.5% in total.
Current assets rose by 15.3%, driven by higher volumes.
The revised classification of financial instruments required
by IFRS 9 led to reclassifications, in particular of financial
services receivables to trade receivables, which are included
in the “Other receivables and financial assets” item. Total
securities increased by €1.3 billion to €3.7 billion.
On December 31, 2018, the Financial Services Division
accounted for around 48.8 (47.6)% of the Volkswagen Group’s
assets.
126
Results of Operations, Financial Position and Net Assets
Group Management Report
The 3.7% rise in equity to €28.5 billion in the reporting period
was mainly attributable to healthy earnings. The equity ratio
was 12.7 (13.7)%.
Noncurrent liabilities were up 14.8%, mainly because of a
rise in noncurrent financial liabilities to refinance the
business volume. Current liabilities increased by a total of
10.3% and the current financial liabilities included in this
item rose markedly.
At €29.9 (31.4) billion, deposits from the direct banking
business were lower at the end of 2018 than they had been a
year earlier.
R E T U R N O N I N V E ST M E N T ( R O I ) A N D VA L U E C O N T R I B U T I O N
The Volkswagen Group’s financial target system centers on
continuously and sustainably increasing the value of the
Company. In order to ensure the efficient use of resources in
the Automotive Division and to measure the success of this,
we have been using a value-based management system for a
number of years, with return on investment (ROI) as a
relative indicator and value contribution1, a key performance
indicator linked to the cost of capital, as an absolute per-
formance measure.
The return on investment serves as a consistent target in
strategic and operational management. If the return on
investment exceeds the market cost of capital, there is an
increase in the value of the invested capital and a positive
value contribution. The concept of value-based management
allows the success of the Automotive Division and individual
business units to be evaluated. It also enables the earnings
power of our products, product lines and projects – such as
new plants – to be measured.
Components of value contribution
Value contribution is calculated on the basis of the operating
result after tax and the opportunity cost of invested capital.
The operating result shows the economic performance of
the Automotive Division and is initially a pre-tax figure.
Using the various international income tax rates of the
relevant companies, we assume an overall average tax rate of
30% when calculating the operating result after tax.
The cost of capital is multiplied by the average invested
capital to give the opportunity cost of capital. Invested capital
is calculated as total operating assets reported in the balance
sheet (property, plant and equipment, intangible assets, lease
assets, inventories and receivables) less non-interest-bearing
liabilities (trade payables and payments on account received).
Average invested capital is derived from the balance at the
beginning and the end of the reporting period.
As the concept of value-based management only com-
prises our operating activities, assets relating to investments
in subsidiaries and associates and the investment of cash
funds are not included when calculating invested capital.
Interest charged on these assets is reported in the financial
result.
Determining the current cost of capital
The cost of capital is the weighted average of the required
rates of return on equity and debt. The cost of equity is
determined using the Capital Asset Pricing Model (CAPM).
This model uses the yield on long-term risk-free Bunds,
increased by the risk premium attaching to investments in
the equity market. The risk premium comprises a general
market risk and a specific business risk.
The general risk premium of 6.5% reflects the general risk
of a capital investment in the equity market and is oriented
on the Morgan Stanley Capital International (MSCI) World
Index.
The specific business risk – price fluctuations in Volks-
wagen preferred shares – has been modeled in comparison to
the MSCI World Index when calculating the beta factor. The
MSCI World Index is a global capital market benchmark for
investors.
The analysis period for the beta factor calculation spans
five years with annual beta figures calculated on a daily basis
followed by the subsequent calculation of the average. A beta
factor of 1.17 (1.12) was determined for 2018.
1 The value contribution corresponds to the Economic Value Added (EVA®). EVA® is a
registered trademark of Stern Stewart & Co.
Group Management Report
Results of Operations, Financial Position and Net Assets
127
C O ST O F C A P I TA L A F T E R TA X A U TO M OT I V E D I V I S I O N
%
Risk-free rate
MSCI World Index market risk premium
Volkswagen-specific risk premium
(Volkswagen beta factor)
Cost of equity after tax
Cost of debt
Tax
Cost of debt after tax
Proportion of equity
Proportion of debt
Cost of capital after tax
2018
2017
0.8
6.5
1.1
1.0
6.5
0.8
(1.17)
(1.12)
8.4
2.5
–0.8
1.8
66.7
33.3
6.2
8.3
1.8
–0.6
1.3
66.7
33.3
6.0
The cost of debt is based on the average yield for long-term
debt. As borrowing costs are tax-deductible, the cost of debt is
adjusted to account for the tax rate of 30%.
A weighting on the basis of a fixed ratio for the fair values
of equity and debt gives an effective cost of capital for the
Automotive Division of 6.2 (6.0)% for 2018.
R E T U R N O N I N V E ST M E N T ( R O I ) A N D VA L U E C O N T R I B U T I O N I N
T H E R E P O R T I N G P E R I O D
The operating result after tax of the Automotive Division,
including the proportionate operating result of the Chinese
joint ventures, was €11,438 (11,756) million in fiscal year
2018. Volume improvements were unable to compensate for
the year-on-year decline that was primarily caused by rising
depreciation and amortization charges due to the large
volume of capital expenditure, higher research and develop-
ment costs, as well as the fair value measurement of gains
and losses on certain derivatives, which have been reported
here since the beginning of the year. Effects on earnings and
assets from purchase price allocation are not taken into
account as they cannot be influenced operationally by man-
agement.
In the reporting year, the invested capital rose to
€104,424 (97,021) million. The increase was particularly due
to higher inventories as well as to additions to investments in
property, plant and equipment and capitalized development
costs.
The return on investment (ROI) is the return on invested
capital for a particular period based on the operating result
after tax. The ROI declined year-on-year as a result of the
lower operating profit and higher invested capital. However,
at 11.0 (12.1)%, it exceeded our minimum rate of return on
invested capital of 9% in spite of the adverse effects of the
special items on earnings.
At €6,474 (5,821) million, the opportunity cost of capital
(invested capital multiplied by cost of capital) was up on the
prior-year level due to the increase in the invested capital and
the higher cost of capital. After deduction of the opportunity
cost of invested capital, operating result after tax – which was
negatively impacted by special items – led to a positive value
contribution of €4,964 (5,935) million.
More information on value-based management is con-
tained in our publication entitled “Financial Control System
of the Volkswagen Group”, which can be downloaded from
our Investor Relations website: www.volkswagenag.com/
en/InvestorRelations/news-and-publications/More_Publica-
tions.html.
R E T U R N O N I N V E ST M E N T ( R O I ) A N D VA L U E C O N T R I B U T I O N I N T H E A U TO M OT I V E D I V I S I O N 1
€ million
Operating result after tax
Invested capital (average)
Return on investment (ROI) in %
Cost of capital in %
Cost of invested capital
Value contribution
2018
2017
11,438
104,424
11.0
6.2
6,474
4,964
11,756
97,021
12.1
6.0
5,821
5,935
1 Including proportionate inclusion of the Chinese joint ventures (including the relevant sales and component companies) and allocation of consolidation adjustments between the
Automotive and Financial Services Divisions.
128
Results of Operations, Financial Position and Net Assets
Group Management Report
S U M M A R Y O F B U S I N E S S D E V E L O P M E N T A N D E C O N O M I C
P O S I T I O N
The Board of Management of Volkswagen AG considers busi-
ness development and the economic position to have been
positive overall.
In spite of the challenges presented by the diesel issue
and public discussion pertaining to diesel vehicles, the persis-
tently difficult market conditions and the new WLTP test
procedure, we slightly lifted our deliveries to customers to
10.8 million vehicles, thus achieving a new sales record.
We saw growth in Europe, South America and the Asia-
Pacific region. The Group’s sales revenue rose by 2.7%, within
the expected range. Operating profit before special items
amounted to €17.1 billion; at 7.3% the operating return on
sales before special items was within the range forecast at the
beginning of the year of 6.5–7.5%. Due to special items
resulting from the diesel issue, the operating return on sales
of 5.9% was moderately below the forecast range, as recently
projected.
F O R E C A ST V E R S U S A C T U A L F I G U R E S
Our efforts to ensure the Company’s future viability are
reflected in research and development costs; at 6.8% the R&D
ratio in the Automotive Division was within the expected
range.
At 6.6%, the Automotive Division’s ratio of capex to sales
revenue was also within the forecast range as well. As
expected, the Automotive Division’s net cash flow consider-
ably exceeded the comparable prior-year figure, but was
negative at €–0.3 billion. This was particularly due to higher-
than-expected cash outflows attributable to the diesel issue,
owing to fines resulting from the administrative fine order
issued by the public prosecutor's offices in Braunschweig and
Munich II. In combination with the acquisition of MAN
shares tendered, this resulted in a year-on-year decline in net
liquidity, which stood at €19.4 billion.
The return on investment (ROI) in the Automotive Divi-
sion of 11.0% was lower than in 2017 but exceeded the
minimum required rate of return on invested capital.
Deliveries to customers
Volkswagen Group
Sales revenue
Actual 20171
Original forecast
for 2018
Adjusted forecast
for 2018
Actual 2018
10.7 million
moderate increase
moderate increase
10.8 million
€229.6 billion
increase of up to 5%
increase of up to 5%
€235.8 billion
Operating return on sales before special items
Operating return on sales
7.4%
6.0%
6.5–7.5%
6.5–7.5%
6.5–7.5%
moderately below 6.5%
Operating result before special items
€17.0 billion
within the forecast range
within the forecast range
€13.8 billion
within the forecast range
within the forecast range
Operating return on sales before special items
Operating return on sales
8.0%
5.9%
6.5–7.5%
6.5–7.5%
6.5–7.5%
moderately below 6.5%
Operating result before special items
€12.5 billion
within the forecast range
within the forecast range
€9.3 billion
within the forecast range
within the forecast range
€157.3 billion
increase of up to 5%
increase of up to 5%
€160.8 billion
7.3%
5.9%
€17.1 billion
€13.9 billion
7.7%
5.7%
€12.4 billion
€9.2 billion
Operating result
Passenger Cars Business Area
Sales revenue
Operating result
Commercial Vehicles Business Area
Sales revenue
Operating return on sales
Operating result
Power Engineering Business Area
Sales revenue
Operating result
Financial Services Division
Sales revenue
Operating result
R&D ratio in the Automotive Division
Capex/sales revenue in the Automotive Division
Net cash flow in the Automotive Division
Net liquidity in the Automotive Division
Return on investment (ROI) in the Automotive
Division
€35.2 billion
increase of up to 5%
increase of up to 5%
€36.7 billion
5.4%
5.0–6.0%
5.0–6.0%
5.4%
€1.9 billion
within the forecast range
within the forecast range
€2.0 billion
€3.3 billion
€–0.1 billion
€33.7 billion
€2.7 billion
6.7%
6.5%
€–6.0 billion
€22.4 billion
12.1%
increase of up to 5%
increase of up to 5%
lower loss
around the prior-year level
increase of up to 5%
increase of up to 5%
at prior-year level
at prior-year level
6.5–7.0%
6.5–7.0%
significant increase,
positive
moderate increase
slight increase,
>9%
6.5–7.0%
6.5–7.0%
significant increase,
positive
moderate decline
slight decline,
>9%
€3.6 billion
€–0.1 billion
€34.8 billion
€2.8 billion
6.8%
6.6%
€–0.3 billion
€19.4 billion
11.0%
1 Adjusted; see disclosures about the application of new International Financial Reporting Standards on page 114.
Group Management Report
Volkswagen AG
129
Volkswagen AG
(Condensed, in accordance with the German Commercial Code)
Unit sales of Volkswagen AG were on a level with the previous year in 2018,
while sales and profit increased.
A N N U A L R E S U LT
Additional special items in connection with the diesel issue
amounting to €2.0 billion were recognized in fiscal year 2018.
These were mainly attributable to the administrative fine
order of €1.0 billion imposed by the Braunschweig public
prosecutor’s office, higher legal risks and legal defense costs
and an increase in expenses for technical measures. Special
items had an impact of €0.1 (–2.0) billion on cost of sales and
of €–2.0 (–0.9) billion on other operating income.
In the reporting period, sales were 1.7% higher than in
the previous year, at €78.0 billion. Sales generated abroad
accounted for a share of 64.7 (62.5)%. Due to a decline in
special items, cost of sales decreased by 0.9% to €72.7 billion.
Gross profit rose accordingly to €5.3 (3.4) billion.
At €7.6 billion, distribution, general and administrative
expenses were up €0.5 billion on the prior-year figure.
The net other operating result was €0.3 billion lower, at
€–0.4 (–0.2) billion. The decline was mainly attributable to the
year-on-year rise of €1.1 billion in special items.
At €8.3 (8.6) billion, the financial result stood at the prior-
year level.
Including the income tax expense of €–0.9 (–0.4) billion,
net income for the year amounted to €4.6 (4.4) billion in
fiscal year 2018.
I N C O M E STAT E M E N T O F V O L K SWA G E N A G
B A L A N C E S H E E T O F V O L K SWA G E N A G A S O F D E C E M B E R 3 1
€ million
Sales
Cost of sales
Gross profit on sales
Distribution, general and administrative
expenses
Net other operating result
Financial result1
Taxes on income
Earnings after tax
Net income for the fiscal year
Retained profits brought forward
Appropriations to revenue reserves
Net retained profits
1 Including write-downs of long-term financial assets.
2018
2017
€ million
2018
2017
78,001
–72,700
5,301
76,729
Fixed assets
–73,355
3,375
Inventories
Receivables1
–7,624
–7,104
–415
8,264
–907
4,620
4,620
3
–2,204
2,419
–154
8,644
–409
4,353
4,353
2
–2,174
2,181
Cash-in-hand and bank balances
Total assets
Equity
Special tax-allowable reserves
Long-term debt
Medium-term debt
Short-term debt
1 Including prepaid expenses.
119,713
113,703
5,140
36,965
14,595
176,412
33,090
19
40,348
37,422
65,533
4,889
32,303
5,798
156,693
30,438
21
33,060
33,415
59,759
130
Volkswagen AG
Group Management Report
N E T A S S E T S A N D F I N A N C I A L P O S I T I O N
Total assets amounted to €176.4 billion on December 31,
2018, up €19.7 billion on the prior-year figure. Property, plant
and equipment was down by €0.2 billion, capital expendi-
ture was lower than depreciation charges. Financial assets
increased, driven in particular by capital increases at Volks-
wagen Finance Luxemburg S.A. (€2.7 billion), Volkswagen
Klassik GmbH (€2.3 billion) and Porsche Holding Stutt-
gart GmbH (€0.9 billion) and by the increased stake in Volks-
wagen Klassik GmbH recognized directly in equity due to an
intragroup reorganization
(€2.6 billion). Particularly the
capital decrease of €3.3 billion implemented at TRATON SE
(formerly TRATON AG) had an offsetting effect.
Fixed assets accounted for a share of 67.9 (72.6)% of total
assets.
Volkswagen AG’s cash funds, comprising cash instruments
with a maturity of less than three months, less bank and cash
pooling liabilities repayable on demand, improved year-on-
year from €–8.5 billion to €–0.2 billion. The interest-bearing
portion of debt amounted to €87.9 (74.0) billion. In our
assessment, the economic position of Volkswagen AG is just
as positive overall as that of the Volkswagen Group.
D I V I D E N D P R O P O S A L
In fiscal year 2018, net retained profits amounted to €2.4 bil-
lion. The Board of Management and Supervisory Board are
proposing to pay a total dividend of €2.4 billion, i.e. €4.80 per
ordinary share and €4.86 per preferred share.
Current assets (including prepaid expenses) amounted to
P R O P O S A L O N T H E A P P R O P R I AT I O N O F N E T P R O F I T
€56.6 (43.0) billion on December 31, 2018.
At €33.1 billion, equity increased due in particular to the
improved net income for the year at the end of the reporting
period. The equity ratio was 18.8 (19.4)%.
€
Other provisions decreased by €2.1 billion to €20.0
(22.1) billion, due primarily to the utilization of provisions in
connection with the diesel issue. Provisions for pensions and
similar obligations rose by €1.8 billion to €16.1 billion, pri-
marily as a result of a change in measurement inputs, while
provisions for taxes increased by €0.2 billion to €3.7 billion.
The €17.1 billion rise in total liabilities (including deferred
income) to €103.4 billion is, above all, attributable to higher
liabilities to affiliated companies.
E M P L OY E E PAY A N D B E N E F I T S AT V O L K SWA G E N A G
Dividend distribution on subscribed capital
(€1,283 million)
of which on: ordinary shares
preferred shares
Balance (carried forward to new account)
Net retained profits
2018
2,418,589,589.10
1,416,431,126.40
1,002,158,462.70
338,837.15
2,418,928,426.25
€ million
Direct pay including cash benefits
Social security contributions
Compensated absence
Retirement benefits
Total expense
2018
8,175
1,437
1,350
611
%
70.6
12.4
11.7
5.3
2017
7,637
1,361
1,161
640
%
70.7
12.6
10.7
5.9
11,573
100.0
10,799
100.0
Group Management Report
Volkswagen AG
131
E X P E N D I T U R E O N E N V I R O N M E N TA L P R OT E C T I O N
When measuring expenditure on environmental protection,
a distinction is made between investments and operating
costs for production-related environmental protection mea-
sures. Of our total investments, only those that are spent
exclusively or primarily on environmental protection are
included in environmental protection investments. We dis-
tinguish here between additive and integrated investments.
Additive environmental protection measures are separate
measures upstream or downstream of the production
process. In contrast to additive environmental protection
measures, integrated measures reduce the environmental
impact already during the production process. In 2018 we
invested primarily in soil and water pollution control.
The recognized operating costs relate to measures that
protect the environment against harmful factors by avoiding,
reducing, or eliminating emissions by the Company. Resources
are also conserved. For example, these include expenditures
incurred to operate equipment that protects the environment
as well as expenditures for measures not relating to such
equipment. As in previous years, the emphasis in 2018 was
on sewage and waste management.
V E H I C L E S A L E S
Volkswagen AG sold a total of 2,597,126 (2,584,375) vehicles
in fiscal year 2018. Vehicles sold abroad accounted for a share
of 71.0 (70.0)%.
P R O D U C T I O N
Volkswagen AG produced a total of 1,113,415 vehicles at its
vehicle production plants in Wolfsburg, Hanover and Emden
in the reporting period (–9.1%).
E M P L OY E E S
As of December 31, 2018, a total of 119,394 (117,420) people
were employed at the sites of Volkswagen AG, excluding staff
employed at subsidiaries. Of this figure, 5,009 (4,953) were
vocational trainees. 4,785 (4,380) employees were in the
passive phase of their partial retirement.
Female employees accounted for 17.3 (17.1)% of the
workforce. Volkswagen AG employed 5,883 (5,069) part-time
workers. The percentage of foreign employees was 6.3 (6.1)%.
83.2 (83.4)% of the employees in Volkswagen AG’s production
area were in possession of vocational or additional training
in the reporting period. The proportion of graduates was 19.5
(18.9)% in the same period. The average age of employees in
fiscal year 2018 was 43.9 (43.6) years.
R E S E A R C H A N D D E V E L O P M E N T
Volkswagen AG’s research and development costs as defined
in the German Commercial Code increased to €5.6 (4.8) bil-
lion in the reporting period. 12,796 (12,332) people were
employed in this area at the end of the reporting period.
V O L K SWA G E N A G E X P E N D I T U R E O N E N V I R O N M E N TA L P R OT E C T I O N
€ million
Investments
Operating costs
2018
13
230
2017
17
227
2016
11
223
2015
21
244
2014
19
226
132
Volkswagen AG
Group Management Report
O P E R A T I N G C O S T S F O R E N V I R O N M E N T A L P R O T E C T I O N A T V O L K S W A G E N A G 2 0 1 8
Share of environmental protection areas in percent
Sewage management
Waste management
Air pollution control
Soil and water
pollution control
Climate protection
Protection against
noise and vibration
Species and
landscape conservation
30.8
29.1
17.6
10.6
6.2
3.0
2.7
0
10
20
30
40
50
60
70
80
90
100
B U S I N E S S D E V E L O P M E N T R I S K S A N D O P P O R T U N I T I E S AT
V O L K SWA G E N A G
The business development of Volkswagen AG is exposed to
essentially the same risks and opportunities as the Volks-
wagen Group. These risks and opportunities are explained
in the Report on Risks and Opportunities on pages 163 to
187 of this annual report.
R I S K S A R I S I N G F R O M F I N A N C I A L I N ST R U M E N T S
Risks for Volkswagen AG arising from the use of financial
instruments are the same as those to which the Volkswagen
Group is exposed. An explanation of these risks can be found
on pages 185 to 186 of this annual report.
D E P E N D E N T C O M PA N Y R E P O R T
The Board of Management of Volkswagen AG has submitted
to the Supervisory Board the report required by section 312
of the AktG and issued the following concluding declaration:
“We declare that, based on the circumstances known to us at
the time when the transactions with affiliated companies
within the meaning of section 312 of the German Stock
Corporation Act (AktG) were entered into, our Company
received appropriate consideration for each transaction. No
transactions with third parties or measures were either
undertaken or omitted on the instructions of or in the
interests of Porsche or other affiliated companies in the
reporting period.”
The Annual Financial Statements of Volkswagen AG (in accordance with the German
Commercial Code can be accessed from the electronic company register at
www.unternehmensregister.de.
Group Management Report
Sustainable Value Enhancement
133
Sustainable Value Enhancement
Our goal is to run our business responsibly along the entire value chain. Everyone should benefit
from this – our customers, our employees, the environment and society. Our future program
TOGETHER – Strategy 2025 describes this change process in the Company. The starting point is
our vision of being one of the world’s leading providers of sustainable mobility.
The main financial key performance indicators for the Volks-
wagen Group are described in the “Results of Operations,
Financial Position and Net Assets” chapter. Nonfinancial key
performance indicators also attest to the efficiency of our
Company’s value drivers. These include the processes in the
areas of research and development, procurement, produc-
tion, marketing and sales, information technology and
quality assurance. In all of these processes, we are aware of
our responsibility towards our customers, our employees, the
environment and society. In this chapter we provide exam-
ples of how we are increasing the value of our Company in a
sustainable way.
S U STA I N A B I L I T Y
The Volkswagen Group is committed to sustainable, trans-
parent and responsible corporate governance. The biggest
challenge we face in implementing this at all levels and at
every step in the value chain is the complexity of our Com-
pany, with its twelve brands, around 665 thousand employees
and 123 production locations. In order to tackle this
complexity in the best way possible, our focus is on
coordinating our sustainability activities across the entire
Group. We have a forward-looking system of risk manage-
ment in place, a clear framework for dealing with future
environmental issues, and attach great weight to social
commitment and employee responsibility. Moreover, we are
oriented towards the recommendations of the German
Corporate Governance Code.
For us, sustainability means simultaneously striving for
economic, social and environmental goals in a way that gives
them equal priority. The future program TOGETHER – Strat-
egy 2025 places sustainable growth at the heart of our Group
strategy: we want to be an excellent employer and a role
model for the environment, safety and integrity, to excite
customers and to ensure that we achieve competitive
profitability at the same time. Our corporate citizenship
activities also support us in this endeavor. We understand
corporate citizenship as voluntary services that our company
performs for society above and beyond our core business.
These services address social challenges, but are also
designed to promote business objectives such as improving
our reputation, credibility and/or attractiveness as an
employer. Specifically, they may take the form of financial
donations or donations in kind, social sponsoring, opera-
tional projects founded on the Company’s initiative but also
different forms of corporate volunteering.
By 2025, we aim to make the Volkswagen Group the
world’s number one in electric mobility. We have therefore set
new priorities with Roadmap E. We also need to ensure that
we detect risks and opportunities in the areas of environ-
ment, society and governance at an early stage at every step
along the value chain.
Management and Coordination
The Volkswagen Group has created a clear management
structure to coordinate the Group’s activities as regards
sustainability – including corporate citizenship. Its highest
committee is the Group Board of Management. It is regularly
briefed by the Group Sustainability steering group on all
issues related to the topics of sustainability and corporate
responsibility. The members of the Group Sustainability
steering group include executives from central Board of
Management business areas and representatives of the Group
Works Council and the brands. The steering group’s tasks
include identifying the key action areas, making decisions on
the strategic sustainability goals and programs, using indi-
cators to monitor the extent to which these goals are being
met and approving the sustainability report.
134
Sustainable Value Enhancement
Group Management Report
T H E V O L K S W A G E N G R O U P ’ S K E Y A C T I O N A R E AS
Compliance,
risk management,
governance
Supplier
management
Product and
transport safety
Stability and
profitability
Customer satisfaction
Integrity
Diversity and
equality
Corporate
responsibility
Health and
occupational safety
O N E O F T H E
W O R L D ’ S L E A D I N G
P R O V I D E R S O F
S U S T A I N A B L E
M O B I L I T Y
Climate protection
and decarbonization
Nature conservation
and biodiversity
Training
Attractiveness
as an employer
Human rights
Zero impact
mobility
Resource conservation
throughout life cycle
Participation and
codetermination
Environmentally
friendly products
Sustainability activities are planned and managed by the
functional area Group Sustainability. Its duties include
coordinating all sustainability activities within the Group,
the brands and the regions. These also include stakeholder
management at Group level, for example contact with
sustainability-driven analysts and investors. In addition,
project teams work across business areas on topics such as
decarbonization, human rights and sustainability in supplier
relationships. This coordination and working structure is also
largely established across the brands and is constantly
expanding. Activities in fiscal year 2018 focused on strate-
gically realigning the functional area Group Sustainability
and anchoring sustainability in our core business, as well as
on developing a sustainability program that places emphasis
on climate protection and sustainable supply chains, among
other things.
Sustainability Council
To support its strategic sustainability goal, the Volkswagen
Group appointed a Sustainability Council in September 2016.
This is made up of internationally renowned experts from
the academic world, politics and society. The Council estab-
lishes its own working methods and areas of focus indepen-
dently, has extensive rights for the purposes of exchanging
information, consultation and initiating action, and consults
regularly with the Board of Management, top management
and the employee representatives.
In 2018, the projects initiated by the Council the year
before were commenced: a dialog platform for innovations
and cultural change in the area of sustainable mobility, an
international program for mitigating the effects of climate
change through forecast-based civil protection financing and
a scientific study for designing future traffic policy in line
with international climate targets. In addition, the Council
decided on a further project for the strategic focus of sus-
tainability at Volkswagen and the establishment of a visiting
professorship for open labs and cultural change at the
Einstein Center Digital Future in Berlin. Furthermore, the
Sustainability Council formulated recommendations for how
technological, political and cultural change should be
organized to win back trust and lay the foundations for
future success.
Materiality analysis
Two developments in 2018 continued to influence the
detailed analysis as to which issues are material to the Volks-
wagen Group: the alingment of the Group as part of the
future program TOGETHER – Strategy 2025 and dealing with
the consequences of the diesel issue.
As the starting point for our analysis, we are oriented
towards the Sustainable Development Goals (SDGs) formu-
lated by the United Nations, which describe the social chal-
lenges facing companies. Based on the results, we defined 18
key action areas for achieving our goal of becoming one of
the world’s leading providers of sustainable mobility. In order
to identify key topics, we took into account external studies,
sector and media analyses, ratings, stakeholder surveys,
internal and external guidelines and codes, the Group-wide
future program TOGETHER – Strategy 2025 and the indi-
vidual departmental strategies.
As the details of the Group strategy have not yet been
finalized, we are still in the process of specifying the content
of the key action areas and defining corresponding values,
targets and indicators.
Principles and guidelines
Voluntary commitments and principles that apply through-
out the Group form the basis of our sustainable focus. In
addition, our sustainability model provides the framework
for sustainable and responsible action. The Volkswagen
Group’s Code of Conduct applies to the entire Group and
helps managers and employees alike to deal with legal and
ethical challenges in their day-to-day work.
Group Management Report
Sustainable Value Enhancement
135
T H E V O L K S W A G E N G R O U P ’ S S T A K E H O L D E RS
M E D IA
R E S I D E N T S &
L O C A L A U T H O R I T I E S
R E S E A R C H E R S &
E X P E R TS
N G O s / C H A R I T A B LE
O R G A N I Z A T I O N S
C U S T O M E RS
V O L K S W A G EN
G R O UP
E M P L O Y E E S
C O M P E T I T O RS
P O L I T I C S &
A S S O C I A T I O N S
B U S I N E S S
P A R T N E R S
I N V E S T O R S &
A N A L Y S T S
We expressly support the United Nations Global Compact, an
agreement between the UN and the business world aimed at
enhancing the social and ecological aspects of globalization.
As long ago as 2002, the Volkswagen Group made a commit-
ment to promoting human rights, labor standards, environ-
mental protection and combating corruption. We are seeking
reincorporation of our membership in the United Nations
Global Compact, which had been suspended following the
diesel issue; talks on this were resumed in 2018. In addition,
our objective is to ensure that our actions are in line with the
declarations of the International Labor Organization (ILO),
the principles and conventions of the Organisation for
Economic Co-operation and Development (OECD) and the
international covenants of the United Nations on basic rights
and freedom.
We have established our own internal guidelines in the
form of the Volkswagen Social Charter, the Charter on Labor
Relations, the Charter on Vocational Education and Training,
and the Charter on Temporary Work. The environmental
policy and the environmental principles for products and
production, which apply throughout the Group, are manda-
tory for environmental protection.
Strategic stakeholder management
Our stakeholders are individuals, groups, or organizations
who have a material influence on or are materially influenced
by the way in which the Group reaches its corporate decisions
and the implications of those decisions. Our customers and
our employees are our key stakeholders. Around this core, we
have defined eight types of stakeholders. This classification is
the product of a stakeholder analysis in which we regularly
identify the Group’s key stakeholder groups.
The role of stakeholder management is to enter into
dialog with stakeholder groups in order to manage the many
demands placed on us and integrate them into decision-
making processes. To be able to systematically incorporate
our stakeholders’ suggestions and recommendations, we have
set up councils such as the Sustainability Council and the
Stakeholder Panel. The Panel is comprised of 300 national
and international opinion leaders. In addition, we offer our
stakeholders a broad range of opportunities for interaction
and feedback channels including regular stakeholder discus-
sion events, stakeholder surveys and international partner-
ships.
R E S E A R C H A N D D E V E L O P M E N T
Forward-looking mobility solutions with brand-defining
products and services would be unthinkable without
innovations. This makes our research and development work
essential for sustainably increasing the value of the Company.
Together with our Group brands, we have launched
strategic initiatives for networking development activities
across the Group based on our future program TOGETHER –
Strategy 2025. At the heart of this is an efficient, cross-brand
development alliance characterized by a close network of our
experts, collaboration on an equal footing, an innovative
working environment and the pooling of development
activities. With this, we aim to make use of synergy effects
across the Group and act as a role model for the environment,
safety and integrity. The alliance is playing a major part in the
Volkswagen Group’s transformation into a leading provider
of sustainable mobility and helping to make the Group fit for
the future.
Based on this strategic focus, we concentrated in the
reporting period on continuing to develop forward-looking
mobility solutions, establishing technological expertise to
strengthen our competitiveness, expanding our range of
products and services and improving the functionality,
quality, safety and environmental compatibility of our prod-
ucts and services, for example through cooperation across
brands.
136
Sustainable Value Enhancement
Group Management Report
C O 2 E M I S S I O N S O F T H E V O L K S W A G E N G R O U P ’ S E U R O P E A N ( E U 2 8 ) N E W P A S S E N G E R C A R F L E E T
in grams per kilometer
2018
2017
2016
2015
2014
123
¹
¹
122
120
121
126
0
20
40
60
80
100
120
140
160
1 Subject to official publication by the European Commission in the annual CO2 fleet monitoring report.
Fuel and drivetrain strategy
The Volkswagen Group’s new passenger car fleet in the EU
(excluding Lamborghini and Bentley) emitted an average of
123 g CO2/km1 in the reporting period and was thus below
the 2018 European limit of 130 g CO2/km. The small year-on-
year increase is mainly attributable to the new measurement
techniques to be applied. As small volume manufacturers, the
Lamborghini and Bentley brands each have an independent
fleet for the purposes of the European CO2 legislation; Bentley
complied with its individual target, Lamborghini was slightly
above its target.
As part of a Group-wide initiative – and with a view to the
legal regulations on emissions – we are currently developing
a forward-looking vehicle and drivetrain portfolio: to achieve
our goal of sustainable mobility, we have set ourselves the
objective of increasing drive system efficiency with each new
model generation – irrespective of whether the means of
propulsion is a combustion engine, a hybrid, a plug-in hybrid,
a purely electric drive, or a fuel cell drive system. The
Volkswagen Group closely coordinates technology and prod-
uct planning with its brands so as to avoid breaches of fleet
fuel consumption limits, since these would entail severe
financial penalties.
We anticipate that already by the year 2025, one in four
new Volkswagen Group vehicles worldwide will have a purely
electric drive; depending on the market development, this
could be up to three million electric vehicles a year. The
Volkswagen Group has launched a comprehensive electrifi-
cation offensive in the form of Roadmap E. By 2025, we plan
to offer our customers around the world more than 80 new
electric models, including some 50 purely battery-electric
vehicles and 30 plug-in hybrids. By 2030, the Volkswagen
Group aims to electrify its entire model portfolio – from
high-volume models to premium vehicles. This will mean
offering at least one electric version – battery-electric, hybrid
or mild hybrid vehicles – of each of our approximately 300
passenger car models across all Group brands. We are
therefore developing two new electric platforms for vehicles
with a range of up to 600 km.
The Volkswagen Group is committed to achieving the
Paris climate targets and is pursuing the goal of making its
vehicle fleet completely carbon neutral by 2050.
To enable sustainable, affordable mobility in the future
for as many people around the world as possible, we will offer
the full range of drivetrains – from conventional combustion
engines to all-electric drive. From today’s perspective, con-
ventional combustion engines look set to make up the lion’s
share of drive technology in the coming years. In the interest
of using resources responsibly, it is therefore essential to
further enhance this engine segment and systematically
consolidate it for specific markets. Powertrain measures such
as far more sophisticated exhaust gas purification or mild
hybridization of the vehicles, but also vehicle measures such
as optimized aerodynamics or reduced rolling resistance will
be necessary to fulfill future emissions standards.
In addition to electric drives and more efficient com-
bustion engines, renewable, reduced-CO2 fuels (in gas or liquid
form) are playing an increasingly important role. We support
the expansion of the natural gas (CNG) infrastructure and are
conducting intensive research into options for producing
fuels from renewable electricity, enabling carbon-neutral
operation of combustion engines.
Group Management Report
Sustainable Value Enhancement
137
Last but not least, we are working under Audi’s leadership to
make fuel cell technology ready for market.
It is more important to us than ever to rigorously pursue
our modular approach. We are reducing the number of
individual modules so that we can make a large product
portfolio economically viable. Over the long term, we will
reduce the number of versions of conventional combustion
engines in the Group by more than a third. This will create
capacity for the development and production of new hybrid
and electric drives.
Life cycle engineering and recycling
On their own, technological innovations for reducing fuel
consumption are not enough to minimize the effect of
vehicles on the environment. That is why we examine the
entire product life cycle of our vehicles – from the extraction
of raw materials to the production of components and the
provision of fuel and energy during vehicle use to their final
disposal. We identify the stages of the life cycle at which
improvements will have the greatest effect and develop
appropriate solutions. We call this life cycle engineering.
Recycling, for example, is an important means of reducing
environmental impact and conserving resources. Already
when developing new vehicles, we therefore pay attention to
the recyclability of the required materials, use high-quality
recycled material and avoid pollutants. At the end of their
lives, our vehicles are 85% recyclable and 95% recoverable.
Leveraging synergies increases efficiency
When developing vehicles, we cooperate closely with our
brands to leverage synergies. The joint strategy of our devel-
opment alliance aims, for example, to make the Group more
competitive and viable in the long term by deploying
resources more effectively and efficiently in the research and
development of new mobility-related technologies, products
and services. In our Group-wide development alliance, the
brands not only work with each other, but also for each other
on key technologies, forming cross-brand networks of
expertise to address the topics of the future. For example, we
consolidated the Group’s activities and responsibility for the
development, procurement and quality assurance of all
battery cells centrally in a Center of Excellence under the
umbrella of the Volkswagen Passenger Cars brand. There, a
pilot line for cell production will be put into operation in
2019 to build up expertise for the Group in cell design, as well
as throughout the entire value chain.
Our modules are also managed centrally to reduce costs,
capital expenditure and complexity. With the aid of a Group
initiative, we are seeking to reduce expenditure in the
toolkits, while at the same time implementing a wide-
reaching electrification offensive and focusing on auton-
omous systems. We will achieve this through a considerable
reduction in complexity using streamlined platforms that
synergize but do not overlap. The individual Group brands
are using the modular toolkits, thus creating synergies
between the various models of a model line and across model
lines. The streamlined toolkits are creating the financial
leeway for development of the future trends of digitalization
and autonomous driving. As part of the TOGETHER – Strategy
2025 program, the high-volume passenger car brands have
introduced model
line organization through a Group
initiative, consequently strengthening the brands’ responsi-
bility for the success of vehicle projects, improving project
work across different cross-departmental areas, accelerating
decision-making and intensifying the focus on results of
projects.
We are also creating synergy effects by continuing to
widely share best practices, for instance in virtual develop-
ment and testing. Finally, the centralized development and
consolidation of IT systems is also helping to strengthen
cooperation across brands, make development activities
more comparable and reduce the Group’s IT costs.
Sustainable mobility, connectivity and automated driving
Mobility is a prerequisite for economic growth. But while the
need to always be mobile is rising, natural resources are
dwindling. This calls for holistic mobility concepts to
minimize the environmental impact. Such solutions need to
be efficient, sustainable, customer-oriented and accessible
anytime and anywhere.
We are researching and developing such pioneering con-
cepts and solutions in our Group-wide alliance. In shaping
the future of mobility, we are looking not only at the auto-
mobile but at all modes of transport and transport infra-
structures, at people’s mobility habits and at other relevant
factors. Innovations such as digital connectivity and auto-
mated driving allow for completely new problem-solving
approaches. We strive to utilize these in order to play our part
in a comprehensive mobility system in the future and to help
shape our industry’s transformation.
Another initiative of our future program TOGETHER –
Strategy 2025 focuses on establishing a cross-brand mobility
solutions business. Our mobility business MOIA is to become
one of the leading providers of innovative transport services
and will develop profitable and globally scalable business
models. Strategic investments and partnerships are also
being sought. Our strategic goal is to make Volkswagen one of
the world’s leading providers of efficient and convenient
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smart mobility services by 2025, with a portfolio encom-
passing all brands and both “mobility as a service” and
“vehicle on demand” services.
On the road to autonomous driving, the Volkswagen
Group further improved its assistance systems and auto-
mated driving functions in 2018 and fitted them in vehicles.
The strategic objective is to market highly automated driving
functions for private vehicles, shared mobility systems and
commercial mobility providers as a core competency of the
Group. The Volkswagen Group has introduced its vision of an
autonomous mobility system in the form of the Sedric
family, comprising fully autonomous vehicles for short- and
long-distance mobility, as well as sports cars, self-driving
delivery vehicles and heavy trucks. In both, cities and rural
areas, these vehicles will enable new forms of mobility –
particularly for user groups that have so far been excluded
from access to mobility.
Autonomous driving in complex urban environments
places especially heavy demands on technology. We are
dedicated to meeting these challenges. Our Autonomous
Intelligent Driving GmbH is working on developing a Group-
wide system for self-driving vehicles.
Given the growing number of digital and software-based
vehicle-related components, customer satisfaction with these
elements is becoming increasingly important. The goal of a
Group initiative is therefore to make Volkswagen one of the
best companies worldwide in terms of user experience. Close
collaboration among our Group brands in this area provides
the basis for this.
Pooling strengths with strategic alliances
The future program TOGETHER – Strategy 2025 plans to
transform our core business and to establish a new mobility
solutions business area at the same time. It is decisive to the
success of this plan that we place our great innovative
strength on even broader foundations.
Growth in the mobility sector is currently a global phe-
nomenon, above all in the economy segment. As part of a
Group initiative, Volkswagen is therefore increasingly entering
into local partnerships to develop and offer economy
products in line with the market. This is helping us to identify
regional customer needs more precisely, to adjust our
product range accordingly and to establish competitive cost
structures. We are therefore concentrating to a greater extent
on partnerships, acquisitions and venture capital invest-
ments and managing investment selection centrally so as to
generate maximum value for the Group and its brands. In
light of this aspect, we have formed a large-scale alliance with
the Ford Motor Company. The first step involves a collabo-
ration regarding the development of vans and mid-sized
pickups starting in 2022. This alliance allows us, in addition
to making optimal use of manufacturing capacity, to share
the development costs and improve the performance and
competitiveness of the vehicles. This generates cost savings,
while further strengthening our innovative power. Beyond
this specific agreement, we are considering collaboration for
additional mobility and vehicle concepts.
Thanks to our strategic partnership with Microsoft, we are
accelerating our transformation into a mobility service
provider with a fully connected vehicle fleet and our digital
ecosystem “Volkswagen We”. Working together, we aim to
press ahead with software development for the automobile of
tomorrow and new services for our customers. This enables
the comprehensive strengthening and expansion of our IT
expertise and solutions.
Developing battery technology as a core competency has
also been defined in a strategic initiative of the Volkswagen
Group. The battery accounts for 20 to 30% of the cost of
materials in electric vehicles; in future, it will be one of the
most important components for differentiating between
products. We have already pooled our in-house expertise in
battery cells in a Center of Excellence and also plan to
accelerate the building up of expertise and technological
change through intelligent partnerships. We anticipate that
our own electric fleet with lithium-ion batteries will require a
battery capacity of more than 150 GWh a year in the period to
2025. To cover this enormous demand, we have defined
strategic battery cell suppliers for our most important
markets and the first MEB models, and we aim to initiate
further long-term strategic partnerships in China, Europe and
the USA. Looking ahead, we are already preparing for the next
generation: together with partners, we aim to develop solid-
state batteries to market readiness.
As part of the joint involvement of our Group brands
Volkswagen Passenger Cars, Audi and Porsche in the pan-
European High-Power Charging (HPC) joint venture IONITY, a
comprehensive charging infrastructure is being built to
safeguard long-distance mobility: by 2020, we aim to jointly
build and operate fast-charging stations at 400 locations
along major transport arteries in Europe.
As part of forward-looking mobility concepts, the Volks-
wagen Group is also working on robot-based service solution
Group Management Report
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139
for a variety of tasks. Rapid charging of an electric vehicle for
example – be it in the user’s garage at home, in underground
car parks or in car parks – is something that could be done by
a service robot in the future: when the driver gets out of the
vehicle in front of the car park, their self-driving electric car
autonomously looks for a free parking space and is charged
there by “CarLa” – a charging robot that the Volkswagen
Group and automation specialist KUKA presented at the
Geneva International Motor Show in 2018.
In view of the growing importance of e-mobility, light-
weight automotive engineering is considered a key technol-
ogy for future competitiveness because a lighter vehicle
weight increases the range of electric vehicles. Our Material
Research team plays a major role in the Open Hybrid
LabFactory, a public-private partnership in which various
industry and research partners work together to develop
lightweight construction solutions for mass production.
We are actively involved in public projects to help shape
the framework conditions for the approval and introduction
of our own self-driving system. The experience we are
gathering here will benefit the Group brands and thus also
our customers.
Key R&D figures
In fiscal year 2018, we filed 7,639 (6,566) patent applications
worldwide for employee inventions, around half of them in
Germany. The fact that an ever increasing share of these
patents is for important cutting-edge fields underscores our
Company’s innovative power. These fields include driver
assistance systems and automation, connectivity, alternative
drive systems and lightweight construction.
The Automotive Division's total research and develop-
ment costs in the reporting period were 3.8% higher than in
the previous year; their percentage of the Automotive Divi-
sion’s sales revenue – the R&D ratio – came to 6.8 (6.7)%.
Along with new models, above all the main focus was on the
electrification of our vehicle portfolio, a more efficient range
of engines, digitalization and new technologies. The capital-
ization ratio was 38.4 (40.0)%. Research and development
expenditure recognized in profit or loss in accordance with
IFRSs increased to €12.1 (11.6) billion.
As of December 31, 2018, our Research and Development
departments – including the equity-accounted Chinese joint
ventures – employed 51,948 people (+5.3%) Group-wide or
7.8% of the total headcount.
R E S E A R C H A N D D E V E L O P M E N T C O ST S I N T H E A U TO M OT I V E D I V I S I O N
€ million
Total research and development costs
of which capitalized development costs
Capitalization ratio in %
Amortization of capitalized development costs
Research and development costs recognized in profit or loss
Sales revenue
Total research and development costs
R&D ratio
2018
13,640
5,234
38.4
3,710
12,116
201,067
13,640
6.8
2017
13,135
5,260
40.0
3,734
11,609
196,949
13,135
6.7
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P R O C U R E M E N T
In fiscal year 2018, the main task for Procurement was once
again to safeguard the supplies and to help create com-
petitive, innovative products and optimize cost structures. In
addition, we continued to digitalize procurement processes.
Procurement strategy
A global network of strong business partners and suppliers is
paramount for achieving the goals of the Group strategy
known as TOGETHER – Strategy 2025. We are implementing
our Group-wide vision TOGETHER – Best in Customer Value
and Cost with our procurement strategy 2025. This involves
using our strengths to deliver products with a high customer
value and optimum cost structures that meet the needs of
the market. We integrate knowledge from our global supplier
networks, secure expertise for the global procurement mar-
kets of the future and ensure well-timed industrialization and
market implementation in line with cost requirements. Six
goals were agreed upon with the brands and regions:
> Access to supplier innovations
> Active cost structures
> Forward-looking structures
> People, expertise and attractiveness
> Supply chain excellence
> Group-wide synergies
We intend to achieve these goals with initiatives that accom-
plished noticeable results in 2018.
By simplifying technical component concepts and bringing
these into line with global standards, we generated signifi-
cant savings. Based on these results, we are now rolling out
the approaches to other regions and vehicle projects. Over
half of our purchasing projects have already benefited from
an extended cost analysis.
We have secured important innovations for the Company
with our innovation contracts. In the case of new technolo-
gies, we selected suitable partners early on to allow inno-
vations to be implemented in the market.
We are tackling the challenges of the transformation in
our procurement markets by setting up a Connectivity,
eMobility & Driver Assistance Systems division. The redesign
of our procurement process for software and data will pave
the way for partnerships that are secure for the future.
Implementation of the Group Procurement Suite is a
means of revamping our procurement systems, automating
procurement operations and facilitating the support of stra-
tegic procurement activities through analyses and artificial
intelligence.
Volkswagen FAST – Supplier network as the basis for success
FAST is the central initiative of Group procurement, intro-
duced in 2015 with the aim of making the Volkswagen Group
and its supply network future-proof. The goal of FAST is to
successfully implement the key topics of innovation and
globalization by involving suppliers at an earlier stage and
more intensively. The FAST initiative enhances the quality
and speed of collaboration with our key partners, and thus
enables us to coordinate global strategies and points of tech-
nological focus even more closely. The common goal is to
make impressive technologies available to our customers
more quickly and to implement worldwide vehicle projects
more effectively and efficiently.
After incorporating additional partners into the FAST
program in 2017, we worked with these partners in the
reporting period to exploit the benefits of the strategic
integration.
Digitalization of supply
We are working systematically to implement a completely
digitalized supply chain. This will help us to ensure supply,
leverage synergies throughout the Group and become a
leader in terms of cost and innovation. We are therefore
creating a shared database and using innovative technologies
to enable efficient, networked collaboration in real time
– both within the Group and with our partners. The corner-
stone for the future of Procurement was laid in 2018 in the
form of Group Procurement’s digitalization strategy. This strat-
egy aims not only to eliminate the weaknesses of Procure-
ment’s IT system environment but also to increase the
organization’s effectiveness, efficiency and future viability.
Structure of key procurement markets
Our procurement is organized at global level, with a presence
in the key markets around the world. This ensures that
production materials, investments in property, plant and
equipment, and services can be procured worldwide to the
quality required on the best possible terms. Networking of
the brands’ procurement organizations enables us to leverage
synergies across the Group in the various procurement
markets.
In addition to the brands’ procurement units, the Volks-
wagen Group operates eight regional offices. In growth
markets, we identify and train local suppliers to generate cost
advantages for all the Group’s production sites. In familiar
and established markets, the regional offices support access
to the latest technologies and innovations.
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141
Supply situation for purchase parts and upstream materials
Systematic safeguarding of the supply of purchase parts is
one of Procurement’s goals. As a result of the new WLTP test
procedure and the related changes in the production pro-
grams, we required a high degree of flexibility from our
suppliers. Adverse effects on production in the Group caused
by unforeseeable events such as natural disasters were
minimized to the best of our ability.
Management of purchased parts and suppliers
The importance of managing purchased parts and suppliers
is steadily growing due to the continued globalization of
supply chains. We support and supervise the processes from
development to series production of the purchased parts,
making a substantial contribution to ensuring production
start-ups for vehicles and powertrains all around the world.
Our activities in purchased parts management focus on safe-
guarding component quality and the industrialization pro-
cess at the individual supplier locations. At the same time,
increased complexity in the automotive industry requires
regular monitoring and safeguarding of supplies for series
production. In order to identify any disruptions at an early
stage and take necessary countermeasures, we simulate series
production at suppliers as part of the pre-production process.
Purchased Parts Management works closely with Quality
Assurance at the production sites and conducts multi-stage
performance testing.
Sustainability in supplier relationships
Successful relationships with our business partners are based
upon observance of human rights, compliance with occupa-
tional health and safety standards, active environmental
protection and combating corruption. These sustainability
standards are defined in the contractually binding Volks-
wagen Group requirements for sustainability in relations with
business partners (Code of Conduct for Business Partners).
Especially in view of the more stringent sustainability
requirements being imposed worldwide, training and profes-
sional development for our suppliers is a key aspect of our
sustainability in supplier relationships concept. By the end of
the reporting period, more than 31,000 supplier locations
had completed our online training program since 2012. In
the Asia-Pacific, South America and European regions, we
trained over 900 employees from more than 550 suppliers at
face-to-face events addressing topics such as sustainability,
and informed them of region-specific challenges. In addition,
we raised awareness of sustainability risks in Procurement
with face-to-face events attended by over 2,000 Procurement
employees.
Our supplier checks for verifying compliance with sustain-
ability requirements retained their importance in 2018. For
this reason, we once again considerably increased the
number of checks performed year-on-year and conducted
local audits at 947 supplier locations. In 551 cases, an action
plan was agreed upon that led to an improvement in sup-
pliers’ sustainability performance. Furthermore, checks of
more than 28,000 supplier locations were carried out by means
of questionaires relating to sustainability since 2012, allowing
improvements in sustainability performance to be achieved
in more than 2,100 cases during the reporting period.
In 2018, we also decided to introduce a comprehensive
sustainability rating for the awarding of contracts in which
the criteria environment, society and compliance will be
systematically reviewed prior to the conclusion of all con-
tracts starting in 2019. Only suppliers with a positive sustain-
ability rating will have the opportunity to enter into a busi-
ness relationship with us.
C O M P O N E N T S B U S I N E S S
A realignment of the Group-wide components business was
decided upon as part of the future program TOGETHER –
Strategy 2025. The aim is further improvement in competi-
tiveness through cross-brand management of components
activities and a value creation strategy coordinated through-
out the Group. For traditional technologies and topics of the
future, synergies will be leveraged to advance the progressive
transition to e-mobility.
The expertise of the components business, which
employs some 80,000 people worldwide, lies in the develop-
ment and manufacture of vehicle components. In order to
realign these competencies in a future-oriented way, it was
decided as part of the Group strategy to combine compo-
nents activities around the world into an independent entity,
Volkswagen Group Components.
To this end, five new business areas were formed in 2018:
Engine and Foundry, Transmissions and Electric Drive Sys-
tems, E-Mobility, Chassis and Seats. In each of the five busi-
ness areas, the different departments such as Development,
Procurement and Production will cooperate closely at an
early stage to boost innovative power and competitiveness.
To achieve efficiency targets, manufacturing and admin-
istration processes will consistently be made leaner; shop
floor management, which ensures uniform communication
between management, foremen and employees, will be
enhanced and savings will be generated by implementing
optimization measures at the sites.
For its product portfolio, the components business relies
on sustainable economic products. Products that are not
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competitive will be progressively phased out in the medium
to long term. E-mobility components will instead become an
integral part of the portfolio.
Employees who take on new responsibilities in this
respect will receive appropriate training.
P R O D U C T I O N
Our global, cross-brand production network safeguards the
processes from the supplier to the factory and assembly line,
and from the factory to dealers and customers. Enduring
efficiency is a prerequisite for our competitiveness. We meet
challenges of the future with holistic optimizations, forward-
looking innovations, flexible supply streams and structures,
and an agile team. In fiscal year 2018, the global vehicle
production volume surpassed the previous year’s level,
reaching 11.0 million units. Productivity increased by around
5.3% year-on-year, despite the continuing difficult conditions
in many markets.
“Intelligently networked” production strategy
Production is supporting the future program TOGETHER
– Strategy 2025 with their “intelligently networked” func-
tional area strategy. By intelligently connecting people,
brands and machines, we aim to pool the strengths and
potential of our global production and logistics and take
advantage of the resulting synergy effects. We are guided in
this by four strategic goals:
> Versatile production network
> Efficient production
> Intelligent production processes
> Future-ready production
With division-specific initiatives we have created content
clusters in which expert teams work on the strategic topics
relevant for production in the Group. Examples include the
competitive design of our global production network, the
reduction and offsetting of environmental impact through-
out the production process, and digitalization with its
implications for production and working processes and for
collaboration. The overarching aim is to increase productivity
and profitability.
With the production strategy, we have laid the foun-
dations for the successful and sustainable enhancement of
our production. We use regular reviews to ensure that we
constantly align our activities to the current challenges.
Global production network
With twelve brands and 123 production locations, aspects
such as consistent standards for product concepts, plants,
operational equipment and production processes are key to
forward-looking production. These standards enable us to
achieve synergy effects, respond flexibly to market chal-
lenges, make optimal use of a flexible production network
and realize multibrand locations. Currently, almost half of the
45 passenger car locations are already multibrand locations.
The Bratislava site continues to serve as a prime example,
producing vehicles for the Volkswagen Passenger Cars, Audi,
Porsche, SEAT and ŠKODA brands. The newest multibrand
location is Wolfsburg, where production of the SEAT Taracco
began in the autumn of 2018.
The Volkswagen Group has set itself the goal of becoming
one of the world’s leading providers of battery-electric
vehicles by 2025. The basis for this is the introduction of the
Modular Electric Drive Toolkit MEB, which we will use to
complement our range with additional battery-electric
vehicles.
In order to design multibrand projects and for electric
mobility to be cost-effective in conjunction with existing
concepts, it is important to make production highly flexible
and efficient. Making maximum use of potential synergy
effects is also a decisive factor for the success of future vehicle
projects. Using common parts and concepts as well as iden-
tical production processes enables reduced capital expen-
diture and provides the opportunity to better utilize existing
capacities. The future will also see electric vehicle projects at
multibrand locations such as Zwickau, Germany and Anting,
China.
We are constantly enhancing our production concepts and
aligning them with new technologies. The targeting process
anchored in our strategy serves to realize ambitious targets
in individual projects as part of a cross-divisional approach.
Production locations
The Volkswagen Group’s production network is comprised of
123 locations in which passenger cars, commercial vehicles
and motorcycles, as well as powertrains and components are
manufactured.
With 71 locations, Europe remains our most important
production region for vehicles and components. There are
28 sites in Germany alone. The Asia-Pacific region has 34
locations. We have five locations in North America and nine
in South America. The Group operates four locations in
Africa.
2018 saw 52 production start-ups: 29 for new products
and successor products and 23 for product upgrades and
derivatives.
Capacity utilization of the locations in the Volkswagen
Group’s production network is further enhanced by sup-
plying the locations with complete knock-down (CKD) kits for
local assembly.
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143
V E H I C L E P R O D U C T I O N L O C A T I O N S O F T H E V O L K S W A G E N G R O U P
Share of total production 2018 in percent
N O R T H A M E R I C A
4 locations (7%)
E U R O P E
36 locations (49%)
A S I A
20 locations (39%)
S O U T H A M E R I C A
6 locations (5%)
A F R I C A
4 locations (1%)
The Group’s production system
Our aim is to continuously and sustainably improve our
production workflows at all the brands’ and regions’ loca-
tions. A key component for achieving excellence in processes
in production and production-related environments is the
Group production system; we are further consolidating this
and increasing the extent to which it is used.
Leadership and individual responsibility are the foremost
factors, embedded in a culture of respect and collaboration.
A factory must work at optimal capacity if it is to achieve
the goal of continuing to manufacture high-quality products
that give customers maximum benefits at competitive prices.
This is made possible by the standardization of production
processes and operating equipment early on in the line,
based on the principle of concept consistency. This ensures
that common design principles, joining techniques and
joining sequences, but also installation and connection
concepts are applied in the brands’ development and pro-
duction areas. The principle of concept consistency is used to
establish a foundation for creating efficient logistics and
manufacturing processes.
New technologies and product innovations
3D printing is one of the key technologies for Industry 4.0
and digitalizing the automotive value chain. The process
opens up wholly new opportunities in the areas of develop-
ment, design and production. Due to the digital nature of the
technology, which requires no tools whatsoever, components
can be flexibly implemented directly from digital drawings,
and completely new designs and component geometries can
be created. The technology of 3D printing has been success-
fully used for building prototypes for many years now and
has advanced rapidly in recent years – also accompanied by
new areas of application at Volkswagen. The specific charac-
teristic of this technology, an additive manufacturing tech-
nique, is its influence along the entire automotive value
chain. It is used for early design studies, for building proto-
types, for manufacturing tools and operational equipment,
for producing parts in small batches and for the manu-
facturing of replacement parts in after sales. The materials
available for 3D printing range from plastics to fiber com-
posite materials and metallic materials.
However, there is still a long way to go before large-scale
automotive production applications are possible. Here, Volks-
wagen leverages the diversity of the Group, achieved through
close collaboration between its brands, and cooperates with
leading technology providers and research institutions. For
example, the Volkswagen Passenger Cars brand has partnered
with printer manufacturer HP and component producer GKN
Powder Metallurgy to become the first automaker to use HP
Metal Jet, the latest 3D printing technology.
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K E Y E N V I R O N M E N T A L I N D I C A T O R S F O R P R O D U C T I O N I N T H E V O L K S W A G E N G R O U P ¹
E N E R G Y C O N S U M P T I O N
in kilowatt hours per vehicle
C O 2 E M I S S I O N S
in kilograms per vehicle
C O2
2018
2017
2010
2,037
2,068
2,519
–19.1%²
2018
2017
2010
720
808
–34.3%²
1,096
V O C E M I S S I O N S³
in kilograms per vehicle
V OC
D I S P O S A B L E W A S T E
in kilograms per vehicle
2018
2017
2010
1.93
2.08
–53.3%²
4.13
2018
2017
2010
12.2
16.0
–47.6%
²
23.3
F R E S H W A T E R C O N S U M P T I ON
in cubic meters per vehicle
2018
2017
2010
3.86
3.76
4.54
–15.1%²
1 Production of passenger cars and light commercial vehicles. Prior-year figures adjusted.
2 Change 2018 as against 2010.
3 Volatile organic compounds (VOCs).
Where the design and introduction of new production
technologies is concerned, affected staff are involved in the
redesign of workplaces and processes from the outset. This is
an important prerequisite if new technologies and solutions
are to find the necessary acceptance.
Environmentally efficient production
One element of the production strategy is the environ-
mentally exemplary production initiative. This involves us
working on four key issues in the period leading up to 2025:
> Setting and achieving ambitious environmental targets for
production
> Developing a long-term vision for environmental targets in
production and rolling it out across the Group
> Strengthening employees’ environmental awareness and
integrating relevant environmental aspects into processes
> Achieving top positions in renowned environmental rank-
ings
In this context, the Volkswagen Group has set itself the goal
of reducing the five key environmental indicators of energy
and water consumption, waste for disposal, and CO2 and VOC
emissions in production by 45% for each vehicle produced by
2025 – starting from 2010 levels. This objective applies to all
of the Group’s production locations and is derived from our
environmental requirements for production processes, which
are anchored in the Group’s environmental principles. The
charts above show the development of these indicators.
We are encouraging networking and communication
between the brands worldwide in order to leverage synergies.
Our environmental experts meet regularly in working
groups; in addition, we train our employees on the topic of
environmental protection.
To identify and implement site-specific cost-cutting
measures, the Environmental Task Force analyzes manufac-
turing processes, factory supply systems and resource and
energy flows at the Group’s locations and evaluates the
impact of the efficiency measures. Based on the experience
from the analyses in several brands and regions, the team can
systematically reinforce and spur on the transfer of mea-
sures.
We record and catalog environmental measures in an IT
system and make these available for a Group-wide exchange
of best practices. In the reporting period, around 1,500
implemented measures in the area of environment and
energy were documented in this system. They serve to
improve infrastructure and production processes for passen-
ger cars and light commercial vehicles. These activities are
beneficial from an environmental and economic perspective.
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145
With a series of effective, innovative measures, we were once
again able to reduce environmental indicator levels in the
reporting period, while at the same time improving pro-
duction processes.
Green logistics
Logistics contributes to the Volkswagen Group’s focus on the
environment by analyzing the emissions of the entire trans-
port chain. The Green Logistics initiative promotes alterna-
tive means of transport and sustainable, energy-efficient
transport systems.
Building on the dialog established between Group
Logistics, Scania, forwarders, authorities and oil companies at
the LNG Truck Day in September 2017, the concept of LNG-
trucks (liquefied natural gas) will now be put into practice.
The aim is to have LNG trucks drive on many routes in the
future, which will require an appropriate fuel station net-
work. Together with its service providers, Group Logistics is
planning to deploy approximately 100 LNG trucks in
northern Germany in the medium term. The first trucks hit
the roads in January 2019.
Where transport activities are concerned, maritime
transport represents another important starting point for
reducing CO2 emissions. In mid-2019, Volkswagen Group
Logistics will put two LNG-powered charter ships into service.
The low-emission LNG ships will transport vehicle models
produced by the Volkswagen Group between Europe and
North America.
To ensure that our employees can provide the best
possible support along the path to achieving our environ-
mental targets and can also help shape this path, in-house
training courses on green logistics and lectures at univer-
sities are a fixed part of the vocational training program.
S A L E S A N D M A R K E T I N G
As part of our future program, we have developed a sales and
marketing strategy aimed at exciting customers on a whole
new level under the slogan “customer delight”. We regard
ourselves as an innovative and sustainable mobility provider
for all commercial and private customers worldwide – with a
unique product portfolio encompassing twelve successful
brands and innovative financial services.
In the 2018 fiscal year, we achieved a milestone in our
TOGETHER sales strategy: together with their sales partners
and importers, our passenger car brands agreed on a
procedure for integrating innovative products and services
into the sales network. The priority is safe handling of
customer data and the way in which this is processed for
digital products and services or in connection with the
vehicle purchase. The legal requirements for handling cus-
tomer data have been tightened in many countries. At the
same time, new Group vehicles that are permanently con-
nected to the Internet are about to be launched. We are
increasingly investing in distribution systems and processes
with the goal of further digitalizing and improving the
individual customer experience in all distribution channels.
Optimal coverage of markets, customer segments and
customer budgets is at the heart of a strategic Group ini-
tiative. To this end, we are establishing automobile-specific
customer segmentation to steer the positioning of our
brands. At the same time, we are examining global markets
for potential revenue sources. This methodology has already
been established for Europe and China and was rolled out to
further markets including the United States and Brazil in
2018. It will be continuously applied in the strategy and
product process and regularly reviewed and adjusted as
necessary whenever new market requirements arise.
Customer satisfaction and customer loyalty
The Volkswagen Group aims its sales activities at exciting its
customers. This is our top priority, as excited customers
remain loyal to our brands and recommend our products and
services to others. In addition to satisfaction with our prod-
ucts and services, we value our customers’ emotional con-
nection to our brands. It is important for us to retain cus-
tomers and win new ones. To measure our success in this
area, we compile and analyze two strategic indicators for the
major passenger car-producing brands:
> Loyalty rate. Proportion of customers of our passenger car
brands who have bought another Group model. The loyalty
of Volkswagen Passenger Cars, Audi, Porsche and ŠKODA
customers has kept these brands in the upper loyalty
rankings in the core European markets in comparison with
competitors for a number of years even though the Volks-
wagen Passenger Cars and Audi brand have seen a slight
decrease in the loyalty rate as a consequence of the diesel
issue. Compared to other manufacturer groups, the Volks-
wagen Group continues to hold a top spot in the core
European markets in terms of loyalty, with a considerable
margin over the competition.
> Conquest rate. Newly acquired passenger car customers as
a proportion of all potential new customers. Here, too, the
Volkswagen Group has a top ranking in comparison with
competitors, primarily thanks to the good scores achieved
by the Volkswagen Passenger Cars brand.
In the core European markets, the downward trend in brand
image and brand trust at the Volkswagen Passenger Cars
brand as a consequence of the diesel issue did not continue
in 2018. After the first signs of recovery had been seen in
2017, the figures continued to stabilize in the reporting
period. Porsche remains in top position in the image ranking.
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We also use a strategic indicator to measure the satisfaction
of customers with our products and services in the truck
business:
> Customer satisfaction. In the markets relevant for the
Volkswagen Group, we aim to be one of the industry
leaders in terms of the satisfaction rate for our commercial
vehicle brands. To evaluate these criteria, we use customer
satisfaction studies, which again delivered exceedingly
positive satisfaction figures in line with our targets in the
reporting period.
In the financial services business, we use two strategic
indicators:
> Customer satisfaction. Satisfaction of our customers
results from a customer-oriented product range and the
service focus of our staff. In the annual assessment, these
two aspects serve as suitable indicators for the critical
evaluation as to whether we will achieve our customer
satisfaction target of 90% in 2025. In 2018, we were within
the expected range with a satisfaction rate of 82%. Our goal
is to satisfy our customers completely. To do so, we are
developing current measures at country level.
> Customer loyalty. Trust in and loyalty to our services rely
on customer satisfaction with our product range and
service. New contract rates are regularly determined based
on product sales to our customers – financing and leasing
agreements for purchases of new Volkswagen Group
vehicles. Currently at 20%, these are proof of customers’
trust in our financial services. With ambitious targets of
50% for 2025, we underscore the focus on fulfilling the
needs of our customers.
E-mobility and digitalization in Group Sales
As part of our Roadmap E, we aim to offer our customers
around the world more than 80 new electric models,
including around 50 pure battery-electric vehicles and 30
plug-in hybrids by 2025. This campaign will be comple-
mented by vehicle-related, customer-focused offerings, such
as customized charging infrastructure solutions and mobile
online services. This is turning the Volkswagen Group from
an automotive manufacturer into a mobility service provider,
posing completely new challenges for sales.
We are making highly targeted use of the opportunities of
digitalization in sales, which include an improved customer
approach. Our actions are guided by a clearly defined strategy
that requires extensive cooperation between the brands to
achieve the greatest possible synergies. Our aim here is to
create a completely new product experience for the custom-
ers of our brands – one which impresses with its seamless
communications, from the initial interest in purchasing a
vehicle, to servicing and ultimately to the sale of the used car.
In doing so, we are opening up new business models relating
to every aspect of the connected vehicle – in particular with
regard to mobility and other services. Vehicles are becoming
an integral part of the customer’s digital world of experience.
We also gear our internal processes and structures to the
methods and new forms of working created by digital
innovation. The result is project teams operating across
different business areas, new forms of cooperation, a more
intensive relationship with the international start-up scene, a
consolidation of venture capital expertise – as a form of
supporting innovative ideas and business models – as well as
new lean systems and cloud-based IT solutions.
Fleet customer business
Business relationships with fleet customers are often long-
term partnerships. In a volatile environment, this customer
group guarantees more stable vehicle sales than the private
customer segment.
The Volkswagen Group has an established base of busi-
ness fleet customers in Germany and the rest of Europe in
particular. Our extensive product range enables us to satisfy
their individual mobility needs from a single source.
In the German passenger car market, which declined as a
whole by 0.2% in 2018, the share of fleet customers in total
registrations fell to 13.6 (14.1)%. The Volkswagen Group’s
share of this customer segment decreased to 44.0 (44.7)%.
Outside Germany, the Group’s share of registrations by fleet
customers in Europe remained stable at 25.2 (25.2)%. The
upward trend until August shows that fleet customers still
have considerable confidence in the Group. The temporary
limitation of the model range as a consequence of the change-
over to the WLTP had a negative impact from September 2018
onwards.
After Sales and Service
In addition to individual service, the timely provision of
genuine parts is essential to ensure passenger car customer
satisfaction in After Sales. The genuine parts supplied by our
passenger cars brands and the expertise of the service centers
represent the highest level of quality and ensure the safety
and value retention of our customers’ vehicles. With our
global after sales network including more than 130 of our
own warehouses, we ensure that almost all our authorized
service facilities around the world can be supplied within
24 hours. We regard ourselves as a complete provider of all
products and services relevant to customers in the after sales
business. Together with our partners, we ensure the world-
wide mobility of our customers. The partner businesses offer
the entire portfolio of services in all vehicle classes. We are
continuously expanding our range of tailored services in
Group Management Report
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147
order to improve convenience for our customers and increase
customer satisfaction.
In the Digital After Sales project, we are modernizing
processes and IT systems in After Sales. By adopting an
approach that focuses product and service development on
the specific needs of both dealers and customers, we aim to
reduce the time needed for administrative tasks at the dealers
through automated, interrelated services and also stabilize
existing IT systems and boost efficiency. Innovative digital
after-sales services will additionally improve the customer
experience.
Around the world, our commercial vehicles business also
prides itself on products of the highest quality and on
customer focus. Our range of trucks, buses and engines is
complemented by services that guarantee fuel efficiency,
reliability and good vehicle availability. The workshop service
and service contracts offer customers a high degree of cer-
tainty, in addition to a high level of quality. We are reducing
servicing times and costs with a view to the vehicles’ total
operating costs and helping to retain their value.
In the Power Engineering segment, we help our custom-
ers ensure the availability of machinery with MAN PrimeServ.
The global network of more than 100 PrimeServ locations
guarantees excellent customer focus and offers, among other
things, replacement parts of genuine-parts quality, qualified
technical service and long-term maintenance contracts.
G R O U P Q U A L I T Y M A N A G E M E N T
The quality of our products and services plays a key role in
maintaining customer satisfaction. Customers are partic-
ularly satisfied and loyal when their expectations of a prod-
uct or service are met or even exceeded. Appeal, reliability
and service determine quality as it is perceived by the cus-
tomer throughout the entire product experience. Our objec-
tive is to positively surprise our customers and fill them with
enthusiasm in all areas, and thus to win them over with our
outstanding quality.
Strategy of Group Quality Management
We embody outstanding quality and ensure dependable
mobility for our customers worldwide – this is the strategic
goal that guides the work of Group Quality Management.
Group Quality Management and the brands’ quality organi-
zations play an active role at all stages of product emergence
and testing, making an important contribution to successful
product
low
warranty and goodwill costs.
launches, high customer satisfaction and
In consultation with the brands, we developed the Group
Quality Management strategy as part of our future program
TOGETHER – Strategy 2025. Focal areas include digitalization,
new technologies and business fields, as well as uniform
processes, methods and standards at all brands.
Advancing digitalization is also a major challenge for the
Volkswagen Group: an ever increasing number of digital
products and services is being developed and brought to
market. To continue to ensure our customary level of quality
and safety amid this diversity, we must adapt our quality
measures accordingly. For example, the increased functional
diversity and complexity of the driver assistance systems,
extending all the way to autonomous vehicles, means that
the software is also growing in scope. We have therefore
introduced the processes and structures of what are known as
smart quality organizations in the Group and the brands,
completing this in the reporting period. Among other things,
smart quality organizations refine the methods we use to
support the development of software for selected critical
features, and with which we can ensure that quality require-
ments are met. At the same time, we are taking advantage of
the progress in digital technology to further optimize our
existing processes and structures. For example, we use virtual
measurement technologies or big data analyses when
vehicles on the market encounter quality problems.
The strategy of Group Quality Management developed in
this context comprises the following four goals:
> We will impress our customers with our outstanding
quality by understanding what exactly they perceive as
quality and implementing this in our products.
> We will contribute to competitive products with optimal
quality costs by ensuring robust processes, thereby reducing
the expense involved in testing each vehicle.
> In critical business processes, we will reinforce the principle
of multiple-party verification and monitor achievement of
milestones even more closely.
> We will become an excellent employer by promoting the
personal development of every single employee even more
intensively.
To achieve our goals, we are working on a variety of quality
initiatives. All are focused on the topics that are decisive to
the success of the quality organizations in the Volkswagen
Group.
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Contributing to the Group’s strategic indicators
We use a strategic indicator to measure the contribution of
Quality Management in the major passenger car-producing
brands.
> Tow-in 12 MIS. This indicator shows the number of vehicles
that need to be towed to a dealer per 1,000 vehicles after
12 months in service (MIS). It includes all Group vehicles
categorized as tow-ins by dealers in the German market.
After a continuous fall in the number of Volkswagen Group
tow-ins in the German market since 2014, a slight overall
increase was recorded again in the 2017 production year.
Of the six brands featured, Audi, SEAT and Porsche saw
their performance improve year-on-year. The Volkswagen
Passenger Cars, ŠKODA and Volkswagen Commercial Vehi-
cles brands recorded a slight upward trend. The brands’
ratios for the 2017 production year are within or slightly
above the target corridor in each case. Quality is the
Volkswagen Group’s top priority. All of the Group brands
are therefore striving to continuously reduce the number
of vehicles that need to be towed to a dealer.
We also use a strategic indicator to measure our success in
the truck and bus area:
> Claims per vehicle 12 MIS Truck. This figure incorporates
the number of claims related to liability for material
defects per 1,000 vehicles after 12 months in service. MAN
and Scania each collect this data for their products from
across the globe. MAN recorded a slight increase in the
number of claims at the beginning of the fiscal year due to
a cross-sector problem that has now been resolved.
Systematic quality management enabled both brands to
keep their figures at a good level for the rest of the year.
Legal and regulatory compliance
The legal and regulatory compliance of our products is
paramount in our work. We have further reinforced appli-
cation of the principle of multiple-party verification – which
involves mutual support and control between the divisions –
and introduced additional important processes, including in
software security. With effect from the reporting period,
software development is accompanied by quality milestones
at all brands, whereby all systems, components and parts that
directly influence a vehicle’s safety, type approval and
functioning and therefore require particular vigilance are
safeguarded through multiple-party verification. At the series
production stage, we are also ensuring even more stringently
than before that the conformity checks on our products are
carried out and assessed with the participation of all business
units involved. This applies particularly to emissions and fuel
consumption.
We are also placing even greater emphasis on our quality
management system than before, reinforcing the process-
driven approach Group-wide across all business areas.
Quality management in the Volkswagen Group is based on
the ISO 9001 standard, which was revised in 2015: the
requirements of this standard must be met to obtain the type
approval needed to produce and sell our vehicles. We con-
ducted numerous system audits in the reporting period to
verify that our locations and brands comply with the require-
ments of the standard. Particular focus was placed on
assessing the risk of non-compliance with defined processes.
Our quality management consultants pay attention to
ensuring that these and other new requirements, as well as
official regulations are implemented and complied with; they
are supported in this endeavor by Group Quality Manage-
ment.
With these and other measures, Group Quality Manage-
ment is helping to ensure that we as a manufacturer meet the
legal requirements, and that our products do so, too.
Observing regional requirements
Our customers in the different regions of the world have very
diverse needs as far as new vehicle models are concerned.
Another important task of Group Quality Management is
therefore to identify and prioritize these regional factors so
that they can be reflected in the development of new
products and the production of established vehicle models –
together with other important criteria such as the quality of
locally available fuel, road conditions, traffic density, country-
specific usage patterns and, last but not least, local legisla-
tion. We mainly use market studies and customer surveys to
determine region-specific customer requirements.
To ensure that the perceived quality of our vehicles is at a
level commensurate with that of our competitors, we already
realigned our vehicle audit back in 2017 and tailored it more
closely to regional customer needs. Every brand works
together with the individual regions to decide how its prod-
uct is to be positioned there. This enables us to strengthen
the responsibility of the brands and invest less in features
that do not resonate with customers. To ensure that the audit
returns comparable results, consistent quality benchmarks
apply across all markets and regions. We are continually
adapting these to changing requirements. For more than 40
years now, we have been deploying auditors around the world
to assess from the customer’s perspective the vehicles that
are ready for delivery and to ensure that these vehicles
comply with the benchmarks defined.
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149
E M P L OY E E S
The Volkswagen Group is one of the world’s largest employers
in the private sector. As of December 31, 2018, we employed
664,496 people, including the Chinese joint ventures, 3.5%
more than at the end of 2017. The ratio of Group employees
in Germany to those abroad remained largely stable over the
past year: at the end of 2018, 44.1 (44.8)% of the employees
worked in Germany.
Human resources strategy and principles of the human resources policy
With the human resources strategy “Empower to transform”,
the Group is continuing with key and successful approaches
to human resource management. These include the pro-
nounced stakeholder focus on corporate governance, com-
prehensive participation rights for employees, outstanding
training opportunities, the principle of long-term service
through systematic employee retention and the aspiration to
appropriately balance performance and remuneration. At the
same time, the new human resources strategy is setting inno-
vative trends. Hierarchies are being dismantled, and modern
forms of working such as agile working – an approach
whereby most responsibility for the work organization is
transferred to the teams – are set to be expanded. In the
future, collaborative robots will ease heavy physical work in
factories and digital processes will simplify administration.
In the Human Resources division, we are guided by five
overarching objectives:
> The Volkswagen Group aims to be an excellent employer
with all of its brands and companies worldwide.
> Highly competent and dedicated employees strive for
excellence in terms of innovation, added value and
customer focus.
> A forward-looking work organization ensures optimal
working conditions in factories and offices.
> An exemplary corporate culture creates an open work
is characterized by mutual trust and
climate that
collaboration.
> The Company’s human resources work is highly employee-
oriented while also aiming for operational excellence and
providing strategic value-added contributions.
In the course of the 2018 reporting period, we continued to
work on our diversity management program that we are
rolling out throughout the Company. Given the cultural
diversity in our global markets and the growing economic
momentum, competitive success requires an ever-broader
range of experience, world views, problem-solving and prod-
uct ideas. The diversity of our staff provides potential for
innovation in this area, which we aim to make better use of in
the future. Mandatory rules on the percentage of women in
management, combined with targets for the internationali-
zation of senior management, are at the heart of diversity
management at Volkswagen.
E M P L O Y E E S B Y C O N T I N E N T
in percent, as of December 31, 2018
Germany
Germany
Rest of Europe
Rest of Europe
America
America
Africa
Africa
Asia/Australia
Asia/Australia
44%
44%
30%
30%
9 %
9 %
1 %
1 %
16%
16%
We are also driving large-scale cultural change to achieve
greater openness and transparency in line with our corporate
strategy. Seven Volkswagen Group Essentials formulated in
2018 provide shared values and the foundation for cultural
change across all brands and companies:
> We take on responsibility for the environment and society.
> We are honest and speak up when something is wrong.
> We break new ground.
> We live diversity.
> We are proud of the work we do.
> We not me.
> We keep our word.
Group-wide activities such as team dialog encourage employ-
ees to analyze the Group Essentials.
In 2018, we also began to implement our new approach
throughout Human Resources departments across the
Group. Going forward, the development paths into manage-
ment will be characterized by greater individual responsi-
bility, transparency and practical relevance and will include
employees from different levels of the hierarchy in the
evaluation of candidates.
When implementing our Group strategy TOGETHER –
Strategy 2025, we paid particular attention in the reporting
period to the level of achievement regarding the goals set by
the applicable strategic KPIs. For the passenger car-producing
brands, we compile and analyze the following information:
> Internal employer attractiveness. The indicator is deter-
mined by asking respondents, as part of the Group-wide
opinion survey, whether they perceive the respective com-
pany as an attractive employer. The target for 2025 is 89.1
out of a possible total of 100 index points. A score of 84.2
index points was achieved throughout the Group in the
reporting period, contrasting with 85.2 points in the pre-
vious year.
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> External employer attractiveness. The ability to recruit top
talent is of decisive importance, particularly in view of the
Company’s transformation into a world-leading provider of
sustainable mobility solutions and the associated develop-
ment of new business fields. Using this strategic indicator,
we check the positioning of the major passenger car-pro-
ducing brands on the labor markets once a year with regard
to graduates and young professionals. Rankings in surveys
by renowned institutions, in which we aim to achieve top
scores for all Group brands, serve as the basis for this.
> Diversity index. As we establish diversity management
across the Group, this strategic indicator for the active
workforce is used worldwide to report the development of
the proportion of women in management and the inter-
nationalization of top management. In particular, it under-
pins the objective of the human resources strategy, which
is aimed at contributing to an exemplary leadership and
corporate culture. The proportion of women in man-
agement amounted to 13.8% in 2018 and was therefore at
the prior-year level; we aim to raise this to 20.2% by 2025.
We aim to increase the level of internationalization in top
management, the uppermost of our three management
tiers, to 25.0% in 2025; in the past fiscal year this was 19.2
(18.7)%.
In the truck and bus business, we look at the opinion survey
and cross-brand exchange of employees to identify how well
strategic targets are being achieved:
> Opinion survey. The sentiment rating is used to determine
the level of employee satisfaction and identification with
the company. The sentiment rating is calculated as the
average score of all responses regularly submitted as part
of the opinion survey. In the truck and bus business, the
2018 result amounts to 76.4 (74.7) index points and is
therefore higher than the previous year’s level.
> Cross-brand exchange and rotation. The aim is to contin-
uously intensify collaboration between the commercial
vehicle brands. It is also designed to enable the creation of
specialist and international networks at the same time. We
use this indicator to analyze how many employees work at
another brand through rotation. In 2018, this opportunity
for career development again saw an increase in uptake.
One strategic indicator has been defined for the financial
services business:
> External employer ranking. This involves taking part in an
external benchmarking, in general once every two years.
The aim is to position ourselves as an attractive employer
and identify measures to become a top-20 employer by
2025, not just in Europe, but globally. Volkswagen Financial
Services AG was represented in various national and inter-
national best-employer rankings the last time it partici-
pated in 2016. In 12th place, it was among the top Euro-
pean employers in the “Great Place to Work” employer
competition.
Training and professional development
At Volkswagen, our capacity for innovation and competi-
tiveness depends to a large extent on the commitment and
knowledge of our staff. Training at Volkswagen is organized
systematically and according to the so-called vocational
groups. These comprise all employees whose tasks are based
on similar technical skills and who require related expertise
in order to perform their jobs. A skills profile lays down the
functional and interdisciplinary skills for each job and serves
as a guide for training measures.
Volkswagen Group employees have access to a wide range
of training measures – from further training in general
Company-related issues to specific training or personal
development programs. Thanks to these opportunities, Volks-
wagen employees are able to further develop and steadily
deepen their knowledge throughout their working lives. In
this process, they are also able to learn from more experi-
enced colleagues, who pass on their knowledge as experts in
the vocational group academies. Training measures are based
on the dual training principle, which combines theoretical
content with practical experience on the job by means of
specific tasks.
New technologies can usefully complement learning and
the transfer of expertise. The Volkswagen Group Academy,
the central training organization in the Group, incorporates
this idea into different projects. One example is the Education
Lab, where the Volkswagen Group Academy conducts educa-
tional research, analyzes training trends and tests tech-
Group Management Report
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151
nologies at Volkswagen together with start-ups, thereby
generating new ways to develop skills at the Company.
One branch of the Volkswagen Group Academy is the
AutoUni. It provides the Group with knowledge that is
relevant for the future by engaging in-house senior experts
and universities. Its events are offered as programs and as
cooperative study modules in what is known as a blended
learning format, which combines classroom training with
online content, supplemented by lectures and conferences.
Volkswagen is striking out in new directions with the
Faculty 73 program it kicked off in October 2018. From 2019
onwards it will train 100 software developers per academic
year who are needed for the digital transformation in the
Company. The AutoUni program is designed for employees
with basic IT skills as well as in-house and external candidates
with other suitable basic qualifications.
Vocational training and cooperative education
The core component of training at Volkswagen is vocational
training or for young people eligible to enter university,
cooperative education (dual study programs combining uni-
versity studies with on-the-job training). As of the end of
2018, the Volkswagen Group had trained 19,244 young people
in approximately 50 trades. We have introduced the principle
of dual vocational training at many of the Group’s inter-
national locations over the past few years and are con-
tinuously working on improvements. The Group’s vocational
trainees predominantly learn their trade through dual
vocational training. Once a year, Volkswagen honors its
highest-achieving vocational trainees in the Group with the
Best Apprentice Award.
Even after their vocational training has been completed,
young people at the start of their careers are encouraged to
continue their professional development in our Company.
This is why we promote particularly talented young special-
ists in talent groups. These two-year development and
training programs accept the highest-achieving 10% of fully
qualified vocational trainees at Volkswagen AG each year. In
addition, fully qualified vocational trainees have the option
to work at a Group company outside Germany for twelve
months as part of the “Wanderjahre” (Year Abroad) program.
In the reporting period, 27 Volkswagen Group locations in
17 countries took part in this program.
Last but not least, we developed the AGEBI+ program. It
promotes fully qualified vocational trainees who are eligible
for university and wish to combine a degree program in
subjects that are crucial for Volkswagen’s future with closley
related practical experience.
Development of university graduates
Volkswagen offers two structured entry and development
programs for university graduates and young professionals.
In the StartUp Direct trainee program, graduate trainees gain
an overview of the Company over two years while working in
their own department and take part in supplementary
training measures. University graduates interested in working
internationally can participate in the 18-month StartUp Cross
program. The aim here is to get to know the Company in all
its diversity and to build up a broad network. During their
participation in the program, young professionals become
familiarized with several locations in Germany and other
countries by working in various departments. Both programs
also include several weeks’ experience working in production.
In 2018, Volkswagen AG hired a total of 164 graduate trainees
as part of these programs, 28.7% of whom were women.
Young people can also take part in graduate trainee
programs at the other Group companies as well as at the
Group’s international locations, such as ŠKODA in the Czech
Republic, SEAT in Spain or Scania in Sweden.
Increasing attractiveness as an employer and target-group-specific
development programs
A family-friendly human resources policy is a major com-
ponent of Volkswagen’s appeal as an employer; in particular,
it helps to achieve greater gender equality. We work con-
tinuously to develop family-friendly working time models
and to increase the number of women in management
positions. In line with German law on the equal participation
of women and men in leadership positions (Führpos-
GleichberG – German Act on the Equal Participation of
Women and Men in Leadership Positions in the Private and
Public Sectors), Volkswagen AG is aiming to have a 13.0%
share of women at the first management level and 16.9% at
the second management level by the end of 2021. As of
December 31, 2018, the proportion of women in the active
workforce at the first level of management was 10.7 (10.4)%
and at the second level of management it was 15.4 (14.0)%.
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P R O P O R T I O N O F W O M E N
as of December 31
A G E S T R U C T U R E I N Y E A R S O F V O L K S W A G E N G R O U P E M P L O Y E E S
as of December 31, 2018; in percent
%
Employees
Vocational trainees1
Graduate recruits2
Total management1
Management1
Senior management1
Top management1
2018
16.5
27.5
28.7
12.1
14.4
9.4
7.0
2017
16.3
28.8
30.3
11.4
13.2
9.2
6.5
1 Germany, excluding Scania, MAN and Porsche.
2 Volkswagen AG
For every board-level division in the Company we have set
targets for the development of the proportion of women in
management to encourage women with high potential to
advance within the Company. This approach is supported by
many different measures including cross-brand mentoring
programs.
In recent years, a large number of company regulations
have also come into effect in the Group to make it easier for
employees to balance the demands of work and home life
and allow staff to arrange their own individual working
model. These include flexible working hours, variable part-
time work and shift models, leave of absence programs
enabling employees to care for close family members, child-
care services that are connected to the company or are
company-owned, and mobile working.
At Volkswagen AG, which entered into its works agree-
ment for mobile working back in 2016, more than 17,800
employees are making use of a more flexible working arrange-
ment as of the end of the reporting period.
Preventive healthcare and occupational safety
Volkswagen’s holistic healthcare management system also
covers work organization, workstation design, behavioral
ergonomics, psychosocial aspects, rehabilitation and reinte-
gration into working life as well as programs for preventing
lifestyle diseases.
In addition to conventional preventive healthcare and
occupational safety, a free and comprehensive voluntary
screening (the Check-up) is provided for all employees at
almost all production sites. To maintain and improve
employees’ health, fitness levels and performance, the Check-
up is followed by measures to promote exercise, healthy
eating and mental balance, for example.
Another important area for action in the Volkswagen
Group is workstation ergonomics. Continuously improving
< 20
< 20
20–29
20–29
30–39
30–39
40–49
40–49
50–59
50–59
60 +
60 +
2 %
2 %
21%
21%
29%
29%
25%
25%
19%
19%
4 %
4 %
these along the entire production chain and in all work
processes is of great importance to us. Together with
scientific partners, we are working resolutely to introduce
state-of-the-art ergonomic workstations and innovative work
processes in as many areas as possible.
Employee participation
Codetermination and employee participation are important
pillars of our human resources strategy. Volkswagen aims to
promote high levels of expertise and a strong sense of team
spirit. This includes employees’ opinions, assessments and
criticisms being heard.
With the opinion survey, a Group-wide poll, the Company
not only regularly gathers information regarding employee
satisfaction, but also inquires about the shape of our
corporate culture and the manner in which, for example,
compliance requirements are implemented. Based on the
results, follow-up processes are implemented in which mea-
sures are developed and implemented. Over 600,000 employ-
ees from 175 locations and companies in 50 countries were
invited to take part in the survey. The participation rate was
79%. The average result that is regularly received through the
opinion survey – the sentiment rating – is an important
parameter in the opinion survey; in 2018 it stood at 78.9 out
of a possible total of 100 index points. The score achieved in
2018 was thus slightly higher than the previous year’s figure
that amounted to 78.3 points.
In addition, we also encourage our employees’ commit-
ment through idea management: employees can use their
creativity and knowledge to contribute their ideas for
improvements, thus helping to streamline workflows, further
enhance ergonomics in the workplace, reduce costs and
continuously increase efficiency. Idea management enables
employees to participate actively in the planning and organi-
Group Management Report
Sustainable Value Enhancement
153
zation of their work. The system also provides monetary
incentives by offering set rewards.
I N F O R M AT I O N T E C H N O L O G Y ( I T )
Volkswagen is working hard on strengthening its digital
competencies with a view to shaping and safeguarding the
Company’s future viability. To this end we are continuously
upgrading our IT systems so that they are sustainable in the
long term and we are progressively moving our systems and
applications over to new cloud platforms. Our primary
concern is further increasing the efficiency of the IT systems
used throughout the Group and standardizing these as far as
possible. We are also concentrating on building up our exper-
tise and specialist IT knowledge, especially in key digital
technologies such as artificial intelligence and the use of new
IT technologies in products, services and business processes.
Volkswagen is embracing on digitalization, particularly
at its in-house IT labs in Wolfsburg, Munich, Berlin, San
Francisco and Barcelona. Group IT, research institutions and
technology partners are working closely together at these
innovation centers on future trends in information technol-
ogy, such as artificial intelligence and machine learning,
quantum computing, digital ecosystems, intelligent human-
robot collaboration and smart mobility. These labs act as test
laboratories for the Group, as centers of expertise for these
future trends and as liaison offices for start-ups. They enable
us to work and experiment with new technologies outside
the line organization. This allows the experience and strategic
expertise of a large company like Volkswagen to be combined
with the pragmatism and speed of young start-ups. Highly
specialized experts at the IT labs in San Francisco and
Munich, for example, are working on exploiting the potential
of quantum computers for areas that have a commercial
application. The focus here is on optimization of flows of
traffic and simulation of materials and alloys. Initial
experimental projects are also investigating opportunities for
combining the potential of quantum computers with self-
learning systems (quantum machine learning).
In IT test projects we are using artificial intelligence to
develop so-called self-learning systems. These learn through
intelligent data analysis and are, for example, designed to
assist staff in recurring administrative work steps by
preparing these activities independently and giving them to
staff for a decision.
The growing convergence of different business areas and
IT is also opening up opportunities. In production, for exam-
ple, big data processes help us to analyze faulty machinery
and take action at an early stage. Our experts from Pro-
duction and Group IT are therefore working together on a
digital platform that combines the systems and equipment in
the factory into an integrated overall system. This will allow
efficiency to be increased and digital pilot projects to be
integrated into the existing architecture much more easily
than before. Applied research in the field of intelligent
human-robot collaboration and IT systems to control mobile
assistive robotics and networked infrastructure (Industrial
Internet of Things) are also important elements of the digi-
talization of production at the Volkswagen Group. Group IT is
likewise contributing its expertise in the field of research and
development in conjunction with the different departments.
For instance, digitalized work tools such as the virtual
concept vehicle make the product development process faster
and more efficient.
In software development centers we develop cross-brand
software for digital ecosystems and for new business pro-
cesses in the Group. We thereby maintain in-house expertise
in the rapid, demand-oriented development of software and
IT solutions. This capability will become increasingly impor-
tant as the Group’s digital transformation evolves.
The “IT for everyone” initiative aims to give all employees
of Volkswagen AG access to digital media and work tools. The
objective is to further improve communication and collab-
oration among production and administrative employees. An
important issue in this connection is the growing volume of
official work being performed on mobile devices. The Com-
pany’s internal network Group Connect promotes knowledge
transfer and networking among all employees. The platform
puts experts in touch with one another across brands and
internationally. The introduction of the Group Connect
application for personal mobile devices further simplifies
access for employees of the direct units.
Safeguarding data and systems at the Volkswagen Group
is another focus of our IT. To also protect our customers
against cyber-attacks and ensure that our solutions are in
conformity with national and international legislation, we
continued setting up an integrated, cross-brand, cross-
regional Information Security Management System (ISMS) as
part of the Protected Customer program. The Group offers
documents, templates and tools to all Group companies and
brands in the form of an ISMS toolbox to help them
implement their own ISMS. Key information security pro-
cesses have been audited and certified within the inter-
national ISO 27001 framework. This is the most important
standard for information security and extends beyond IT to
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Sustainable Value Enhancement
Group Management Report
also cover issues such as personal security, compliance,
physical security and legal requirements. One of the aims of
the program, which is set to run until 2021, is also to
safeguard the complete life cycle of our vehicles and the
digital mobility services.
In fiscal year 2018, another focus of IT was on the sys-
tematic implementation of the European General Data Pro-
tection Regulation (GDPR), which was combined in a Group
program and rolled out in all corporate functions. In the
course of the sustainable implementation of the GDPR, the
data protection processes and procedures in place in the
brands will be consolidated and standardized. When new IT
solutions are being developed, the requirements will be
enforced from the outset. Transparency in the processing and
minimization of data are key goals on which we will continue
to work. To ensure sustainable observance of the GDPR, the
Group program will be gradually transferred to a company-
wide data protection management system as well as a data
protection organization in 2019.
In 2015, Volkswagen AG co-founded Deutsche Cyber-
Sicherheitsorganisation GmbH (DCSO). DCSO is accumulating
specialist knowledge on cybersecurity and aims to become
the preferred service provider to European businesses in this
field. DCSO is a competence center and a managed security
service provider for protecting companies against criminal
hackers, industrial espionage, government attacks and sabo-
tage.
E N V I R O N M E N TA L ST R AT E G Y
Protecting the environment is firmly anchored in the main
goals of our future program TOGETHER – Strategy 2025. As a
world-leading provider of sustainable mobility, we want to be
a role model on environmental issues. We are working
towards this goal, taking responsibility for the environment
every single day. In striving to achieve our goal of becoming a
role model, we consider the environmental impact through-
out the entire product life cycle: from manufacturing
(including the supply chain) to use and disposal. In addition
to the global challenges of climate change, our approach also
looks at other important environmental resources, particu-
larly water, soil, air, energy and raw materials. We use major
sustainability ratings as our benchmark and aim to achieve
top rankings in these. To this end, we have defined the
following target areas:
> To continuously improve our carbon footprint
> To continuously reduce harmful emissions
> To continuously reduce resource consumption
We use the decarbonization index (DCI) as a strategic indi-
cator to document our progress. This measures the products’
CO2 emissions along the entire value chain. The DCI is
calculated from the ratio of the carbon footprint to the
number of vehicles sold. It encompasses both direct and
indirect CO2 emissions at the individual production sites
(Scope 1 and 2) as well as all further CO2 emissions over the
life cycle of the vehicles sold – from the extraction of raw
materials, to vehicle use and final disposal of old vehicles
(Scope 3). The DCI thus enables transparent, comprehensive
tracking of progress toward climate-friendly mobility. We are
currently defining the DCI target figures for 2025 together
with the Volkswagen Group brands. The 2°C target of the
Paris Agreement adopted at the UN Climate Change Confer-
ence in late 2015 serves as an important parameter for us in
this endeavor.
We are also calculating the environmental impact reduc-
tion production indicator. We have set a target for the Group
and brands to reduce the environmental impact of produc-
tion by 45% per vehicle compared with 2010 levels. This
indicator includes energy and water consumption, CO2 and
VOC emissions and the volume of waste; the charts on page
144 show the development of these indicators.
Organization of Environmental Protection
The Group Board of Management is the highest internal
decision-making authority on environmental matters. Since
2012, it has simultaneously functioned as the Group’s Sus-
tainability Board. The Group-wide management of environ-
mental protection is the responsibility of the Group Steering
Committee for the Environment and Energy, which is
supported by numerous specialist bodies.
The brands and companies are responsible for their own
environmental organization. They base their own environ-
mental policies on the targets, guidelines and principles that
apply throughout the Group. The Group Steering Committee
for the Environment and Energy coordinates the brands and
companies. It reports on progress to the Board of Management.
Environmental officers from throughout the Group meet
regularly for the Group Environmental Conference in order to
optimize the environmental focus along the entire value chain.
Our production sites, including the central development
areas, are certified in accordance with ISO 14001 or EMAS
(101 of 123 production sites in 2018). Many production
locations have also certified their energy management
systems in accordance with ISO 50001. Since 2009, the “inte-
gration of environmental aspects into the product develop-
ment at the Volkswagen brand” has also been certified in
accordance with ISO TR 14062 in the Technical Development
department at the Volkswagen Passenger Cars brand.
Group Management Report
Sustainable Value Enhancement
155
Biodiversity
Biodiversity means the variety of life on our planet, and
covers the variety of species, the genetic differences within
species and the diversity of ecosystems. We rely on it as the
basis for our continued existence: healthy food, clean water,
fertile soils and a balanced climate. Due to the global decline
in biodiversity, the United Nations has declared the current
decade to be the “UN Decade on Biodiversity”.
Volkswagen has been committed to protecting biodiver-
sity since 2007 and is a founding member of the Biodiversity
in Good Company e.V. initiative. In our mission statement, we
have committed to supporting the protection of species at all
of our locations. For this, we are collaborating with local
partners and suppliers. We are in the process of developing a
suitable evaluation model to show the effect of biodiversity
projects and promote biodiversity at our production loca-
tions. Our membership in Biodiversity in Good Company e.V.
had been temporarily suspended as a result of the diesel
issue, but we were reincorporated as an active member at the
beginning of 2019.
Protecting biodiversity is an integral part of our environ-
mental management. We contribute to achieving the targets
of the UN Convention on Biological Diversity (CBD) by reducing
greenhouse gas emissions and utilizing resources as effi-
ciently as possible. Volkswagen supports networking between
the various players in the fields of business, politics, society
and academia with a view to increasing public awareness of
biodiversity conservation and to increase knowledge of the
issue.
S E PA R AT E N O N F I N A N C I A L G R O U P R E P O R T
The combined separate nonfinancial report of Volkswagen AG
and the Volkswagen Group in accordance with sections 289b
and 315b Handelsgesetzbuch (HGB – German Commercial
Code) for fiscal year 2018 will be available on the website
https://www.volkswagenag.com/presence/nachhaltigkeit/docu-
ments/sustainability-report/2018/Nichtfinanzieller_Bericht_
2018_d.pdf in German and at https://www.volkswagenag.com/
presence/nachhaltigkeit/documents/sustainability-report/
2018/Nonfinancial_Report_2018_e.pdf in English by no later
than April 30, 2019.
R E P O R T O N P O ST - B A L A N C E S H E E T D AT E E V E N T S
There were no significant events after the end of fiscal year
2018.
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Group Management Report
Report on Expected Developments
The global economic growth is expected to slow down somewhat in 2019. We also assume that
global demand for vehicles will vary from region to region and remain at the prior-year level on
the whole. With its brand diversity, broad product range and pioneering technologies and services,
the Volkswagen Group is well prepared for the future challenges in the mobility business and the
mixed conditions in the markets.
In the following, we describe the expected development of
the Volkswagen Group and the general framework for its
business activities. Risks and opportunities that could
represent a departure from the forecast trends are presented
in the Report on Risks and Opportunities.
Our assumptions are based on current estimates by third-
party institutions. These include economic research insti-
tutes, banks, multinational organizations and consulting
firms.
D E V E L O P M E N T S I N T H E G L O B A L E C O N O MY
Our forecasts are based on the assumption that global
economic growth will slow down somewhat in 2019. We still
believe risks will arise from protectionist tendencies, turbu-
lence in the financial markets and structural deficits in
individual countries. In addition, growth prospects will be
negatively affected by continuing geopolitical tensions and
conflicts. We therefore anticipate weaker momentum than in
2018 in both the advanced economies and the emerging
markets. We expect the strongest rates of expansion in Asia’s
emerging economies.
Furthermore, we anticipate that the global economy will
also continue to grow in the period from 2020 to 2023.
Europe/Other Markets
In Western Europe, economic growth is likely to slow down in
2019 compared with the reporting period. Resolving struc-
tural problems continues to pose a major challenge, as do the
uncertain impacts of the United Kingdom’s planned exit
from the EU.
In Central Europe, we estimate that growth rates in 2019 will
be lower than those for the past fiscal year. The economic
situation
further,
in Eastern Europe should stabilize
providing the conflict between Russia and Ukraine does not
worsen. The growth of the Russian economy is expected to
lose some of its momentum.
For Turkey, we expect the growth rate to taper off further
amid higher inflation. The South African economy will
probably be dominated by political uncertainty and social
tensions again in 2019 resulting, in particular, from high
unemployment. Growth is therefore likely to remain at a low
level.
Germany
We expect that gross domestic product (GDP) in Germany will
increase slower in 2019 than in the reporting period. The
situation in the labor market will probably remain stable and
bolster consumer spending.
North America
We assume that the economic situation in the USA will
remain stable in 2019. GDP growth should be lower than in
the reporting period, however. The US Federal Reserve could
further raise the key interest rate throughout 2019. Economic
growth is likely to continue to slow down in Canada and
Mexico.
South America
The Brazilian economy will most likely stabilize further in
2019 and record somewhat stronger growth than in the
reporting period. Amid sustained high inflation, the eco-
nomic situation in Argentina is expected to remain tense.
Group Management Report
Report on Expected Developments
157
Asia-Pacific
In 2019, the Chinese economy is expected to continue
growing at a relatively high level, but will lose some of its
momentum compared with prior years owing to the trade
disputes with the USA. For India, we anticipate an expansion
rate on a similar scale to the previous years. In Japan, growth
is forecast to remain weak.
T R E N D S I N T H E M A R K E T S F O R PA S S E N G E R C A R S A N D L I G H T
C O M M E R C I A L V E H I C L E S
We expect trends in the markets for passenger cars in the
individual regions to be mixed in 2019. Overall, global
demand for new vehicles will probably be at the 2018 level.
We are forecasting growing demand for passenger cars world-
wide in the period from 2020 to 2023.
Trends in the markets for light commercial vehicles in the
individual regions will be mixed again in 2019; on the whole,
we anticipate a slight dip in demand in 2019. We expect a
return to the growth trajectory for the years 2020 to 2023.
The Volkswagen Group is well prepared for the future
challenges pertaining to the automotive mobility business
and the mixed developments in regional automotive mar-
kets. Our brand diversity, our presence in all major world
markets, our broad, selectively expanded product range and
pioneering technologies and services place us in a good com-
petitive position worldwide. Our goal is to offer all customers
mobility and innovations suited to their needs and thus
ensuring long-term success.
Europe/Other Markets
For 2019, we anticipate that the volume of new passenger car
registrations in Western Europe will be in line with that seen
in the reporting period. The uncertain impact of the United
Kingdom’s planned exit from the EU is likely to further
exacerbate the ongoing uncertainty among consumers,
continuing to put a damper on demand. We expect to see
slight growth in the Italian market in 2019, whereas growth
momentum in Spain will probably slow somewhat. We
anticipate volumes in the French passenger car market to be
on a level with the previous year. In the United Kingdom, we
estimate that new vehicle registrations in 2019 will be at the
prior-year level.
For light commercial vehicles we expect demand in
Western Europe in 2019 to narrowly miss the prior-year level
owing to the uncertain impact of the United Kingdom’s
planned exit from the EU. We estimate a marked decline in
Italy and a moderate decline in the United Kingdom and
France. In Spain, we anticipate a noticeable increase in demand.
Sales of passenger cars in 2019 are expected to slightly exceed
the prior-year figures in markets in Central and Eastern
Europe. In Russia, we anticipate a market volume that is
slightly higher than in the previous year following the
marked recovery in the reporting period. The number of new
registrations should continue to grow in most of the other
markets in this region.
Registrations of light commercial vehicles in the Central
and Eastern European markets in 2019 will probably be some-
what lower than in the previous year. In Russia, we expect the
market volume to decline perceptibly compared with 2018.
We anticipate a further substantial downturn in the pas-
senger car market in Turkey. The volume of new registrations
in South Africa in 2019 is likely to increase slightly year-on-
year.
Germany
After a positive performance overall in recent years, we
expect demand in the German passenger car market to fall
slightly year-on-year in 2019.
We anticipate that registrations of light commercial vehi-
cles will be around the previous year’s level.
North America
The volume of demand in the markets for passenger cars and
light commercial vehicles (up to 6.35 tonnes) in North
America as a whole and in the United States of America is
likely to be slightly lower in 2019 than in the prior year.
Demand will probably remain highest for models in the SUV
and pickup segments. In Canada, the number of new regis-
trations is also projected to be on a level with the previous
year. By contrast, in Mexico we anticipate that demand will
pick up slightly year-on-year.
South America
Owing to their dependence on demand for raw materials
worldwide, the South American markets for passenger cars
and light commercial vehicles are heavily influenced by
developments in the global economy. We expect to see an
overall moderate increase in new registrations in the South
American markets in 2019 compared with the previous year.
In Brazil, demand volume is expected to rise markedly again
in 2019 following the increase in the reporting period.
However, we anticipate that demand in Argentina will be
perceptibly lower year-on-year.
Asia-Pacific
In 2019, the passenger car markets in the Asia-Pacific region
are expected at the prior-year level. Demand in China should
be around the previous year’s level. Attractively priced entry-
level models in the SUV segment in particular should
continue to see strong demand. For as long as there is no
resolution in sight, the trade dispute between China and the
United States will continue to weigh on business and
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consumer confidence. In the Indian market we anticipate
somewhat stronger growth than in the previous year. Japan’s
market volume is forecast to diminish moderately in 2019.
The market volume for light commercial vehicles in 2019
will probably just miss the previous year’s figure. We are
expecting demand in the Chinese market to fall noticeably
short of the prior-year level. For India, we are forecasting a
moderately higher volume in 2019 than in the reporting
period. In the Japanese market, demand is likely to be
moderately below the previous year’s level.
T R E N D S I N T H E M A R K E T S F O R C O M M E R C I A L V E H I C L E S
In the markets for mid-sized and heavy trucks that are
relevant for the Volkswagen Group, new registrations in 2019
are set to be slightly up on the level seen in 2018. We antic-
ipate a solid increase for the period from 2020 to 2023.
We assume that demand in Western Europe will taper off
moderately year-on-year in 2019. In Germany, we expect the
market to decline slightly compared to the previous year.
Central and Eastern European markets should record a
moderate increase in demand. In Russia we expect to see a
marked rebound in demand in 2019.
We assume that demand in the South America region will
pick up perceptibly in 2019.
In the bus markets that are relevant for the Volkswagen
Group, we anticipate a slight increase in demand in 2019
compared with the prior-year level. We forecast moderate
growth for the market in Western Europe in the same period.
In Central and Eastern Europe, we anticipate a slight drop in
demand. In South America, new registrations will probably be
moderately higher than the prior-year level.
For the period 2020 to 2023, we expect noticeable growth
overall in the demand for buses in the markets that are
relevant for the Volkswagen Group.
T R E N D S I N T H E M A R K E T S F O R P O W E R E N G I N E E R I N G
We expect the market environment in power engineering to
remain difficult in 2019, with undiminished price and
competitive pressures.
In 2019, the market volume for two-stroke engines used
in merchant shipping is likely to reach a level similar to that
seen in the reporting period. Calls for high energy efficiency
and low pollutant emissions will continue to have a signifi-
cant influence on ship designs in the future. We expect
sustained stable demand in the market for four-stroke
engines used in ferries, dredgers and government vessels. In
the offshore sector, new order volumes of special applications
look set to be on the low side due to existing overcapacity.
Overall, we expect the marine market to remain at a similar
level to that seen in the reporting period. The competitive
pressure will continue unabated.
Demand for energy correlates strongly with macro-
economic and demographic trends, especially in emerging
markets. The global trend toward decentralized power sta-
tions and gas-based applications shows no sign of losing
momentum. For 2019, we expect demand to rise slightly but
remain at a low level overall.
In turbomachinery, demand looks set to recover in 2019
due to price increases in our customers’ sales markets. As
capacity utilization of their production facilities increases,
the number of projects for turbocompressors is likely to rise.
In energy generation, demand for steam and gas turbines will
probably continue to vary from region to region. Sustained
stable demand is expected in the countries with strong
industrial growth or a low level of electrification. By contrast,
electricity producers in the industrialized countries are still
experiencing overcapacity. Possible growth will be satisfied
above all by renewable energy sources, whose irregular
electricity production requires a significant increase in
storage capacity. As a consequence of the shortage of raw
materials for batteries, we expect that the development and
construction of thermal storage will be pushed, thereby
invigorating the market for turbocompressors and turbo-
expanders. Overall, the price and competitive pressures will
ease somewhat but remain high due to existing overcapacity.
We anticipate a positive trend in the marine and power
plant after-sales business for diesel engines in 2019. In
turbomachinery, we expect a slight upward trend.
For the period 2020 to 2023, we expect to see growing
demand in the power engineering markets. The extent and
timing of this growth will vary in the individual business
fields, however.
T R E N D S I N T H E M A R K E T S F O R F I N A N C I A L S E R V I C E S
We believe that automotive financial services will be very
important for vehicle sales worldwide in 2019. We expect
demand to continue rising in emerging markets where
market penetration has so far been low, such as China.
Regions with already developed automotive financial services
markets will see a continuation of the trend towards enabling
mobility at the lowest possible total cost. Integrated end-to-
end solutions, which include mobility-related service mod-
ules such as insurance and innovative packages of services,
Group Management Report
Report on Expected Developments
159
will become increasingly important for this. Additionally, we
expect demand to increase for new forms of mobility, such as
rental services, and for integrated mobility services, for
example parking, refueling and charging. We estimate that
this trend will continue in the years 2020 to 2023.
the United States of America, it is possible that the key
interest rate will be raised again, depending on the future
development of the economy. For the years 2020 to 2023, we
anticipate a rise in interest rates, though the pace will vary
from region to region.
In the mid-sized and heavy commercial vehicles category,
we anticipate rising demand for financial services products in
emerging markets. In these countries in particular, financing
solutions support vehicle sales and are thus an essential
component of the sales process. In the developed markets, we
expect to see increased demand for telematics services and
services aimed at reducing total cost of ownership in 2019.
This trend is also expected to continue in the period 2020 to
2023.
E XC H A N G E R AT E T R E N D S
The global economy continued its robust growth in 2018
with declining momentum. Average prices for energy and
other commodities were up year-on-year but remained at a
relatively low level. As the year went on, the euro lost ground
against the US dollar. By contrast, the euro/sterling exchange
rate remained virtually unchanged in spite of the uncertainty
surrounding the outcome of the Brexit negotiations and the
question of what form the relationship between the United
Kingdom and the EU will take in the future. The currencies of
major emerging markets lost further ground against the euro
in the reporting period. For 2019, we are forecasting that the
euro will strengthen against the US dollar, sterling and the
Chinese renminbi. The expectation is that the Russian ruble,
Brazilian real and Indian rupee will remain relatively weak.
For 2020 to 2023, we currently expect that the euro will then
be stable against the key currencies, but that the comparative
weakness of the currencies in the above-mentioned emerging
markets will probably continue. However, there is still a
general event risk – defined as the risk arising from unfore-
seen market developments.
I N T E R E ST R AT E T R E N D S
Interest rates remained low with a few exceptions in fiscal
year 2018 due to the continuation of the prevailing expan-
sionary monetary policy worldwide and the challenging
overall economic environment.
In the major Western
industrialized nations, key interest rates persisted at a
historic low level on the whole. While it became apparent in
the USA that the extremely loose monetary policy was
gradually drawing to an end, the European Central Bank con-
tinued to pursue this course. In light of further expansionary
monetary policy measures in the eurozone, we therefore
expect no more than a slight rise in interest rates in 2019. In
C O M M O D I T Y P R I C E T R E N D S
Geopolitical and economic uncertainty in different forms
caused the prices for many raw and input materials to vary in
2018. For example, average prices for raw materials such as
iron ore, rare earths, natural rubber and lead fell, while prices
for coking coal, crude oil, aluminium, copper and the pre-
cious metals palladium and rhodium, among others, rose. For
the raw materials lithium and cobalt, which are relevant for
e-mobility and also saw higher year-on-year average price
levels, market prices eased in the course of the year. Based on
analyses of factors of influence and trends in the commodity
markets, we expect the prices of most commodities to rise in
2019. For the years 2020 to 2023, we continue to expect
volatility in the commodity markets with prices trending
upwards. We preventively analyze and limit these risks using
system-based procurement methods. Long-term, stable
supply agreements ensure that the Group’s needs are satis-
fied and guarantee a high degree of supply reliability.
N E W M O D E L S I N 2 0 1 9
In 2019, the Volkswagen Passenger Cars brand will expand its
range of SUVs worldwide by adding the T-Cross. The compact
crossover model impresses with its striking design and an
innovative interior concept, and will be available in Europe as
well as in South America and China. In addition, the Passat
will be revamped and fitted with a large number of new
driver assistance systems. In the United States, the GLI, the
sporty derivative of the Jetta, will enter the market. A new
version of the Passat designed for the US market will also
make its debut. The Passat will celebrate its market launch in
South America. Plug-in hybrid versions of the Passat and
Magotan will be launched in China. Furthermore, the e-Golf
and derivatives of the Lavida and the Bora will complement
the range of all-electric vehicles. The Teramont coupé and the
revamped Sagitar and Magotan will round off the portfolio in
China.
In early 2019, Audi will roll out the e-tron, the first all-
electric model from the brand with the four rings. Other
electric models are waiting in the wings. The product
upgrades of the A4 and the Q7 will also raise the bar.
ŠKODA is redefining the compact class with the Scala.
Based on the Modular Transverse Toolkit, the hatchback
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Report on Expected Developments
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represents the next step in the development of ŠKODA’s
design language. The Kamiq, a completely new crossover
model, will also expand the SUV family in Europe. It com-
bines the merits of an SUV with the agility of a compact
vehicle.
SEAT will present the first electric vehicle from the
Spanish brand: a derivative of the Mii.
Porsche will start its rollout of the eighth generation of
the 911 in 2019. This will be kicked off by the models 911
Carrera S and 911 Carrera 4S, followed by cabriolet models
and the 911 Speedster. The Cayenne model range will be
expanded in 2019 by the addition of the Turbo S with a plug-
in hybrid drive and – for the first time ever – coupé models.
Around mid-year, the new Macan Turbo will delight the first
customers with its performance and everyday practicality. In
the second half of the year, Porsche will focus on the market
launch of the Taycan, with which the brand will take the next
step into the age of e-mobility.
Bentley will deliver its first hybrid model in 2019, a
derivative of the successful SUV Bentayga. In addition, the
powerful Bentayga Speed will make its debut as the series’
latest top model. Further on in the year, this will be followed
by the new Flying Spur, which will give customers a new
driving experience with impressive performance and inno-
vative technologies.
From the beginning of 2019, Lamborghini will start
delivering the V12 top model Aventador SVJ to customers.
Following this, the roadster version of the Aventador SVJ will
also become available in the course of the year. The Huracán
coupé and Spyder will receive a product upgrade in the form
of a new design, higher performance and improved handling.
In 2019, Volkswagen Commercial Vehicles will put a
product upgrade of the Multivan/Transporter on the market
that features a revamped interior and exterior plus new info-
tainment functions.
Scania will also work steadily on introducing new prod-
ucts and services in 2019.
MAN will bring out additional engines in 2019 that
comply with the Euro 6d emission standard.
Ducati will launch numerous new models in 2019,
including the Panigale V4 R, two versions of the Multistrada
and four new members of the Scrambler family.
I N V E ST M E N T A N D F I N A N C I A L P L A N N I N G
To ensure the Volkswagen Group’s future viability, we will
continue to mobilize our pronounced strengths in inno-
vation and technology further and vigorously invest in
e-mobility, digitalization, new mobility services and autono-
mous driving in the coming years.
In our current planning for 2019, the majority of capex
(investments in property, plant and equipment, investment
property and intangible assets, excluding capitalized develop-
ment costs) will be spent on new products and the continued
rollout and further development of the modular toolkit. The
focus is on the electrification and digitalization of our
vehicles, in particular through the development of the
Modular Electric Drive Toolkit (MEB). At the same time, we
will primarily expand our SUV range further. We are also
investing in the modification of selected locations for the
production of electric vehicles. The Automotive Division’s
ratio of capex to sales revenue will fluctuate around a level of
6.5–7.0%.
Besides capex, investing activities will include additions
to capitalized development costs. Among other things, these
reflect upfront expenditures in connection with the electrifi-
cation and updating of our model range.
With the investments in our facilities and models, as well
as in the development of alternative drives and modular
toolkits, we are laying the foundations for profitable, sustain-
able growth at Volkswagen. These investments also include
commitments arising from decisions taken in previous fiscal
years.
We aim to finance the investments in our Automotive
Division from our own capital resources and expect cash
flows from operating activities to exceed the Automotive
Division’s investment requirements. Cash outflows resulting
from the diesel issue will negatively impact the cash flow
again in 2019, but will probably be significantly lower than in
the reporting period. Consequently, we anticipate a positive
net cash flow for 2019 that will be up significantly on the
prior-year figure.
The tendering of shares held by MAN’s noncontrolling
interest shareholders as a consequence of the judgment
issued on the award proceedings and the resulting termi-
nation of the control and profit and loss transfer agreement
with MAN SE is reflected in the amount of €1.7 billion,
reducing net liquidity.
Current estimates indicate that the change in the
accounting for leases (IFRS 16), which entered into force in
January 2019, will give rise to a negative one-off effect on the
net liquidity reported by the Automotive Division, amounting
to approximately 1% of the Volkswagen Group’s total assets.
We therefore expect net liquidity in the Automotive
Division in 2019 to be down significantly on the level seen in
the reporting period.
These plans are based on the Volkswagen Group’s current
structures. A possible IPO of TRATON SE and related cash
inflows are not taken into account.
Our joint ventures in China are included using the equity
method and are therefore not included in the figures above.
For 2019, the joint ventures plan to invest in e-mobility and
the digitalization of their model range, in new technol-
Group Management Report
Report on Expected Developments
161
ogies and mobility services, in strengthening their develop-
ment and manufacturing capacity, and in new products.
Their capex will exceed the 2018 level and be financed from
the companies’ own funds.
In the Financial Services Division, we are planning
slightly higher investments in 2019 than in the previous year.
We expect the growth in lease assets and in receivables from
leasing, customer and dealer financing to lead to funds tied
up in working capital, of which around half will be financed
from the gross cash flow. As is common in the sector, the
remaining funds needed will be met primarily through
unsecured bonds on the money and capital markets, the
issuing of asset-backed securities, customer deposits from
direct banking business, as well as through the use of
international credit lines.
TA R G E T S F O R VA L U E - B A S E D M A N A G E M E N T
Based on long-term interest rates derived from the capital
market and the target capital structure (fair value of equity
to debt = 2:1), the minimum required rate of return on
invested capital defined for the Automotive Division remains
unchanged at 9%.
In spite of the adverse effects of the special items on
earnings, we exceeded the minimum rate of return on
invested capital in the reporting period, with a return on
investment (ROI) of 11.0 (12.1)% (see also page 127). Invested
capital will continue to increase further in 2019 as a result of
investments in new models, in the development of alter-
native drives and modular toolkits and in future technol-
ogies. Invested capital will also rise as a consequence of the
change in the accounting for leases (IFRS 16) that entered into
force in January 2019. The return on investment (ROI) in the
Automotive Division will probably exceed our minimum
required rate of return on invested capital and be slightly
higher than in the previous year.
F U T U R E O R G A N I Z AT I O N A L ST R U C T U R E O F T H E G R O U P
As part of the changes in the management structure of the
Volkswagen Group, the Volkswagen Commercial Vehicles
brand will be allocated to the Passenger Cars segment from
January 1, 2019 and the segment will be renamed Passenger
Cars and Light Commercial Vehicles. Consequently, the
Passenger Cars Business Area will then include the Volks-
wagen Commercial Vehicles brand in the financial reporting.
The Commercial Vehicles segment will continue to comprise
the Commercial Vehicles Business Area, but from January 1,
2019, will exclude the Volkswagen Commercial Vehicles
brand. The Automotive Division will remain unchanged.
The following tables show the forecast-related effects that
the reclassification of the Volkswagen Commercial Vehicles
brand will have on the Passenger Cars and Commercial
Vehicles Business Areas.
A D J U ST M E N T O F T H E PA S S E N G E R C A R S B U S I N E S S A R E A
€ million
Sales revenue
Operating result
Operating return on sales (%)
Actual 2018
Actual 2018
after adjustments1
160,802
9,220
5.7
172,678
10,000
5.8
1 Passenger Cars Business Area including the Volkswagen Commercial Vehicles brand in
accordance with the reporting from January 1, 2019.
A D J U ST M E N T O F T H E C O M M E R C I A L V E H I C L E S B U S I N E S S A R E A
€ million
Sales revenue
Operating result
Operating return on sales (%)
Actual 2018
Actual 2018
after adjustments1
36,656
1,971
5.4
24,781
1,191
4.8
1 Commercial Vehicles Business Area excluding the Volkswagen Commercial Vehicles
brand in accordance with the reporting from January 1, 2019.
turbulence
S U M M A R Y O F E X P E C T E D D E V E L O P M E N T S
The Volkswagen Group’s Board of Management expects the
growth of the global economy to slow somewhat in 2019. We
still believe that risks will continue to arise from protectionist
tendencies,
financial markets and
structural deficits in individual countries. In addition, growth
prospects will be negatively
impacted by continuing
geopolitical tensions and conflicts. We therefore expect both
the advanced economies and the emerging markets to show
weaker momentum than in 2018. We anticipate the strongest
rates of expansion in Asia’s emerging economies.
the
in
The trend in the automotive industry closely follows global
economic developments. We assume that competition in the
international automotive markets will intensify further.
We expect trends in the passenger car markets in the
individual regions to be mixed in 2019. Overall, global
demand for new vehicles will probably be at the prior-year
level. We anticipate that the volume of new registrations for
passenger cars in Western Europe will be in line with the
figure seen in the reporting period. After a positive perfor-
mance overall in recent years, we estimate that demand in
the German passenger car market will fall slightly year-on-
year. Sales of passenger cars in 2019 are expected to slightly
exceed the prior-year figures in markets in Central and
Eastern Europe. The volume of demand in the markets for
passenger cars and light commercial vehicles (up to 6.35
tonnes) in North America is likely to be slightly lower than in
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the prior year. We expect new registrations in the South
American markets for passenger cars and light commercial
vehicles to grow moderately overall compared with the
previous year. The passenger car markets in the Asia-Pacific
region are expected at the prior-year level.
Trends in the markets for light commercial vehicles in the
individual regions will be mixed again in 2019; on the whole,
we anticipate a slight dip in demand.
In the markets for mid-sized and heavy trucks that are
relevant for the Volkswagen Group and in the relevant mar-
kets for buses, new registrations in 2019 are expected to
slightly exceed the prior-year level.
We believe that automotive financial services will con-
tinue to be very important for vehicle sales worldwide in 2019.
The Volkswagen Group is well prepared overall for the
future challenges pertaining to the automobility business
and the mixed developments in regional vehicle markets. Our
brand diversity, our presence in all major world markets, our
broad, selectively expanded product range and pioneering
technologies and services put us in a good competitive
position worldwide. As part of the transformation of our core
business, we are positioning our Group brands with a
stronger focus on their
individual characteristics and
optimizing the vehicle and drive portfolio. The focus hereby
is primarily on our vehicle fleet’s carbon footprint and on the
most attractive and fastest-growing market segments. In
addition, we are working to make even more focused use of
the advantages of our multibrand group by continuously
developing new technologies and our toolkits. Our goal is to
offer all customers mobility and innovations suited to their
needs and thus ensuring long-term success. We will unveil
additional SUV models, integrate digitalization into our
products even more systematically and provide important
stimuli for the future with e-mobility offerings.
We expect that deliveries to customers of the Volkswagen
Group in 2019 will slightly exceed the prior-year figure amid
continuously challenging market conditions.
Challenges will arise particularly from the economic situ-
ation, the increasing intensity of competition, exchange rate
volatility and more stringent WLTP (Worldwide Harmonized
Light-Duty Vehicles Test Procedure) requirements.
We expect the sales revenues of the Volkswagen Group
and its Passenger Cars and Commercial Vehicles business
areas to grow by as much as 5% year-on-year. In terms of the
operating profit for the Group and the Passenger Cars
Business Area, we forecast an operating return on sales in the
range of 6.5–7.5% in 2019. For the Commercial Vehicles Busi-
ness Area, we anticipate an operating return on sales of
between 6.0% and 7.0%. In the Power Engineering Business
Area, we expect a loss around the previous year’s level amid a
slight rise in sales revenue. For the Financial Services
Division, we are forecasting a moderate increase in sales
revenues and an operating profit at the prior-year level.
In the Automotive Division, the R&D ratio and the ratio of
capex to sales revenue will probably fluctuate in the range of
6.5–7.0% in 2019. Cash outflows resulting from the diesel
issue will negatively impact the cash flow again in 2019, but
will probably be significantly lower than in the reporting
period. Consequently, we anticipate a positive net cash flow
for 2019 that will be up significantly on the prior-year figure.
Net liquidity in the Automotive Division is likely to be
considerably lower, primarily due to a negative one-off effect
arising from the change brought by IFRS 16, which will not
affect cash outflows. We expect a slight increase in return on
investment (ROI) compared with the previous year. Our
unchanged stated goal is to continue our solid liquidity
policy.
The commitment and considerable technical expertise of
our staff are key prerequisites to successfully shaping the
transformation into the world's leading provider of sustain-
able mobility. With our future program, TOGETHER – Strategy
2025, we are attaching even greater importance to our respon-
sibility in relation to the environment, safety and society. We
are also aiming for operational excellence in all business
processes and intensifying our focus on profitable growth.
Group Management Report
Report on Risks and Opportunities
163
Report on Risks and Opportunities
( C O N TA I N S T H E R E P O R T I N A C C O R D A N C E W I T H S E C T I O N 2 8 9 ( 4 ) O F T H E H G B )
Promptly identifying the risks and opportunities arising from our operating activities and taking
a forward-looking approach to managing them is crucial to our Company’s long-term success.
A comprehensive risk management and internal control system help the Volkswagen Group deal
with risks in a responsible manner.
In this section, we first explain the objective and structure of
the Volkswagen Group’s risk management system (RMS) and
internal control system (ICS) and describe these systems with
regard to the financial reporting process. We then outline the
main risks and opportunities arising in our business activi-
ties.
O B J E C T I V E O F T H E R I S K M A N A G E M E N T SY ST E M A N D I N T E R N A L
C O N T R O L SY ST E M AT V O L K S WA G E N
Only by promptly identifying, accurately assessing and
effectively and efficiently managing the risks and oppor-
tunities arising from our business activities can we ensure
the Volkswagen Group’s sustainable success. The aim of the
RMS/ICS is to identify potential risks at an early stage so that
suitable countermeasures can be taken to avert the threat of
loss to the Company, and any risks that might jeopardize its
continued existence can be ruled out.
Assessing the probability and extent of future events and
developments is, by its nature, subject to uncertainty. We are
therefore aware that even the best RMS cannot foresee all
potential risks and even the best ICS can never completely
prevent irregular acts.
ST R U C T U R E O F T H E R I S K M A N A G E M E N T SY ST E M A N D I N T E R N A L
C O N T R O L SY ST E M AT V O L K S WA G E N
The organizational design of the Volkswagen Group’s RMS/
ICS is based on the internationally recognized COSO frame-
work for enterprise risk management (COSO: Committee of
Sponsoring Organizations of the Treadway Commission).
Structuring the RMS/ICS in accordance with the COSO frame-
T H E T H R E E L I N E S O F D E F E N S E M O D E L
S U P E R V I S O R Y B O A RD
B O A R D O F M A N A G E M E N T
1st
line of defense
2nd
line of defense
Companies
and business units
Group
Risk Management
3rd
line of defense
Group
Internal Audit
work for enterprise risk management ensures that potential
risk areas are covered in full. Uniform Group principles are
used as the basis for managing risks in a standardized
manner. Opportunities are not recorded.
Another key element of the RMS/ICS at Volkswagen is the
three lines of defense model, a basic element required,
among other bodies, by the European Confederation of Insti-
tutes of Internal Auditing (ECIIA). In line with this model the
Volkswagen Group’s RMS/ICS has three lines of defense that
are designed to protect the Company from significant risks
occurring.
First line of defense: operational risk management
The primary line of defense comprises the operational risk
management and internal control systems at the individual
Group companies and business units. The RMS/ICS is an
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Report on Risks and Opportunities
Group Management Report
integral part of the Volkswagen Group’s structure and work-
flows. Events that may give rise to risk are identified and
assessed locally in the divisions and at the investees.
Countermeasures are introduced immediately, their effects
assessed, and the information incorporated into the planning
in a timely manner. The results of the operational risk
management process are incorporated into budget planning
and financial control on an ongoing basis. The targets agreed
in the budget planning rounds are continually reviewed in
revolving planning updates.
At the same time, the results of risk mitigation measures
that have already been taken are incorporated into the
monthly forecasts on further business development in a
timely manner. This means that the Board of Management
also has access to an overall picture of the current risk situ-
ation via the documented reporting channels during the year.
The minimum requirements for the operational risk
management and internal control system are set out for the
entire Group in uniform guidelines. These also include a
process for the timely reporting of material risks.
Operational risk management also includes compliance
with the Golden Rules in the areas of control unit software
development, emission classification and escalation manage-
ment. These rules are the minimum requirements in the
organization, processes and tools & systems categories. We
continued to reinforce the internal control system in the area
of product compliance in 2018.
Second line of defense: identifying and reporting systemic and current
risks using Group-wide processes
In addition to the ongoing operational risk management, the
Group Risk Management department each year sends stan-
dardized surveys on the risk situation and the effectiveness of
the RMS/ICS to the significant Group companies and units
worldwide (regular Governance, Risk & Compliance (GRC)
process). The feedback is used to update the overall picture of
the potential risk situation and assess the effectiveness of the
system.
Each systemic risk reported is assessed using the expected
likelihood of occurrence and various risk criteria (financial
and nonfinancial). In addition, the measures taken to manage
and control risk are documented at management level. This
means that risks are assessed in the context of any risk
management measures initiated, i.e. in a net analysis. In
addition to strategic, operational and reporting risks, risks
arising from potential compliance violations are also inte-
grated into this process. Moreover, the effectiveness of key
risk management and control measures is tested and any
weaknesses identified in the process are reported and
rectified.
A N N U A L S T A N D A R D G O V E R N A N C E , R I S K A N D C O M P L I A N C E P R O C E S S
Selection
of companies
and units
Follow-up activities
targeting weaknesses
Data identified/
assessed in the units
Reporting
Documentation
of effectiveness
in the units
All Group companies and units selected from among the
entities in the consolidated Group on the basis of materiality
and risk criteria were subject to the regular GRC process in
fiscal year 2018.
In addition to the ad hoc and annual risk assessment, the
Board of Management also receives quarterly risk reports.
Similar to the annual standard GRC process, the assessment
takes risk-minimizing control measures into account (net
assessment). All Group brands are included in this process
along with Porsche Holding Salzburg, Volkswagen Financial
Services AG and Volkswagen Bank GmbH.
Information on relevant systemic and current risks is
regularly reported to the Group Board of Management and
the Audit Committee of the Supervisory Board of Volks-
wagen AG.
In addition, the Company set up the Group Board of
Management Committee for Risk Management in 2017. This
met quarterly in the reporting year. The committee has the
following tasks, among others:
> to further increase transparency in relation to significant
risks to the Group and their management,
> to explain specific
issues where these constitute a
significant risk to the Group,
> to make recommendations on the further development of
the RMS/ICS,
> to support the open approach to dealing with risks and
promote an open risk culture.
The Scania brand was incorporated into the standard GRC
process in 2018. The brand has already been included in
quarterly risk reporting since 2016.
Group Management Report
Report on Risks and Opportunities
165
Third line of defense: checks by Group Internal Audit
Group Internal Audit helps the Board of Management to
monitor the various divisions and corporate units within the
Group. It regularly checks the risk early warning system and
the structure and implementation of the RMS/ICS and the
compliance management system (CMS) as part of its inde-
pendent audit procedures.
R I S K E A R LY WA R N I N G SY ST E M I N L I N E W I T H T H E KO N T R A G
The Company’s risk situation is ascertained, assessed and
documented in accordance with the requirements of the
Gesetz zur Kontrolle und Transparenz im Unternehmens-
bereich (KonTraG – German Act on Control and Transparency
in Business). The requirements for a risk early warning
system are met by means of the RMS/ICS elements described
above (first and second lines of defense). Independently of
this, the external auditors check both the processes and
procedures implemented in this respect and the adequacy of
the documentation on an annual basis. The plausibility and
adequacy of the risk reports are examined on a random basis
in detailed interviews with the divisions and companies
concerned that also involve the external auditors. The latter
assessed our risk early warning system based on this volume
of data and ascertained that the risks identified were
presented and communicated accurately. The risk early
warning system meets the requirements of the KonTraG.
In addition, scheduled examinations as part of the audit
of the annual financial statements are conducted at com-
panies in the Financial Services Division. As a credit institu-
tion, Volkswagen Bank GmbH, including its subsidiaries, is
subject to supervision by the European Central Bank, while
Volkswagen Leasing GmbH as a financial services institution
and Volkswagen Versicherung AG as an insurance company
are subject to supervision by the relevant division of the
Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin – the
German Federal Financial Supervisory Authority). As part of
the scheduled supervisory process and unscheduled audits, the
competent supervisory authority assesses whether the require-
ments, strategies, processes and mechanisms ensure solid risk
management and solid risk cover. Furthermore, the Prüfungs-
verband deutscher Banken (Auditing Association of German
Banks) audits Volkswagen Bank GmbH from time to time.
Volkswagen Financial Services AG, which is responsible
for the leasing, insurance, services and mobility business and
the lending business outside Europe, operates a risk early
warning and management system. This system ensures that
the locally applicable regulatory requirements are adhered to
and at the same time enables appropriate and effective risk
management at Group level. Important components of it are
regularly reviewed as part of the audit of the annual financial
statements.
Monitoring the effectiveness of the risk management system and the
internal control system
To ensure the effectiveness of the RMS/ICS, we regularly
optimize it as part of our continuous monitoring and im-
provement processes. In the process, we give equal con-
sideration to both internal and external requirements. On a
case-by-case basis, external experts assist in the continuous
enhancement of our RMS/ICS. The results culminate in both
regular and event-driven reporting to the Board of Manage-
ment and Supervisory Board of Volkswagen AG.
T H E R I S K M A N A G E M E N T A N D I N T E G R AT E D I N T E R N A L C O N T R O L
SY ST E M I N T H E C O N T E X T O F T H E F I N A N C I A L R E P O R T I N G P R O C E S S
The accounting-related part of the RMS/ICS that is relevant
for the financial statements of Volkswagen AG and the Volks-
wagen Group as well as its subsidiaries comprises measures
intended to ensure that the information required for the
preparation of the financial statements of Volkswagen AG,
the consolidated financial statements and the combined
management report of the Volkswagen Group and Volks-
wagen AG is complete, accurate and transmitted in a timely
manner. These measures are designed to minimize the risk of
material misstatement in the accounts and in the external
reporting.
Main features of the risk management and integrated internal control
system relevant for the financial reporting process
The Volkswagen Group’s accounting is essentially organized
along decentralized lines. For the most part, accounting
duties are performed by the consolidated companies them-
selves or entrusted to the Group’s shared service centers. In
principle, the audited financial statements of Volkswagen AG
and its subsidiaries prepared in accordance with IFRSs and
the Volkswagen IFRS accounting manual are transmitted to
the Group in encrypted form. A standard market product is
used for encryption.
The Volkswagen IFRS Accounting Manual, which has been
prepared using external expert opinions in certain cases,
ensures the application and assessment of uniform account-
ing policies based on the requirements applicable to the
parent. In particular, it includes more detailed guidance on
the application of legal requirements and industry-specific
issues. Components of the reporting packages required to be
prepared by the Group companies are also set out in detail
there and requirements established for the presentation and
settlement of intragroup transactions and the balance
reconciliation process that builds on this.
Control activities at Group level include analyzing and, if
necessary, adjusting the data reported in the financial
statements presented by the subsidiaries, taking into account
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Group Management Report
the reports submitted by the auditors and the outcome of the
meetings on the financial statements with representatives of
the individual companies. These discussions address both the
reasonableness of the single-entity financial statements and
specific significant issues at the subsidiaries. Alongside rea-
sonableness reviews, other control mechanisms applied
during the preparation of the single-entity and consolidated
financial statements of Volkswagen AG include the clear
delineation of areas of responsibility and the application of
the dual control principle.
The combined management report of the Volkswagen
Group and Volkswagen AG is prepared – in accordance with
the applicable requirements and regulations – centrally but
with the involvement of and in consultation with the Group
units and companies.
In addition, the accounting-related internal control system
is independently reviewed by Group Internal Audit in Germany
and abroad.
Integrated consolidation and planning system
The Volkswagen consolidation and corporate management
system (VoKUs) enables the Volkswagen Group to consolidate
and analyze both Financial Reporting’s backward-looking
data and Controlling’s budget data. VoKUs offers centralized
master data management, uniform reporting, an authori-
zation concept and maximum flexibility with regard to
changes to the legal environment, providing a future-proof
technical platform that benefits Group Financial Reporting
and Group Controlling in equal measure. To verify data
consistency, VoKUs has a multi-level validation system that
primarily checks content plausibility between the balance
sheet, the income statement and the notes.
R I S K S A N D O P P O R T U N I T I E S
In this section, we outline the significant risks and opportu-
nities that arise in the course of our business activities. We
into categories. Unless explicitly
have grouped them
mentioned, there were no material changes to the specific
risks and opportunities compared with the previous year. The
increasing number of partnerships generates both opportu-
nities as well as risks.
The diesel issue gives rise to its own risks for the Volks-
wagen Group and also has an impact on existing risks. These
are described under the respective risk category.
We use competitive and environmental analyses and
market studies to identify not only risks but also opportun-
ities with a positive impact on the design of our products,
the efficiency with which they are produced, their success in
the market and our cost structure. Where they can be
assessed, risks and opportunities that we expect to occur are
already reflected in our medium-term planning and our
forecast. The following therefore reports on internal and
external developments as risks and opportunities that may
result in a negative or positive deviation from our forecast.
Risks from the diesel issue
The Volkswagen Group has recognized provisions arising
from the diesel issue, in particular for the service measures,
recalls and customer-related measures as well as for legal
risks.
Further significant financial liabilities may emerge due to
existing estimation risks particularly from legal risks, such as
criminal, administrative and civil proceedings, technical solu-
tions, lower market prices, repurchase obligations, customer-
related measures and possible official or statutory require-
ments for diesel vehicles.
Demand may decrease – possibly exacerbated by a loss of
reputation or insufficient communication. Other potential
consequences include lower margins in the new and used car
businesses and a temporary increase in funds tied up in
working capital.
The funding needed to cover the risks may lead to assets
having to be sold due to the situation and equivalent pro-
ceeds for them not being achieved as a result.
As a result of the diesel issue, the ability to use refinan-
cing instruments may possibly be restricted or precluded for
the Volkswagen Group. A downgrade of the Company’s rating
could adversely affect the terms associated with the Volks-
wagen Group’s borrowings.
We are cooperating with all the responsible authorities to
clarify these matters completely and transparently.
Additional information about the litigation can be found
on pages 94 and 177 to 183 of this annual report.
Macroeconomic risks and opportunities
We believe that risks to continued global economic growth
arise primarily from turbulence in the financial markets,
increasingly protectionist tendencies and structural deficits,
which pose a threat to the performance of individual
advanced economies and emerging markets. The worldwide
transition from an expansionary monetary policy to a more
restrictive one also presents risks for the macroeconomic
environment. Persistently high private- and public-sector
debt in many places is clouding the outlook for growth and
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may likewise cause markets to respond negatively. Declines in
growth in key countries and regions often have an immediate
impact on the state of the global economy and therefore pose
a central risk. In particular, the Volkswagen Group would be
adversely affected by a disorderly Brexit and by other trade
policy measures such as tariffs.
The economic development of some emerging economies
is being hampered primarily by dependence on energy and
commodity prices and capital inflows, but also by socio-
political tensions. Corruption, inadequate government struc-
tures and a lack of legal certainty also pose risks.
Geopolitical tensions and conflicts are a further major
risk factor to the performance of individual economies and
regions. As the global economy becomes increasingly inter-
connected, it is also vulnerable to local developments. Any
escalation of the conflicts in Eastern Europe, the Middle East,
or Africa, for example, could cause upheaval on the global
energy and commodity markets and exacerbate migration
trends. An aggravation of the situation in East Asia could put
further strain on the global economy. The same applies to
violent conflicts, terrorist activities and the spread of infec-
tious diseases, which may prompt unexpected, short-term
responses from the markets.
On the whole, we do not anticipate a global recession next
year. Due to the risk factors mentioned, however, a decline in
global economic growth or a period of below-average growth
rates is possible.
The macroeconomic environment may also give rise to
opportunities for the Volkswagen Group if actual develop-
ments differ in a positive way from expected developments.
Sector-specific risks and market opportunities/potential
Western Europe and China are our main sales markets. A drop
in demand in these regions due to the economic climate
would have a particularly strong negative impact on the Com-
pany’s earnings. We counter this risk with a clear, customer-
oriented and innovative product and pricing policy.
Outside Western Europe and China, delivery volumes are
spread widely across the key regions: Central and Eastern
Europe, North America and South America. In addition, we
either already have a strong presence in numerous existing
and developing markets or are working systematically
towards this goal. Particularly in smaller markets with growth
potential, we are increasing our presence with the help of
strategic partnerships and are catering to requirements there.
Price pressure in established automotive markets as a
result of high market saturation is a particular challenge for
the Volkswagen Group as a supplier of volume and premium
models. Competitive pressures are likely to remain high in
the future. Individual manufacturers may respond by
offering incentives in order to meet their sales targets,
putting the entire sector under additional pressure.
The growth markets of Central and Eastern Europe, South
America and Asia are particularly important to the Volks-
wagen Group. These markets harbor considerable potential;
however, the underlying conditions in some countries in
these regions make it difficult to increase unit sales figures
there. Some have high customs barriers or minimum local
content requirements for production, for example. At the
same time, wherever the economic and regulatory situation
permits, there are opportunities above and beyond current
projections. These arise from faster growth in the emerging
markets where vehicle densities are currently still low.
In Europe, there is a risk that further municipalities and
cities will impose a driving ban on diesel vehicles in order to
comply with emission limits. In China, restrictions on vehicle
registrations could enter into force in further metropolitan
areas in the future. Furthermore, China will impose a so-
called “new energy vehicle quota” from 2019 onwards, which
means that battery-electric vehicles, plug-in hybrids and fuel
cell vehicles will have to account for a certain proportion of a
manufacturer’s new passenger car fleet. To ensure com-
pliance with emissions standards, we continuously tailor our
range of vehicle models and engines to the conditions in the
relevant markets. These requirements may lead to higher
costs and consequently to price increases and declines in
volumes.
The demand that built up in individual established
markets in times of crisis could bring a more marked
recovery in these markets if the economic environment eases
more quickly than expected.
Economic performance varied in individual regions in fis-
cal year 2018. The resulting challenges for our trading and
sales companies, such as efficient inventory management
and a profitable dealer network, are considerable and are
being met by appropriate measures on their part. However,
financing business activities through bank loans remains
difficult. Our financial services companies offer dealers
financing on attractive terms with the aim of strengthening
their business models and reducing operational risk. We have
installed a comprehensive liquidity risk management system
so that we can promptly counteract any liquidity bottlenecks
at the dealers’ end that could hinder smooth business opera-
tions.
We continue to approve loans for vehicle finance on the
basis of the same cautious principles applied in the past,
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taking into account the regulatory requirements of section
25a(1) of the Kreditwesengesetz (KWG – German Banking Act).
Volkswagen may be exposed to increased competition in
aftermarkets for two reasons in particular: firstly, because of
the provisions of the block exemption regulations, which
have applied to after-sales services since June 2010, and,
secondly, because of the amendments included in EU Regula-
tion 566/2011 as of June 8, 2011 regarding access by inde-
pendent market participants to technical information.
In Germany, legislation is currently being prepared to
restrict or abolish design protection for repair parts through
the introduction of a repair clause. In addition, the European
Commission is evaluating the market with regard to existing
design protection. A possible restriction or abolition of
design protection for visible replacement parts could
adversely affect the Volkswagen Group’s genuine parts busi-
ness.
The automotive industry faces a process of transfor-
mation with far-reaching changes. Electric drives, connected
vehicles and autonomous driving are associated with both
opportunities and risks for our sales. In particular, more
rapidly evolving customer requirements, swift implemen-
tation of legislative initiatives and the market entry of new
competitors from outside the industry will require changed
products, a faster pace of innovation and adjustments to
business models.
Furthermore, we cannot entirely rule out the possibility
of freight deliveries worldwide being shifted from trucks to
other means of transport, and of demand for the Group’s
commercial vehicles falling as a result.
Below, we outline the greatest growth and market poten-
tial for the Volkswagen Group.
China
In China, the largest market in the Asia-Pacific region, there
was a slight year-on-year decline in the passenger car market
in the reporting year. Though demand for vehicles will rise in
the coming years due to the need for individual mobility, the
trade conflict with the USA means that this will be at a slower
pace than in the past. Demand will also shift from the large
coastal cities to the interior of the country. In order to
leverage the considerable opportunities offered by the
Chinese market – also with regard to e-mobility – and to
defend our strong market position in China over the long
term, we are continuously expanding our product range to
include models that have been specially developed for this
market. We are further extending our production capacity in
this growing market through additional production facilities.
India
The political and economic situation in India further stabi-
lized in 2018. The vehicle markets continued their growth
path. We expect this trend to continue. Against this backdrop,
the Group is currently consolidating its activities, as India
remains an important strategic future market for the Group.
USA
The volume of the US vehicle market in 2018 was in line with
the previous year. For 2019, the market volume is expected to
be slightly down on the reporting period. In the USA, Volks-
wagen Group of America is systematically pursuing our
strategy of becoming a full-fledged volume supplier. The
expansion of local production capacity – also including a
production facility for electric vehicles in the future – will
allow the Group to better serve the market in the North
America region. We are also pressing forward with additional
products tailored specifically to the US market.
Brazil
The economic environment eased somewhat in the reporting
year, while Brazil’s political path is uncertain after the presi-
dential elections. The volume of demand in the vehicle mar-
ket recovered markedly compared with the weak prior year.
We anticipate a continued upturn in demand in 2019. The
growing number of automobile manufacturers with local
production has resulted in a sharp increase in price pressure
and competition. The Brazilian market plays a key role for the
Volkswagen Group. To strengthen our competitive position
here, we offer vehicles that have been specially developed for
this market and are locally produced, such as the Gol and the
Virtus.
Russia
Russia has the potential to grow into one of the largest auto-
motive markets in the world. The volume of the Russian
vehicle market in 2018 was up markedly on the previous year
and we are forecasting that the passenger car market will
slightly exceed the reporting year in 2019. However, the heavy
reliance on oil and gas income, rising taxes, currency volatil-
ity resulting at present in high vehicle prices, the political
crisis and the related sanctions imposed by the EU and the
USA continue to impact the development of demand nega-
tively. The market remains strategically important to the Volks-
wagen Group, which is why we are working intensively there.
The Middle East
Political and economic uncertainty is weighing on the
region’s main sales markets, particularly Turkey. Increased
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Report on Risks and Opportunities
169
tariffs along with the dramatic depreciation of the Turkish
lira, which is accompanied by very high inflation and rising
interest rates, are weakening demand in the country. Despite
the instability, however, the Middle East region offers long-
term growth potential. We are leveraging the potential for
growth with a range of vehicles that has been specifically
tailored to this market, but do not have our own production
facilities.
Power Engineering
The underlying trends in the global economy, such as sus-
tained growth and a greater international division of labor,
are set to continue, despite increased geopolitical and macro-
economic risks compared with the previous year. This also
applies to the resulting transport routes and volumes and to
the demand for touristic offers such as cruises. Growing
global energy needs call for innovation in industry and a
growing willingness on the part of governments to invest in
relation to global climate policy.
We are working systematically to leverage market oppor-
tunities across the world, for example by positioning our-
selves as a solution provider for reduced-carbon drive system
and energy generation technologies as well as for storage
technologies. Moreover, significant potential can be lever-
aged in the medium term by enhancing our after-sales busi-
ness through the introduction of new products and the
expansion of our service network. Going forward, stricter
requirements with respect to reliability, the availability of the
plants that are already in operation, the increase in environ-
mental compatibility and efficient operation, together with
the large number of engines and plants, will provide the basis
for growth.
As part of the capital goods industry, the Power Engi-
neering business is affected by fluctuations in the investment
climate. Even minor changes in growth rates or growth
forecasts, resulting from geopolitical uncertainties or volatile
commodities and foreign exchange markets, for example, can
lead to significant changes in demand or the cancellation of
already existing orders. The measures we use to counter the
considerable economic risks include flexible production con-
cepts and cost flexibility by means of temporary employ-
ment, working time accounts and short-time work, and – if
necessary – structural adjustments.
Research and development risk
The automotive industry is undergoing a radical transfor-
mation process. Multinational corporations like Volkswagen
are facing major challenges in the areas of customer/market,
technological advances and legislation. Key aspects are the
implementation of increasingly stringent emission and con-
sumption regulations, taking new test procedures and test
cycles (e.g. WLTP) into account, as well as compliance with
approval processes (homologation), which are becoming
increasingly more complex and time-consuming and may
vary by country. On a national and international level there
are numerous legal requirements regarding the use, handling
and storage of substances and mixtures (including restric-
tions concerning chemicals, heavy metals, biocides, persis-
tent organic pollutants), which apply to both the manufac-
turing of automobiles and the automobile itself.
The economic success and competitiveness of the Volks-
wagen Group depend on how successful we are in promptly
tailoring our portfolio of products and services to the
changing conditions. Due to the intensity of the competition
and the speed of technological development, identifying
relevant trends at an early stage and reacting accordingly is
crucial.
Among other things, we therefore conduct trend analyses
and customer surveys and examine the relevance of the
results for our customers. We counter the risk that it may not
be possible to develop modules, vehicles or services within
the specified timeframe, to the required quality standards, or
in line with cost specifications by continuously and system-
atically monitoring the progress of all projects. To avoid
patent infringements, we intensively analyze third-party
industrial property rights, increasingly in relation to com-
munication technologies. We regularly compare the results of
all the analyses with the respective project’s targets; in the
event of variances, we introduce appropriate countermea-
sures in good time. Our end-to-end project organization
supports effective cooperation among all areas involved in
the process, ensuring that specific requirements are incor-
porated into the development process as early as possible and
that their implementation is planned in good time.
Risks and opportunities from the modular toolkit strategy
We are continuously expanding our modular toolkits, focusing
on future customer requirements, legal requirements and
infrastructural requirements.
The Modular Transverse Toolkit (MQB) has created an
extremely flexible vehicle architecture that permits dimen-
sions determined by the concept – such as the wheelbase,
track width, wheel size and seat position – to be harmonized
throughout the Group and utilized flexibly. Other dimen-
sions, for example the distance between the pedals and the
middle of the front wheels, are always the same, ensuring a
uniform system in the front of the car. Based on the synergy
effects thereby achieved, we are able to cut both development
costs and the necessary one-time expenses and manu-
facturing times. The toolkits also allow us to produce
different models from different brands in various quantities,
using the same system in a single plant. This means that our
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capacities can be used with greater flexibility throughout the
entire Group, enabling us to achieve efficiency gains.
We are currently transferring this principle of standard-
ization with maximum flexibility to the Modular Electric
Drive Toolkit (MEB), a concept developed for all-electric
drives. The synergy effects and efficiency gains achieved from
the modular toolkit strategy will give us the opportunity to
bring e-mobility into mass production manufacturing world-
wide from 2020 with the introduction of the first MEB-based
vehicle.
Higher volumes will, however, increase the risk that
quality problems will affect an increasing number of vehicles.
Opportunities and risks from partnerships
As part of our future program TOGETHER – Strategy 2025, we
are stepping up our efforts to forge collaborations, both for
the transformation of our core business and for the
establishment of the new mobility solutions business. By
entering into partnerships at a local level, we aim to identify
regional customer needs more precisely, establish com-
petitive cost structures and develop and offer market-driven
products. Going forward, we will concentrate to a greater
extent than previously on partnerships, acquisitions and
venture capital investments. This will enable us to generate
maximum value for the Group and its brands and to expand
our expertise, particularly in new areas of business.
Volkswagen owns a large number of patents and other
industrial property rights and copyrights. Partnerships can
lead to patent and licensing infringements and thus to the
unauthorized disclosure of company-specific expertise.
Volkswagen monitors the sales markets and also protects its
expertise with legal action.
Procurement risks and opportunities
Current trends in the automotive industry such as e-mobility
and automated driving are resulting in an increased need for
financing among suppliers. The Volkswagen Group’s pro-
curement risk management system assesses suppliers before
they are commissioned to perform projects. Among other
things, the procurement function considers the risk of insuf-
ficient competition if it concentrates on a few financially
strong suppliers when awarding contracts.
The positive economic trend in Europe, North America
and China weakened over the course of the year. Moreover,
shifts in demand from our customers and restrictions in the
availability of model variants as a result of the WLTP test
procedure posed a challenge to suppliers. These changed
circumstances restricted suppliers’ financing opportunities,
particularly in areas where alternative technologies are
gaining importance. The procurement risk management
system continuously and globally monitors the financial
situation of our suppliers and takes targeted measures to
avoid supply bottlenecks.
The number of crises and insolvencies among suppliers
worldwide fell in 2018 in line with the global economic
situation. Specialists in restructuring and supply reliability
are coordinating the measures to be taken on a Group-wide
basis to safeguard production in a timely and sustainable
manner.
The current trends in the automotive industry will also
affect the availability of special raw materials, which are
principally used in electrified vehicles. The raw material and
demand trend was continuously analyzed and assessed on an
interdisciplinary basis over the reporting year to enable steps
to be taken in a timely manner in the event of potential
bottlenecks.
New bilateral and multilateral trade agreements, including
those for steel, for the expected shift in the product mix from
diesel to petrol engines and for short-term demand fluctu-
ations relating to the WLTP test procedure, present challenges
that must be tackled together with suppliers. As a result of
the new trade agreement between the USA, Mexico and
Canada, there is a risk of additional costs due to more expen-
sive deliveries.
Quality problems may necessitate technical intervention
involving a considerable financial outlay where costs cannot
be passed on to the supplier or can only be passed on to a
limited extent. It is not possible at present to rule out the
possibility of a further increase in recalls of various models
produced by different manufacturers in which certain airbags
manufactured by Takata were installed. This could also affect
Volkswagen Group models.
In addition to financial difficulties, supply risks may arise,
for example, as a result of fires or accidents at suppliers.
Supply risks are identified without delay in the procurement
function through early warning systems and mitigated
immediately by applying derived measures.
Additional measures were taken to safeguard supply and
avert future assembly line stoppages caused by suspensions
of deliveries.
Antitrust investigations into suppliers on grounds of
price-fixing agreements are being monitored by Risk Man-
agement. The effects on Volkswagen are being systematically
reviewed.
Production risk
Volatile developments in the global automotive markets,
accidents at suppliers and disruption in the supply chain
caused production volumes of individual vehicle models to
fluctuate at some plants. In specific markets, we also recorded
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171
a change in incoming orders: the number of orders for diesel
vehicles fell, while orders for petrol engines rose. We address
such fluctuations using tried-and-tested tools, such as
flexible working time models. The design of the production
network enables us to respond dynamically to varying
changes in demand at the sites. “Turntable concepts” even
out capacity utilization between production facilities. At
multibrand sites, volatile demand can also be smoothed
across brands.
Legal changes, for instance in the context of the change-
over to the WLTP test procedure, may impact production. For
one thing, a temporary reduction in the range causes
demand to focus on the available variants. Moreover, gaps in
production can occur if model variants have not been
approved. These fluctuations necessitate measures to stabi-
lize production, such as the temporary storage of vehicles
until official approval.
Short-term changes in customer demand for specific
equipment features in our products, and the decreasing
predictability of demand, may lead to supply bottlenecks. We
minimize this risk, for example, by continuously comparing
our available resources against future demand scenarios. If
we identify bottlenecks in the supply of materials, we can
introduce countermeasures far enough in advance.
Production capacity is planned several years in advance
for each vehicle project on the basis of expected sales trends.
These are subject to market changes and generally entail a
degree of uncertainty. If forecasts are too optimistic, there is a
risk that capacity will not be fully utilized. However, forecasts
that are too pessimistic pose a risk of undercapacity, as a result
of which it may not be possible to meet customer demand.
The range of our models is growing, while at the same
time product life cycles are becoming shorter; the number of
new vehicle start-ups at our sites worldwide is therefore
increasing. The processes and technical systems we use for
this are complex and there is thus a risk that vehicle
deliveries may be delayed. We address this risk by drawing on
experience of past start-ups and identifying weaknesses at an
early stage so as to ensure that production volumes and
quality standards are met during our new vehicle start-ups
throughout the Group.
In order to prevent downtime, lost output, rejects and
reworking in general, we use the TPM (Total Productive Main-
tenance) method at our production facilities. TPM is a con-
tinuous process, that involves the entire workforce. Round-
the-clock maintenance of the technical facilities means that
they are always operational and guaranteed to function
reliably.
Particular events beyond our control such as natural
disasters or other events such as fires, explosions or the
leakage of substances hazardous to health and/or the environ-
ment, may adversely affect production to a significant extent.
As a consequence, bottlenecks or even outages may occur,
thus preventing the planned volume of production from
being achieved. We address such risks with, among other
things, fire protection measures and hazardous goods man-
agement, and, where financially viable, ensure that they are
covered by insurance policies.
Risks arising from long-term production
In the case of large projects, risks may arise that are often
only identified in the course of the project. They may result in
particular from contract drafting errors, miscosting, post-
contract changes in economic and technical conditions,
weaknesses in project management, or poor performance by
subcontractors. In particular, omissions or errors made at the
start of a project are usually difficult to compensate for or
correct, and often entail substantial additional expenses.
We endeavor to identify these risks at an even earlier
stage and to take appropriate measures to eliminate or mini-
mize them before they occur by constantly optimizing the
project control process across all project phases and by using
a lessons-learned process and regular project reviews. We can
thus further reduce risk, particularly during the bidding and
planning phase for large upcoming projects.
Risks arising from changes in demand
As a result of the diesel issue, the Volkswagen Group may
experience decreases in demand, possibly exacerbated by
media reports.
Consumer demand is shaped not only by real factors such
as disposable income, but also by psychological factors that
cannot be planned for. Unexpected buyer reluctance could
stem from households’ worries about the future economic
situation, 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. We are countering the buyer reluctance
with our attractive range of models and systematic customer
orientation.
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A combination of buyer reluctance in some markets as a
result of the crisis and increases in some vehicle taxes based
on CO2 emissions – as already exist in many European
countries – may shift demand towards smaller segments and
engines. We counter the risk that such a shift will negatively
impact the Volkswagen Group’s earnings by constantly devel-
oping new, fuel-efficient vehicles and alternative drive tech-
nologies, based on our drivetrain and fuel strategy.
Automotive markets around the world are exposed to
risks from government intervention such as tax increases,
which curb private consumption, or from protectionist ten-
dencies.
Commercial vehicles are capital goods: even minor
changes in growth rates or growth forecasts can significantly
affect transport requirements and thus demand. The pro-
duction fluctuations arising as a result require a high degree
of flexibility from manufacturers. Although production vol-
umes are significantly lower, the complexity of the trucks and
buses range in fact significantly exceeds the already very high
complexity of the passenger cars range. Key factors for
commercial vehicle customers are total cost of ownership,
vehicle reliability and the service provided. In addition,
customers are increasingly interested in additional services
such as freight optimization and fleet utilization, which we
offer in the commercial vehicle segment through the newly
established digital brand RIO, for example.
MAN Power Engineering’s two-stroke engines are pro-
duced exclusively by licensees, particularly in South Korea,
China and Japan. On account of volatile demand in new ship
construction, there is excess capacity in the market for
marine engines, which may result in a decline in license
revenues and bad debt losses. Due to changes in the com-
petitive environment, especially in China, there is also the
risk of losing market share. We address these risks by con-
stantly monitoring the markets, working closely with all
licensees and introducing new technologies.
Dependence on fleet customer business
Viewed over an extended period, the fleet customer business
is generally more stable than the business with retail custom-
ers; in 2018, it continued to be characterized by increasing
concentration and internationalization.
The Volkswagen Group is well positioned with its broad
portfolio of products and drive systems, as well as its target-
group-focused customer care. There is no concentration of
default risks at individual fleet customers or markets. The
high market share in Europe shows that fleet customers still
have confidence in the Group.
Quality risk
Right from the product development stage, we aim to identify
and rectify quality problems at the earliest possible point, so
as to avoid delays to the start of production. As we are using
an increasing number of modular components as part of our
modular toolkit strategy, it is particularly important when
malfunctions do occur to identify the cause and eliminate the
malfunctions as quickly as possible. We further optimized the
processes with which we can prevent these defects at our
brands and improved our organizational processes during
the reporting period so that we are able to counter the
associated risks more effectively.
Increasing technical complexity and the use of the toolkit
system in the Group mean that the need for high-grade
supplier components and software of impeccable quality is
rising. To ensure the continuity of production, it is also
extremely important that our own plants and our suppliers
deliver components on time. We ensure long-term quality
and supply capability from the very start of the supply chain
using a risk management system that we first tested
internally and then introduced with suppliers. In this way,
Group Quality Management contributes to fulfilling cus-
tomer expectations and consequently to boosting our Com-
pany’s reputation, sales figures and earnings.
Assuring quality is of fundamental importance especially
in the Brazilian, Russian, Indian and Chinese markets, for
which we develop dedicated vehicles and where local manu-
facturers and suppliers have been established, particularly as
it may be very difficult to predict the impact of regulations or
official measures. We continuously analyze the conditions
specific to each market and adapt quality requirements
individually to them. We counter the local risks we identify
by continuously developing measures and implementing
them locally, thereby effectively preventing quality defects
from arising.
Vehicle registration and operation criteria are defined and
monitored by national and, in some cases, international
authorities. Several countries also have special – and in some
cases new – rules aimed at protecting customers in their
dealings with vehicle manufacturers. With our established
and revised quality assurance processes, we ensure that the
Volkswagen Group brands and their products fulfill all
respective applicable requirements and that local authorities
receive timely notification of all issues requiring reporting.
By doing so, we reduce the risk of customer complaints or
other negative consequences.
Personnel risk
We counter economic risks as well as changes in the market
and competitive situation with a range of instruments that
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173
help the Volkswagen Group to remain flexible with a fluctu-
ating order situation – whether orders decline or demand for
our products increases. These include time accounts which
are filled when overtime is necessary and reduced through
time off in quiet periods, enabling our factories to adjust
their capacity to the production volume with measures such
as extra shifts, closure days and flexible shift models. The use
of temporary workers also allows us to plan more flexibly. All
of these measures help the Volkswagen Group to generally
maintain a stable permanent workforce even when orders
fluctuate.
The technical expertise and individual commitment of
employees are indispensable prerequisites for the success of
the Volkswagen Group. Our strategically oriented and holistic
human resource development gives all employees attractive
training and development opportunities, with particular
emphasis being placed on strengthening professional skills in
the Company’s different vocational groups. By boosting our
training programs, particularly at our international locations,
we are able to adequately address the challenges of tech-
nological change.
We are continuously expanding our recruitment tools.
Our systematic talent relationship management, for example,
enables us to make contact with talented candidates from
strategically relevant target groups at an early stage and to
build a long-term relationship between them and the Group.
In addition to the standard dual vocational training,
programs such as our StIP integrated degree and traineeship
scheme ensure a pipeline of highly qualified and motivated
employees. By systematically increasing our attractiveness as
an employer, we gain talented people in the future-critical
areas of IT, design and social media. With tools such as these,
we ensure that we can cover our requirement for highly
qualified new staff even amid a shortage of skilled labor.
We counter the risk that knowledge will be lost as a result
of employee fluctuation and retirement with intensive,
department-specific training. We have also established a base
of senior experts in the Group. With this instrument, we use
the valuable knowledge of our experienced specialists who
have retired from Volkswagen.
The advancing digitalization of our human resources
processes entails risks arising from the processing of
personal data. Volkswagen is aware of its responsibility in the
processing of this data. We address these risks as part of our
data protection management system by implementing a wide
range of measures.
One challenge of our collaboration with the monitor lies
in the tension, in some regards, between the monitor’s
requests for information on the one hand and both German
and international data-protection requirements on the other.
This is true particularly against the backdrop of the existing
scopes of assessment and interpretation regarding data-
protection requirements. In the interest of precluding infringe-
ments of the law as best as possible – despite a partially
unclear legal situation – Volkswagen is advised by external
law firms on these issues.
IT Risks
At Volkswagen, a global company geared towards further
growth, the information technology (IT) used in all divisions
Group-wide is assuming an increasingly important role. IT
risks exist in relation to the three protection goals of confi-
dentiality, integrity and availability, and comprise in partic-
ular unauthorized access to, modification of and extraction
of sensitive electronic corporate or customer data as well as
limited systems availability as a consequence of downtime
and disasters. Handling data with integrity ensures that it is
correct and uncorrupted, and that systems function without
error.
The high standards we set for the quality of our products
also apply to the way in which we handle our customers’
and employees’ data. In particular, the digital services for our
mobility services must be secured. Our guiding principles are
data security, transparency and informational self-deter-
mination.
We address the risk of unauthorized access to, modifi-
cation of, or extraction of corporate and customer data with
the use of IT security technologies (e.g. firewall and intrusion
prevention systems) and a multiple-authentication procedure.
Additionally, we increase protection by restricting the allo-
cation of access rights to systems and information and by
keeping backup copies of critical data resources. Redundant
IT infrastructures protect us against risks that occur in the
event of a systems failure or natural or other disasters.
We used commercially available technologies to protect
our IT landscape, adhering to standards applicable through-
out the Company. We future-proof our IT through continual
standardization and updates. Continuously increasing auto-
mation enhances process reliability and the quality of pro-
cessing.
The further development and Group-wide use of IT gover-
nance processes, particularly the further standardization of
the IT risk management process, also helps to identify risks at
an early stage and reduce them effectively.
The focus of our IT security program is the ongoing
enhancement of Group-wide security measures. This cur-
rently includes the setting up of an IT security command
center. The center’s role is to detect cyber-attacks quickly,
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helping us to successfully defeat them using the latest tools.
Volkswagen complements these technical measures by sys-
tematically raising awareness and providing training for
employees.
Environmental protection regulations
The specific emission limits for all new passenger car and
light commercial vehicle fleets for brands and groups in the
EU for the period up to 2019 are set out in Regulation (EC)
No 443/2009 on CO2 emissions from passenger cars and
Regulation (EU) No 510/2011 on light commercial vehicles of
up to 3.5 tonnes, which came into effect in April 2009 and
June 2011, respectively. These regulations are important
components of the European climate protection policy and
therefore form the key regulatory framework for product
design and marketing by all vehicle manufacturers selling in
the European market.
The average CO2 emissions of new European passenger
car fleets have not been allowed to exceed 130 g CO2/km since
2012. Compliance with this requirement was introduced in
phases; since 2015 the entire fleet has to meet this limit.
Regulation (EU) No 333/2014, which was adopted in 2014,
states that the average emissions of European passenger car
fleets may be no higher than just 95 g CO2/km from 2021
onwards; in 2020, this emissions limit will already apply to
95% of the fleet. Up to and including 2020, European fleet
legislation will be complied with on the basis of the New
European Driving Cycle (NEDC). After 2021, the NEDC target
value will be changed into a WLTP target value through a
process defined by lawmakers; this change is not expected to
lead to additional tightening of the target value.
The EU’s CO2 regulation for light commercial vehicles
requires limits to be met from 2014 onwards, with targets
being phased in over the period to 2017. Under this regu-
lation, the average CO2 emissions of new vehicle registrations
in Europe may not exceed 175 g CO2/km. From 2020 onwards,
the limit under Regulation (EU) No 253/2014, which was
adopted in 2014, is 147 g CO2/km.
In the fourth quarter of 2017, the European Commission
published a regulatory proposal for the CO2 regime after
2020. In December 2018, the European Council, Parliament
and Commission agreed on post-2020 fleet legislation, which
has yet to be conclusively published in the Official Journal of
the European Union. This legislation stipulates a reduction of
15% from 2025 and 37.5% from 2030 for the European new
passenger car fleets and a reduction of 15% in 2025 and 31%
in 2030 for the new light commercial vehicle fleets. In each
case, the starting point is the fleet value in 2021. Policy-
makers are already discussing reduction targets for the
transport sector for the period to 2050, such as the 60%
reduction in greenhouse gas emissions compared to 1990
levels cited in the EU White Paper on transport published in
March 2011. These long-term targets can only be achieved
through a high proportion of electric vehicles.
At the same time, regulations governing fleet fuel con-
sumption are also being developed or introduced outside the
EU28, for example in Brazil, Canada, China, India, Japan,
Mexico, Saudi Arabia, South Korea, Switzerland, Taiwan and
the USA. Brazil has introduced a fleet efficiency target as part
of a voluntary program for granting a tax advantage. To receive
a 30% tax advantage, vehicle manufacturers must, among
other things, achieve a specified fleet efficiency. The fuel con-
sumption regulations in China, which set an average fleet
target of 6.9 liters/100 km for the period 2012–2015, were
continued into the period 2016–2020 with a target of
5.0 liters/100 km. Preparations for legislation up to 2025 have
begun. In addition to this legislation on fleet consumption,
China will impose a so-called “new energy vehicle quota” in
the future. This means that from 2019 onwards, battery-
electric vehicles, plug-in hybrids and fuel cell vehicles will
have to account for a certain proportion of a manufacturer’s
new passenger car fleet. Due to the extension of greenhouse
gas legislation in the USA (the law was signed in 2012),
uniform fuel consumption and greenhouse gas standards
will continue to apply in all federal states in the period from
2017 to 2025.
The increased regulation of fleet-based CO2 emissions and
fuel consumption makes it necessary to use the latest mobil-
ity technologies in all key markets worldwide. At the same
time, electrified and also purely electric drives will become
increasingly common. The Volkswagen Group closely coor-
dinates technology and product planning with its brands so
as to avoid breaches of fleet fuel consumption limits, since
these would entail severe financial penalties. Volkswagen
continues to regard diesel technology as an important ele-
ment in the fulfillment of CO2 emissions targets.
EU legislation allows excess emissions and emission
shortfalls to be offset between vehicle models within a fleet
of new vehicles. Furthermore, the EU permits some flexibility
in fulfilling the emissions targets, for example:
> Emission pools may be formed,
> Relief opportunities may be provided for additional inno-
vative technologies contained in the vehicle that apply
outside the test cycle (eco-innovations),
> Special rules are in place for small-series producers and
niche manufacturers,
> Particularly efficient vehicles qualify for super-credits.
Whether the Group meets its fleet targets depends crucially
on its technological and financial capabilities, which are
reflected in, among other things, our drivetrain and fuel
strategy.
In the EU, a new, more time-consuming test procedure –
the Worldwide Harmonized Light-Duty Vehicles Test Proce-
dure (WLTP), – for determining pollutant and CO2 emissions
as well as fuel consumption in passenger cars and light
commercial vehicles has applied to new vehicle types since
September 2017 and to all new vehicles since September
2018. Other challenges arise in connection with stricter
Group Management Report
Report on Risks and Opportunities
175
processes and requirements regarding WLTP, such as from
test criteria and from homologation
(achievement of
approval).
The Real Driving Emissions (RDE) regulation for passen-
ger cars and light commercial vehicles is also one of the main
European regulations. New, uniform limits for nitrogen oxide
and particulate emissions in real road traffic have applied to
new vehicle types across the EU since September 2017. This
makes the RDE test procedure fundamentally different from
the Euro 6 standard still in force, which stipulates that the
limits on the chassis dynamometer are authoritative. The
RDE regulation is intended primarily to improve air quality in
urban areas and areas close to traffic. It leads to stricter
requirements for exhaust gas aftertreatment in passenger
cars and light commercial vehicles. There are challenges asso-
ciated with stricter processes and requirements regarding
RDE, such as from test criteria and from homologation
(achievement of approval).
The other main EU regulations affecting the automotive
industry include:
> EU Directive 2007/46/EC establishing a framework for the
approval of motor vehicles,
> EU Directive 2009/33/EC on the promotion of clean and
energy-efficient road transport vehicles (Green Procure-
ment Directive),
> EU Directive 2006/40/EC relating to emissions from air-
conditioning systems in motor vehicles,
> The Car Labeling Directive 1999/94/EC,
> The Fuel Quality Directive (FQD) 2009/30/EC updating the
fuel quality specifications and introducing energy effi-
ciency specifications for fuel production,
> Renewable Energy Directive (RED) (2009/28/EC) intro-
ducing sustainability criteria; the follow-up regulation
(RED2) contains higher quotas for advanced biofuels,
> The
revised Energy Taxation Directive 2003/96/EC
updating the minimum tax rates for all energy products
and power.
The implementation of the above-mentioned directives by
the EU member states serves to support the CO2 regulations
in Europe. These are aimed not only at vehicle manufac-
turers, but also at other sectors such as the mineral oil
industry. Vehicle taxes based on CO2 emissions are having a
similar steering effect; many EU member states have already
incorporated CO2 elements into their rules on vehicle
taxation.
There is particular momentum in the debate on driving
bans for diesel vehicles in Germany. This was triggered by the
failure of some municipalities and cities to comply with the
limits for nitrogen dioxide (NO2) immissions. In many places,
lawsuits have been filed and judgments issued. It is argued in
this context that only driving bans for diesel vehicles can
bring about the necessary short-term reduction in NO2
immissions. The discussion may result in sales volumes of
diesel vehicles to decline further and to financial liabilities
arising from customer-related measures and possible official
or statutory requirements.
Local driving bans are already in place in a number of
countries, though these mainly affect older vehicles. Regula-
tions in Belgium that successively bar older vehicles from
larger cities are one corresponding example. With a view to
the future, large urban areas such as Paris and London are
discussing banning vehicles with combustion engines.
Heavy commercial vehicles first put into operation from
2014 onwards are already subject to the stricter emission
requirements of the Euro 6 standard in accordance with
Regulation (EU) No 582/2011. Alongside the CO2 legislation
for passenger cars and light commercial vehicles, the EU has
prepared more comprehensive regulation of CO2 emissions in
heavy commercial vehicles. Simply setting an overarching
limit for these vehicles – such as that in place for passenger
cars and light commercial vehicles – would require an
extremely complex set of rules because of the wide range of
variants. For this reason, the European Commission has
worked with independent scientific institutions and the
European Automobile Manufacturers’ Association (ACEA) to
prepare a simulation-based method called the Vehicle Energy
Consumption Calculation Tool (VECTO). This can be used to
determine the CO2 emissions of heavy commercial vehicles of
over 7.5 tonnes based on their typical use (short-haul,
regional, distribution and long-haul trips, service on con-
struction sites and as municipal vehicles, city buses, intercity
buses and coaches). A legislative proposal for the CO2 certifi-
cation of heavy commercial vehicles and regulations on the
reporting and monitoring of CO2 figures was presented in
May 2017; the legislation for the declaration of CO2 figures
for heavy commercial vehicles came into effect in January
2018. A CO2 declaration will be compulsory for selected
vehicle categories from 2019 (initially long-haul and regional
distribution vehicles, later also buses and other segments),
with the captured data first being used to enable the
customer to compare information and for certification and
monitoring purposes. Further vehicle categories are likely to
be included as time progresses. As part of its strategy to
decarbonize transport, the European Commission has also
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announced that it will be proposing CO2 standards for
heavy commercial vehicles in order to achieve the targets of
the Paris climate agreement. During trilogue negotiations in
February 2019, the European Parliament and EU member
states agreed on a joint proposal regarding the CO2 regulation
for heavy trucks. Accordingly, truck manufacturers have to
achieve the intermediate goal by 2025, namely a 15%
reduction of CO2 emissions for their new vehicle fleets within
the EU. The goal of achieving a reduction provision of 30%
shall apply by 2030. The reference year for all reduction goals
is 2019. The current proposal also provides for fines if the
limits are exceeded. Before these provisions can bindingly
enter into force, the Council and the Parliament must
approve the resolutions.
trucks
As part of its efforts to reduce the CO2 emissions of heavy
commercial vehicles, the European Commission has also
amended the provisions regarding the maximum permis-
sible dimensions and weights of
(Directive
1996/53/EC, the Weights and Dimensions Directive) and
revised them through EU Directive 2015/719. According to
these, cabs with a rounded shape and air conduction devices
at the rear of the vehicle will make it possible to improve
aerodynamics in future. In addition, the legislators increased
the overall weight permitted for vehicles with alternative
drive technologies by up to one tonne. The specific technical
requirements for the development of aerodynamic cabs are
currently being examined.
The European commercial vehicles industry supports the
goals of reducing CO2 emissions and improving transport
safety. However, it is not just the vehicles themselves that
affect future CO2 emissions; individual components also play
an important role, such as reduced rolling resistance tires or
the aerodynamic trim of the trailer, as do driving behavior,
alternative fuels including the required filling stations,
transport infrastructure and transport conditions. As part of
a field trial that took place up to the end of 2016, longer and
heavier vehicles that can decrease fuel consumption and thus
CO2 emissions by up to 25% according to scientific studies by
the German Federal Highway Research Institute, were also
driving on German roads. Since the beginning of 2017, these
longer vehicles have been used in regular operations on a
certified road network.
Networking and digitalizing the transport system will
also eliminate existing inefficiencies such as inadequate
utilization of existing load capacities, empty trips or unnet-
worked route planning: vehicles that move in networked,
intermodal transport systems in which flows of traffic are
optimized through the use of artificial intelligence, save fuel
and hence reduce CO2 emissions. Automated driving also
presents considerable potential for more sustainable organi-
zation of goods transport in road traffic, for example through
platooning, in which the driver of the first truck in a convoy
of networked, partially self-driving trucks specifies the
direction and speed. Driving in the slipstream of other trucks
on motorways allows fuel consumption to be reduced and
safety to be increased. However, platooning requires changes
in the legal framework and establishment of the necessary
infrastructure.
In the Power Engineering segment, the International
Maritime Organization (IMO) has introduced the International
Convention for the Prevention of Pollution from Ships
(MARine POLlution – MARPOL), with which limits on emis-
sions from marine engines will be lowered in phases. A
reduction of the sulfur content in marine fuel has been
confirmed with effect from January 1, 2020. In addition, the
IMO has decided on a number of emission control areas in
Europe and in the USA/Canada that will be subject to special
environmental regulations. Expansion to further regions
such as the Mediterranean or Japan is already being planned;
other regions such as the Black Sea, Alaska, Australia or South
Korea are also in discussion. In addition, emission limits also
apply, for example, under Regulation (EU) 2016/1628 and in
accordance with the regulations of the U.S. Environmental
Protection Agency (EPA). On specialist bodies and in public,
we are emphatically championing a “maritime energy tran-
sition”. In a first step, we are supporting the switch to
liquefied natural gas (LNG) as a fuel for maritime applications
and also offer dual fuel and gas-powered engines for new and
retrofitted vessels. For long-term, climate-neutral operation
of seagoing vessels, we advocate power-to-X technology, in
which excess sustainably generated electricity is converted
into carbon-neutral gas or liquid fuel.
As regards stationary equipment, there are a number of
national rules in place worldwide that limit permitted
emissions. On December 18, 2008, the World Bank Group set
limits for gas and diesel engines in its “Environmental,
Health, and Safety Guidelines for Thermal Power Plants”,
which are required to be applied if individual countries have
adopted no national requirements of their own, or ones that
are less strict than those of the World Bank Group. These are
currently being revised. In addition, the United Nations
adopted the Convention on Long-range Transboundary Air
Pollution back in 1979, setting limits on total emissions as
well as nitrogen oxide for the signatory states (including all
EU states, other countries in Eastern Europe, the USA and
Canada). Enhancements to the product portfolio in the Power
Engineering segment focus on improving the efficiency of
the equipment and systems.
The allocation method for emissions certificates changed
fundamentally when the third emissions trading period
(2013–2020) began. As a general rule, all emission allowances
for power generators have been sold at auction since 2013.
Group Management Report
Report on Risks and Opportunities
177
For the manufacturing industry and certain power genera-
tion installations (e.g. combined heat and power instal-
lations), a portion of the certificates are allocated free of
charge on the basis of benchmarks applicable throughout the
EU. The portion of certificates allocated free of charge will
gradually decrease as the trading period progresses: the
remaining quantities required will have to be bought at
auction. Furthermore, installation operators can partly fulfill
their obligation to hold emission allowances using certifi-
cates from climate change projects (Joint Implementation
and Clean Development Mechanism projects). In certain (sub-)
sectors of industry, there is a risk that production will be
transferred to countries outside Europe due to the amended
provisions governing emissions trading, a phenomenon
referred to as “carbon leakage”. A consistent quantity of cer-
tificates will be allocated to these sectors free of charge for the
period from 2013 to 2020 on the basis of the pan-EU bench-
marks. The automotive industry was included in the new
carbon leakage list that came into effect in 2015. As a result,
individual facilities at Volkswagen Group locations in Europe
will receive additional certificates free of charge by the end of
the third trading period. Already back in 2013, the European
Commission decided to initially withhold a portion of the
certificates to be auctioned and not to release them for
auction until a later date during the third trading period
(backloading). The certificates will be directed into a market
stability reserve that was established in 2018. The reserve will
serve to offset any imbalance between the supply of and
demand for certificates in emissions trading in the fourth
trading period. Furthermore, the European Commission is
planning further modifications in emissions trading when
the fourth trading period begins (from 2021) that may lead to
a tightening of the system and thus to price increases for the
certificates.
In addition to the EU member states, other countries in
which the Volkswagen Group has production sites are also
considering introducing an emissions trading system. In
China, for example, seven corresponding pilot projects are
underway, which do not affect the Volkswagen Group. The
Chinese government officially
implemented a national
emissions trading system at the end of 2017. Initially, this will
only impact the power generation sector; a gradual expan-
sion is being planned.
Litigation
In the course of their operating activities, Volkswagen AG and
the companies in which it is directly or indirectly invested are
involved in a great number of legal disputes and govern-
mental proceedings in Germany and abroad. Such legal
disputes and other proceedings occur in relation to employ-
ees, dealers, investors, customers, or suppliers, among others,
or in relation to relevant public authorities. For the com-
panies involved, these may result in payment or other obli-
gations. In particular, substantial compensatory or punitive
damages may have to be paid and cost-intensive measures
may have to be implemented. In this context, specific quan-
tification of the objectively likely consequences is often
possible only to a very limited extent, if at all.
Risks may also emerge in connection with the adherence
to regulatory requirements. This particularly applies in the
case of regulatory vagueness that may be interpreted dif-
ferently by Volkswagen and the authorities responsible for
the respective regulations. In addition, legal risks can arise
from the criminal activities of individual persons, which even
the best compliance management system can never com-
pletely prevent.
Where transparent and economically viable, adequate
insurance coverage was taken out for these risks. For the
identifiable and measurable risks, provisions considered
appropriate based on existing information were recognized
and information about contingent liabilities disclosed. As
some risks cannot be assessed or can only be assessed to a
limited extent, the possibility of loss or damage not covered
by the insured amounts and provisions cannot be ruled out.
This applies particularly to legal risk assessment regarding
the diesel issue.
Diesel issue
In the USA Volkswagen AG and certain affiliates reached
settlement agreements (including various consent decrees)
with the US Department of Justice (DOJ), the US Environ-
mental Protection Agency (EPA), the State of California, the
California Air Resources Board (CARB), the California Attorney
General, the US Federal Trade Commission, and private
plaintiffs represented by a Plaintiffs' Steering Committee in a
multi- district litigation in California. These settlement
agreements resolved certain civil claims made in relation to
affected diesel vehicles in the United States of America.
Volkswagen AG also entered into agreements to resolve
US federal criminal liability and certain civil penalties and
claims relating to the diesel issue. As part of its plea agree-
ment, Volkswagen AG agreed to plead guilty to three felony
counts under US law – including conspiracy to commit fraud,
obstruction of justice and using false statements to import
cars into the United States of America – and has been
sentenced to three years' probation.
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A description of the diesel issue can be found starting on
page 92. In connection with the diesel issue, potential con-
sequences for Volkswagen’s results of operations, financial
position and net assets could emerge primarily in the
following legal areas:
Partial Consent Decrees to clarify that Volkswagen may repair
certain technical issues with approved emissions modifi-
cations through an “AEM Correction” (Approved Emissions
Modifications).
1. Coordination with the authorities on technical measures
worldwide
In agreement with the respective responsible authorities, the
Volkswagen Group is making technical measures available
worldwide for virtually all diesel vehicles with type EA 189
engines.
Within its area of responsibility, the German Federal
Motor Transport Authority (Kraftfahrt-Bundesamt or KBA)
ascertained for all clusters (groups of vehicles) that imple-
mentation of the technical measures would not bring about
any adverse changes in fuel consumption figures, CO2 emis-
sion figures, engine power, maximum torque, and noise
emissions.
AUDI AG has worked intensively for many months to
check all relevant diesel concepts for possible discrepancies
and retrofit potentials. The measures proposed by AUDI AG
have been adopted and mandated in various recall notices
issued by the KBA for vehicle models with V6 and V8 TDI
engines.
Currently, AUDI AG assumes that the total cost, including
the amount based on recalls, of the ongoing largely software-
based retrofit program that began in July 2017 will be
manageable and has recognized corresponding balance-sheet
risk provisions. The measures submitted by AUDI AG are
being examined by the KBA and can only be made available
to customers after corresponding approval by the KBA.
The Ministry of Environment in South Korea qualified
certain emissions strategies in the engine control software of
various diesel vehicles with V6 or V8-TDI engines meeting the
Euro 6 emission standard as an unlawful defeat device and
ordered a recall on April 4, 2018; the same applies to the
Dynamic Shift Program (DSP) in the transmission control of a
number of Audi models.
In the USA, in fiscal year 2018, the EPA and CARB issued
the outstanding official approvals needed for the technical
solutions for the affected vehicles with 2.0 l TDI and with V6
3.0 l TDI engines. In the case of 2.0 l Generation 2 diesel
vehicles with manual transmissions, Volkswagen Group of
America, Inc. elected to withdraw the approved emissions
modification proposal, whereby owners were given the
option of a buyback and lessees were given the option of
early lease termination.
On October 31, 2018, after discussions with DOJ, EPA, and
CARB, the parties agreed to modify the First and Second
2. Criminal and administrative proceedings worldwide
(excluding the USA/Canada)
Criminal
investigations, regulatory offense proceedings,
and/or administrative proceedings (in Germany for example
by the Bundesanstalt für Finanzdienstleistungsaufsicht,
BaFin – Federal Financial Supervisory Authority) have been
opened in some countries. The public prosecutor’s offices in
Braunschweig and Munich are investigating the core issues of
the criminal investigations.
The Braunschweig Office of the Public Prosecutor is
investigating approximately 40
former)
employees and a former member of the Board of Manage-
ment for possible fraud, among other things. The investi-
gations are ongoing. The defendants and Volkswagen AG
were permitted to inspect the investigation files.
(current and
The regulatory offense proceeding that was opened
against Volkswagen AG in this connection in April 2016 has
been terminated by the administrative fine order issued
against Volkswagen AG by the Braunschweig Office of the
Public Prosecutor on June 13, 2018. The administrative fine
order is based on a negligent breach in the Powertrain Devel-
opment department of the obligation to supervise, relating to
the period from mid-2007 to 2015 and a total of 10.7 million
vehicles with diesel engines of types EA 189 worldwide and
EA 288 (Generation 3) in the USA and Canada. The adminis-
trative order imposes a total fine of €1.0 billion, consisting of
a penalty payment of €5 million and the forfeiture of
economic benefits in the amount of €995 million. After
thorough examination, the fine has been accepted and paid
in full by Volkswagen AG, rendering the administrative fine
order legally final. The administrative fine order termi-
nates the regulatory offense proceeding against Volkswagen
AG. Further sanctions against or forfeitures by Volkswagen
AG and its Group companies are therefore not expected in
Germany in connection with the unitary factual situation
covered by the administrative order concerning diesel
engines of types EA 189 worldwide and EA 288 (Generation 3)
in the USA and Canada. As a result, Volkswagen expects that
the conclusion of this proceeding will have a substantially
positive impact on other governmental proceedings being
conducted in Europe against Volkswagen AG and its Group
companies.
The Braunschweig Office of the Public Prosecutor is con-
ducting another proceeding against three (current or former)
members of the Board of Management for alleged market
Group Management Report
Report on Risks and Opportunities
179
manipulation with respect to capital market disclosure
obligations in connection with the diesel issue. In this con-
text, the Office of the Public Prosecutor has been conducting
a regulatory offense proceeding against Volkswagen AG
under §30 OWiG (German Regulatory Offenses Act) since July
30, 2018. Volkswagen AG has since been permitted to inspect
the public prosecutor's investigation files several times. The
investigations are ongoing.
The Munich II Office of the Public Prosecutor is con-
ducting investigations against 24 persons, including the
former Chairman of the Board of Management of AUDI AG
(who is also a former member of the Board of Management of
Volkswagen AG) and another active member of the Board of
Management of AUDI AG. The investigations are ongoing.
AUDI AG has appointed two renowned major law firms to
clarify the matters underlying the public prosecutor’s accu-
sations. The Board of Management and Supervisory Board of
AUDI AG are being regularly updated on the current state of
affairs.
The administrative fine order issued on October 16, 2018
by the Munich II Office of the Public Prosecutor terminates
the regulatory offense proceeding conducted against AUDI AG
in this connection. The administrative fine order is based on
a negligent breach of the obligation to supervise occurring in
the organizational unit “Emissions Service/Engine Type
Approval”. The administrative order imposes a total fine of
€800 million, consisting of a penalty payment of €5 million
and the forfeiture of economic benefits in the amount of
€795 million. After thorough examination, the fine has been
accepted and paid in full by AUDI AG, rendering the admin-
istrative fine order legally final. The administrative fine order
terminates the regulatory offense proceeding against AUDI AG.
Further sanctions against or forfeitures by AUDI AG are
therefore not to be expected in Europe in connection with the
unitary factual situation underlying the administrative fine
order.
The Stuttgart Office of the Public Prosecutor has com-
menced a criminal investigation relating to the diesel issue
against one board member, one employee, and one former
employee of Dr. Ing. h.c. F. Porsche AG on suspicion of fraud
and illegal advertising as well as an analogous regulatory
offense proceeding against Dr. Ing. h.c. F. Porsche AG under
§30 OWiG. Dr. Ing. h.c. F. Porsche AG has appointed two
renowned major law firms to clarify the matter underlying
the public prosecutor’s accusations. The Board of Manage-
ment and Supervisory Board of Dr. Ing. h.c. F. Porsche AG are
being regularly updated on the current state of affairs.
On July 6, 2018, the Federal Constitutional Court rendered
its decision on the constitutional complaints filed in con-
nection with the search of the premises of the law firm Jones
Day, holding that the lower court ruling affirming the pro-
visional seizure of client engagement documents and data of
Volkswagen AG did not violate constitutional law. The com-
panies of the Volkswagen Group will continue to cooperate
with the German government authorities with due regard for
the ruling of the German Federal Constitutional Court.
Whether the criminal and administrative proceedings will
ultimately result in fines for the Company, and if so in what
amount, is currently subject to estimation risks. According to
Volkswagen’s estimates so far, the likelihood that a sanction
will be imposed is 50% or less in the majority of these pro-
ceedings. Contingent liabilities have therefore been disclosed
where the amount of such liabilities could be measured and
the likelihood of a sanction being imposed was assessed at
not lower than 10%. Provisions were recognized to a small
extent.
3. Product-related lawsuits worldwide (excluding the USA/
Canada)
In principle, it is possible that customers in the affected
markets will file civil lawsuits or that importers and dealers
will assert recourse claims against Volkswagen AG and other
Volkswagen Group companies. Besides individual lawsuits,
various forms of collective actions (i.e. assertion of individual
claims by plaintiffs acting jointly or as representatives of a
class) are available in various jurisdictions. Furthermore, in a
number of markets it is possible for consumer and/or envi-
ronmental organizations to bring suit to enforce alleged
rights to injunctive relief, declaratory judgment, or damages.
Customer class action lawsuits and actions brought by
consumer and/or environmental associations are pending
against Volkswagen AG and other companies of the
Volkswagen Group in various countries including Argentina,
Austria, Australia, Belgium, Brazil, Chile, China, the Czech
Republic, Germany, Israel, Italy, Mexico, the Netherlands,
Poland, Portugal, Spain, South Africa, South Korea,
Switzerland, Taiwan, and the United Kingdom. Alleged rights
to damages and other relief are asserted in these actions.
The actions pending in the aforementioned countries
include in particular the following:
Various class action lawsuits with opt-out mechanism,
one individual lawsuit, and two civil suits by the Australian
Competition and Consumer Commission are currently
pending in Australia against Volkswagen AG and other Group
companies, including the Australian subsidiaries. These pro-
ceedings have been joined with each other. Given the opt-out
rule, the class actions have the potential to automatically
cover all vehicles with type EA 189 engines unless the right to
opt out is actively exercised. In all, approximately 100 thou-
sand vehicles in the Australian market with type EA 189
engines are affected. An initial court hearing lasting several
weeks was held in March 2018 on technical questions; further
issues are to be argued in September 2019.
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In Belgium, the Belgian consumer organization Test Aankoop
VZW has filed a class action to which an opt-out mechanism
has been held to apply. The class action pertains to vehicles
purchased by consumers on the Belgian market after Septem-
ber 1, 2014. The asserted claims are based on purported
violations of unfair competition and consumer protection
law as well as on alleged breach of contract. An initial hearing
for oral argument has yet to take place in this matter. The
court has extended the statutorily mandated negotiation
phase until July 8, 2019.
In Brazil two class actions are pending. One of them
pertains to approximately 17 thousand vehicles. In this pro-
ceeding, a judgment, which is not yet final, has been rendered
holding Volkswagen do Brasil liable in an amount of €0.3
billion plus interest. The judgment has been appealed. In the
second class action alleged compensation claims are made
based on purported breaches of environmental regulations.
In Germany, the Verbraucherzentrale Bundesverband e. V.
(Federation of Consumer Organizations) filed an action on
November 1, 2018 with the Braunschweig Higher Regional
Court for model declaratory judgment against Volkswagen AG.
The complaint is seeking a ruling that certain preconditions
for potential consumer claims against Volkswagen AG are
met; however, no specific payment obligations would result
from any determinations the court may make. Individual
claims then would have to be enforced afterwards in subse-
quent separate proceedings.
In addition, various actions have been brought against
companies of the Volkswagen Group in several German
Regional Courts (Landgericht) by financialright GmbH, which
is asserting rights assigned to it by a total of approximately
46 thousand customers in Germany, Slovenia, and Switzer-
land.
In England and Wales, suits filed in court by various law
firms have been joined in a single collective action (group
litigation). Roughly 117 thousand claimants joined the group
litigation prior to expiration of the opt-in deadline on
December 19, 2018; around 40 thousand additional plaintiffs
not currently covered by the group litigation could still be
added. Because of the opt-in mechanism, not all vehicles with
type EA 189 engines are automatically covered by the group
litigation; potential claimants must instead take action in
order to join. A judicial case management conference is
scheduled for March 2019. No oral argument on the sub-
stantive merits of the claims has as yet taken place.
Italian consumer protection law are being asserted in these
proceedings. In the Codacons proceeding, the court dis-
missed the class action as inadmissible on December 18,
2018. In the Altroconsumo proceeding, the deadline for the
filing of claims has passed and those filed are currently being
tabulated by an appointed expert.
In the Netherlands, Stichting Volkswagen Car Claim has
brought an opt-in class action seeking declaratory rulings.
Any individual claims would then have to be reduced to
judgment afterwards in a separate proceeding.
Several lawsuits filed by the Austrian consumer protec-
tion organization (VKI – Verein für Konsumentenschutz) and
by the Cobin Claims platform are pending in Austria. In these
actions, damage claims assigned for collection to VKI or to
the Cobin Claims platform are being asserted on behalf of
roughly 10 thousand customers.
A Portuguese consumer organization has filed a class
action with opt-out mechanism in Portugal. There are approx-
imately 126 thousand affected vehicles in the Portuguese
market. The complaint seeks vehicle return and alleges dam-
ages as well.
Volkswagen estimates the likelihood that the plaintiffs
will prevail to be 50% or less for the majority of the customer
class actions and the complaints filed by consumer and/or
environmental organizations. Contingent
liabilities are
disclosed for these proceedings where the amount of such
liabilities can be measured and the chance that the plaintiff
will prevail was assessed as not implausible. Since most of
these proceedings are still in an early stage, it is in many cases
not yet possible to quantify the realistic risk exposure. Pro-
visions were recognized to a small extent.
Furthermore, individual lawsuits and similar proceedings
are pending against Volkswagen AG and other Volkswagen
Group companies in various countries, most of which are
seeking damages or rescission of the purchase contract. In
Germany, there are around 46 thousand such individual
lawsuits. A total of approximately one thousand additional
individual lawsuits are pending in other countries. According
to Volkswagen’s estimates, the likelihood that the plaintiffs
will prevail is 50% or less in the vast majority of the indi-
vidual lawsuits. Contingent liabilities are disclosed for these
actions where the amount of such liabilities can be measured
and the chance that the plaintiff will prevail was assessed as
not implausible. In addition, provisions were recognized to
the extent necessary based on the current assessment.
In Italy, two class action lawsuits have been filed with the
Venice Regional Court by two consumer associations
(Altroconsumo and Codacons) acting on behalf of Italian
customers. Damage claims based on alleged breach of
contract as well as claims based on purported violations of
At this time it cannot be estimated how many customers
will choose to file lawsuits in the future in addition to those
already pending given the action for model declaratory
judgment in Germany, among other things, and what their
prospect of success will be.
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181
4. Lawsuits filed by investors worldwide (excluding the USA/
Canada)
Investors from Germany and abroad have filed claims for
damages against Volkswagen AG – in some cases along with
Porsche Automobil Holding SE (Porsche SE) as joint and
several debtors – based on purported losses due to alleged
misconduct in capital market communications in connection
with the diesel issue.
The vast majority of these investor lawsuits are currently
pending at the Regional Court in Braunschweig. On August 5,
2016, the Regional Court in Braunschweig ordered that
common questions of law and fact relevant to the lawsuits
pending at the Regional Court in Braunschweig be referred to
the Higher Regional Court (Oberlandesgericht) in Braun-
schweig for binding declaratory rulings pursuant to the Ger-
man Act on Model Case Proceedings in Disputes Regarding
Capital Market Information (KapMuG – Kapitalanleger-Muster-
verfahrensgesetz). In this proceeding, common questions of
law and fact relevant to these actions are to be adjudicated in
a consolidated manner by the Higher Regional Court in
Braunschweig (model case proceedings). All lawsuits at the
Regional Court in Braunschweig will be stayed pending
resolution of the common issues, unless the cases can be
dismissed for reasons independent of the common issues
that are to be adjudicated in the model case proceedings. The
resolution in the model case proceedings of the common
questions of law and fact will be binding for all pending cases
that have been stayed in the described manner. In the model
case action, hearing for oral argument before the Braun-
schweig Higher Regional Court began on September 10, 2018
and was continued in subsequent sessions. Tracking the
objects of declaratory judgment, the Court gave indications
as to its preliminary assessment. Oral argument is to con-
tinue in 2019.
At the Regional Court in Stuttgart, further investor
lawsuits have been filed against Volkswagen AG, in some
cases along with Porsche SE as joint and several debtor. On
December 6, 2017, the Regional Court in Stuttgart issued an
order for reference to the Higher Regional Court in Stuttgart
in relation to procedural issues, particularly for clarification
of jurisdiction. An action for model declaratory judgment
concerning the diesel issue is also pending against Porsche SE
before the Stuttgart Higher Regional Court; as the case
currently stands, Volkswagen AG is model case defendant in
this action as well.
Further investor lawsuits have been filed at various courts
in Germany and the Netherlands. In Austria, the first-in-
stance dismissal of the last investor complaint pending in
connection with the diesel issue became binding in the
reporting period.
Worldwide (excluding USA and Canada), investor lawsuits,
judicial applications for dunning procedures and conciliation
proceedings, and claims under the KapMuG are currently
pending against Volkswagen AG in connection with the diesel
issue, with the claims totaling roughly €9.6 billion. Volks-
wagen AG remains of the opinion that it duly complied with
its capital market obligations. Therefore, no provisions have
been recognized for these investor lawsuits. Insofar as the
chance of success was estimated at not lower than 10%,
contingent liabilities have been disclosed.
5. Proceedings in the USA/Canada
Following the publication of the EPA’s “Notices of Violation,”
Volkswagen AG and other Volkswagen Group companies have
been the subject of intense scrutiny, ongoing investigations
(civil and criminal), and civil litigation. Volkswagen AG and
other Volkswagen Group companies have received subpoenas
and inquiries from state attorneys general and other
governmental authorities.
Volkswagen AG and other Volkswagen Group companies
are facing litigation in the USA/Canada on a number of
different fronts relating to the matters described in the EPA’s
“Notices of Violation”. In that respect, investigations by
various US and Canadian regulatory and government author-
ities are ongoing, particularly in areas relating to securities,
financing and tax. Additionally, in the USA and Canada,
certain putative class actions by customers, investors, sales-
persons and dealers; individual customers’ lawsuits and
claims by state, provincial or municipal authorities have been
filed in various courts, including state and provincial courts.
A large number of these putative class action lawsuits have
been filed in US federal courts and consolidated for pretrial
coordination purposes in the federal multidistrict litigation
proceeding in the State of California.
In the USA, Volkswagen has reached separate agreements
with the attorneys general of 49 states, the District of
Columbia and Puerto Rico to resolve their existing or
potential consumer protection and unfair trade practices
claims in connection with both 2.0 l TDI and 3.0 l TDI vehicles
in the USA. New Mexico still has consumer protection claims
outstanding. Volkswagen has also reached separate agree-
ments with the attorneys general of thirteen US states
(California, Connecticut, Delaware, Maine, Maryland, Massa-
chusetts, New Jersey, New York, Oregon, Pennsylvania, Rhode
Island, Vermont, and Washington) to resolve their existing or
potential future claims for civil penalties and injunctive relief
for alleged violations of environmental laws. The attorneys
general of eight other US states (Alabama, Illinois, Montana,
New Hampshire, New Mexico, Ohio, Tennessee, and Texas)
and some municipalities have suits pending in state and
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federal courts against Volkswagen AG, Volkswagen Group of
America, Inc. and certain affiliates, alleging violations of
environmental laws. The environmental claims of eight states
– Alabama, Illinois, Missouri, Minnesota, Ohio, Tennessee,
Texas, and Wyoming – as well as Hillsborough County (Florida),
Salt Lake County (Utah), and two Texas counties, have been
dismissed in full or in part by trial or appellate courts as
preempted by federal law. Alabama, Illinois, Ohio, Tennessee,
Hillsborough County, and Salt Lake County have appealed or
may still appeal the dismissal of their claims.
The U.S. Securities and Exchange Commission (the “SEC”)
has requested
information from Volkswagen regarding
potential violations of securities laws in connection with
issuances of bonds and asset-backed securities, as a result of
nondisclosure of certain Volkswagen diesel vehicles' noncom-
pliance with US emission standards. The SEC informed
Volkswagen that it had issued a formal order of investigation
in January 2017; this investigation is ongoing. The SEC Staff
subsequently informed Volkswagen that the SEC might bring
an enforcement action against Volkswagen arising out of this
investigation.
On August 28, 2018, Volkswagen AG and a putative
class of purchasers of Volkswagen AG American Depositary
Receipts agreed to settle the class’ claims alleging a drop in
price purportedly resulting from the matters described in the
EPA’s “Notices of Violation” in exchange for a cash payment
of USD 48 million. The proposed settlement was granted
preliminary approval by the court in November 2018.
On December 21, 2017, Volkswagen announced an
agreement in principle on a proposed consumer settlement
in Canada involving 3.0 l diesel vehicles that was approved by
the courts in Ontario and Quebec in April 2018. Also in
Canada, a criminal enforcement-related investigation related
to 2.0 l and 3.0 l diesel vehicles by the federal environmental
regulator is ongoing, and a quasi-criminal enforcement-
related offense has been charged by the Ontario provincial
environmental regulator related to 2.0 l diesel vehicles. Addi-
tionally, in Quebec, a certified environmental class action on
behalf of residents is pending. This environmental class
action was authorized on the sole issue of whether punitive
damages could be recovered. Volkswagen is seeking leave to
appeal this authorization ruling. Class action and joinder
lawsuits have also been filed in Canada, including alleged
consumer protection and securities claims asserting dam-
ages among other things.
To the extent a matter is not separately described above, an
assessment is not yet possible at the current stage of the
proceedings or has, in accordance with IAS 37.92, not been
presented so as not to compromise the results of the pro-
ceedings and the interests of the Company.
6. Additional proceedings
With its ruling of November 8, 2017, the Higher Regional
Court of Celle ordered, upon the request of three US funds,
the appointment of a special auditor for Volkswagen AG. The
special auditor is to examine whether there was a breach of
duties on the part of the members of the Board of Manage-
ment and Supervisory Board of Volkswagen AG in connection
with the diesel issue on or after June 22, 2006 and, if so,
whether this resulted in damages for Volkswagen AG. The
ruling by the Higher Regional Court of Celle is formally
unappealable. However, Volkswagen AG has filed a consti-
tutional complaint with the German Federal Constitutional
Court alleging infringement of its constitutionally guaran-
teed rights. It is currently unclear when the German Federal
Constitutional Court will reach a decision on this matter.
Following the formally unappealable ruling from the Higher
Regional Court of Celle, the special auditor appointed by the
court indicated that he was not available to conduct the
special audit on grounds of age. The US funds then applied to
the Regional Court of Hanover to appoint another special
auditor. Volkswagen AG is of the opinion that replacing the
court-appointed special auditor in this manner is impermis-
sible and has requested that the application for the appoint-
ment of a new special auditor be denied. A decision by the
Regional Court of Hanover is expected in the course of 2019.
In addition, a second motion seeking appointment of a
special auditor for Volkswagen AG to examine matters
relating to the diesel issue has been filed with the Regional
Court of Hanover. This proceeding has been suspended until
the German Federal Constitutional Court renders its decision
in the first special auditor litigation.
7. Risk assessment regarding the diesel issue
An amount of around €2.4 billion has been included in the
provisions for litigation and legal risks as of December 31,
2018 to protect against the currently known legal risks related
to the diesel issue based on existing information and current
assessments. Insofar as these can be adequately measured at
this stage, contingent liabilities relating to the diesel issue
Group Management Report
Report on Risks and Opportunities
183
were disclosed in the notes in an aggregate amount of
€5.4 billion (previous year: €4.3 billion), whereby approxi-
mately €3.4 billion (previous year: €3.4 billion) of this amount
results from lawsuits filed by investors in Germany. The
provisions recognized and the contingent liabilities disclosed
as well as the other latent legal risks in the context of diesel
issue are in part subject to substantial estimation risks given
that the fact finding efforts have not yet been concluded, the
complexity of the individual relevant factors and the ongoing
coordination with the authorities. Should these legal or
estimation risks materialize, this could result in further
considerable financial charges.
In line with IAS 37.92, no further statements have been
made concerning estimates of financial impact or about
uncertainty regarding the amount or maturity of provisions
and contingent liabilities in relation to the diesel issue. This is
so as to not compromise the results of the proceedings or the
interests of the Company.
Additional important legal cases
In 2011, ARFB Anlegerschutz UG (haftungsbeschränkt) brought
an action against Volkswagen AG and Porsche SE for claims for
damages for allegedly violating disclosure requirements under
capital market law in connection with the acquisition of
ordinary shares in Volkswagen AG by Porsche SE in 2008. The
damages currently being sought based on allegedly assigned
rights amounted to approximately €2.26 billion plus interest.
In April 2016, the Regional Court in Hanover had formulated
numerous objects of declaratory judgment that the cartel
senate of the Higher Regional Court in Celle will decide on in
model case proceedings under the KapMuG. In the first hearing
on October 12, 2017, the Court already indicated that it cur-
rently does not see claims against Volkswagen AG as justified,
both for want of sufficiently specific pleadings and for reasons
of law. Volkswagen AG sees the statements of the court’s senate
as confirmation that the claims made against the Company
have absolutely no basis.
At the time in question (2010/2011), other investors had
also asserted claims – including claims against Volkswagen AG
– arising out of the same circumstances in an approximate
total amount of €4.6 billion and initiated conciliation pro-
ceedings. Volkswagen AG always refused to participate in these
conciliation proceedings; since then, these claims have not
been pursued further.
In June 2013, the Annual General Meeting of MAN SE
approved the conclusion of a control and profit and loss
transfer agreement between MAN SE and TRATON SE (at that
time Truck & Bus GmbH), a subsidiary of Volkswagen AG. In
July 2013, an award proceeding was instituted to review the
appropriateness of the cash settlement set out in the agree-
ment in accordance with §305 of the Aktiengesetz (AktG –
German Stock Corporation Act) and the cash compen-
sation in accordance with §304 of the AktG. By ruling of
June 26, 2018 (supplemented and amended by the rulings of
July 30, 2018 and December 17, 2018), the Munich Higher
Regional Court rendered a final decision increasing the
annual compensation claim under §304 AktG to €5.47 gross
per share (less any corporate income tax and any solidarity
surcharge at the respective tax rate applicable to these taxes
for the financial year in question). The cash settlement in the
amount of €90.29 per share, increased in the first instance by
the Munich I Regional Court, was affirmed. The decisions by
the Munich Higher Regional Court are final and were
published in the German Federal Gazette on August 6, 2018
and January 10, 2019.
In Brazil, the Brazilian tax authorities commenced tax
proceedings against MAN Latin America; at issue in these
proceedings are the tax consequences of the acquisition
structure chosen for MAN Latin America in 2009. In Decem-
ber 2017, a second instance judgment that was negative for
MAN Latin America was rendered in administrative court
proceedings. MAN Latin America
initiated proceedings
against this judgment before the regular court in 2018. Due
to the difference in the penalties plus interest which could
potentially apply under Brazilian law, the estimated size of
the risk in the event that the tax authorities are able to prevail
overall with their view is laden with uncertainty. However, a
positive outcome continues to be expected for MAN Latin
America. Should the opposite occur, this could result in a risk
of about €0.7 billion for the contested period from 2009
onwards, which has been stated within the contingent lia-
bilities in the notes.
In 2011, the European Commission conducted searches at
European truck manufacturers on suspicion of an unlawful
exchange of information during the period 1997–2011 and
issued a statement of objections to MAN, Scania and the
other truck manufacturers concerned in November 2014.
With its settlement decision in July 2016, the European Com-
mission fined five European truck manufacturers. MAN’s fine
was waived in full as the company had informed the Euro-
pean Commission about the irregularities as a key witness.
In September 2017, the European Commission fined
Scania €0.88 billion. Scania has appealed to the European
Court of Justice in Luxembourg and will use all means at its
disposal to defend itself. Scania had already recognized a
provision of €0.4 billion in 2016.
Furthermore, antitrust lawsuits for damages from cus-
tomers were received. As is the case in any antitrust pro-
ceedings, this may result in further lawsuits for damages.
Neither provisions nor contingent liabilities were stated
because the early stage of proceedings makes an assessment
currently impossible.
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As part of the cartel investigations in the automotive
industry already known to the public, the European Com-
mission took the procedural step of initiating formal
proceedings against affected undertakings on September 18,
2018. The investigations have been ongoing for some time.
As the European Commission’s press statement indicates, the
European Commission is now restricting the scope of the
investigation to the subject of emissions. The formal ini-
tiation of proceedings is standard and is a purely procedural
step in the process, which was expected by Volkswagen. The
Volkswagen Group and the relevant Group brands have been
cooperating fully with the European Commission and will
continue to cooperate.
In addition, the Italian Competition Authority initiated
proceedings to investigate potential competition law infringe-
ments (alleged exchange of competitively sensitive infor-
mation) by a number of captive automotive finance com-
panies, including Volkswagen Bank GmbH. The proceedings
were later extended to the relevant parent companies,
including Volkswagen AG. In October 2018, Volkswagen Bank
GmbH and Volkswagen AG received a statement of objections
summarizing the findings by the authority and describing
the alleged infringement. Volkswagen AG and Volkswagen
Bank GmbH transmitted their respective replies to the Italian
Competition Authority in November 2018. In January 2019,
the Italian Competition Authority imposed a fine of €163 mil-
lion against Volkswagen AG and Volkswagen Bank GmbH.
Provisions were recognized by Volkswagen Bank GmbH.
Volkswagen AG and Volkswagen Bank GmbH intend to appeal
this decision. Lawsuits seeking damages are possible in this
proceeding as well.
In 2017, plaintiffs filed numerous complaints in various
US jurisdictions on behalf of putative classes of purchasers of
German luxury vehicles against several automobile manu-
facturers, including Volkswagen AG and other Group com-
panies, that are now pending in two consolidated class
actions in the multidistrict litigation in the State of Cali-
fornia. The complaints allege that since the 1990s, defendants
engaged in a conspiracy to unlawfully increase the prices of
German luxury vehicles in violation of US antitrust and
consumer protection law. Plaintiffs in Canada filed claims
with similar allegations on behalf of putative classes of
luxury vehicles against several
purchasers of German
automobile manufacturers, including Volkswagen Canada
Inc., Audi Canada Inc., and other Group companies. Neither
provisions nor contingent liabilities were stated because the
early stage of proceedings makes an assessment currently
impossible.
In addition, a few national and international authorities
have initiated antitrust investigations. Volkswagen is cooper-
ating closely with the responsible authorities in these
investigations. An assessment of the underlying situation is
not possible at this early stage.
For certain T6 models (M1 class) with Euro 6 diesel engines
registered as passenger cars, the inspection regarding the
conformity of the current production of new vehicles with
the approved type (conformity of production) identified that
certain technical data could not be fully confirmed. To ensure
this conformity of production for new vehicles, Volkswagen
AG developed a software measure, which was approved by the
KBA at the end of February 2018 and was applied to newly
produced vehicles as well as to new vehicles (approximately
30 thousand in all) that had not been delivered by then.
Volkswagen AG also conducted in-use tests (tests to verify the
conformity of vehicles in use to their type approval) to
determine whether the roughly 200 thousand T6 used vehi-
cles already on the market conform to the technical data. The
tests carried out on the proposal of Volkswagen AG were
taking place in close collaboration with the KBA, which
included this process in a decision dated March 1, 2018.
Following further tests in August 2018, at the proposal of
Volkswagen AG and in accordance with this decision, there is
also a software measure for used T6 vehicles to ensure con-
formity with the approved vehicle type.
Since November 2016, Volkswagen has been responding to
information requests from the EPA and CARB related to
automatic transmissions in certain vehicles with gasoline
engines.
Additionally, putative class actions filed against Audi AG
and certain affiliates have been transferred to the federal
multidistrict litigation proceeding in the State of California
lawsuits allege that defendants
and consolidated. The
concealed the existence of defeat devices in Audi brand
vehicles with automatic transmissions. Other actions alleging
similar claims are also pending in the Northern District of
California and two provincial courts in Canada.
In the summer of 2017, plaintiffs filed a complaint, on behalf
of a putative class of purchasers of Volkswagen AG’s American
Depositary Receipts, against Volkswagen AG and against
Group Management Report
Report on Risks and Opportunities
185
three former and one current member of Volkswagen AG’s
Board of Management, in the US District Court for the Eastern
District of New York. On July 13, 2018, plaintiffs filed an
amended complaint, which defendants moved to dismiss.
Plaintiffs assert securities claims alleging that defendants
made material misstatements and omissions concerning
Volkswagen AG’s compliance measures, in particular those
relating to competition and antitrust law as well as alle-
gations in an antitrust litigation against Volkswagen AG in
the Northern District of California. Defendants believe that
the alleged claims are without merit.
Provisions were recognized by Volkswagen Bank GmbH and
Volkswagen Leasing GmbH for possible claims in connection
with financial services provided to consumers.
In addition, various proceedings are pending worldwide,
particularly in the USA, in which customers are asserting
purported claims either individually or in class actions. These
claims are as a rule based on alleged vehicle defects, including
defects alleged in vehicle parts supplied to the Volkswagen
Group (for instance, in the Takata case).
Risks may also result from patent infringement actions,
particularly in Germany and the USA. These actions seeking
injunctive relief and damages pertain among other things to
patents for semiconductor technology used in vehicles.
In line with IAS 37.92, no further statements have been made
concerning estimates of financial impact or about uncer-
tainty regarding the amount or maturity of provisions and
contingent liabilities in relation to additional important legal
cases. This is so as to not compromise the results of the pro-
ceedings or the interests of the Company.
Strategies for hedging financial risks
In the course of our business activities, financial risks may
arise from changes in interest rates, exchange rates, raw
material prices, or share and fund prices. Management of
financial and liquidity risks is the responsibility of the central
Group Treasury department, which minimizes these risks
using nonderivative and derivative financial instruments.
The Board of Management is informed of the current risk
situation at regular intervals.
We hedge interest rate risk – where appropriate in combi-
nation with currency risk – and risks arising from fluctu-
ations in the value of financial instruments by means of
interest rate swaps, cross-currency interest rate swaps and
other
interest rate contracts with generally matching
amounts and maturities. This also applies to financing
arrangements within the Volkswagen Group.
Foreign currency risk is reduced in particular through
natural hedging, i.e. by flexibly adapting our production
capacity at our locations around the world, establishing new
production facilities in the most important currency regions
and also procuring a large percentage of components locally.
We hedge the residual foreign currency risk using hedging
instruments. These include currency forwards, currency
options and cross-currency interest rate swaps. We use these
transactions to limit the currency risk associated with fore-
casted cash flows from operating activities, intragroup
financing and liquidity positions in currencies other than the
respective functional currency, for example as a result of
restrictions on capital movements. The currency forwards
and currency options can have a term of up to six years. We
thus hedge our principal foreign currency risks, mostly
against the euro and primarily in Argentine pesos, Australian
dollars, Brazilian real, British pound sterling, Canadian dol-
lars, Chinese renminbi, Czech koruna, Hong Kong dollars,
Hungarian forints, Indian rupees, Japanese yen, Mexican
pesos, Norwegian kroner, Polish zloty, Russian rubles, Singa-
pore dollars, South African rand, South Korean won, Swedish
kronor, Swiss francs, Taiwan dollars and US dollars.
The purchasing of raw materials entails risks relating to
the availability of raw materials and price trends. We con-
tinuously analyze potential risks arising from changes in
commodity and energy prices in the market so that immedi-
ate action can be taken whenever these arise. We limit these
risks mainly by entering into forward transactions and swaps.
We have used appropriate contracts to hedge some of our
requirements for commodities such as aluminum, lead, coal,
copper, nickel, platinum, palladium and rhodium over a
period of up to six years. We have entered into similar trans-
actions in order to supplement and improve allocations of
CO2 emission certificates.
Pages 289 to 310 of the notes to the consolidated financial
statements explain our hedging policy, the hedging rules and
the default and liquidity risks, and quantify the hedging
transactions mentioned. Additionally, we disclose informa-
tion on market risk within the meaning of IFRS 7.
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Risks arising from financial instruments
Channeling excess liquidity into investments and entering
into derivatives contracts gives rise to counterparty risk.
Partial or complete failure by a counterparty to perform its
obligation to pay interest and repay principal, for example,
would have a negative impact on the Volkswagen Group’s
earnings and liquidity. We counter this risk through our
counterparty risk management, which we describe in more
detail in the section entitled “Principles and Goals of Finan-
cial Management” starting on page 118. The financial instru-
ments held for hedging purposes give rise to both counter-
party risks and balance sheet risks, which we limit using
hedge accounting.
By diversifying when selecting business partners, we
ensure that the impact of a default is limited and the Volks-
wagen Group remains solvent at all times, even in the event
of a default by individual counterparties.
Risks arising from trade receivables and from financial
services are explained in more detail in the notes to the
consolidated financial statements, starting on page 289.
Liquidity risk
We ensure that the Company remains solvent at all times by
holding liquidity reserves, through confirmed credit lines
and through our money market and capital market pro-
grams. We cover the capital requirements of the financial
services business mainly by raising funds at matching matu-
rities in the national and international financial markets as
well as through customer deposits from the direct banking
business.
Projects are financed by, among other things, loans pro-
vided by supranational or international development banks
such as the European Investment Bank (EIB) and the Euro-
pean Bank for Reconstruction and Development (EBRD), or by
national development banks such as Kreditanstalt für Wieder-
aufbau (KFW) and Banco Nacional de Desenvolvimento
Econômico e Social (BNDES). Confirmed and unconfirmed
lines of credit from banks supplement our broadly diversified
refinancing structure.
As a result of the diesel issue, the ability to use refinanc-
ing instruments may possibly be restricted or precluded for
the Volkswagen Group. A downgrade of the Company’s rating
could adversely affect the terms associated with the Volks-
wagen Group’s borrowings.
Information on the ratings of Volkswagen AG, Volks-
wagen Financial Services AG and Volkswagen Bank GmbH can
be found on page 113 of this report.
Residual value risk in the financial services business
In the financial services business, we agree to buy back
selected vehicles at a residual value that is fixed at inception
of the contract. Residual values are set at a realistic amount
so that we are able to leverage market opportunities. We
evaluate the underlying lease and financing contracts at
regular intervals and recognize any necessary provisions if
we identify any potential risks.
Management of the residual value risk is based on a
defined feedback loop ensuring the full assessment, moni-
toring, management and communication of risks. This
process design ensures not only professional management of
residual risks but also that we systematically improve and
enhance our handling of residual value risks.
As part of our risk management, we use residual value
forecasts to regularly assess the appropriateness of the pro-
visions for risks and the potential for residual value risk – also
with a view to the public debate on further driving bans for
diesel vehicles in major European cities. In the process, we
compare the contractually agreed residual values with the
fair values obtainable. These are determined utilizing data
from external service providers and our own marketing data.
We do not take account of the upside in residual market
values when making provisions for risks.
More information on residual value risk and other risks
in the financial services business can be found in the 2018
Annual Report of Volkswagen Financial Services AG and
Volkswagen Bank GmbH.
Reputational risks
The reputation of the Volkswagen Group and its brands is one
of the most important assets and forms the basis for long-
term business success. Our policy on issues such as integrity,
ethics and sustainability is in the public focus. One of the
Group Management Report
Report on Risks and Opportunities
187
basic principles of running our business is therefore to pay
particular attention to compliance with legal requirements
and ethical principles. However, we are aware that miscon-
duct or criminal acts by individuals and the resulting repu-
tational damage can never be fully prevented. In addition,
media reactions can have a negative effect on the reputation
of the Volkswagen Group and its brands. This impact could be
amplified through insufficient crisis communication.
Moreover, the above-described individual risks that may
arise in the course of our operating activities may turn into a
threat to the Volkswagen Group’s reputation.
Other factors
Going beyond the risks already outlined, there are other
factors that cannot be predicted and whose repercussions are
therefore difficult to control. Should these transpire, they
could have an adverse effect on the further development of
the Volkswagen Group. In particular, such occurrences
include natural disasters, epidemics, violent conflicts and
terrorist attacks.
O V E R A L L A S S E S S M E N T O F T H E R I S K A N D O P P O R T U N I T Y P O S I T I O N
The Volkswagen Group’s overall risk and opportunity
position results from the specific risks and opportunities
shown above. We have put in place a comprehensive risk
management system to ensure that these risks are controlled.
The most significant risks to the Group may result from a
negative trend in unit sales of, and markets for, vehicles and
genuine parts, from the failure to develop and produce
products in line with demand and regulations as well as from
quality problems. Risks relating to the diesel issue still
remain for the Volkswagen Group which, when aggregated,
are among the most significant risks. Taking into account all
the information known to us at present, no risks exist which
could pose a threat to the continued existence of significant
Group companies or the Volkswagen Group.
This annual report contains forward-looking statements on the business development of
markets, or any significant shifts in exchange rates relevant to the Volkswagen Group, will
the Volkswagen Group. These statements are based on assumptions relating to the
have a corresponding effect on the development of our business. In addition, there may be
development of the economic and legal environment in individual countries and economic
departures from our expected business development if the assessments of the factors
regions, and in particular for the automotive industry, which we have made on the basis of
influencing sustainable value enhancement, as well as risks and opportunities, presented
the information available to us and which we consider to be realistic at the time of going
in this annual report develop in a way other than we are currently expecting, or if
to press. The estimates given entail a degree of risk, and actual developments may differ
from those forecast. Any changes in significant parameters relating to our key sales
additional risks and opportunities or other factors emerge that affect the development of
our business.
188
Prospects for 2019
Group Management Report
Prospects for 2019
The Volkswagen Group is well prepared overall for the future
challenges pertaining to the automobility business and the
mixed developments in regional vehicle markets. Our brand
diversity, our presence in all major world markets, our broad,
selectively expanded product range and pioneering tech-
nologies and services put us in a good competitive position
worldwide. As part of the transformation of our core busi-
ness, we are positioning our Group brands with a stronger
focus on their individual characteristics and optimizing the
vehicle and drive portfolio. The focus hereby is primarily on
our vehicle fleet’s carbon footprint and on the most attractive
and fastest-growing market segments. In addition, we are
working to make even more focused use of the advantages of
our multibrand group by continuously developing new tech-
nologies and our toolkits.
We expect that deliveries to customers of the Volkswagen
Group in 2019 will slightly exceed the prior-year figure amid
continuously challenging market conditions.
Challenges will arise particularly from the economic situ-
ation, the increasing intensity of competition, exchange rate
volatility and more stringent WLTP (Worldwide Harmonized
Light-Duty Vehicles Test Procedure) requirements.
We expect the sales revenues of the Volkswagen Group
and its Passenger Cars and Commercial Vehicles business
areas to grow by as much as 5% year-on-year. In terms of the
operating profit for the Group and the Passenger Cars Busi-
ness Area, we forecast an operating return on sales in the
range of 6.5–7.5% in 2019. For the Commercial Vehicles
Business Area, we anticipate an operating return on sales of
between 6.0% and 7.0%. In the Power Engineering Business
Area, we expect a loss around the previous year’s level amid a
slight rise in sales revenue. For the Financial Services
Division, we are forecasting a moderate increase in sales
revenues and an operating profit at the prior-year level.
The Volkswagen Group’s Board of Management expects the
growth of the global economy to slow somewhat in 2019. We
still believe that risks will continue to arise from protectionist
tendencies, turbulence in the financial markets and struc-
tural deficits in individual countries. In addition, growth
prospects will be negatively impacted by continuing geopoli-
tical tensions and conflicts. We therefore expect both the
advanced economies and the emerging markets to show
weaker momentum than in 2018. We anticipate the strongest
rates of expansion in Asia’s emerging economies.
We expect trends in the passenger car markets in the
individual regions to be mixed in 2019. Overall, global
demand for new vehicles will probably be at the prior-year
level. We anticipate that the volume of new registrations for
passenger cars in Western Europe will be in line with the
figure seen in the reporting period. After a positive perfor-
mance overall in recent years, we estimate that demand in
the German passenger car market will fall slightly year-on-
year. Sales of passenger cars in 2019 are expected to slightly
exceed the prior-year figures in markets in Central and
Eastern Europe. The volume of demand in the markets
for passenger cars and light commercial vehicles (up to
6.35 tonnes) in North America is likely to be slightly lower
than in the prior year. We expect new registrations in the
South American markets for passenger cars and light com-
mercial vehicles to grow moderately overall compared with
the previous year. The passenger car markets in the Asia-
Pacific region are expected at the prior-year level.
Trends in the markets for light commercial vehicles in the
individual regions will be mixed again in 2019; on the whole,
we anticipate a slight dip in demand.
In the markets for mid-sized and heavy trucks that are
relevant for the Volkswagen Group and in the relevant mar-
kets for buses, new registrations in 2019 are expected to
slightly exceed the prior-year level.
We believe that automotive financial services will contin-
ue to be very important for vehicle sales worldwide in 2019.
Wolfsburg, February 22, 2019
The Board of Management
S
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Consolidated Financial
Statements
Inhalt nicht aktuell
CONSOLIDATED FINANCIAL STATEMENTS
193 Income Statement
194 Statement of Comprehensive Income
196 Balance Sheet
198 Statement of Changes in Equity
200 Cash flow Statement
201 NOTES
201 Basis of presentation
202 Effects of new and amended IFRSs
209 New and amended IFRSs not applied
210 Key events
211 Basis of consolidation
221 Consolidation methods
222 Currency translation
223 Accounting policies
234 Segment reporting
259 18. Noncurrent and current other receivables
259 19. Tax assets
260 20. Inventories
260 21. Trade receivables
261 22. Marketable securities
261 23. Cash, cash equivalents and time deposits
261 24. Equity
263 25. Noncurrent and current financial liabilities
263 26. Noncurrent and current other financial liabilities
264 27. Noncurrent and current other liabilities
265 28. Tax liabilities
265 29. Provisions for pensions and other
post-employment benefits
274 30. Noncurrent and current other provisions
275 31. Put options and compensation rights granted to
noncontrolling interest shareholders
237 Income statement disclosures
275 32. Trade payables
237 1. Sales revenue
238 2. Cost of sales
239 3. Distribution expenses
239 4. Administrative expenses
239 5. Other operating income
240 6. Other operating expenses
240 7. Share of the result of
equity-accounted investments
241 8. Interest result
241 9. Other financial result
242 10. Income tax income/expense
245 11. Earnings per share
276 Disclosures in accordance with IFRS 7 – Financial
Instruments (balance sheet)
287 Other disclosures
287 33. Cash flow statement
289 34. Financial risk management and
financial instruments
308 35. Capital management
310 36. Contingent liabilities
311 37. Litigation
320 38. Other financial obligations
321 39. Total audit fees of the Group auditor
321 40. Personnel expenses
246 Disclosures in accordance with IAS 23 – Borrowing Costs
322 41. Average number of employees during the year
246 Disclosures in accordance with IFRS 7 – Financial
322 42. Events after the balance sheet date
Instruments (income statement)
322
43. Remuneration based on performance shares and
248 Balance Sheet disclosures
248 12. Intangible assets
251 13. Property, plant and equipment
253 14. Lease assets and investment property
255 15. Equity-accounted investments and other
equity investments
phantom shares (share-based payment)
323 44. Related party disclosures in accordance with IAS 24
327 45. German Corporate Governance Code
327 46. Remuneration of the Board of Management
and the Supervisory Board
329 Responsibility Statement
257 16. Noncurrent and current financial services receivables
330 Independent Auditor’s Report
258 17. Noncurrent and current other financial assets
Inhalt nicht aktuell
Consolidated Financial Statements
Income Statement
193
Income Statement
of the Volkswagen Group for the period January 1 to December 31, 2018
€ million
Sales revenue
Cost of sales
Gross result
Distribution expenses
Administrative expenses
Other operating income
Other operating expenses
Operating result
Share of the result of equity-accounted investments
Interest income
Interest expenses
Other financial result
Financial result
Earnings before tax
Income tax income/expense
Current
Deferred
Earnings after tax
of which attributable to
Noncontrolling interests
Volkswagen AG hybrid capital investors
Volkswagen AG shareholders
Basic earnings per ordinary share in €
Diluted earnings per ordinary share in €
Basic earnings per preferred share in €
Diluted earnings per preferred share in €
1 Prior-year figures adjusted (see disclosures on IFRS 9 and IFRS 15).
Note
2018
2017¹
1
2
3
4
5
6
7
8
8
9
10
11
11
11
11
235,849
–189,500
46,350
–20,510
–8,819
11,631
–14,731
13,920
3,369
967
–1,547
–1,066
1,723
15,643
–3,489
–3,533
43
12,153
17
309
229,550
–186,001
43,549
–20,859
–8,126
11,514
–12,259
13,818
3,482
951
–2,317
–2,262
–146
13,673
–2,210
–3,205
995
11,463
10
274
11,827
11,179
23.57
23.57
23.63
23.63
22.28
22.28
22.34
22.34
194
Statement of Comprehensive Income
Consolidated Financial Statements
Statement of Comprehensive
Income
Changes in comprehensive income for the period January 1 to December 31, 20171
€ million
Earnings after tax
Pension plan remeasurements recognized in other comprehensive income
Pension plan remeasurements recognized in other comprehensive income, before tax
Deferred taxes relating to pension plan remeasurements recognized in other
comprehensive income
Pension plan remeasurements recognized in other comprehensive income, net of tax
Fair value valuation of other participations and securities (equity instruments) that will not
be reclassified to profit or loss, net of tax
Share of other comprehensive income of equity-accounted investments
that will not be reclassified to profit or loss, net of tax
Items that will not be reclassified to profit or loss
Exchange differences on translating foreign operations
Gains/losses on currency translation recognized in other comprehensive income
Transferred to profit or loss
Exchange differences on translating foreign operations, before tax
Deferred taxes relating to exchange differences on translating foreign operations
Exchange differences on translating foreign operations, net of tax
Hedging
Fair value changes recognized in other comprehensive income (OCI I)
Transferred to profit or loss (OCI I)
Cash flow hedges (OCI I), before tax
Deferred taxes relating to cash flow hedges (OCI I)
Cash flow hedges (OCI I), net of tax
Fair value changes recognized in other comprehensive income (OCI II)
Transferred to profit or loss (OCI II)
Cash flow hedges (OCI II), before tax
Deferred taxes relating to cash flow hedges (OCI II)
Cash flow hedges (OCI II), net of tax
Fair value valuation of securities and receivables (debt instruments) that may be
reclassified to profit or loss
Fair value changes recognized in other comprehensive income
Transferred to profit or loss
Fair value valuation of securities and receivables (debt instruments) that may be
reclassified to profit or loss, before tax
Deferred taxes relating to fair value valuation of securities and receivables (debt
instruments) recognized in other comprehensive income
Fair value valuation of securities and receivables (debt instruments) that may be reclassified
to profit or loss, net of tax
Share of other comprehensive income of equity-accounted investments that
may be reclassified to profit or loss, net of tax
Items that may be reclassified to profit or loss
Other comprehensive income, before tax
Deferred taxes relating to other comprehensive income
Other comprehensive income, net of tax
Total comprehensive income
1 Prior-year figures adjusted (see disclosures on IFRS 9 and IFRS 15).
Equity
attributable to
Volkswagen AG
shareholders
Total
Equity
attributable to
Volkswagen AG
hybrid capital
investors
Equity
attributable to
noncontrolling
interests
11,463
11,179
274
10
785
–198
588
106
96
789
–2,095
–4
–2,099
–8
–2,107
6,216
–558
5,659
–1,621
4,038
171
–
171
–51
120
–19
–1
–20
7
–13
–346
1,691
4,351
–1,871
2,480
13,943
784
–198
586
106
96
788
–2,094
–4
–2,098
–8
–2,106
6,216
–558
5,658
–1,621
4,038
171
–
171
–51
120
–19
–1
–20
7
–13
–346
1,691
4,350
–1,871
2,479
13,658
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
274
1
0
1
–
–
1
–1
–
–1
–
–1
0
0
0
0
0
–
–
–
–
–
–
–
–
–
–
–
–1
1
0
1
11
Consolidated Financial Statements
Statement of Comprehensive Income
195
Changes in comprehensive income for the period January 1 to December 31, 2018
€ million
Earnings after tax
Pension plan remeasurements recognized in other comprehensive income
Pension plan remeasurements recognized in other comprehensive income, before tax
Deferred taxes relating to pension plan remeasurements recognized in other
comprehensive income
Pension plan remeasurements recognized in other comprehensive income, net of tax
Fair value valuation of other participations and securities (equity instruments) that will not
be reclassified to profit or loss, net of tax
Share of other comprehensive income of equity-accounted investments
that will not be reclassified to profit or loss, net of tax
Items that will not be reclassified to profit or loss
Exchange differences on translating foreign operations
Gains/losses on currency translation recognized in other comprehensive income
Transferred to profit or loss
Exchange differences on translating foreign operations, before tax
Deferred taxes relating to exchange differences on translating foreign operations
Exchange differences on translating foreign operations, net of tax
Hedging
Fair value changes recognized in other comprehensive income (OCI I)
Transferred to profit or loss (OCI I)
Cash flow hedges (OCI I), before tax
Deferred taxes relating to cash flow hedges (OCI I)
Cash flow hedges (OCI I), net of tax
Fair value changes recognized in other comprehensive income (OCI II)
Transferred to profit or loss (OCI II)
Cash flow hedges (OCI II), before tax
Deferred taxes relating to cash flow hedges (OCI II)
Cash flow hedges (OCI II), net of tax
Fair value valuation of securities and receivables (debt instruments) that may be
reclassified to profit or loss
Fair value changes recognized in other comprehensive income
Transferred to profit or loss
Fair value valuation of securities and receivables (debt instruments) that may be
reclassified to profit or loss, before tax
Deferred taxes relating to fair value valuation of securities and receivables
(debt instruments) recognized in other comprehensive income
Fair value valuation of securities and receivables (debt instruments) that may be reclassified
to profit or loss, net of tax
Share of other comprehensive income of equity-accounted investments that
may be reclassified to profit or loss, net of tax
Items that may be reclassified to profit or loss
Other comprehensive income, before tax
Deferred taxes relating to other comprehensive income
Other comprehensive income, net of tax
Total comprehensive income
Equity
attributable to
Volkswagen AG
shareholders
Total
Equity
attributable to
Volkswagen AG
hybrid capital
investors
Equity
attributable to
noncontrolling
interests
12,153
11,827
309
144
–88
56
19
34
110
–406
61
–345
–8
–353
–568
–1,939
–2,506
715
–1,792
–1,360
377
–983
291
–692
–5
1
–4
1
–3
28
–2,811
–3,612
911
–2,701
9,452
145
–88
57
19
34
110
–406
61
–345
–8
–353
–568
–1,939
–2,506
715
–1,791
–1,360
377
–983
291
–692
–5
1
–4
1
–3
28
–2,812
–3,612
911
–2,701
9,126
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
309
17
–1
0
–1
–
–
–1
1
0
1
–
1
0
0
0
0
0
–
–
–
–
–
–
–
–
0
0
–
0
0
0
0
17
196
Balance Sheet
Consolidated Financial Statements
Balance Sheet
of the Volkswagen Group as of December 31, 2018
€ million
Assets
Noncurrent assets
Intangible assets
Property, plant and equipment
Lease assets
Investment property
Equity-accounted investments
Other equity investments
Financial services receivables
Other financial assets
Other receivables
Tax receivables
Deferred tax assets
Current assets
Inventories
Trade receivables
Financial services receivables
Other financial assets
Other receivables
Tax receivables
Marketable securities
Cash, cash equivalents and time deposits
Assets held for sale
Total assets
Note
Dec. 31, 2018
Dec. 31, 2017
12
13
14
14
15
15
16
17
18
19
19
20
21
16
17
18
19
22
23
64,613
57,630
43,545
496
8,434
1,474
78,692
6,521
2,608
476
10,131
274,620
45,745
17,888
54,216
11,586
6,203
1,879
17,080
28,938
–
183,536
458,156
63,419
55,243
39,254
468
8,205
1,318
73,249
8,455
2,252
407
9,810
262,081
40,415
13,357
53,145
11,998
5,346
1,339
15,939
18,457
115
160,112
422,193
Consolidated Financial Statements
Balance Sheet
197
€ million
Equity and Liabilities
Equity
Subscribed capital
Capital reserve
Retained earnings¹
Other reserves¹
Equity attributable to Volkswagen AG hybrid capital investors
Equity attributable to Volkswagen AG shareholders and hybrid capital investors
Noncontrolling interests
Noncurrent liabilities
Financial liabilities
Other financial liabilities
Other liabilities
Deferred tax liabilities
Provisions for pensions
Provisions for taxes
Other provisions
Current liabilities
Put options and compensation rights granted to noncontrolling interest shareholders
Financial liabilities
Trade payables
Tax payables
Other financial liabilities
Other liabilities
Provisions for taxes
Other provisions
Total equity and liabilities
1 Prior-year figures adjusted (see disclosures on IFRS 9 and IFRS 15).
Note
Dec. 31, 2018
Dec. 31, 2017
24
25
26
27
28
29
28
30
31
25
32
28
26
27
28
30
1,283
14,551
91,105
–2,417
12,596
117,117
225
117,342
101,126
3,219
6,448
5,030
33,097
3,047
20,879
1,283
14,551
81,248
678
11,088
108,849
229
109,077
81,628
2,665
6,199
5,636
32,730
3,030
20,839
172,846
152,726
1,853
89,757
23,607
456
9,416
17,593
1,412
23,874
167,968
458,156
3,795
81,844
23,046
430
8,570
15,961
1,397
25,347
160,389
422,193
198
Statement of Changes in Equity
Consolidated Financial Statements
Statement of Changes in Equity
of the Volkswagen Group for the period January 1 to December 31, 2018
€ million
Unadjusted balance at Jan. 1, 2017
Changes in accounting policy to reflect IFRS 9
Balance at Jan. 1, 2017
Earnings after tax
Other comprehensive income, net of tax
Total comprehensive income
Disposal of equity instruments
Capital increases¹
Dividends payment
Capital transactions involving a change in ownership interest
Other changes
Balance at Dec. 31, 2017
Unadjusted balance at Jan. 1, 2018
Changes in accounting policy to reflect IFRS 9 and 15
Balance at Jan. 1, 2018
Earnings after tax
Other comprehensive income, net of tax
Total comprehensive income
Disposal of equity instruments
Capital increases/Capital decreases²
Dividends payment
Capital transactions involving a change in ownership interest
Other changes
Balance at Dec. 31, 2018
O T H E R R E S E R V E S
Subscribed capital
Capital reserve
Retained earnings
Currency
translation reserve
1,283
–
1,283
14,551
–
14,551
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
70,446
57
70,503
11,179
586
11,765
–
–
–1,015
–
–4
–1,117
–
–1,117
–
–2,106
–2,106
–
–
–
–
–
1,283
14,551
81,248
–3,223
1,283
–
1,283
14,551
–
14,551
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
81,367
–282
81,085
11,827
57
11,884
113
–
–1,967
–10
0
–3,223
–
–3,223
–
–353
–353
–
–
–
–
–
1,283
14,551
91,105
–3,576
1 Volkswagen AG recorded an inflow of cash funds amounting to €3,500 million, less a discount of €4 million and transaction costs of €23 million, from the hybrid capital issued in June 2017.
Additionally, there were noncash effects from the deferral of taxes amounting to €8 million. The hybrid capital is required to be classified as equity instruments granted.
2 Volkswagen AG recorded an inflow of cash funds amounting to €2,750 million, less transaction costs of €19 million, from the hybrid capital issued in June 2018. Additionally, there were noncash
effects from the deferral of taxes amounting to €6 million. The hybrid capital is required to be classified as equity instruments granted. The calling of the first tranche of the hybrid capital issued in
September 2013 resulted in an outflow of cash funds of €1,250 million in September 2018. In addition, other effects of €14 million had to be recognized in equity.
Explanatory notes on equity are presented in the note relating to equity.
Consolidated Financial Statements
Statement of Changes in Equity
199
H E D G I N G
Cash flow hedges
(OCI I)
Deferred costs
of hedging
(OCI II)
Equity and debt
instruments
Equity-
accounted
investments
Equity
attributable to
Volkswagen AG
hybrid capital
investors
Equity
attributable to
Volkswagen AG
shareholders and
hybrid capital
investors
Noncontrolling
interests
Total equity
–457
–
–457
–
4,038
4,038
–
–
–
–
–
3,581
3,525
56
3,581
–
–1,791
–1,791
–
–
–
–
–
–
–57
–57
–
120
120
–
–
–
–
–
63
–
63
63
–
–692
–692
–
–
–
–
–
–2
–
–2
–
93
93
–
–
–
–
–
91
91
–225
–133
–
16
16
–113
–
–
–
–
417
–
417
–
–251
–251
–
–
–
–
–
166
166
–
166
–
62
62
–
–
–
–
–
7,567
–
7,567
274
–
274
–
3,481
–311
–
78
92,689
–
92,689
11,453
2,479
13,932
–
3,481
–1,326
–
73
11,088
108,849
11,088
–
11,088
309
–
309
–
1,501
–403
–
101
108,849
–388
108,461
12,136
–2,701
9,435
–
1,501
–2,370
–10
101
1,790
–629
–230
228
12,596
117,117
221
–
221
10
1
11
–
–
–5
–
1
229
229
1
229
17
0
17
–
–
–4
–18
2
225
92,910
–
92,910
11,463
2,480
13,943
–
3,481
–1,332
–
75
109,077
109,077
–387
108,690
12,153
–2,701
9,452
–
1,501
–2,375
–28
102
117,342
200
Cash flow statement
Consolidated Financial Statements
Cash flow statement
of the Volkswagen Group for the period January 1 to December 31, 2018
€ million
2018
2017¹
Cash and cash equivalents at beginning of period
Earnings before tax
Income taxes paid
Depreciation and amortization of, and impairment losses on, intangible assets, property, plant and equipment,
and investment property²
Amortization of and impairment losses on capitalized development costs²
Impairment losses on equity investments²
Depreciation of and impairment losses on lease assets²
Gain/loss on disposal of noncurrent assets and equity investments
Share of the result of equity-accounted investments
Other noncash expense/income
Change in inventories
Change in receivables (excluding financial services)
Change in liabilities (excluding financial liabilities)
Change in provisions
Change in lease assets
Change in financial services receivables
Cash flows from operating activities
Investments in intangible assets (excluding development costs), property, plant and equipment, and investment property
Additions to capitalized development costs
Acquisition of subsidiaries
Acquisition of other equity investments
Disposal of subsidiaries
Disposal of other equity investments
Proceeds from disposal of intangible assets, property, plant and equipment, and investment property
Change in investments in securities
Change in loans and time deposits
Cash flows from investing activities
Capital contributions/capital redemptions
Dividends paid
Capital transactions with noncontrolling interest shareholders
Proceeds from issuance of bonds
Repayments of bonds
Changes in other financial liabilities
Lease payments
Cash flows from financing activities
Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents at end of period
Cash and cash equivalents at end of period
Securities, loans and time deposits
Gross liquidity
Total third-party borrowings
Net liquidity
1 Prior-year figures adjusted (see disclosures on IFRS 9).
2 Net of impairment reversals.
18,038
15,643
–3,804
11,034
3,668
170
7,689
98
244
347
–5,372
–6,400
3,645
–762
–11,647
–7,282
7,272
–13,729
–5,234
–470
–420
–26
210
282
–1,378
–826
–21,590
1,491
–2,375
–28
35,308
–15,290
5,488
–29
24,566
–173
10,075
28,113
18,833
13,673
–3,664
10,562
3,734
136
7,734
–25
274
–240
–4,198
–1,660
5,302
–9,443
–11,478
–11,891
–1,185
–13,052
–5,260
–277
–561
496
24
411
1,376
335
–16,508
3,473
–1,332
–
30,279
–17,877
3,109
–28
17,625
–727
–796
18,038
28,113
28,036
56,148
–190,883
–134,735
18,038
26,291
44,329
–163,472
–119,143
Explanatory notes on the cash flow statement are presented in the section relating to the cash flow statement.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
201
Notes to the Consolidated
Financial Statements
of the Volkswagen Group as of December 31, 2018
Basis of presentation
Volkswagen AG is domiciled in Wolfsburg, Germany, and entered in the commercial register at the Braunschweig
Local Court under No. HRB100484. The fiscal year corresponds to the calendar year.
In accordance with Regulation No. 1606/2002 of the European Parliament and of the Council, Volks-
wagen AG prepared its consolidated financial statements for 2018 in compliance with the International Finan-
cial Reporting Standards (IFRSs), as adopted by the European Union. We have complied with all the IFRSs adopt-
ed by the EU and required to be applied.
The accounting policies applied in the previous year were retained, with the exception of the changes due to
the new or amended standards.
In addition, we have complied with all the provisions of German commercial law that we are also required
to apply, as well as with the German Corporate Governance Code. For information on notices and disclosures of
changes regarding the ownership of voting rights in Volkswagen AG in accordance with the Wertpapierhandels-
gesetz (WpHG – German Securities Trading Act), please refer to the annual financial statements of
Volkswagen AG.
The consolidated financial statements were prepared in euros. Unless otherwise stated, all amounts are given
in millions of euros (€ million).
All figures shown are rounded, so minor discrepancies may arise from addition of these amounts.
The income statement was prepared using the internationally accepted cost of sales method.
Preparation of the consolidated financial statements in accordance with the above-mentioned standards
requires management to make estimates that affect the reported amounts of certain items in the consolidated
balance sheet and in the consolidated income statement, as well as the related disclosure of contingent assets
and liabilities. The consolidated financial statements present fairly the net assets, financial position and results
of operations as well as the cash flows of the Volkswagen Group.
The Board of Management completed preparation of the consolidated financial statements on February 22,
2019. On that date, the period ended in which adjusting events after the reporting period are recognized.
202
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Effects of new and amended IFRSs
Volkswagen AG has applied all accounting pronouncements adopted by the EU and effective for periods begin-
ning in fiscal year 2018.
Amendments to IAS 40 (Investment Property) have been applicable since January 1, 2018; they clarify when a
property is transferred to or from investment property and thus the scope of IAS 40.
In addition, amendments to IFRS 1 and IAS 28 are applicable, which the International Accounting Standards
Board issued as part of the improvements to International Financial Reporting Standards (Annual Improvement
Project 2016). In IFRS 1 (First-time Adoption of IFRSs), short-term exemptions for first-time adopters of the IFRSs
have been deleted. In IAS 28 (Investments in Associates and Joint Ventures), guidance on investment entities has
been clarified.
In addition, IFRS 2 (Share-based Payment) was amended. These amendments relate to the clarification of how
transactions with share-based payment are classified and measured.
Moreover, amendments to IFRS 4 (Insurance Contracts) have come into effect, which reduce the impact of the
different initial application dates of IFRS 9 and IFRS 17.
IFRIC 22 (Foreign Currency Transactions and Advance Consideration) also applies; this interpretation clarifies
the exchange rates to be used in foreign currency transactions with advance consideration.
The amendments referred to above do not materially affect the Volkswagen Group’s net assets, financial
position and results of operations.
I F R S 9 – F I N A N C I A L I N ST R U M E N T S
IFRS 9 changes the accounting requirements for classifying and measuring financial assets, for impairment of
financial assets, and for hedge accounting.
Financial assets are classified and measured on the basis of the entity’s business model and the characteris-
tics of the financial asset’s cash flows. A financial asset is initially measured either “at amortized cost”, “at fair
value through other comprehensive income”, or “at fair value through profit or loss”. The classification and
measurement of financial liabilities under IFRS 9 are largely unchanged compared with the accounting re-
quirements of IAS 39.
The basis for measuring impairment losses and recognizing loss allowances switched from an incurred
credit loss model to an expected credit loss model. The change in measurement method leads to an increase in
the loss allowance. The increase in the loss allowance results firstly from the requirement to recognize a loss
allowance even for financial assets not classified as non-performing and whose credit risk has not increased
significantly since initial recognition. Secondly, the increase results from the requirement to recognize loss
allowances on the basis of the entire expected remaining life of the contractual asset for financial assets for
which there has been a significant increase in credit risk since initial recognition.
In the case of hedge accounting, IFRS 9 contains both extended designation options and the need to
implement more complex recognition and measurement methods. In addition, IFRS 9 also eliminates the
quantitative limits for effectiveness measurement.
Furthermore, IFRS 9 has an impact on the entity’s reclassification practice. Depending on market trends,
there is an expectation that operating profit or loss will be affected by hedging transactions to a greater extent.
Due to the retrospective application of the guidance on designating options, the prior-year figures were adjusted.
This resulted in an effect of €– 0.2 billion on earnings after tax in fiscal year 2017.
This also results in far more extensive disclosures in the notes.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
203
The tables below show the main effects of the new accounting rules under IFRS 9 on the classification and
measurement of financial assets, the impairment of financial assets and hedge accounting.
For the class of derivatives in hedge accounting, IFRS 9 did not result in any reclassifications from or to
other classes.
A D J U ST M E N T S T O B A L A N C E S H E E T A M O U N T S A S O F J A N U A R Y 1 , 2 0 1 8 A S A R E S U LT O F I F R S 9
€ million
Assets
Noncurrent assets
Financial services receivables
Investments, equity-accounted
investments and other equity
investments, other receivables and
financial assets
Current assets
Financial services receivables
Other receivables and financial assets
Marketable securities
Cash, cash equivalents and time
deposits
Equity and liabilities
Equity
Total Equity
Noncurrent liabilities
Other liabilities
Current liabilities
Other liabilities
D E C . 3 1 , 2 0 1 7
Before adjustments
Adjustments
J A N . 1 , 2 0 1 8
After adjustments
73,249
30,916
53,145
32,040
15,939
18,457
–173
52
–122
–206
2
–2
73,076
30,967
53,023
31,834
15,941
18,456
109,077
–391
108,687
38,368
51,705
–67
7
38,302
51,712
In addition to the changes described above, the new rules on the recognition of loss allowances had an impact
on the measurement of lease assets. This resulted in an adjustment of €43 million (of which €35 million
recognized in lease assets and €7 million in inventories). This transition effect, net of deferred taxes, was recog-
nized directly in equity.
204
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
R E C O N C I L I AT I O N O F T H E C L A S S E S O F F I N A N C I A L A S S E T S A N D F I N A N C I A L L I A B I L I T I E S M E A S U R E D AT F A I R VA L U E
F R O M I A S 3 9 T O I F R S 9 A S O F J A N U A R Y 1 , 2 0 1 8
T R A N S F E R S
MEASURED AT FAIR VALUE
IAS 39
FROM MEASURED AT
AMORTIZED COST
TO MEASURED AT
AMORTIZED COST
MEASURED AT FAIR VALUE
IFRS 9
Carrying amount
Dec. 31, 2017
Fair value
Dec. 31, 2017
Fair value
Dec. 31, 2017
Carrying amount
Jan. 1, 2018
–
243
–
776
–
–
936
15,939
–
–
774
–
–
–
766
–
–
533
–
44
0
5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
243
533
776
44
0
941
79
15,861
–
–
–
–
–
–
–
–
–
774
–
–
–
766
€ million
Noncurrent assets
Equity-accounted investments
Other equity investments
Financial services receivables
Other financial assets
Current assets
Trade receivables
Financial services receivables
Other financial assets
Marketable securities
Cash, cash equivalents and time
deposits
Noncurrent liabilities
Noncurrent financial liabilities
Other noncurrent financial liabilities
Current liabilities
Put options and compensation
rights granted to noncontrolling
interest shareholders
Current financial liabilities
Trade payables
Other current financial liabilities
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
205
R E C O N C I L I AT I O N O F T H E C L A S S E S O F F I N A N C I A L A S S E T S A N D F I N A N C I A L L I A B I L I T I E S M E A S U R E D AT A M O R T I Z E D C O S T
F R O M I A S 3 9 T O I F R S 9 A S O F J A N U A R Y 1 , 2 0 1 8
T R A N S F E R S
MEASURED AT
AMORTIZED COST
IAS 39
Carrying
amount
Dec. 31,
2017
Fair value
Dec. 31,
2017
Fair value
Dec. 31,
2017
FROM MEASURED AT
FAIR VALUE
Carrying
amount
adjust-
ment
Jan. 1,
2018
Provision
for credit
risks ad-
justment
Jan. 1,
2018
TO MEASURED AT
FAIR VALUE
MEASURED AT
AMORTIZED COST
IFRS 9
Carrying
amount
Jan. 1,
2018
Carrying
amount
Dec. 31,
2017
Fair value
Dec. 31,
2017
Carrying
amount
Jan. 1,
2018
Fair value
Jan. 1,
2018
€ million
Noncurrent assets
Equity-accounted
investments
Other equity investments
Financial services
receivables
–
–
–
–
43,096
44,093
Other financial assets
4,364
4,391
Current assets
Trade receivables
Financial services
receivables
13,357
13,357
37,142
37,142
Other financial assets
9,153
9,153
Marketable securities
–
–
Cash, cash equivalents and
time deposits
18,457
18,457
Noncurrent liabilities
Noncurrent financial
liabilities
Other noncurrent
financial liabilities
Current liabilities
Put options and
compensation rights
granted to noncontrolling
interest shareholders
Current financial liabilities
Trade payables
Other current
financial liabilities
81,200
82,108
1,630
1,633
3,795
81,793
23,046
3,811
81,793
23,046
7,358
7,358
–
–
–
–
–
–
–
79
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
78
–
–
–
–
–
–
–
–
–
533
–
–
–
–
–
–
–
533
42,563
43,560
–
4,364
4,391
44
44
13,313
13,313
0
5
–
–
–
–
–
–
–
–
0
5
–
–
–
–
–
–
–
–
37,142
37,142
9,148
9,148
78
78
18,457
18,457
81,200
82,108
1,630
1,633
3,795
81,793
23,046
3,811
81,793
23,046
7,358
7,358
The categories of financial instruments have been added as part of the implementation of IFRS 9 (see the sec-
tion on “Accounting policies”). The principal movement in this context was the reclassification of lease receiv-
ables and liabilities in the “measured at amortized cost” category to “not allocated to any measurement category”.
Prior-year values under financial services receivables and financial liabilities have been restated. The carrying
amount of lease receivables was €49,166 million (previous year €46,156 million) and their fair value (fair value
hierarchy level 3) was €49,791 million (previous year €46,959 million). The carrying amount of lease liabilities
was €449 million (previous year €479 million) and their fair value (fair value hierarchy level 2) was €466 million
(previous year €510 million).
206
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
R E C O N C I L I AT I O N O F T H E P R O V I S I O N F O R C R E D I T R I S K S I N R E S P E C T O F F I N A N C I A L A S S E T S
F R O M I A S 3 9 T O I F R S 9 A S O F J A N U A R Y 1 , 2 0 1 8
€ million
To financial assets measured at fair value through
profit or loss IFRS 9
Dec. 31, 2017
Adjustments
Jan. 1, 2018
To financial assets measured at fair value through
other comprehensive income IFRS 9
(equity instruments)
Dec. 31, 2017
Adjustments
Jan. 1, 2018
To financial assets measured at fair value through
other comprehensive income IFRS 9
(debt instruments)
Dec. 31, 2017
Adjustments
Jan. 1, 2018
To financial assets measured at amortized cost
IFRS 9
Dec. 31, 2017
Adjustments
Jan. 1, 2018
To lease receivables
Dec. 31, 2017
Adjustments
Jan. 1, 2018
To assets IFRS 15
Dec. 31, 2017
Adjustments
Jan. 1, 2018
To credit commitments
Dec. 31, 2017
Adjustments
Jan. 1, 2018
To financial guarantees
Dec. 31, 2017
Adjustments
Jan. 1, 2018
Total Jan. 1, 2018
From financial assets
measured at fair
value through other
comprehensive income
IAS 39
From financial assets
measured at
amortized cost
IAS 39
No measurement
category under
IAS 39
Total
63
–63
–
333
–333
–
–
2
2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2
–
–
–
–
–
–
–
–
–
3,046
318
3,364
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
982
238
1,221
25
3
29
–
11
11
–
5
5
63
–63
–
333
–333
–
–
2
2
3,046
318
3,364
982
238
1,221
25
3
29
–
11
11
–
5
5
3,364
1,266
4,631
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
207
R E C O N C I L I AT I O N O F T H E C A R R Y I N G A M O U N T S O F F I N A N C I A L A S S E T S M E A S U R E D AT F A I R VA L U E T H R O U G H
P R O F I T O R L O S S F R O M I A S 3 9 T O I F R S 9
€ million
Carrying
amount IAS 39
Dec. 31, 2017
Reclassifications
Adjustments
IFRS 9
Carrying amount
IFRS 9
Jan. 1, 2018
Change in
retained earnings
Jan. 1, 2018
Financial assets measured at fair value through
profit or loss IAS 39
1,712
Additions
Available for sale financial assets IAS 39
Financial assets measured at amortized cost
IAS 39
Deductions
Financial assets measured at amortized cost
IFRS 9
Financial assets measured at fair value through
other comprehensive income IFRS 9
Financial assets measured at fair value through
profit or loss IFRS 9
13,124
–230
12,894
–230
580
–
–
–9
–
–
571
–9
–
–
15,177
–
–
R E C O N C I L I AT I O N O F T H E C A R R Y I N G A M O U N T S O F F I N A N C I A L A S S E T S M E A S U R E D AT F A I R VA L U E T H R O U G H O T H E R
C O M P R E H E N S I V E I N C O M E F R O M I A S 3 9 TO I F R S 9
€ million
Carrying
amount IAS 39
Dec. 31, 2017
Reclassifications
Adjustments
IFRS 9
Carrying amount
IFRS 9
Jan. 1, 2018
Change in
retained earnings
Jan. 1, 2018
Available for sale financial assets IAS 39
16,182
Additions
Financial assets measured at amortized cost
IAS 39
Deductions
Financial assets measured at amortized cost
IFRS 9
Financial assets measured at fair value through
profit or loss IFRS 9
Financial assets measured at fair value through
other comprehensive income IFRS 9
5
79
13,124
–
–
–
5
79
13,124
2,984
–
–
–
208
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
R E C O N C I L I AT I O N O F T H E C A R R Y I N G A M O U N T S O F F I N A N C I A L A S S E T S M E A S U R E D AT A M O R T I Z E D C O ST
F R O M I A S 3 9 T O I F R S 9
€ million
Carrying amount
IAS 39
Dec. 31, 2017
Reclassifications
Adjustments
IFRS 9
Carrying amount
IFRS 9
Jan. 1, 2018
Change in
retained earnings
Jan. 1, 2018
Financial assets measured at amortized cost
IAS 39
125,550
Additions
Available for sale financial assets IAS 39
Deductions
Financial assets measured at fair value
through other comprehensive income IFRS 9
Financial assets measured at fair value
through profit or loss IFRS 9
Financial assets measured at amortized cost
IFRS 9
79
5
580
0
–
–
78
5
580
125,044
0
–
–
I F R S 1 5 – R E V E N U E F R O M CO N T R A C T S W I T H C U STO M E R S
IFRS 15 specifies new accounting rules for revenue recognition. The Volkswagen Group applies the modified
retrospective transition method. This did not result in material transition effects for the Volkswagen Group as
of January 1, 2018, because the existing approach used by the Volkswagen Group is already largely in line with
the new guidance.
In the MAN subgroup, sales revenue for certain types of contracts are recognized at a later point in time
than under the previous accounting treatment. Other provisions and other liabilities were adjusted accordingly.
The recognition of prepayments due but not yet transferred by the customer in the form of cash increased total
assets by €0.2 billion in the balance sheet as of January 1, 2018 compared with the previous year.
Starting in fiscal year 2018, certain items previously recognized in distribution expenses (in particular fi-
nancing cost subsidies granted to third parties) are allocated to sales allowances.
In addition, from 2018 onward, the reversal of provisions for sales allowances is no longer presented under
other operating income, but under sales revenue. As a result, an amount of €0.6 billion has been moved be-
tween other operating income and sales revenue.
To make the presentation more consistent and easier to compare, the way other income from the reversal of
provisions and accrued liabilities is reported was also adjusted in this context; these items were allocated to
those functional areas in which they were originally recognized. As a result, cost of sales declined in the report-
ing period because of income from the reversal of provisions and accrued liabilities of €2.5 billion (previous year:
€2.1 billion). In addition, distribution expenses were down by €0.5 billion (previous year: €0.7 billion) and
administrative expenses by €0.2 billion (previous year: €0.1 billion). There was a corresponding €3.3 billion
(previous year: €3.0 billion) decrease in other operating income.
In addition, it was established in connection with the introduction of IFRS 15 that certain sales programs in
certain countries should be allocated to sales allowances rather than distribution expenses. The prior-period
distribution expenses were therefore adjusted by €1.1 billion. There was a corresponding decrease in sales
revenue.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
209
New and amended IFRSs not applied
In its 2018 consolidated financial statements, Volkswagen AG did not apply the following accounting pro-
nouncements that have already been adopted by the IASB, but were not yet required to be applied for the fiscal
year.
Standard/Interpretation
Published
by the IASB
Application
mandatory1
Adopted by
the EU
Expected impact
IFRS 3
IFRS 9
IFRS 10
and IAS 28
Business Combinations:
Definition of a Business
Financial Instruments:
Prepayment Features with Negative
Compensation
Consolidated Financial Statements
and Investments in Associates and
Joint Ventures:
Sale or Contribution of Assets
between an Investor and its Associate
or Joint Venture
IFRS 16
Leases
IFRS 17
Insurance Contracts
Presentation of Financial Statements
and Accounting Policies, Changes in
Accounting Estimates and Errors:
Definition of Material
IAS 1 and
IAS 8
Employee Benefits:
Remeasurement on a Plan
Amendment, Curtailment or
Settlement
IAS 19
Investments in Associates and Joint
Ventures:
Long-term Interests
in Associates
and Joint Ventures
IAS 28
Annual improvements to
International Financial Reporting
Standards 20173
IFRIC 23
Uncertainty over Income Tax
Treatments
Oct. 22, 2018
Jan. 1, 2020
No
No material impact
Oct. 12, 2017
Jan. 1, 2019
Yes
None
Sep. 11, 2014 deferred2
Jan. 13, 2016
Jan. 1, 2019
May 18, 2017
Jan. 1, 2021
–
Yes
No
None
Described in detail below this table
No material impact
Oct. 31, 2018
Jan. 1, 2020
No
No material impact
Feb. 7, 2018
Jan. 1, 2019
No
No material impact
Oct. 12, 2017
Jan. 1, 2019
Yes
None
Dec. 12, 2017
Jan. 1, 2019
No
No material impact
Jun. 7, 2017
Jan. 1, 2019
Yes
No material impact
1 Effective date from Volkswagen AG’s perspective.
2 The IASB decided on December 15, 2015 to defer the effective date indefinitely.
3 Minor amendments to a number of IFRSs (IFRS 3, IFRS 11, IAS 12 and IAS 23).
210
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
I F R S 1 6 – L E A S E S
IFRS 16 amends the rules for lease accounting and replaces the previous IAS 17 standard and related interpreta-
tions.
The main objective of IFRS 16 is to recognize all leases. It establishes that lessees are no longer required to
classify their leases as either finance leases or operating leases. They will instead be required to recognize a
right-of-use asset and a lease liability for all leases in the balance sheet. The lease liability is measured on the
basis of the outstanding lease payments, discounted using the incremental borrowing rate, while the right-of-
use asset is always measured at the amount of the lease liability plus any initial direct costs. During the lease
term, the right-of-use asset must be depreciated and the lease liability adjusted using the effective interest
method and taking the lease payments into account. Exceptions will be made for short-term leases and leases
of low-value assets. For these cases, the Volkswagen Group will make use of the practical expedient provided for
in IFRS 16, and opt not to recognize a right-of-use asset or a lease liability arising from such lease agreements;
instead it will continue to recognize the lease payments as expenses in profit or loss.
Lessor accounting essentially follows the current guidance of IAS 17. In the future, lessors will continue to
classify their leases as finance leases or operating leases on the basis of the risks and rewards incidental to own-
ership of the leased asset.
As of January 1, 2019, the Volkswagen Group will for the first time account for leases in accordance with
IFRS 16, using the modified retrospective transition method. This requires the recognition of the lease liability at
the present value of the remaining lease payments, discounted using an incremental borrowing rate at the transi-
tion date. To simplify, the right-of-use assets are recognized in the amount of the corresponding lease liability,
adjusted for any prepaid or accrued lease payments. As a result of the first-time recognition of right-of-use assets
and lease liabilities in almost the same amounts, current estimates indicate that the balance sheet total will
increase by around 1%. The rise in financial liabilities will have a negative effect on the Volkswagen Group’s net
liquidity. No significant effect on equity is expected.
Unlike the previous procedure, under which all operating lease expenses were reported under operating
profit, the only items allocated to operating profit under IFRS 16 are depreciation charges on right-of-use assets.
Interest expense from adding interest on lease liabilities is reported in the financial result. Based on leases in
place as of January 1, 2019, current estimates indicate that there will be an improvement in operating profit by
an amount in the low three-digit million range.
The change in the way operating lease expenses are presented in the cash flow statement will result in a
slight improvement in cash flows from operating activities and a corresponding reduction in cash flows from
financing activities.
This standard also results in far more extensive disclosures in the notes.
Key events
On September 18, 2015, the US Environmental Protection Agency (EPA) publicly announced in a “Notice of
Violation” that irregularities in relation to nitrogen oxide (NOx) emissions had been discovered in emissions
tests on certain vehicles of Volkswagen Group with type 2.0 l diesel engines in the USA. In this context,
Volkswagen AG announced that noticeable discrepancies between the figures achieved in testing and in actual
road use had been identified in around eleven million vehicles worldwide with type EA 189 diesel engines. On
November 2, 2015, the EPA issued a “Notice of Violation” alleging that irregularities had also been discovered in
the software installed in US vehicles with type V6 3.0 l diesel engines.
In the months following publication of a study by the International Council on Clean Transportation in
May 2014, Volkswagen AG’s Powertrain Development department checked the test set-ups on which the study
was based for plausibility, confirming the unusually high NOx emissions from certain US vehicles with type EA
189 2.0 l diesel engines. The California Air Resources Board (CARB) – a part of the environmental regulatory
authority of California – was informed of this result, and, at the same time, an offer was made to recalibrate the
engine control unit software of type EA 189 diesel engines in the USA as part of a service measure that was
already planned in the USA. This measure was evaluated and adopted by the Ausschuss für Produktsicherheit
(APS – Product Safety Committee), which initiates necessary and appropriate measures to ensure the safety and
conformity of Volkswagen AG’s products that are placed in the market. There are no findings that an unlawful
“defeat device” under US law was disclosed to the APS as the cause of the discrepancies or to the persons
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
211
responsible for preparing the 2014 annual and consolidated financial statements. Instead, at the time the 2014
annual and consolidated financial statements were being prepared, the persons responsible for preparing the
2014 annual and consolidated financial statements remained under the impression that the issue could be
solved with comparatively little effort as part of a service measure.
In the course of the summer of 2015, however, it became successively apparent to individual members of
Volkswagen AG’s Board of Management that the cause of the discrepancies in the USA was a modification of
parts of the software of the engine control unit, which was later identified as an unlawful “defeat device” as
defined by US law. This culminated in the disclosure of a “defeat device” to EPA and CARB on September 3, 2015.
According to the assessment at that time of the responsible persons dealing with the matter, the scope of the
costs expected by the Volkswagen Group (recall costs, retrofitting costs and financial penalties) was not funda-
mentally dissimilar to that of previous cases involving other vehicle manufacturers, and, therefore, appeared to
be controllable overall with a view to the business activities of the Volkswagen Group. This assessment by the
Volkswagen Group was based, among other things, on the advice of a law firm engaged in the USA for approval
issues, according to which similar cases in the past were resolved amicably with the US authorities. The publica-
tion of the “Notice of Violation” by the EPA on September 18, 2015, which, especially at that time, came unex-
pectedly to the Board of Management, then presented the situation in an entirely different light.
Additional special items in connection with the diesel issue amounting to €3.2 billion (previous year:
€3.2 billion) were recognized in the reporting period. The main reasons for the expenses are the administrative
fine orders totaling €1.8 billion imposed by the Braunschweig public prosecutor and the Munich II public pros-
ecutor’s office in connection with the diesel issue, as well as higher legal risks and legal defense costs and an
increase in expenses for technical measures.
Apart from the above, there are no conclusive findings or assessments of facts available to the Board
of Management of Volkswagen AG that would suggest that a different assessment of the associated risks
(e.g. investor lawsuits) should have been made.
Further details can be found in the “Diesel Issue” section of the management report.
In the award proceedings regarding the appropriateness of the cash settlement and the right to compensation
for the noncontrolling interest shareholders of MAN SE, the Higher Regional Court in Munich made a final
decision at the end of June 2018, ruling that the right to annual compensation per share must be increased. The
cash settlement per share, raised in a first instance ruling by the First Regional Court in Munich, was confirmed.
In August 2018, the control and profit and loss transfer agreement with MAN SE was terminated by extraor-
dinary notice as of January 1, 2019.
Cash outflows for compensation payments and the acquisition of shares tendered amounted to €2.1 billion
in the period to December 31, 2018. There was a corresponding decline in the amount of “put options and
compensation rights granted to noncontrolling interest shareholders” reported in the balance sheet.
Further information can be found in the “Litigation” section.
Basis of consolidation
In addition to Volkswagen AG, the consolidated financial statements comprise all significant German and non-
German subsidiaries, including structured entities that are controlled directly or indirectly by Volkswagen AG.
This is the case if Volkswagen AG obtains power over the potential subsidiaries directly or indirectly from
voting rights or similar rights, is exposed, or has rights to, positive or negative variable returns from its in-
volvement with the subsidiaries, and is able to influence those returns. In the case of the structured entities
consolidated in the Volkswagen Group, Volkswagen is able to direct the material relevant activities remaining
after the change in the structure even if it is not invested in the structured entity concerned and is thus able to
influence the variable returns from its involvement. The structured entities are used primarily to enter into
asset-backed securities transactions to refinance the financial services business and to invest surplus liquidity
in special securities funds. Consolidation of subsidiaries begins at the first date on which control exists, and
ends when such control no longer exists.
212
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Subsidiaries whose business is dormant or insignificant, both individually and in the aggregate, for the fair
presentation of the net assets, financial position and results of operations as well as the cash flows of the
Volkswagen Group are not consolidated. They were carried in the consolidated financial statements at cost net
of any impairment losses and reversals of impairment losses required to be recognized.
Significant companies where Volkswagen AG is able, directly or indirectly, to significantly influence finan-
cial and operating policy decisions (associates), or that are directly or indirectly jointly controlled (joint ven-
tures), are accounted for using the equity method. Joint ventures also include companies in which the
Volkswagen Group holds the majority of voting rights, but whose articles of association or partnership agree-
ments stipulate that important decisions may only be resolved unanimously. Insignificant associates and joint
ventures are carried at cost net of any impairment losses and reversals of impairment losses required to be
recognized.
The composition of the Volkswagen Group is shown in the following table:
Volkswagen AG and consolidated subsidiaries
Germany
Abroad
Subsidiaries carried at cost
Germany
Abroad
Associates, joint ventures and other equity investments¹
Germany
Abroad
2018
2017
152
712
70
251
64
79
1,328
156
717
69
238
59
71
1,310
1 The prior-year figures were adjusted to reflect the number of joint ventures.
The list of all shareholdings that forms part of the annual financial statements of Volkswagen AG can be
downloaded from the electronic companies register at www.unternehmensregister.de and from www.volks-
wagenag.com/ir.
The following consolidated German subsidiaries with the legal form of a corporation or partnership meet
the criteria set out in section 264(3) or section 264b of the Handelsgesetzbuch (HGB – German Commercial
Code) due to their inclusion in the consolidated financial statements and have as far as possible exercised the
option not to publish annual financial statements:
> Audi Berlin GmbH, Berlin
> Audi Frankfurt GmbH, Frankfurt am Main
> Audi Hamburg GmbH, Hamburg
> Audi Hannover GmbH, Hanover
> Audi Leipzig GmbH, Leipzig
> Audi Stuttgart GmbH, Stuttgart
> Autostadt GmbH, Wolfsburg
> Bugatti Engineering GmbH, Wolfsburg
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
213
> Dr. Ing. h.c. F. Porsche AG, Stuttgart
> GETAS Verwaltung GmbH & Co. Objekt Augsburg KG, Pullach i. Isartal
> GETAS Verwaltung GmbH & Co. Objekt Heinrich-von-Buz-Straße KG, Pullach i. Isartal
> HABAMO Verwaltung GmbH & Co. Objekt Sterkrade KG, Pullach i. Isartal
> Haberl Beteiligungs-GmbH, Munich
> Karosseriewerk Porsche GmbH & Co. KG, Stuttgart
> MAHAG GmbH, Munich
> MAN Energy Solutions SE, Augsburg
> MOIA GmbH, Berlin
> Porsche Consulting GmbH, Bietigheim-Bissingen
> Porsche Deutschland GmbH, Bietigheim-Bissingen
> Porsche Dienstleistungs GmbH, Stuttgart
> Porsche Engineering Group GmbH, Weissach
> Porsche Engineering Services GmbH, Bietigheim-Bissingen
> Porsche Erste Beteiligungsgesellschaft mbH, Stuttgart
> Porsche Financial Services GmbH & Co. KG, Bietigheim-Bissingen
> Porsche Financial Services GmbH, Bietigheim-Bissingen
> Porsche Holding Stuttgart GmbH, Stuttgart
> Porsche Leipzig GmbH, Leipzig
> Porsche Lizenz- und Handelsgesellschaft mbH & Co. KG, Ludwigsburg
> Porsche Logistik GmbH, Stuttgart
> Porsche Niederlassung Berlin GmbH, Berlin
> Porsche Niederlassung Berlin-Potsdam GmbH, Kleinmachnow
> Porsche Niederlassung Hamburg GmbH, Hamburg
> Porsche Niederlassung Leipzig GmbH, Leipzig
> Porsche Niederlassung Stuttgart GmbH, Stuttgart
> Porsche Nordamerika Holding GmbH, Ludwigsburg
> Porsche Siebte Vermögensverwaltung GmbH, Wolfsburg
> Porsche Smart Mobility GmbH, Stuttgart
> Porsche Zentrum Hoppegarten GmbH, Stuttgart
> Raffay Versicherungsdienst GmbH, Hamburg
> SEAT Deutschland Niederlassung GmbH, Frankfurt am Main
> SKODA AUTO Deutschland GmbH, Weiterstadt
> TRATON SE, Munich (previously TRATON AG, Munich)
> TB Digital Services GmbH, Munich
> VfL Wolfsburg-Fußball GmbH, Wolfsburg
> VGRD GmbH, Wolfsburg
> Volkswagen AirService GmbH, Braunschweig
> Volkswagen Automobile Berlin GmbH, Berlin
> Volkswagen Automobile Chemnitz GmbH, Chemnitz
> Volkswagen Automobile Frankfurt GmbH, Frankfurt am Main
> Volkswagen Automobile Hamburg GmbH, Hamburg
> Volkswagen Automobile Hannover GmbH, Hanover
> VOLKSWAGEN Automobile Leipzig GmbH, Leipzig
> Volkswagen Automobile Region Hannover GmbH, Hanover
> Volkswagen Automobile Rhein-Neckar GmbH, Mannheim
> Volkswagen Automobile Stuttgart GmbH, Stuttgart
> Volkswagen Beteiligungsverwaltung GmbH, Wolfsburg
> Volkswagen Dritte Leasingobjekt GmbH, Braunschweig
> Volkswagen Erste Leasingobjekt GmbH, Braunschweig
> Volkswagen Fünfte Leasingobjekt GmbH, Braunschweig
> Volkswagen Gebrauchtfahrzeughandels und Service GmbH, Langenhagen
> Volkswagen Group IT Services GmbH, Wolfsburg
> Volkswagen Group Real Estate GmbH & Co. KG, Wolfsburg
214
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
> Volkswagen Group Services GmbH, Wolfsburg
> Volkswagen Immobilien GmbH, Wolfsburg
> Volkswagen Klassik GmbH, Wolfsburg
> Volkswagen Konzernlogistik GmbH & Co. OHG, Wolfsburg
> Volkswagen Original Teile Logistik GmbH & Co. KG, Baunatal
> Volkswagen Osnabrück GmbH, Osnabrück
> Volkswagen R GmbH, Wolfsburg
> Volkswagen Sachsen GmbH, Zwickau
> Volkswagen Sechste Leasingobjekt GmbH, Braunschweig
> Volkswagen Siebte Leasingobjekt GmbH, Braunschweig
> Volkswagen Vertriebsbetreuungsgesellschaft mbH, Chemnitz
> Volkswagen Vierte Leasingobjekt GmbH, Braunschweig
> Volkswagen Zubehör GmbH, Dreieich
> Volkswagen Zweite Leasingobjekt GmbH, Braunschweig
C O N S O L I D AT E D S U B S I D I A R I E S
Part of the PGA Group SAS, Paris, France, was sold by POFIN Financial Services Verwaltungs GmbH, Freilassing,
to the Emil Frey Group on June 1, 2017. The sale is in connection with the strategic development of Porsche
Holding Salzburg’s dealer network and the corresponding focus on dealerships exclusively selling Volkswagen
Group brand vehicles.
The transaction encompasses dealerships in Poland, the Netherlands, Belgium and in some cases also in
France. This had a positive effect of €0.8 billion on net liquidity and, taking into account the disposal of the
assets and liabilities, resulted in an insignificant income amount for the Volkswagen Group, which is reported
in other operating income.
Overall, the transaction led to the disposal of assets in the amount of €2.5 billion and liabilities in the
amount of €2.1 billion. The assets mainly consist of noncurrent leased assets (€0.6 billion) and inventories
(€1.0 billion). The liabilities principally comprise noncurrent and current other liabilities (€0.9 billion) and
trade payables (€0.7 billion).
The fiscal year’s changes in the consolidated Group are shown in the following table:
Number
Germany
Abroad
Initially consolidated
Subsidiaries previously carried at cost
Newly acquired subsidiaries
Newly formed subsidiaries
Deconsolidated
Mergers
Liquidations
Sales/other
4
–
1
5
3
6
–
9
26
–
9
35
18
8
14
40
The initial consolidation or deconsolidation of these subsidiaries, either individually or collectively, did not
have a significant effect on the presentation of the net assets, financial position and results of operations. The
unconsolidated structured entities are immaterial from a Group perspective. In particular, they do not give rise
to any significant risks to the Group.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
215
I N V E ST M E N T S I N A S S O C I AT E S
From a Group perspective, the associates Sinotruk (Hong Kong) Ltd., Hongkong, China (Sinotruk), Bertrandt AG,
Ehningen (Bertrandt), There Holding B.V., Rijswijk, the Netherlands (There Holding), and Navistar International
Corporation, Lisle, USA (Navistar), were material at the reporting date.
Sinotruk
Sinotruk is one of the largest truck manufacturers in the Chinese market. There is an agreement in place
between Group companies and Sinotruk regarding a long-term strategic partnership, under which the Group
participates in the local market. In addition to the partnership with Sinotruk in the volume segment, exports of
MAN vehicles to China are also helping to expand access to the small, but fast-growing premium truck market.
Sinotruk’s principal place of business is in Hongkong, China.
As of December 31, 2018, the quoted market price of the shares in Sinotruk amounted to €908 million (pre-
vious year: €648 million).
Bertrandt
Bertrandt is an engineering partner to companies in the automotive and aviation industry. Its portfolio of
services ranges from developing individual components through complex modules to end-to-end solutions.
Bertrandt’s principal place of business is in Ehningen.
As of December 31, 2018, the quoted market price of the shares in Bertrandt amounted to €201 million
(previous year: €299 million).
There Holding
The Audi Subgroup, the BMW Group and Daimler AG each held a 33.3 % interest in There Holding B.V., Rijswijk,
the Netherlands, which was established in 2015. In December 2016, There Holding B.V. signed a contract with
Intel Holdings B.V., Schiphol-Rijk, the Netherlands, for the sale of 15 % of the shares in HERE International B.V.,
Rijswijk, the Netherlands. The transaction with Intel Holdings B.V. was completed on January 31, 2017. This
resulted in a loss of control within the meaning of IFRS 10 at the There Holding B.V. level. The deconsolidation
gave rise to a proportionate effect for the Volkswagen Group of €183 million, which was shown in the share of
profits or losses of equity-accounted investments in the previous year. Since a significant influence continues
to exist, HERE International B.V. is included in the financial statement of There Holding B.V. as an associated
company using the equity method. There was no change in the Volkswagen Group’s participating interest in
There Holding B.V. as a result of the sale.
In December 2017, agreements for the sale of shares in There Holding B.V. were signed with Robert Bosch
Investment Nederland B.V., Boxtel, the Netherlands and Continental Automotive Holding Netherlands B.V.,
Maastricht, the Netherlands. In this process, Robert Bosch Investment Nederland B.V. and Continental Automo-
tive Holding Netherlands B.V. acquired an interest of 5.9 % each in There Holding B.V. The transactions were
completed on February 28, 2018. The Audi Subgroup, the BMW Group and Daimler AG sold the equivalent
number of shares. As a result, the interest held by the Volkswagen Group declined to 29.4 % as of this date. There
was no material effect on financial position or financial performance.
A capital reduction was carried out at There Holding B.V. in February 2018. The share attributable to the
Volkswagen Group amounted to €96 million. In addition, in June 2018 and November 2018, There Holding B.V.
implemented capital increases in which the Volkswagen Group participated. As a result, the shares accounted for
using the equity method increased by €62 million and the participating interest was 29.6 % as of December 31, 2018.
Navistar
Within the framework of a capital increase, TRATON SE, a wholly owned subsidiary of Volkswagen AG, acquired
16.6 % of the shares in Navistar, paying USD 15.76 per share in 2017. The purchase price came to €0.3 billion.
Due to Volkswagen’s representation on the Board of Directors of Navistar and the agreed cooperation, the
investment in Navistar is reported as an equity-accounted investment in the consolidated financial state-
ments. As of December 31, 2018, an interest of 16.8 % was held in Navistar, and the quoted market price of the
shares in Navistar amounted to €377 million (previous year: €595 million).
216
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
S U M M A R I Z E D F I N A N C I A L I N F O R M AT I O N O N M AT E R I A L A S S O C I AT E S O N A 1 0 0 % B A S I S
€ million
2018
Equity interest (%)
Noncurrent assets
Current assets
Noncurrent liabilities
Current liabilities
Net assets
Sales revenue
Earnings after tax from continuing operations
Earnings after tax from discontinued operations
Other comprehensive income
Total comprehensive income
Dividends received4
2017
Equity interest (%)
Noncurrent assets
Current assets
Noncurrent liabilities
Current liabilities
Net assets
Sales revenue
Earnings after tax from continuing operations
Earnings after tax from discontinued operations
Other comprehensive income
Total comprehensive income
Dividends received
Sinotruk1
Bertrandt2
There Holding
Navistar3
25
2,239
6,461
54
5,250
3,395
8,047
558
–
0
558
50
25
2,086
5,449
55
4,420
3,060
5,961
260
–
13
272
6
29
586
469
306
167
583
1,020
25
–
0
25
7
29
600
478
338
157
583
992
21
–
0
21
7
30
1,763
2
–
1
17
1,846
4,528
6,478
3,356
1,764
–3,461
–
–351
–
–7
–358
–
33
1,906
289
–
0
8,625
310
–
245
555
–
17
1,648
3,470
5,893
3,041
2,195
–3,816
71
–151
513
2
364
–
5,507
95
1
341
437
–
1 Balance sheet amounts refer to the June 30 reporting date and income statement amounts refer to the period from July 1 to June 30.
2 Balance sheet amounts refer to the September 30 reporting date and income statement amounts refer to the period from October 1 to September 30.
3 Balance sheet amounts refer to the October 31, 2018 reporting date. The income statement amounts for fiscal year 2018 refer to the period from
November 1, 2017 to October 31, 2018, while those for fiscal year 2017 refer to the period from March 1, 2017 to October 31, 2017.
4 Proportionate dividends are shown net of withholding tax.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
217
R E C O N C I L I AT I O N O F T H E F I N A N C I A L I N F O R M AT I O N TO T H E C A R R Y I N G A M O U N T O F T H E E Q U I T Y - A C C O U N T E D
I N V E ST M E N T S
€ million
2018
Net assets at January 1²
Profit or loss
Other comprehensive income
Changes in reserves
Foreign exchange differences
Dividends³
Net assets at December 31
Proportionate equity
Consolidation/Goodwill/Others
Carrying amount of equity-accounted investments
2017
Net assets at January 1
Profit or loss
Other comprehensive income
Changes in reserves
Foreign exchange differences
Dividends
Net assets at December 31
Proportionate equity
Consolidation/Goodwill/Others
Carrying amount of equity-accounted investments
Sinotruk
Bertrandt
There Holding
Navistar1
3,060
558
0
–3
13
–232
3,395
849
–402
447
2,956
260
13
1
–135
–34
3,060
765
–387
378
583
25
0
–
–
–25
583
168
163
331
587
21
0
–
–
–25
583
168
163
331
2,209
–351
–7
–87
–
–
1,764
522
–
522
1,832
362
2
–
–
–
2,195
646
–
646
–3,816
310
245
13
–191
–22
–3,461
–582
1,012
430
–4,270
96
341
11
7
–
–3,816
–644
946
301
1 Reconciliation presented for Navistar in 2017 as of March 1, 2017, the date of the first time inclusion of Navistar.
2 Value in the opening balance of There Holding adjusted due to IFRS 15.
3 Dividends are shown before withholding tax.
S U M M A R I Z E D F I N A N C I A L I N F O R M AT I O N O N I N D I V I D U A L LY I M M AT E R I A L A S S O C I AT E S O N T H E B A S I S O F T H E
V O L K SWA G E N G R O U P ’ S P R O P O R T I O N AT E I N T E R E ST
€ million
2018
2017
Earnings after tax from continuing operations
Earnings after tax from discontinued operations
Other comprehensive income
Total comprehensive income
Carrying amount of equity-accounted investments
–20
–
1
–20
332
–29
–
0
–29
90
There were no unrecognized losses relating to investments in associates. Furthermore, there were also no con-
tingent liabilities or financial guarantees relating to associates.
218
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
I N T E R E ST S I N J O I N T V E N T U R E S
From a Group perspective, the joint ventures FAW-Volkswagen Automotive Company Ltd., Changchun, China,
SAIC-Volkswagen Automotive Company Ltd., Shanghai, China, and SAIC-Volkswagen Sales Company Ltd.,
Shanghai, China, were material at the reporting date due to their size.
FAW-Volkswagen Automotive Company
FAW-Volkswagen Automotive Company develops, produces and sells passenger cars. There is an agreement in
place between Group companies and the joint venture partner China FAW Corporation Limited regarding a
long-term strategic partnership. The principal place of business is in Changchun, China.
SAIC-Volkswagen Automotive Company
SAIC-Volkswagen Automotive Company develops and produces passenger cars. There is an agreement in place
between Group companies and the joint venture partner Shanghai Automotive Industry Corporation regarding
a long-term strategic partnership. The principal place of business is in Shanghai, China.
SAIC-Volkswagen Sales Company
SAIC-Volkswagen Sales Company sells passenger cars for SAIC-Volkswagen Automotive Company. There is an
agreement in place between Group companies and the joint venture partner Shanghai Automotive Industry
Corporation regarding a long-term strategic partnership. The principal place of business is in Shanghai, China.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
219
S U M M A R I Z E D F I N A N C I A L I N F O R M AT I O N O N T H E M AT E R I A L J O I N T V E N T U R E S O N A 1 0 0 % B A S I S
€ million
2018
Equity interest (%)
Noncurrent assets
Current assets
of which: cash, cash equivalents and time deposits
Noncurrent liabilities
of which: financial liabilities2
Current liabilities
of which: financial liabilities2
Net assets
Sales revenue
Depreciation and amortization
Interest income
Interest expenses
Earnings before tax from continuing operations
Income tax expense
Earnings after tax from continuing operations
Earnings after tax from discontinued operations
Other comprehensive income
Total comprehensive income
Dividends received3
2017
Equity interest (%)
Noncurrent assets
Current assets
of which: cash, cash equivalents and time deposits
Noncurrent liabilities
of which: financial liabilities
Current liabilities
of which: financial liabilities
Net assets
Sales revenue
Depreciation and amortization
Interest income
Interest expenses
Earnings before tax from continuing operations
Income tax expense
Earnings after tax from continuing operations
Earnings after tax from discontinued operations
Other comprehensive income
Total comprehensive income
Dividends received
FAW-Volkswagen
Automotive
Company
SAIC-Volkswagen
Automotive
Company1
SAIC-Volkswagen
Sales Company
40
10,651
10,903
3,764
1,260
–
12,936
–
7,358
41,607
1,335
123
–
4,851
1,186
3,665
–
47
3,712
1,209
40
10,071
13,018
7,385
1,470
–
14,768
–
6,851
40,828
1,212
72
–
4,907
1,369
3,538
–
–49
3,489
1,502
50
8,580
6,689
4,412
1,205
–
8,526
4
5,538
28,863
1,479
64
1
4,588
1,040
3,548
–
1
3,549
1,626
50
8,266
9,304
6,198
0
–
12,157
6
5,414
28,767
1,279
36
35
4,555
1,086
3,469
10
–5
3,473
1,702
30
671
3,680
206
110
–
3,692
–
549
33,212
8
5
–
665
167
498
–
–
498
148
30
626
4,383
214
61
–
4,402
–
546
33,398
6
–
–
669
168
501
–
–
501
137
1 SAIC-Volkswagen Sales Company sells passenger cars for SAIC-Volkswagen Automotive Company. Therefore, the sales revenue reported for SAIC-Volkswagen
Automotive Company was mostly generated from its business with SAIC-Volkswagen Sales Company.
2 Excluding trade liabilities.
3 Proportionate dividends are shown net of withholding tax.
220
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
R E C O N C I L I AT I O N O F T H E F I N A N C I A L I N F O R M AT I O N TO T H E C A R R Y I N G A M O U N T O F T H E E Q U I T Y - A C C O U N T E D
I N V E ST M E N T S
FAW-Volkswagen
Automotive
Company
SAIC-Volkswagen
Automotive
Company
SAIC-Volkswagen
Sales Company
€ million
2018
Net assets at January 1¹
Profit or loss
Other comprehensive income
Changes in share capital
Changes in reserves
Foreign exchange differences
Dividends²
Net assets at December 31
Proportionate equity
Consolidation/Goodwill/Others
Carrying amount of equity-accounted investments
2017
Net assets at January 1
Profit or loss
Other comprehensive income
Changes in share capital
Changes in reserves
Foreign exchange differences
Dividends
Net assets at December 31
Proportionate equity
Consolidation/Goodwill/Others
Carrying amount of equity-accounted investments
1 Values in the opening balance adjusted due to IFRS 9.
2 Dividends are shown before withholding tax.
6,851
3,665
47
–
–
68
–3,273
7,358
2,943
–593
2,350
7,466
3,538
–49
–
–
–350
–3,755
6,851
2,740
–456
2,284
5,405
3,548
1
–
–
–23
–3,393
5,538
2,769
–851
1,918
5,579
3,479
–5
–
–
–236
–3,403
5,414
2,707
–576
2,131
546
498
–
–
–
–1
–494
549
165
–
165
520
501
–
–
–
–18
–458
546
164
–
164
2017
290
10
0
299
1,881
S U M M A R I Z E D F I N A N C I A L I N F O R M AT I O N O N I N D I V I D U A L LY I M M AT E R I A L J O I N T V E N T U R E S O N T H E B A S I S O F T H E
V O L K SWA G E N G R O U P ’ S P R O P O R T I O N AT E I N T E R E ST
€ million
Earnings after tax from continuing operations
Earnings after tax from discontinued operations
Other comprehensive income
Total comprehensive income
Carrying amount of equity-accounted investments
2018
319
–
–2
317
1,939
There were no unrecognized losses relating to interests in joint ventures. Contingent liabilities to joint ventures
amounted to €183 million (previous year: €186 million) and financial guarantees to joint ventures amounted
to €146 million (previous year: €82 million). Cash funds of €268 million (previous year: €260 million) are de-
posited as collateral for asset-backed securities transactions and are therefore not available to the Volkswagen
Group.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
221
I F R S 5 – N O N - C U R R E N T A S S E T S H E L D F O R S A L E
As of December 31, 2017, assets in a total amount of €115 million were classified as assets “held for sale” and
reported in a separate line item of the balance sheet in accordance with IFRS 5. The assets “held for sale” were
measured at the lower of carrying amount and fair value, less expected costs to sell. The assets were no longer
depreciated or amortized. The amount reported was mainly attributable to the sale of property, plant and
equipment (€24 million) and the sale of shares in There Holding B.V. (€86 million). The sales did not have any
material impact on the Volkswagen Group’s results of operations or net liquidity.
Consolidation methods
The assets and liabilities of the German and foreign companies included in the consolidated financial state-
ments are recognized in accordance with the uniform accounting policies used within the Volkswagen Group.
In the case of companies accounted for using the equity method, the same accounting policies are applied to
determine the proportionate equity, based on the most recent audited annual financial statements of each
company.
In the case of subsidiaries consolidated for the first time, assets and liabilities are measured at their fair val-
ue at the date of acquisition. Their carrying amounts are adjusted in subsequent years. Goodwill arises when
the purchase price of the investment exceeds the fair value of identifiable net assets. Goodwill is tested for
impairment once a year to determine whether its carrying amount is recoverable. If the carrying amount of
goodwill is higher than the recoverable amount, an impairment loss must be recognized. If this is not the case,
there is no change in the carrying amount of goodwill compared with the previous year. If the purchase price of
the investment is less than the identifiable net assets, the difference is recognized in the income statement in
the year of acquisition. Goodwill is accounted for at the subsidiaries in the functional currency of those subsid-
iaries. Any difference that arises from the acquisition of additional shares of an already consolidated subsidiary
is taken directly to equity. Unless otherwise stated, the proportionate equity directly attributable to noncontrol-
ling interests is determined at the acquisition date as the share of the fair value of the assets (excluding good-
will) and liabilities attributable to them. Contingent consideration is measured at fair value at the acquisition
date. Subsequent changes in the fair value of contingent consideration do not generally result in the adjust-
ment of the acquisition-date measurement. Acquisition-related costs that are not equity transaction costs are
not added to the purchase price, but instead recognized as expenses in the period in which they are incurred.
The consolidation process involves adjusting the items in the separate financial statements of the parent
and its subsidiaries and presenting them as if they were those of a single economic entity. Intragroup assets,
liabilities, equity, income, expenses and cash flows are eliminated in full. Intercompany profits or losses are
eliminated in Group inventories and noncurrent assets. Deferred taxes are recognized for consolidation
adjustments, and deferred tax assets and liabilities are offset where taxes are levied by the same tax authority
and have the same maturity.
222
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Currency translation
Transactions in foreign currencies are translated in the single-entity financial statements of Volkswagen AG
and its consolidated subsidiaries at the rates prevailing at the transaction date. Foreign currency monetary
items are recorded in the balance sheet using the middle rate at the closing date. Foreign exchange gains and
losses are recognized in the income statement. This does not apply to foreign exchange differences from loans
receivable that represent part of a net investment in a foreign operation. The financial statements of foreign
companies are translated into euros using the functional currency concept, under which asset and liability
items are translated at the closing rate. With the exception of income and expenses recognized directly in equi-
ty, equity is translated at historical rates. The resulting foreign exchange differences are recognized in other
comprehensive income until disposal of the subsidiary concerned, and are presented as a separate item in
equity.
Income statement items are translated into euros at weighted average rates.
The rates applied are presented in the following table:
Argentina
Australia
Brazil
Canada
Czech Republic
India
Japan
Mexico
People’s Republic of China
Poland
Republic of Korea
Russia
South Africa
Sweden
United Kingdom
USA
B A L A N C E S H E E T M I D D L E R A T E
I N C O M E S T A T E M E N T
O N D E C E M B E R 3 1
A V E R A G E R A T E
2018
2017
2018
2017
43.15687
22.99203
32.89363
18.72636
1.62240
4.44485
1.55930
25.72450
79.90650
1.53285
3.97065
1.50260
25.57900
76.56700
1.58021
4.30729
1.53032
25.64308
80.71466
1.47300
3.60471
1.46444
26.32920
73.50146
125.91000
134.87000
130.40158
126.66763
22.52035
23.61420
22.71496
21.33175
7.87725
4.29780
7.80085
4.17490
7.80766
4.26098
7.62688
4.25727
1,276.90000
1,278.22000
1,299.41384
1,275.94974
79.83765
16.46690
10.25070
0.89690
1.14525
69.33520
14.75715
9.83140
0.88730
1.19875
74.08214
15.62243
10.25830
0.88476
1.18156
65.88875
15.04543
9.63700
0.87626
1.12933
€1 =
ARS
AUD
BRL
CAD
CZK
INR
JPY
MXN
CNY
PLN
KRW
RUB
ZAR
SEK
GBP
USD
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
223
Accounting policies
M E A S U R E M E N T P R I N C I P L E S
With certain exceptions, such as financial instruments measured at fair value and provisions for pensions and
other post-employment benefits, items in the Volkswagen Group are accounted for under the historical cost
convention. The methods used to measure the individual items are explained in more detail below.
I N TA N G I B L E A S S E T S
Purchased intangible assets are recognized at cost and amortized over their useful life using the straight-line
method. This relates in particular to software, which is normally amortized over three years.
In accordance with IAS 38, research costs are recognized as expenses when incurred.
Development costs for future series products and other internally generated intangible assets are capital-
ized at cost, provided manufacture of the products is likely to bring the Volkswagen Group an economic benefit.
If the criteria for recognition as assets are not met, the expenses are recognized in the income statement in the
year in which they are incurred.
Capitalized development costs include all direct and indirect costs that are directly attributable to the de-
velopment process. The costs are amortized using the straight-line method from the start of production over
the expected life cycle of the models or powertrains developed – generally between two and ten years.
Amortization recognized during the year is allocated to the relevant functional areas in the income state-
ment.
Brand names from business combinations usually have an indefinite useful life and are therefore not amor-
tized. An indefinite useful life is usually the result of a brand’s further use and maintenance.
Goodwill, intangible assets with indefinite useful lives and intangible assets that are not yet available for
use are tested for impairment at least once a year. Assets in use and other intangible assets with finite useful
lives are tested for impairment only if there are specific indications that they may be impaired. The Volkswagen
Group generally applies the higher of value in use and fair value less costs to sell of the relevant cash-generating
unit (brands or products) to determine the recoverable amount of goodwill and indefinite-lived intangible
assets. Measurement of value in use is based on management’s current planning. This planning is based on
expectations regarding future global economic trends and on assumptions derived from those trends about the
markets for passenger cars and commercial vehicles, market shares and the profitability of the products. The
planning for the Financial Services segment is likewise prepared on the basis of these expectations, and also
reflects the relevant market penetration rates and regulatory requirements. The planning for the Power Engi-
neering segment reflects expectations about trends in the various individual markets. The planning includes
reasonable assumptions about macroeconomic trends (exchange rate, interest rate and commodity price
trends) and historical developments. The planning period generally covers five years. For information on the
assumptions applied to the detailed planning period, please refer to the Report on Expected Developments,
which is part of the Management Report. For subsequent years, plausible assumptions are made regarding
future trends. The planning assumptions are adapted to reflect the current state of knowledge.
Estimation of cash flows is generally based on the expected growth trends for the markets concerned. The
estimates for the cash flows following the end of the planning period are generally based on a growth rate of up
to 1 % p.a. (previous year: up to 1 % p.a.) in the Passenger Cars segment, and on a growth rate of up to 1 % p.a.
(previous year: up to 1 % p.a.) in the Power Engineering and Commercial Vehicles segments.
224
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Value in use is determined for the purpose of impairment testing of goodwill, indefinite-lived intangible assets
and finite-lived intangible assets – mainly capitalized development costs – using the following pretax weighted
average cost of capital (WACC) rates, which are adjusted if necessary for country-specific discount factors:
WACC
Passenger Cars segment
Commercial Vehicles segment
Power Engineering segment
2018
5.5%
6.8%
7.8%
2017
5.8%
6.8%
8.0%
The WACC rates are calculated based on the risk-free rate of interest, a market risk premium and the cost of debt.
Additionally, specific peer group information on beta factors and leverage are taken into account. The composi-
tion of the peer groups used to determine beta factors is continuously reviewed and adjusted if necessary.
P R O P E R T Y, P L A N T A N D E Q U I P M E N T
Property, plant and equipment is carried at cost less depreciation and – where necessary – write-downs for
impairment. Investment grants are generally deducted from cost. Cost is determined on the basis of the direct
and indirect costs that are directly attributable. Special tools are reported under other equipment, operating
and office equipment. Property, plant and equipment is depreciated using the straight-line method over its
estimated useful life. The useful lives of items of property, plant and equipment are reviewed on a regular basis
and adjusted if required.
Depreciation is based mainly on the following useful lives:
Buildings
Site improvements
Technical equipment and machinery
Other equipment, operating and office equipment, including special tools
Useful life
20 to 50 years
10 to 20 years
6 to 12 years
3 to 15 years
Impairment losses on property, plant and equipment are recognized in accordance with IAS 36 where the re-
coverable amount of the asset concerned has fallen below the carrying amount. Recoverable amount is the
higher of value in use and fair value less costs to sell. Value in use is determined using the principles described
for intangible assets. The discount rates for product-specific tools and investments are the same as the discount
rates for capitalized development costs given above for each segment. If the reasons for impairments recog-
nized in previous years no longer apply, the impairment losses are reversed up to a maximum of the amount
that would have been determined if no impairment loss had been recognized.
In accordance with the principle of substance over form, assets that have been formally transferred to third
parties under a sale and leaseback transaction including a repurchase option also continue to be accounted for
as separate assets.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
225
Where leased items of property, plant and equipment are used, the criteria for classification as a finance lease as
set out in IAS 17 are met if all material risks and rewards incidental to ownership have been transferred to the
Group company concerned. In such cases, the assets concerned are recognized at fair value or at the present
value of the minimum lease payments (if lower) and depreciated using the straight-line method over the asset’s
useful life, or over the term of the lease if this is shorter. The payment obligations arising from the future lease
payments are discounted and recorded as a liability in the balance sheet.
Where Group companies are the lessees of assets under operating leases, i.e. if not all material risks and re-
wards are transferred, lease and rental payments are recorded directly as expenses in profit or loss.
L E A S E A S S E T S
Vehicles leased out under operating leases are recognized at cost and depreciated to their estimated residual
value using the straight-line method over the term of the lease. Impairment losses identified as a result of an
impairment test in accordance with IAS 36 are recognized and the future depreciation rate is adjusted. The
forecast residual values are adjusted to include constantly updated internal and external information on resid-
ual values, depending on specific local factors and the experiences gained in the marketing of used cars. This
requires management to make assumptions in particular about vehicle supply and demand in the future, as
well as about vehicle price trends. Such assumptions are based either on qualified estimates or on data pub-
lished by external experts. Qualified estimates are based on external data – if available – that reflects additional
information that is available internally, such as historical experience and current sales data.
I N V E ST M E N T P R O P E R T Y
Real estate and buildings held in order to obtain rental income (investment property) are carried at amortized
cost; the useful lives applied to depreciation generally correspond to those of the property, plant and equip-
ment used by the Company itself. The fair value of investment property must be disclosed in the notes if it is
carried at amortized cost. Fair value is generally estimated using an investment method based on internal cal-
culations. This involves determining the income value for a specific building on the basis of gross income,
taking into account additional factors such as land value, remaining useful life and a multiplier specific to
property.
C A P I TA L I Z AT I O N O F B O R R O W I N G C O ST S
Borrowing costs of qualifying assets are capitalized as part of the cost of these assets. A qualifying asset is an
asset that necessarily takes at least a year to get ready for its intended use or sale.
E Q U I T Y - A C C O U N T E D I N V E ST M E N T S
The cost of equity-accounted investments is adjusted to reflect the share of increases or reductions in equity at
the associates and joint ventures after the acquisition that is attributable to the Volkswagen Group, as well as
any effects from purchase price allocation. Additionally, the investment is tested for impairment if there are
indications of impairment and written down to the lower recoverable amount if necessary. The recoverable
amount is determined using the principles described for indefinite-lived intangible assets. If the reason for
impairment ceases to apply at a later date, the impairment loss is reversed to the carrying amount that would
have been determined had no impairment loss been recognized.
226
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
F I N A N C I A L I N ST R U M E N T S
Financial instruments are contracts that give rise to a financial asset of one company and a financial liability or
an equity instrument of another. Regular way purchases or sales of financial instruments are accounted for at
the settlement date – that is, at the date on which the asset is delivered.
Financial assets are classified and measured on the basis of the entity’s business model and the characteristics of
the financial asset’s cash flows.
IFRS 9 classifies financial assets into the following categories:
> financial assets at fair value through profit or loss;
> financial assets at fair value through other comprehensive income (debt instruments);
> financial assets at fair value through other comprehensive income (equity instruments); and
> financial assets at amortized cost.
Financial liabilities are classified into the following categories:
> financial liabilities at fair value through profit or loss; and
> financial liabilities measured at amortized cost.
In the Volkswagen Group, the categories presented above are allocated to the “at amortized cost” and “at fair
value” classes.
F I N A N C I A L A S S E T S A N D L I A B I L I T I E S AT A M O R T I Z E D C O ST
Financial assets measured at amortized cost are held under a business model that is aimed at collecting con-
tractual cash flows (“hold” business model). The cash flows of these assets relate solely to payments of principal
and interest on the principal amount outstanding. The amortized cost of a financial asset or liability is the
amount:
> at which a financial asset or liability is measured at initial recognition;
> minus any principal repayments;
> taking account of any loss allowances, write-downs for impairment and uncollectibility relating to financial
assets; and
> plus or minus the cumulative amortization of any difference between the original amount and the amount
repayable at maturity (premium, discount), amortized using the effective interest method over the term of
the financial asset or liability.
Financial liabilities measured at amortized cost using the effective interest method relate to liabilities to banks,
bonds, commercial paper and notes, loans and other liabilities. Gains or losses resulting from changes in amor-
tized cost, including the effects of changes in exchange rates, are recognized through profit or loss. For reasons
of materiality, discounting or unwinding of discounting is not applied to current liabilities (due within one
year).
Financial assets and liabilities measured at amortized cost are
> receivables from financing business;
> trade receivables and payables;
> other receivables and financial assets and liabilities;
> financial liabilities; and
> cash, cash equivalents and time deposits.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
227
F I N A N C I A L A S S E T S A N D L I A B I L I T I E S AT F A I R VA L U E
Changes in the carrying amount of financial assets measured at fair value are recognized either through OCI or
through profit or loss.
The fair value through OCI (debt instruments) category comprises exclusively debt instruments. Changes in
fair value are always recognized directly in equity, net of deferred taxes. Certain changes in the fair value of
these debt instruments (impairment losses, foreign exchange gains and losses, interest calculated using the
effective interest method) are recognized immediately in profit or loss.
Financial assets measured at fair value through other comprehensive income (debt instruments) are held
under a business model aimed at both collecting contractual cash flows and selling financial assets (“hold and
sell” business model).
Financial assets that are equity instruments are also measured at fair value. Here Volkswagen exercises the
option to recognize changes in fair value are always recognized through other comprehensive income, i.e. gains
and losses from the measurement of equity investments are never recycled to the income statement and
instead reclassified to revenue reserves on disposal (no reclassification).
Any financial assets not measured at either amortized cost or through other comprehensive income are allo-
cated to the fair value through profit or loss category. Financial assets at fair value through profit or loss are
aimed in particular at generating cash flows by selling financial instruments (“sell” business model).
At Volkswagen, this category primarily comprises
> hedging relationships to which hedge accounting is not applied and
> investment fund units.
All financial liabilities at fair value through profit or loss relate to derivatives to which hedge accounting is not
applied.
Fair value generally corresponds to the market or quoted market price. If no active market exists, fair value
is determined using other observable inputs as far as possible. If no observable inputs are available, fair value is
determined using valuation techniques, such as by discounting the future cash flows at the market interest
rate, or by using recognized option pricing models, and, as far as possible, verified by confirmations from the
banks that handle the transactions.
In the case of current financial receivables and liabilities, amortized cost generally corresponds to the prin-
cipal or repayment amount.
The fair value option for financial assets and financial liabilities is not used in the Volkswagen Group.
Financial assets and financial liabilities are generally presented at their gross amounts and only offset if the
Volkswagen Group currently has a legally enforceable right to set off the amounts and intends to settle on a net
basis.
Subsidiaries, associates and joint ventures that are not consolidated for reasons of materiality do not fall
within the scope of IFRS 9 and IFRS 7.
Likewise, the accounting policies for financial instruments accounted for pursuant to IAS 39, on which the
prior-year figures are based, have not been modified. In this context, please refer to the notes provided in the
2017 annual report.
228
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
D E R I VAT I V E S A N D H E D G E A C C O U N T I N G
Volkswagen Group companies use derivatives to hedge balance sheet items and future cash flows (hedged
items). Appropriate derivatives such as swaps, forward transactions and options are used as hedging instru-
ments. The criteria for the application of hedge accounting are that the hedging relationship between the
hedged item and the hedging instrument is clearly documented and that the hedge is highly effective.
The accounting treatment of changes in the fair value of hedging instruments depends on the nature of the
hedging relationship. In the case of hedges against the risk of change in the fair value of balance sheet items
(fair value hedges), both the hedging instrument and the hedged risk portion of the hedged item are measured
at fair value. Several risk portions of hedged items are grouped into a portfolio if appropriate. In the case of a
fair value portfolio hedge, the changes in fair value are accounted for in the same way as for a fair value hedge
of an individual underlying. Gains or losses from the measurement of hedging instruments and hedged items
are recognized in profit or loss. The Volkswagen Group has opted not to retain IAS 39 hedge accounting for all
its hedges. This means that, as of the beginning of fiscal year 2018, the only area where IAS 39 accounting is
relevant alongside IFRS 9 is the guidance on portfolio hedges of interest rate risk in the Financial Services Divi-
sion.
In the case of hedges of future cash flows (cash flow hedges), the hedging instruments are also measured at
fair value. The designated effective portion of the hedging instrument is accounted for through OCI I and the
non-designated portion through OCI II. They are only recognized in the income statement when the hedged
item is recognized in profit or loss. The ineffective portion of cash flow hedges is recognized through profit or
loss immediately.
Derivatives used by the Volkswagen Group for financial management purposes to hedge against interest
rate, foreign currency, commodity price, equity price, or fund price risks, but that do not meet the strict hedge
accounting criteria of IFRS 9, are classified as financial assets or liabilities at fair value through profit or loss
(also referred to below as derivatives to which hedge accounting is not applied). This also applies to options on
shares. External hedging instruments of intragroup hedged items that are subsequently eliminated in the con-
solidated financial statements are also assigned to this category as a general rule. Assets and liabilities meas-
ured at fair value through profit or loss consist of derivatives or components of derivatives that are not includ-
ed in hedge accounting. These relate for example to the non-designated currency forwards used to hedge sales
revenue, interest rate hedges, commodity futures and currency forwards relating to commodity futures.
R E C E I VA B L E S F R O M F I N A N C E L E A S E S
Where a Group company is the lessor – generally of vehicles – a receivable in the amount of the net investment
in the lease is recognized in the case of finance leases, in other words where substantially all the risks and re-
wards are transferred to the lessee.
I M PA I R M E N T L O S S E S O N F I N A N C I A L I N ST R U M E N T S
Financial assets are exposed to default risk, which is taken into account by recognizing loss allowances or, if
losses have already been incurred, by recognizing impairment losses. Default risk on loans and receivables in
the financial services segment is accounted for by recognizing specific loss allowances and portfolio-based loss
allowances.
In particular, a loss allowance is recognized on these financial assets in the amount of the expected loss in
accordance with Group-wide standards. The actual specific loss allowances for the losses incurred are then
charged to this loss allowance. A potential impairment is assumed not only for a number of situations such as
delayed payment over a certain period, the institution of enforcement measures, the threat of insolvency or
overindebtedness, application for or the opening of bankruptcy proceedings, or the failure of reorganization
measures, but also for receivables that are not past due.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
229
Portfolio-based loss allowances are recognized by grouping together insignificant receivables and significant
individual receivables for which there is no indication of impairment into homogeneous portfolios on the basis
of comparable credit risk features and allocating them by risk class. Average historical default probabilities are
used in combination with forward-looking parameters for the portfolio concerned to calculate the amount of
the impairment loss.
Credit risks must be considered for all financial assets measured at amortized cost or fair value through
profit or loss (debt instruments), as well as for contract assets in accordance with IFRS 15 and lease receivables
within the scope of IAS 17. The rules on impairment also apply to risks from irrevocable credit commitments
not recognized in the balance sheet and to the measurement of financial guarantees.
As a matter of principle, a simplified process, which takes historical default rates and forward-looking
information into account, and specific loss allowances are used to account for impairment losses on receivables
outside the Financial Services segment.
D E F E R R E D TA X E S
Deferred tax assets are generally recognized for tax-deductible temporary differences between the tax base of
assets and liabilities and their carrying amounts in the consolidated balance sheet, as well as on tax loss carry-
forwards and tax credits provided it is probable that they can be used in future periods. Deferred tax liabilities
are generally recognized for all taxable temporary differences between the tax base of assets and liabilities and
their carrying amounts in the consolidated balance sheet.
Deferred tax liabilities and assets are recognized in the amount of the expected tax liability or tax benefit,
as appropriate, in subsequent fiscal years, based on the expected enacted tax rate at the time of realization. The
tax consequences of dividend payments are generally not taken into account until the resolution on appropria-
tion of earnings available for distribution has been adopted.
Deferred tax assets that are unlikely to be realized within a clearly predictable period are reduced by loss
allowances.
Deferred tax assets for tax loss carryforwards are usually measured on the basis of future taxable income
over a planning period of five fiscal years.
Deferred tax assets and deferred tax liabilities are offset where taxes are levied by the same taxation author-
ity and relate to the same tax period.
I N V E N T O R I E S
Raw materials, consumables and supplies, merchandise, work in progress and self-produced finished goods
reported in inventories are carried at the lower of cost or net realizable value. Cost is determined on the basis of
the direct and indirect costs that are directly attributable. Borrowing costs are not capitalized. The measure-
ment of same or similar inventories is generally based on the weighted average cost method.
N O N C U R R E N T A S S E T S H E L D F O R S A L E A N D D I S C O N T I N U E D O P E R AT I O N S
Under IFRS 5, noncurrent assets or groups of assets and liabilities (disposal groups) are classified as held for sale
if their carrying amounts will be recovered principally through a sale transaction rather than through continu-
ing use. Such assets are carried at the lower of their carrying amount and fair value less costs to sell, and are
presented separately in current assets and liabilities in the balance sheet.
Discontinued operations are components of an entity that have either been disposed of or are classified as
held for sale. The assets and liabilities of operations that are held for sale represent disposal groups that must
be measured and reported using the same principles as noncurrent assets held for sale. The income and
expenses from discontinued operations are presented in the income statement as profit or loss from discon-
tinued operations below the profit or loss from continuing operations. Corresponding disposal gains or losses
are contained in the profit or loss from discontinued operations. The prior-year figures in the income state-
ment are adjusted accordingly.
230
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
P E N S I O N P R O V I S I O N S
The actuarial valuation of pension provisions is based on the projected unit credit method stipulated by IAS 19
for defined benefit plans. The valuation is not only based on pension payments and vested entitlements known
at the balance sheet date, but also reflects future salary and pension trends, as well as experience-based staff
turnover rates. Remeasurements are recognized in retained earnings in other comprehensive income, net of
deferred taxes.
P R O V I S I O N S F O R I N C O M E TA X E S
Tax provisions contain obligations resulting from current income taxes. Deferred taxes are presented in sepa-
rate items of the balance sheet and income statement. Provisions are recognized for potential tax risks on the
basis of the best estimate of the liability.
S H A R E - B A S E D PAYM E N T
The share-based payment consists of phantom shares and performance shares. The obligations arising from the
share-based payment are accounted for as cash-settled plans in accordance with IFRS 2. The cash-settled share-
based payments are measured at fair value until maturity. Fair value is determined using a recognized valuation
technique. The compensation cost is allocated over the vesting period.
OT H E R P R O V I S I O N S
In accordance with IAS 37, provisions are recognized where a present obligation exists to third parties as a re-
sult of a past event, where a future outflow of resources is probable and where a reliable estimate of that out-
flow can be made.
Provisions not resulting in an outflow of resources in the year immediately following are recognized at
their settlement value discounted to the balance sheet date. Discounting is based on market interest rates. An
average discount rate of 0.20 % (previous year: 0.08 %) was used in the Eurozone. The settlement value also
reflects cost increases expected at the balance sheet date.
Provisions are not offset against claims for reimbursement.
Insurance contracts that form part of the insurance business are recognized in accordance with IFRS 4. Re-
insurance acceptances are accounted for without any time delay in the year in which they arise. Provisions are
generally recognized based on the cedant’s contractual duties. Estimation techniques based on assumptions
about future changes in claims are used to calculate the claims provision. Other technical provisions relate to
the provision for cancellations.
The share of the provisions attributable to reinsurers is calculated in accordance with the contractual
agreements with the retrocessionaries and reported under other assets.
C O N T I N G E N T L I A B I L I T I E S
If the criteria for recognizing a provision are not met, but the outflow of financial resources is not remote, such
obligations are disclosed in the notes to the consolidated financial statements (see the “Contingent liabilities”
section). Contingent liabilities are only recognized if the obligations are more certain, i.e. the outflow of finan-
cial resources has become probable and their amount can be reliably estimated.
L I A B I L I T I E S
Noncurrent liabilities are recorded at amortized cost in the balance sheet. Differences between historical cost
and the repayment amount are amortized using the effective interest method.
Liabilities to members of partnerships from puttable shares are recognized in the income statement at the
present value of the redemption amount at the balance sheet date.
Liabilities under finance leases are carried at the present value of the lease payments.
Current liabilities are recognized at their repayment or settlement value.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
231
R E V E N U E A N D E X P E N S E R E C O G N I T I O N
Sales revenue, interest and commission income from financial services and other operating income are recog-
nized only when the relevant service has been rendered or the goods have been delivered, i.e. when the custom-
er has obtained control of the good or service. Where new and used vehicles and original parts are sold, the
Company’s performance invariably occurs upon delivery, because that is the point when control is transferred,
and the inventory risk and, for deliveries to a dealer, invariably also the pricing decision pass to the customer.
Revenue is reported net of sales allowances (discounts, rebates, or customer bonuses). The Volkswagen Group
measures sales allowances and other variable consideration on the basis of experience and by taking account of
current circumstances. Vehicles are normally sold on payment terms. A trade receivable is recognized for the
period between vehicle delivery and receipt of payment. Any financing component included in the transaction
is only recognized if the period between the transfer of the goods and the payment of consideration is longer
than one year and the amount to be accrued is significant.
Sales revenue from financing and finance lease agreements is recognized using the effective interest meth-
od. If non-interest-bearing or low-interest vehicle financing arrangements are agreed, sales revenue is reduced
by the interest benefits granted. Sales revenue from operate leases is recognized over the term of the contract
on a straight line basis.
In contracts under which the goods or services are transferred over a period of time, revenue is recognized,
depending on the type of goods or services provided, either according to the stage of completion or, to simplify,
on a straight-line basis; the latter is only allowed, if revenue recognition on a straight-line basis does not differ
materially from recognition according to the stage of completion. As a rule, the stage of completion is deter-
mined as the proportion that contract costs incurred by the end of the reporting period bear to the estimated
total contract costs (cost-to-cost method). Contract costs incurred invariably represent the best way to measure
the stage of completion for the performance obligation. If the outcome of a performance obligation satisfied
over time is not sufficiently certain, but the company expects, as a minimum, to recover its costs, revenue is
only recognized in the amount of contract costs incurred (zero profit margin method). If the expected costs
exceed the expected revenue, the expected losses are recognized immediately in full as expenses by recognizing
impairment losses on the associated contract assets recognized, and additionally by recognizing provisions for
any amounts in excess of the impairment losses. Since long-term construction contracts invariably give rise to
contingent receivables from customers for the period to completion or payment by the customer, contract
assets are recognized for the corresponding amounts. A trade receivable is recognized as soon as the Company
has transferred the goods or services in full.
If a contract comprises several separately identifiable components (multiple-element arrangements), these
components are recognized separately in accordance with the principles outlined above.
If services are sold to the customer at the same time as the vehicle, and the customer pays for them in ad-
vance, the Group recognizes a corresponding contract liability until the services have been transferred. Exam-
ples of services that customers pay for in advance are servicing, maintenance and certain warranty contracts as
well as mobile online services. For extended warranties granted to customers for a particular model, a provision
is normally recognized in the same way as for statutory warranties. If the warranty is optional for the customer
or includes an additional service component, the sales revenue is deferred and recognized over the term of the
warranty.
Income from the sale of assets for which a Group company has a buyback obligation is recognized only
when the assets have definitively left the Group. If a fixed repurchase price was agreed when the contract was
entered into, the difference between the selling price and the present value of the repurchase price is recognized
as income ratably over the term of the contract. Prior to that time, the assets are carried as inventories in the
case of short contract terms and as lease assets in the case of long contract terms.
Sales revenue is always determined on the basis of the price stated in the contract. If variable consideration
(e.g. volume-based bonus payments) has been agreed in a contract, the large number of contracts involved
means that revenue has to be estimated using the expected value method. In exceptional cases, the most prob-
able amount method may also be used. Once the expected sales revenue has been estimated, an additional
check is carried out to determine whether there is any uncertainty that necessitates the reversal of the revenue
initially recognized so that it can be virtually ruled out that sales revenue subsequently has to be adjusted
downward. Provisions for reimbursements arise mainly from dealer bonuses.
232
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
In multiple element arrangements, the transaction price is allocated to the different performance obligations of
the contract on the basis of relative standalone selling prices. In the Automotive Division, non-vehicle-related
services are invariably measured at their standalone selling prices for reasons of materiality.
Cost of sales includes the costs incurred to generate the sales revenue and the cost of goods purchased for
resale. This item also includes the costs of additions to warranty provisions. Research and development costs
not eligible for capitalization in the period and amortization of development costs are likewise carried under
cost of sales. Reflecting the presentation of interest and commission income in sales revenue, the interest and
commission expenses attributable to the financial services business are presented in cost of sales.
Dividend income is recognized on the date when the dividend is legally approved.
G O V E R N M E N T G R A N T S
Government grants related to assets are deducted when arriving at the carrying amount of the asset and are
recognized in profit or loss over the life of the depreciable asset as a reduced depreciation expense. If the Group
becomes entitled to a grant subsequently, the amount of the grant attributable to prior periods is recognized in
profit or loss.
Government grants related to income, i.e. that compensate the Group for expenses incurred, are recognized
in profit or loss for the period in those items in which the expenses to be compensated by the grants are also
recognized. Grants in the form of nonmonetary assets (e.g. the use of land free of charge or the transfer of re-
sources free of charge) are disclosed as a memo item.
E ST I M AT E S A N D A S S U M P T I O N S B Y M A N A G E M E N T
Preparation of the consolidated financial statements requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities, and income and expenses, as well as the
related disclosure of contingent assets and liabilities of the reporting period. The estimates and assumptions
relate largely to the following matters:
The impairment testing of nonfinancial assets (especially goodwill, brand names, capitalized development
costs and special tools) and equity-accounted investments, or investments accounted at cost, and the measure-
ment of options on shares in companies that are not traded in an active market require assumptions about the
future cash flows during the planning period, and possibly beyond it, as well as about the discount rate to be
applied. The estimates made in order to separate cash flows mainly relate to future market shares, the trend in
the respective markets and the profitability of the Volkswagen Group’s products. In addition, the recoverability
of the Group’s lease assets depends in particular on the residual value of the leased vehicles after expiration of
the lease term, because this represents a significant portion of the expected cash flows. More detailed infor-
mation on impairment tests and the measurement parameters used for those tests can be found in the expla-
nations on the accounting policies for intangible assets.
If there are no observable market inputs, the fair values of assets acquired and liabilities assumed in a busi-
ness combination are measured using recognized valuation techniques, such as the relief-from-royalty method
or the residual method.
Impairment testing of financial assets requires estimates about the extent and probability of occurrence of
future events. As far as possible, estimates are derived from experience taking into account current market data
as well as rating categories and scoring information. The more detailed balance sheet disclosures in accordance
with IFRS 7 (Financial Instruments) contain further details on how to determine loss allowances.
Accounting for provisions is also based on estimates of the extent and probability of occurrence of future
events, as well as estimates of the discount rate. As far as possible, these are also based on experience or exter-
nal opinions. The assumptions applied in the measurement of pension provisions are described in the “Provi-
sions for pensions and other post-employment benefits” section. Remeasurements are recognized in other
comprehensive income and do not affect profit or loss reported in the income statement. Any change in the
estimates of the amount of other provisions is always recognized in profit or loss. The provisions are regularly
adjusted to reflect new information obtained. The use of expected values means that additional amounts must
frequently be recognized for provisions, or that unused provisions are reversed. Similarly to expenses for the
recognition of provisions, income from the reversal of provisions is allocated to the respective functions. War-
ranty claims from sales transactions are calculated on the basis of losses to date, estimated future losses and
the policy on ex gratia arrangements. Assumptions were made in respect of the provisions recognized in con-
nection with the diesel issues. These depend on the series, model year and country concerned and relate in
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
233
particular to the effort, material costs and hourly wage rates involved. In addition, assumptions are made about
future resale prices of repurchased vehicles. These assumptions are based on qualified estimates, which are
based in turn on external data, and also reflect additional information available internally, such as values de-
rived from experience. An overview of other provisions can be found in the “Noncurrent and current other
provisions” section. Further information on the legal proceedings and on the legal risks associated with the
diesel issue can be found in the “Litigation” section.
Government grants are recognized based on an assessment as to whether there is reasonable assurance that
the Group companies will fulfill the attached conditions and the grants will be awarded. This assessment is
based on the nature of the legal entitlement and past experience.
Estimates of the useful life of finite-lived assets are based on experience and are reviewed regularly. Where
estimates are modified the residual useful life is adjusted and an impairment loss is recognized, if necessary.
Measuring deferred tax assets requires assumptions regarding future taxable income and the timing of the
realization of deferred tax assets.
The estimates and assumptions are based on underlying assumptions that reflect the current state of avail-
able knowledge. Specifically, the expected future development of business was based on the circumstances
known at the date of preparation of these consolidated financial statements and a realistic assessment of the
future development of the global and sector-specific environment. Our estimates and assumptions remain
subject to a high degree of uncertainty because future business developments are subject to uncertainties that
in part cannot be influenced by the Group. This applies in particular to short- and medium-term cash flow
forecasts and to the discount rates used.
Developments in this environment that differ from the assumptions and that cannot be influenced by
management could result in amounts that differ from the original estimates. If actual developments differ from
the expected developments, the underlying assumptions and, if necessary, the carrying amounts of the assets
and liabilities affected are adjusted.
Global gross domestic product (GDP) rose by 3.2 % (previous year: 3.3 %) in 2018. Our forecasts are based on
the assumption that global economic growth will slow down slightly in 2019. As a result, from today's perspec-
tive, we are not expecting material adjustments in the following fiscal year in the carrying amounts of the assets
and liabilities reported in the consolidated balance sheet.
Estimates and assumptions by management were based in particular on assumptions relating to the devel-
opment of the general economic environment, the automotive markets and the legal environment. These and
further assumptions are explained in detail in the Report on Expected Developments, which is part of the
Group Management Report.
234
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Segment reporting
Segments are identified on the basis of the Volkswagen Group’s internal management and reporting. In line
with the Group’s multibrand strategy, each of its brands (operating segments) is managed by its own board of
management. The Group targets and requirements laid down by the Board of Management of Volkswagen AG
must be complied with. Segment reporting comprises four reportable segments: Passenger Cars, Commercial
Vehicles, Power Engineering and Financial Services.
The activities of the Passenger Cars segment cover the development of vehicles and engines, the produc-
tion and sale of passenger cars, and the corresponding genuine parts business. Given the high degree of tech-
nological and economic interlinking in the production network of the individual brands, the Passenger Cars
reporting segment combines the Volkswagen Group’s individual car brands to a single reportable segment.
Furthermore, there is collaboration within key areas such as procurement, research and development or
treasury.
The Commercial Vehicles segment primarily comprises the development, production and sale of light
commercial vehicles, trucks and buses, the corresponding genuine parts business and related services. Just as in
the case of the car brands, there is collaboration within the areas procurement, development and sale. The aim
is to achieve further forms of interlinking.
The activities of the Power Engineering segment consist of the development and production of large-bore
diesel engines, turbo compressors, industrial turbines and chemical reactor systems, as well as the production
of gear units, propulsion components and testing systems.
The activities of the Financial Services segment comprise dealer and customer financing, leasing, banking
and insurance activities, fleet management and mobility services. In this segment, combinations occur espe-
cially while taking into account the comparability of the type of services as well as the regulatory situation.
Purchase price allocation for companies acquired is allocated directly to the corresponding segments.
At Volkswagen, segment profit or loss is measured on the basis of the operating result.
In the segment reporting, the share of the result of joint ventures is contained in the share of the result of
equity-accounted investments in the corresponding segments.
The reconciliation contains activities and other operations that by definition do not constitute segments. It
also includes the unallocated Group financing activities. Consolidation adjustments between the segments are
also contained in the reconciliation.
Investments in intangible assets, property, plant and equipment, and investment property are reported net
of investments under finance leases.
As a matter of principle, business relationships between the companies within the segments of the
Volkswagen Group are transacted at arm’s length prices.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
235
R E P O R T I N G S E G M E N T S 2 0 1 7 1
€ million
Passenger Cars
Commercial
Vehicles
Power
Engineering
Financial
Services
Total
segments
Reconciliation
Volkswagen
Group
Sales revenue from
external customers
Intersegment sales revenue
Total sales revenue
Depreciation and amortization
Impairment losses
Reversal of impairment losses
168,381
18,892
187,273
11,363
704
14
27,632
7,568
35,200
2,557
2
1
Segment result (operating result)
12,644
1,892
Share of the result of
equity-accounted investments
Interest result and
other financial result
Equity-accounted investments
Investments in intangible assets,
property, plant and equipment,
and investment property
3,390
–1,964
6,724
83
–220
753
3,280
3
3,283
371
0
–
–55
1
–2
18
30,191
3,541
33,733
6,797
574
41
229,486
30,004
259,489
21,089
1,280
56
64
229,550
–30,004
–29,939
–147
0
–
–
229,550
20,941
1,280
56
2,673
17,153
–3,335
13,818
9
3,482
–
3,482
–180
710
–2,366
8,205
–1,262
–
–3,628
8,205
15,713
1,915
159
421
18,208
104
18,313
1 Prior-year figures adjusted (see disclosures on IFRS 15).
R E P O R T I N G S E G M E N T S 2 0 1 8
€ million
Passenger Cars
Commercial
Vehicles
Power
Engineering
Financial
Services
Total
segments
Reconciliation
Volkswagen
Group
Sales revenue from
external customers
Intersegment sales revenue
Total sales revenue
Depreciation and amortization
Impairment losses
Reversal of impairment losses
171,028
17,059
188,088
12,143
629
156
29,388
7,269
36,656
2,524
89
6
Segment result (operating result)
12,245
1,971
Share of the result of
equity-accounted investments
Interest result and
other financial result
Equity-accounted investments
Investments in intangible assets,
property, plant and equipment,
and investment property
3,094
214
6,731
213
248
971
3,605
3
3,608
378
–
2
–64
3
2
18
31,592
3,190
34,782
6,523
469
98
2,793
58
–70
712
235,613
27,521
263,134
21,567
1,186
262
16,945
3,369
393
8,434
236
235,849
–27,521
–27,285
–56
110
–
–3,025
–
235,849
21,511
1,296
262
13,920
–
3,369
–2,039
–
–1,646
8,434
15,599
2,491
176
510
18,776
187
18,962
236
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
R E C O N C I L I AT I O N
€ million
Segment sales revenue
Unallocated activities
Group financing
Consolidation
Group sales revenue
Segment result (operating result)
Unallocated activities
Group financing
Consolidation
Operating result
Financial result
Consolidated result before tax
1 Prior-year figures adjusted (see disclosures on IFRS 9 and IFRS 15).
B Y R E G I O N 2 0 1 7
2018
20171
263,134
259,489
981
24
–28,290
235,849
948
25
–30,912
229,550
16,945
17,153
–22
–17
–2,987
13,920
1,723
15,643
10
–16
–3,328
13,818
–146
13,673
€ million
Germany
markets¹ North America
South America
Asia-Pacific
Total
Europe/Other
Sales revenue from external customers2
44,333
98,420
37,686
9,988
39,123
229,550
Intangible assets, property, plant and equipment,
lease assets and investment property
1 Excluding Germany.
2 Prior-year figures adjusted (see disclosures on IFRS 15).
B Y R E G I O N 2 0 1 8
89,905
35,936
26,855
2,850
2,837
158,384
€ million
Germany
markets¹ North America
South America
Asia-Pacific
Europe/Other
Hedges
sales revenue
Total
Sales revenue from
external customers
Intangible assets, property, plant
and equipment, lease assets and
investment property
1 Excluding Germany.
43,526
99,563
37,656
10,405
43,166
1,535
235,849
95,217
36,110
29,332
2,795
2,830
–
166,285
Allocation of sales revenue to the regions follows the destination principle.
Since 2018, the allocation of interregional intragroup transactions has been unitary presented according to
the economic ownership regarding the segment assets. The prior-year figures have been adjusted accordingly.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
237
Income statement disclosures
1. Sales revenue
ST R U C T U R E O F G R O U P S A L E S R E V E N U E 2 0 1 7 1
€ million
Passenger Cars
Commercial
Vehicles
Power
Engineering
Financial
Services
Total segments
Reconciliation
Volkswagen
Group
Vehicles
Genuine parts
Used vehicles and
third-party products
Engines, powertrains
and parts deliveries
Power Engineering
Motorcycles
Leasing business
Interest and similar
income
Hedges sales revenue
Other sales revenue
138,697
12,539
25,535
3,197
12,049
1,780
11,760
–
601
779
245
–
10,605
187,273
733
–
–
1,947
4
–
2,005
35,200
1 Prior-year figures adjusted (see disclosures on IFRS 15).
ST R U C T U R E O F G R O U P S A L E S R E V E N U E 2 0 1 8
–
–
–
–
3,283
–
–
–
–
–
–
–
–
–
–
–
25,989
7,035
–
709
3,283
33,733
164,232
15,736
–19,407
–108
144,826
15,628
13,829
–474
13,355
12,493
3,283
601
28,714
7,283
–
13,319
259,489
–1,175
–3
–
–4,144
–164
–
–4,465
–29,939
11,318
3,280
601
24,570
7,119
–
8,853
229,550
€ million
Passenger Cars
Commercial
Vehicles
Power
Engineering
Financial
Services
Total segments
Reconciliation
Volkswagen
Group
Vehicles
Genuine parts
Used vehicles and
third-party products
Engines, powertrains
and parts deliveries
Power Engineering
Motorcycles
Leasing business
Interest and similar
income
Hedges sales revenue
Other sales revenue
136,331
12,705
11,379
12,976
–
582
826
230
1,362
11,697
188,088
26,166
3,321
1,825
1,192
–
–
1,714
6
89
2,343
36,656
–
–
–
–
3,608
–
–
–
–
–
–
–
–
–
–
–
26,667
7,302
–
814
3,608
34,782
162,497
16,026
–15,671
–107
146,826
15,919
13,204
–650
12,554
14,168
3,608
582
29,207
7,537
1,451
14,854
263,134
–1,728
–3
–
–4,200
–187
83
–4,824
–27,285
12,440
3,605
582
25,006
7,351
1,535
10,031
235,849
238
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
For segment reporting purposes, the sales revenue of the Group is presented by segment and market.
Other sales revenue comprises revenue from workshop services and license revenue, among other things.
Of the sales revenue recognized in the period under review, an amount of €6,333 million was included in
contract liabilities as of January 1, 2018.
€667 million of the sales revenue recognized in the period under review is attributable to performance obli-
gations satisfied in a prior period.
In addition to existing performance obligations of €3,614 million in the Power Engineering segment, most
of which are expected to be satisfied or for which sales revenue is expected to be recognized by December 31,
2019, the vast majority of the Volkswagen Group’s performance obligations that are unsatisfied as of the report-
ing date relate to vehicle deliveries. Most of these deliveries had already been made at the time this report was
prepared, or will be made in the first quarter of 2019. The calculation of the amounts for the Power Engineering
Business Area took account of both contracts with a term of more than one year and service contracts under
which the Volkswagen Group realizes sales revenue in exactly the same amount as the customer benefits from
the provision of services by the Company. In the case of variable consideration, sales revenue is only recognized
to the extent that there is reasonable assurance that this sales revenue will not subsequently have to be re-
versed or adjusted downward.
2. Cost of sales
Cost of sales includes interest expenses of €2,270 million (previous year: €1,961 million) attributable to the
financial services business.
This item also includes impairment losses on intangible assets (primarily development costs), property,
plant and equipment (primarily other equipment, operating and office equipment), and lease assets in the
amount of €1,165 million (previous year: €1,185 million). The impairment losses totaling €631 million (previ-
ous year: €700 million) recognized during the reporting period on intangible assets and items of property,
plant and equipment result in particular from lower values in use of various products in the Passenger Cars
segment, from market and exchange rate risks, and in particular from expected declines in volumes. The im-
pairment losses on lease assets in the amount of €534 million (previous year: €485 million) are predominantly
attributable to the Financial Services segment. They are based on constantly updated internal and external
information that is factored into the forecast residual values of the vehicles. Thereof, €24 million (previous
year: €37 million) are reported in current lease assets.
To make the presentation more consistent and easier to compare, the way income from the reversal of pro-
visions and accrued liabilities is reported was adjusted during the implementation of IFRS 15; these items have
been allocated to those functional areas in which they were originally recognized. Prior-year figures adjusted
(see disclosures on IFRS 15).
Government grants related to income amounted to €466 million in the fiscal year (previous year:
€424 million) and were generally allocated to the functional areas.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
239
3. Distribution expenses
Distribution expenses amounting to €20.5 billion (previous year: €20.9 billion) include nonstaff overheads and
personnel costs, and depreciation and amortization applicable to the distribution function, as well as the costs
of shipping, advertising and sales promotions. To make the presentation more consistent and easier to com-
pare, the way income from the reversal of provisions and accrued liabilities is reported was adjusted during the
implementation of IFRS 15; these items have been allocated to those functional areas in which they were origi-
nally recognized. Prior-year figures have been restated (see disclosures on IFRS 15).
4. Administrative expenses
Administrative expenses of €8.8 billion (previous year: €8.1 billion) mainly include nonstaff overheads and
personnel costs, as well as depreciation and amortization charges applicable to the administrative function. To
make the presentation more consistent and easier to compare, the way income from the reversal of provisions
and accrued liabilities is reported was adjusted during the implementation of IFRS 15; these items have been
allocated to those functional areas in which they were originally recognized. Prior-year figures have been re-
stated (see disclosures on IFRS 15).
5. Other operating income
€ million
2018
2017
Income from reversal of loss allowances on receivables and other assets
Income from reversal of provisions and accruals¹
Income from foreign currency hedging derivatives within hedge accounting
Income from foreign exchange gains
Income from other hedges
Income from sale of promotional material
Income from cost allocations
Income from investment property
Gains on asset disposals and the reversal of impairment losses
Miscellaneous other operating income
1 Prior-year figures adjusted (see disclosures on IFRS 15).
1,586
1,144
822
2,530
1,138
483
1,139
14
390
2,383
11,631
1,043
1,398
2,259
2,656
–
502
1,386
16
212
2,041
11,514
Foreign exchange gains mainly comprise gains from changes in exchange rates between the dates of recogni-
tion and payment of receivables and liabilities denominated in foreign currencies, as well as exchange rate
gains resulting from measurement at the closing rate. Foreign exchange losses from these items are included in
other operating expenses.
Income from other hedges includes primarily foreign exchange gains from the fair value measurement of
financial instruments used to hedge exchange rates and commodity prices and that are not designated in a
hedging relationship. Foreign exchange losses are included in other operating expenses. In the previous year,
these effects were recognized in the financial result. Under IFRS 9, they are included in operating profit.
240
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
6. Other operating expenses
€ million
2018
2017
Loss allowances on trade receivables including construction contracts
Loss allowances on other receivables and other assets
Losses from foreign currency hedging derivatives within hedge accounting
Expenses from other hedges
Foreign exchange losses
Expenses from cost allocations
Expenses for termination agreements
Losses on disposal of noncurrent assets
Miscellaneous other operating expenses
315
1,833
856
1,592
2,800
650
36
161
6,488
14,731
–
1,650
1,753
–
2,839
609
35
175
5,197
12,259
The implementation of IFRS 15, requires loss allowances on trade receivables, including receivables from long-
term construction contracts, to be presented separately. The prior-year amount is included in the loss allowanc-
es on other receivables and other assets item.
In addition, the changes in the currency hedging derivatives are due to the exchange rate changes between
the trade price and the price on realization; this applies in particular to the US dollar, the Chinese renminbi and
sterling.
Expenses from other hedges include primarily foreign exchange losses from the fair value measurement of
financial instruments used to hedge exchange rates and commodity prices and that are not designated in a
hedging relationship. In the previous year, these effects were recognized in the financial result. Under IFRS 9,
they are included in operating profit.
Miscellaneous other operating expenses consist of litigation expenses of €3.0 billion (previous year:
€1.0 billion) in connection with the diesel issue.
7. Share of the result of equity-accounted investments
€ million
2018
2017
Share of profits of equity-accounted investments
of which: from joint ventures
of which: from associates
Share of losses of equity-accounted investments
of which: from joint ventures
of which: from associates
3,551
(3,320)
(231)
182
(23)
(159)
3,369
3,519
(3,327)
(191)
36
(2)
(34)
3,482
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
241
8. Interest result
€ million
Interest income
Other interest and similar income
Income from valuation of interest derivatives
Interest expenses
Other interest and similar expenses
Expenses from valuation of interest derivatives
Interest expenses included in lease payments
Interest result on other liabilities
Net interest on the net defined benefit liability
Interest result
9. Other financial result
€ million
Income from profit and loss transfer agreements
Cost of loss absorption
Other income from equity investments
Other expenses from equity investments
Income from marketable securities and loans
Realized income of loan receivables and payables in foreign currency
Realized expenses of loan receivables and payables in foreign currency
Gains and losses from remeasurement and impairment of financial instruments
Gains and losses from fair value changes of derivatives not included in hedge accounting
Gains and losses from fair value changes of derivatives included in hedge accounting
Other financial result
1 Prior-year figures adjusted (see disclosures on IFRS 9).
2018
967
950
17
–1,547
–974
–1
–27
77
–623
–580
2018
77
–54
101
–360
–355
1,161
–1,130
–41
–453
–12
–1,066
2017
951
839
113
–2,317
–1,305
–368
–29
–13
–602
–1,366
2017¹
35
–76
71
–289
–222
734
–1,107
–475
–1,050
117
–2,262
The implementation of IFRS 9 resulted in some hedging gains or losses being allocated to sales revenue and
some to other operating income (see disclosures on IFRS 9).
242
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
10. Income tax income/expense
C O M P O N E N T S O F TA X I N C O M E A N D E X P E N S E
€ million
Current tax expense, Germany
Current tax expense, abroad
Current income tax expense
of which prior-period income (–)/expense (+)
Deferred tax income (–)/expense (+), Germany
Deferred tax income (–)/expense (+), abroad
Deferred tax income (–)/expense (+)
Income tax income/expense
1 Prior-year figures adjusted (see disclosures on IFRS 9).
2018
2017¹
1,131
2,401
3,533
(79)
429
–472
–43
3,489
614
2,590
3,205
(216)
321
–1,315
–995
2,210
The statutory corporation tax rate in Germany for the 2018 assessment period was 15 %. Including trade tax
and the solidarity surcharge, this resulted in an aggregate tax rate of 29.9 % (previous year: 29.9 %).
A tax rate of 29.8 % (previous year: 29.9 %) was used to measure deferred taxes in the German consolidated
tax group.
The local income tax rates applied for companies outside Germany vary between 0 % and 45 %. In the case of
split tax rates, the tax rate applicable to undistributed profits is applied.
The realization of tax benefits from tax loss carryforwards from previous years resulted in a reduction in
current income taxes in 2018 of €732 million (previous year: €422 million).
Previously unused tax loss carryforwards amounted to €20,501 million (previous year: €14,931 million).
Tax loss carryforwards amounting to €13,217 million (previous year: €9,660 million) can be used indefinitely,
while €636 million (previous year: €3,834 million) must be used within the next ten years. There are additional
tax loss carryforwards amounting to €6,648 million (previous year: €1,437 million) that can be used within a
period of 15 or 20 years. Tax loss carryforwards of €7,995 million (previous year: €7,222 million) were estimated
not to be usable overall. Of these, €315 million (previous year: €343 million) will expire within five years,
€2,165 million (previous year: €2,152 million) within 6 to 20 years and €126 million (previous year:
€93 million) after 20 years. Tax loss carryforwards of €5,390 million (previous year: €4,634 million) that are
estimated not to be usable will not expire.
The benefit arising from previously unrecognized tax losses or tax credits of a prior period that is used to
reduce current tax expense in the current fiscal year amounts to €94 million (previous year: €114 million).
Deferred tax expense was reduced by €116 million (previous year: €75 million) because of a benefit arising
from previously unrecognized tax losses and tax credits of a prior period. Deferred tax expense resulting from
the write-down of a deferred tax asset amounts to €95 million (previous year: €130 million). Deferred tax in-
come resulting from the reversal of a write-down of deferred tax assets amounts to €231 million (previous year:
€40 million).
Tax credits granted by various countries amounted to €385 million (previous year: €500 million).
No deferred tax assets were recognized for deductible temporary differences of €1,123 million (previous
year: €1,028 million) and for tax credits of €123 million (previous year: €228 million) that would expire in the
next 20 years, or for tax credits of €3 million (previous year: €0 million) that will not expire.
In accordance with IAS 12.39, deferred tax liabilities of €213 million (previous year: €266 million) for tem-
porary differences and undistributed profits of Volkswagen AG subsidiaries were not recognized because con-
trol exists.
Deferred tax expense resulting from changes in tax rates amounted to €79 million at Group level (previous
year: income of €1,044 million).
Deferred taxes in respect of temporary differences and tax loss carryforwards of €8,235 million (previous
year: €8,344 million) were recognized without being offset by deferred tax liabilities in the same amount. The
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
243
deferred tax assets of companies within the German tax group were recognized due to positive results in the
past and are included in this analysis. The companies concerned are expecting positive tax income in the fu-
ture, following losses in the reporting period or the previous year. €4,532 million (previous year: €3,655 mil-
lion) of the deferred taxes recognized in the balance sheet was credited to equity and relates to other compre-
hensive income. €2 million (previous year: €2 million) of this figure is attributable to noncontrolling interests.
In the fiscal year under review, there were only immaterial changes arising from items that will not be
reclassified to profit or loss and were recognized directly in equity. Changes in deferred taxes classified by
balance sheet item are presented in the statement of comprehensive income.
The first-time application of IFRS 9 in the past fiscal year resulted in adjustments and reclassifications total-
ing €33 million, which were accounted for as a deduction from equity. In fiscal year 2018, tax effects of €6 million
resulting from equity transaction costs were recognized in equity. The calling of the first tranche of the hybrid
capital issued in September 2013 resulted in a reduction of equity in the amount of €5 million in the reporting
period.
D E F E R R E D TA X E S C L A S S I F I E D B Y B A L A N C E S H E E T I T E M
The following recognized deferred tax assets and liabilities were attributable to recognition and measurement
differences in the individual balance sheet items and to tax loss carryforwards:
€ million
Intangible assets
Property, plant and equipment, and lease assets
Noncurrent financial assets
Inventories
Receivables and other assets
(including Financial Services Division)
Other current assets
Pension provisions
Liabilities and other provisions
Loss allowances on deferred tax assets from
temporary differences
Temporary differences, net of loss allowances
Tax loss carryforwards, net of loss allowances
Tax credits, net of loss allowances
Value before consolidation and offset
of which noncurrent
Offset
Consolidation
Amount recognized
D E F E R R E D T A X A S S E T S
D E F E R R E D T A X L I A B I L I T I E S
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2018
Dec. 31, 2017
370
4,677
35
2,458
2,113
3,653
6,429
10,173
–151
29,758
3,246
259
33,262
(21,530)
26,038
2,906
10,131
363
4,567
35
2,653
1,879
3,884
6,652
9,603
–327
29,307
2,090
273
31,670
(18,858)
24,816
2,956
9,810
10,402
6,996
179
838
7,990
5
33
3,581
–
30,024
–
–
30,024
(23,147)
26,038
1,044
5,030
10,055
6,017
43
784
8,889
42
24
4,109
–
29,963
–
–
29,963
(22,863)
24,816
489
5,636
244
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
In accordance with IAS 12, deferred tax assets and liabilities are offset if, and only if, they relate to income taxes
levied by the same taxation authority and relate to the same tax period.
The tax expense reported for 2018 of €3,489 million (previous year: €2,210 million) was €1,188 million lower
(previous year: €1,878 million lower) than the expected tax expense of €4,677 million that would have
resulted from application of a tax rate for the Group of 29.9 % (previous year: 29.9 %) to the earnings before tax
of the Group.
R E C O N C I L I AT I O N O F E X P E C T E D T O E F F E C T I V E I N C O M E TA X
€ million
Profit before tax
Expected income tax income (–) / expense (+)
(tax rate 29.9%; previous year: 29.9%)
Reconciliation:
Effect of different tax rates outside Germany
Proportion of taxation relating to:
tax-exempt income
expenses not deductible for tax purposes
effects of loss carryforwards and tax credits
permanent differences
Tax credits
Prior-period tax expense
Effect of tax rate changes
Nondeductible withholding tax
Other taxation changes
Effective income tax expense
Effective tax rate (%)
1 Prior-year figures adjusted (see disclosures on IFRS 9).
2018
2017¹
15,643
13,673
4,677
4,088
–684
–541
–1,152
–1,237
440
255
61
–69
–406
79
502
–214
3,489
22.3
407
476
5
–50
–212
–1,044
383
–65
2,210
16.2
In the preceding 2017 fiscal year, the effects of changes in the tax rate had been impacted by the tax reform in
the USA which brought a reduction in the corporate income tax rate from 35% to 21%, among other things.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
245
11. Earnings per share
Basic earnings per share are calculated by dividing earnings attributable to Volkswagen AG shareholders by the
weighted average number of ordinary and preferred shares outstanding during the reporting period. Since the
basic and diluted number of shares is identical, basic earnings per share also correspond to diluted earnings per
share.
The distribution of dividends is in accordance with Article 27(2) Nos. 2 and 3 of the Articles of Association
of Volkswagen AG, whereby, in the case of a full distribution, the dividend paid for each preferred share is €0.06
higher than that paid for each ordinary share.
Quantity
O R D I N A R Y
P R E F E R R E D
2018
2017
2018
2017
Weighted average number of shares outstanding – basic
295,089,818
295,089,818
206,205,445
206,205,445
Weighted average number of shares outstanding – diluted
295,089,818
295,089,818
206,205,445
206,205,445
€ million
Earnings after tax
Noncontrolling interests
Earnings attributable to Volkswagen AG hybrid capital investors
Earnings attributable to Volkswagen AG shareholders
Basic earnings attributable to ordinary shares
Diluted earnings attributable to ordinary shares
Basic earnings attributable to preferred shares
Diluted earnings attributable to preferred shares
1 Prior-year figures adjusted (see disclosures on IFRS 9).
€
Basic earnings per ordinary share
Diluted earnings per ordinary share
Basic earnings per preferred share
Diluted earnings per preferred share
1 Prior-year figures adjusted (see disclosures on IFRS 9).
2018
2017¹
12,153
11,463
17
309
10
274
11,827
11,179
6,955
6,955
4,872
4,872
6,573
6,573
4,606
4,606
2018
2017¹
23.57
23.57
23.63
23.63
22.28
22.28
22.34
22.34
246
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Additional Income Statement Disclosures in accordance
with IAS 23 (Borrowing Costs)
Capitalized borrowing costs amounted to €62 million (previous year: €83 million) and related mainly to capital-
ized development costs. An average cost of debt of 1.5 % (previous year: 1.5 %) was used as a basis for capitali-
zation in the Volkswagen Group.
Additional Income Statement Disclosures in accordance
with IFRS 7 (Financial Instruments)
The tables below show net gains and losses on financial assets and financial liabilities by measurement category,
followed by a detailed explanation of key aspects:
N E T G A I N S O R L O S S E S F R O M F I N A N C I A L I N ST R U M E N T S B Y I A S 3 9 M E A S U R E M E N T C AT E G O R Y I N 2 0 1 7
€ million
Financial instruments at fair value through profit or loss
Loans and receivables
Available-for-sale financial assets
Financial liabilities measured at amortized cost
1 Prior-year figures adjusted (see disclosures on IFRS 9).
N E T G A I N S O R L O S S E S F R O M F I N A N C I A L I N ST R U M E N T S B Y I F R S 9 M E A S U R E M E N T C AT E G O R Y I N 2 0 1 8
€ million
Financial instruments at fair value through profit or loss
Financial assets measured at amortized cost
Financial assets at fair value through other comprehensive income (debt instruments)
Financial liabilities measured at amortized cost
2017¹
–1,080
2,105
–206
1,689
2,508
2018
–763
6,241
17
–4,963
531
Net gains and losses in the category at "financial instruments at fair value through profit or loss" are mainly
composed of the fair value measurement gains and losses on derivatives, including interest and gains and
losses on currency translation.
Net gains and losses from financial assets measured at fair value through other comprehensive income
(debt instruments) relate to interest income from fixed-income securities.
Net gains and losses from financial assets and liabilities measured at amortized cost mainly comprise inter-
est income and expenses calculated according to the effective interest method pursuant to IFRS 9, currency
translation effects, and the recognition of loss allowances. Interest also includes interest income and expenses
from the lending business of the Financial Services Division.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
247
The table below presents total interest income and expenses from financial assets and liabilities measured at
amortized cost, separately from financial assets measured at fair value through other comprehensive income.
TOTA L I N T E R E ST I N C O M E A N D E X P E N S E S AT T R I B U TA B L E TO F I N A N C I A L I N ST R U M E N T S N OT
M E A S U R E D AT F A I R VA L U E T H R O U G H P R O F I T O R L O S S I N 2 0 1 7
€ million
Interest income
Interest expenses
TOTA L I N T E R E ST I N C O M E A N D E X P E N S E S AT T R I B U TA B L E TO F I N A N C I A L I N ST R U M E N T S N OT
M E A S U R E D AT F A I R VA L U E T H R O U G H P R O F I T O R L O S S I N 2 0 1 8
€ million
Financial Assets and liabilities measured at amortized cost
Interest income
Interest expenses
Financial Assets (debt instruments) measured at fair value through other comprehensive income
Interest income
Interest expenses
I M PA I R M E N T L O S S E S O N F I N A N C I A L A S S E T S B Y C L A S S I N 2 0 1 7
€ million
Measured at fair value
Measured at amortized cost
2017
4,794
3,509
1,285
2018
5,022
3,183
17
1
2017
3
1,628
1,631
In fiscal year 2018, €2 million (previous year: €3 million) was recognized as an expense and €51 million (previ-
ous year: €58 million) as income from fees and commissions for trust activities and from financial assets and
liabilities not measured at fair value that are not accounted for using the effective interest method.
248
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Balance sheet disclosures
12. Intangible assets
C H A N G E S I N I N TA N G I B L E A S S E T S I N T H E P E R I O D J A N U A R Y 1 TO D E C E M B E R 3 1 , 2 0 1 7
Capitalized
development costs
for products under
development
Capitalized
development
costs for products
currently in use
Other
intangible assets
€ million
Brand names
Goodwill
Cost
Balance at Jan. 1, 2017
Foreign exchange differences
Changes in
consolidated Group
Additions
Transfers
Disposals
17,024
–30
–
–
–
–
23,559
–91
–18
–
–
7
Balance at Dec. 31, 2017
16,995
23,443
Amortization and impairment
Balance at Jan. 1, 2017
Foreign exchange differences
Changes in
consolidated Group
Additions to cumulative
amortization
Additions to cumulative
impairment losses
Transfers
Disposals
Reversal of impairment
losses
Balance at Dec. 31, 2017
Carrying amount at
Dec. 31, 2017
84
–3
–
3
–
–
–
–
83
0
0
0
–
7
–
7
–
0
7,285
–44
–
4,080
–4,197
10
7,115
39
0
–
–
57
–
–
–
95
27,366
–183
–
1,180
4,197
3,607
28,952
15,040
–122
–
3,345
332
–
3,595
–
14,999
16,911
23,442
7,020
13,953
Total
83,870
–539
–130
5,788
–7
3,890
85,093
21,271
–263
–84
4,178
397
2
3,827
–
21,674
63,419
8,637
–192
–112
528
–7
266
8,588
6,109
–138
–84
831
1
2
226
–
6,496
2,093
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
249
C H A N G E S I N I N TA N G I B L E A S S E T S I N T H E P E R I O D J A N U A R Y 1 TO D E C E M B E R 3 1 , 2 0 1 8
Capitalized
development costs
for products under
development
Capitalized
development
costs for products
currently in use
Other
intangible assets
€ million
Brand names
Goodwill
Cost
Balance at Jan. 1, 2018
Foreign exchange differences
Changes in
consolidated Group
Additions
Transfers
Disposals
16,995
–43
23,443
–131
–
–
–
–
6
–
–
–
Balance at Dec. 31, 2018
16,952
23,318
Amortization and impairment
Balance at Jan. 1, 2018
Foreign exchange differences
Changes in
consolidated Group
Additions to cumulative
amortization
Additions to cumulative
impairment losses
Transfers
Disposals
Reversal of impairment
losses
Balance at Dec. 31, 2018
Carrying amount at
Dec. 31, 2018
83
–2
–
3
–
–
–
–
84
0
0
0
–
–
–
–
–
1
7,115
–20
–
4,192
–4,040
32
7,215
95
–1
0
–
3
–15
–
42
42
28,952
–125
0
1,042
4,040
1,890
32,020
14,999
–55
–
3,665
41
15
1,897
–
16,768
16,868
23,317
7,173
15,251
Total
85,093
–421
18
5,815
41
2,049
88,496
21,674
–137
–1
4,337
57
1
2,005
42
23,883
64,613
8,588
–103
12
581
41
127
8,992
6,496
–79
–1
669
13
1
109
0
6,989
2,003
Other intangible assets comprise in particular concessions, purchased customer lists and dealer relationships,
industrial and similar rights, and licenses in such rights and assets.
250
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
The allocation of the brand names and goodwill to the operating segments is shown in the following table:
€ million
Brand names by operating segment
Porsche
Scania Vehicles and Services
MAN Truck & Bus
MAN Diesel & Turbo
Ducati
Other
Goodwill by operating segment
Porsche
Scania Vehicles and Services
MAN Truck & Bus
MAN Diesel & Turbo
Ducati
ŠKODA
Porsche Holding Salzburg
Other
2018
2017
13,823
949
1,127
415
404
150
13,823
990
1,127
415
404
153
16,868
16,911
18,825
2,755
18,825
2,866
587
267
290
158
156
280
595
268
290
159
151
289
23,317
23,442
The impairment test for recognized goodwill is based on value in use. Recoverability is not affected by a varia-
tion in the growth forecast with respect to the perpetual annuity or in the discount rate of +/– 0.5 percentage
points.
Research and development costs developed as follows:
€ million
2018
2017
Total research and development costs
of which: capitalized development costs
Capitalization ratio in %
Amortization of capitalized development costs
Research and development costs recognized in profit or loss
13,640
5,234
38.4
3,710
12,116
13,141
5,260
40.0
3,734
11,614
%
3.8
–0.5
–
–0.6
4.3
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
251
13. Property, plant and equipment
C H A N G E S I N P R O P E R T Y, P L A N T A N D E Q U I P M E N T I N T H E P E R I O D J A N U A R Y 1 TO D E C E M B E R 3 1 , 2 0 1 7
€ million
Cost
Balance at Jan. 1, 2017
Foreign exchange differences
Changes in consolidated Group
Additions
Transfers
Disposals
Balance at Dec. 31, 2017
Depreciation and impairment
Balance at Jan. 1, 2017
Foreign exchange differences
Changes in consolidated Group
Additions to cumulative depreciation
Additions to cumulative impairment losses
Transfers
Disposals
Reversal of impairment losses
Balance at Dec. 31, 2017
Carrying amount at Dec. 31, 2017
of which assets leased under finance leases
Carrying amount at Dec. 31, 2017
Land, land rights
and buildings,
including
buildings on
third-party land
Technical
equipment and
machinery
Other
equipment,
operating and
office equipment
Payments on
account and
assets under
construction
33,534
43,353
–440
–303
630
1,063
149
–824
–71
1,355
2,509
873
64,595
–1,056
–117
5,056
1,829
1,399
34,335
45,450
68,909
30,531
–560
–62
3,211
–9
–16
807
2
32,286
13,164
49,999
–790
–80
5,152
254
–1
1,183
0
53,352
15,557
13,887
–153
–117
1,058
3
14
71
0
14,621
19,714
286
Total
148,490
–2,473
–501
12,516
–11
2,452
155,569
94,456
–1,508
–259
9,421
303
–3
2,068
15
100,327
55,243
7,008
–152
–11
5,474
–5,411
31
6,876
39
–5
–
–
55
0
7
13
69
6,807
6
46
–
339
Future finance lease payments due, and their present values, are shown in the following table:
€ million
2018
2019 – 2022
from 2023
Finance lease payments
Interest component of finance lease payments
Carrying amount of liabilites
67
16
51
263
87
176
390
139
252
Total
721
242
479
252
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
C H A N G E S I N P R O P E R T Y, P L A N T A N D E Q U I P M E N T I N T H E P E R I O D J A N U A R Y 1 TO D E C E M B E R 3 1 , 2 0 1 8
€ million
Cost
Balance at Jan. 1, 2018
Foreign exchange differences
Changes in consolidated Group
Additions
Transfers
Disposals
Balance at Dec. 31, 2018
Depreciation and impairment
Balance at Jan. 1, 2018
Foreign exchange differences
Changes in consolidated Group
Additions to cumulative depreciation
Additions to cumulative impairment losses
Transfers
Disposals
Reversal of impairment losses
Balance at Dec. 31, 2018
Carrying amount at Dec. 31, 2018
of which assets leased under finance leases
Carrying amount at Dec. 31, 2018
Land, land rights
and buildings,
including
buildings on
third-party land
Technical
equipment and
machinery
Other
equipment,
operating and
office equipment
Payments on
account and
assets under
construction
Total
155,569
–452
189
13,112
–43
3,071
165,305
100,327
–232
18
9,876
574
–1
2,770
117
6,876
–59
6
6,452
–4,703
35
8,537
69
–5
–
–
258
–18
0
41
34,335
–98
168
597
858
117
45,450
–216
9
1,103
1,753
1,424
68,909
–79
6
4,960
2,048
1,495
35,743
46,676
74,350
32,286
–130
7
3,222
21
47
1,370
26
34,057
12,618
53,352
–59
1
5,593
273
–25
1,318
14
57,803
16,546
14,621
–39
10
1,062
22
–5
83
36
15,552
20,191
267
263
8,274
107,675
57,630
5
41
0
314
Options to purchase buildings and plant leased under the terms of finance leases exist in most cases, and are
also expected to be exercised.
Future finance lease payments due, and their present values, are shown in the following table:
€ million
2019
2020 – 2023
from 2024
Finance lease payments
Interest component of finance lease payments
Carrying amount of liabilites
68
18
51
231
73
158
360
119
241
Total
659
210
449
For assets leased under operating leases, payments recognized in the income statement amounted to
€1,690 million (previous year: €1,449 million). With respect to internally used assets, €1,544 million (previous
year: €1,302 million) of this figure is attributable to minimum lease payments and €13 million (previous year:
€55 million) to contingent lease payments. The payments of €133 million (previous year: €92 million) under
subleases primarily relate to minimum lease payments.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
253
Government grants of €207 million (previous year: €135 million) were deducted from the cost of property,
plant and equipment and noncash benefits received amounting to €0 million (previous year: €12 million) were
not capitalized as the cost of assets.
In connection with land and buildings, real property liens of €1,062 million (previous year: €916 million)
are pledged as collateral for partial retirement obligations, financial liabilities and other liabilities.
14. Lease assets and investment property
C H A N G E S I N L E A S E A S S E T S A N D I N V E ST M E N T P R O P E R T Y I N T H E P E R I O D J A N U A R Y 1 TO D E C E M B E R 3 1 , 2 0 1 7
€ million
Lease assets
Investment property
Total
Cost
Balance at Jan. 1, 2017
Foreign exchange differences
Changes in consolidated Group
Additions
Transfers
Disposals
Balance at Dec. 31, 2017
Depreciation and impairment
Balance at Jan. 1, 2017
Foreign exchange differences
Changes in consolidated Group
Additions to cumulative depreciation
Additions to cumulative impairment losses
Transfers
Disposals
Reversal of impairment losses
Balance at Dec. 31, 2017
Carrying amount at Dec. 31, 2017
51,483
–3,093
–873
21,319
6
16,616
52,226
13,044
–803
–228
7,327
448
0
6,775
41
12,972
39,254
780
–36
–
18
12
26
748
268
–5
0
15
3
1
4
–
279
468
52,262
–3,129
–873
21,336
18
16,641
52,973
13,312
–808
–228
7,343
451
1
6,779
41
13,251
39,722
The following payments from noncancelable leases and rental agreements were expected to be received over
the coming years:
€ million
Lease payments
2018
2019 – 2022
from 2023
Total
3,392
4,675
46
8,112
254
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
C H A N G E S I N L E A S E A S S E T S A N D I N V E ST M E N T P R O P E R T Y I N T H E P E R I O D J A N U A R Y 1 TO D E C E M B E R 3 1 , 2 0 1 8
€ million
Lease assets
Investment property
Total
Cost
Balance at Jan. 1, 2018
Foreign exchange differences
Changes in consolidated Group
Additions
Transfers
Disposals
Balance at Dec. 31, 2018
Depreciation and impairment
Balance at Jan. 1, 2018¹
Foreign exchange differences
Changes in consolidated Group
Additions to cumulative depreciation
Additions to cumulative impairment losses
Transfers
Disposals
Reversal of impairment losses
Balance at Dec. 31, 2018
Carrying amount at Dec. 31, 2018
52,226
609
–138
21,256
–106
16,354
57,493
13,007
60
–57
7,282
510
–8
6,744
103
13,947
43,545
748
12
–
38
2
13
786
279
2
–
16
0
0
8
0
290
496
52,973
621
–138
21,294
–104
16,367
58,279
13,287
62
–57
7,298
511
–8
6,752
103
14,237
44,042
1 Values in the opening balance adjusted (see disclosures on IFRS 9).
Lease assets include assets leased out under the terms of operating leases and assets covered by long-term
buyback agreements.
Investment property includes apartments rented out and leased dealerships with a fair value of
€1,106 million (previous year: €993 million). Fair value is estimated using an investment method based on
internal calculations (Level 3 of the fair value hierarchy). Operating expenses of €46 million (previous year:
€52 million) were incurred for the maintenance of investment property in use. Expenses of €1 million (previ-
ous year: €3 million) were incurred for unused investment property.
The following payments from noncancelable leases and rental agreements are expected to be received over
the coming years:
€ million
Lease payments
2019
2020 – 2023
from 2024
Total
4,108
5,187
17
9,312
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
255
15. Equity-accounted investments and other equity investments
C H A N G E S I N E Q U I T Y - A C C O U N T E D I N V E ST M E N T S A N D O T H E R E Q U I T Y I N V E ST M E N T S
I N T H E P E R I O D J A N U A R Y 1 TO D E C E M B E R 3 1 , 2 0 1 7
€ million
Gross carrying amount at Jan. 1, 2017
Foreign exchange differences
Changes in consolidated Group
Additions
Transfers
Assets held for sale
Disposals
Changes recognized in profit or loss
Dividends
Other changes recognized in other comprehensive income
Balance at Dec. 31, 2017
Impairment losses
Balance at Jan. 1, 2017
Foreign exchange differences
Changes in consolidated Group
Additions
Transfers
Disposals
Reversal of impairment losses
Balance at Dec. 31, 2017
Carrying amount at Dec. 31, 2017
Equity-accounted
investments
Other equity investments
8,727
–129
–13
348
–
–86
7
3,495
–3,640
–251
8,443
110
–1
–
129
–
–
–
238
8,205
1,417
–17
–90
519
0
–
34
–
–
30
1,825
420
–3
–15
129
–
24
1
507
1,318
Total
10,143
–146
–104
867
0
–86
40
3,495
–3,640
–221
10,268
531
–4
–15
258
–
24
1
745
9,523
256
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
C H A N G E S I N E Q U I T Y - A C C O U N T E D I N V E ST M E N T S A N D O T H E R E Q U I T Y I N V E ST M E N T S
I N T H E P E R I O D J A N U A R Y 1 TO D E C E M B E R 3 1 , 2 0 1 8
€ million
Gross carrying amount at Jan. 1, 2018¹
Foreign exchange differences
Changes in consolidated Group
Additions
Transfers
Disposals
Changes recognized in profit or loss
Dividends2
Other changes recognized in other comprehensive income
Balance at Dec. 31, 2018
Impairment losses
Balance at Jan. 1, 2018
Foreign exchange differences
Changes in consolidated Group
Additions
Transfers
Disposals
Reversal of impairment losses
Balance at Dec. 31, 2018
Carrying amount at Dec. 31, 2018
1 Values in the opening balance adjusted (see disclosures on IFRS 9 and IFRS 15).
2 Dividends before withholding tax.
Equity-accounted
investments
Other equity investments
8,431
–9
269
247
–
84
3,371
–3,460
62
8,826
238
–1
–
155
–
–
–
392
8,434
1,827
9
–368
693
0
19
–
–
1
2,142
507
–1
–4
172
0
5
1
668
1,474
Total
10,259
0
–99
939
0
103
3,371
–3,460
62
10,968
745
–2
–4
326
0
5
1
1,060
9,908
Equity-accounted investments include joint ventures in the amount of €6,372 million (previous year:
€6,459 million) and associates in the amount of €2,062 million (previous year: €1,746 million).
Of the other changes recognized in other comprehensive income, €7 million (previous year: €–249 million)
is attributable to joint ventures and €55 million (previous year: €–2 million) to associates. They are mainly the
result of foreign exchange differences in the amount of €9 million (previous year: €–327 million), pension plan
remeasurements in the amount of €31 million (previous year: €112 million) and fair value measurement of
cash flow hedges in the amount of €28 million (previous year: €–30 million).
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
257
16. Noncurrent and current financial services receivables
€ million
Current
Noncurrent Dec. 31, 2018 Dec. 31, 2018
Current
Noncurrent Dec. 31, 2017 Dec. 31, 2017
C A R R Y I N G A M O U N T
F A I R
V A L U E
C A R R Y I N G A M O U N T
F A I R
V A L U E
Receivables from
financing business
Customer financing
Dealer financing
Direct banking
Receivables from
operating leases
Receivables from
finance leases
21,487
14,781
284
45,089
2,099
3
66,575
16,879
288
67,500
16,839
288
19,841
17,033
269
40,899
2,194
4
60,739
19,227
272
61,763
19,200
272
36,551
47,191
83,742
84,627
37,142
43,096
80,239
81,236
219
–
219
219
193
–
193
193
17,446
54,216
31,501
78,692
48,948
49,572
132,909
134,418
15,810
53,145
30,153
73,249
45,963
46,766
126,395
128,195
The receivables from customer financing and finance leases contained in financial services receivables of
€132.9 billion (previous year: €126.4 billion) decreased by €26 million (previous year: €31 million) as a result of
a fair value adjustment from portfolio hedging.
The receivables from customer and dealer financing are secured by vehicles or real property liens. Of the re-
ceivables, €175 million (previous year: €287 million) was furnished as collateral for financial liabilities and
contingent liabilities.
The receivables from dealer financing include €24 million (previous year: €51 million) receivable from un-
consolidated affiliated companies.
258
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
The receivables from finance leases – almost all of them for vehicles – were based on the following expected
cash flows as of December 31, 2017 and December 31, 2018:
€ million
2018
2019 – 2022
from 2023
Total
Future payments from finance lease receivables
Unearned finance income from finance leases (discounting)
Present value of minimum lease payments outstanding
at the reporting date
16,952
–1,142
32,280
–2,261
15,810
30,018
145
–11
135
49,377
–3,414
45,963
€ million
2019
2020 – 2023
from 2024
Total
Future payments from finance lease receivables
Unearned finance income from finance leases (discounting)
Present value of minimum lease payments outstanding
at the reporting date
18,768
–1,321
33,611
–2,256
17,446
31,355
156
–9
146
52,534
–3,586
48,948
Accumulated loss allowances for uncollectible minimum lease payments receivable amount to €103 million
(previous year: €116 million).
17. Noncurrent and current other financial assets
€ million
Current
Noncurrent
Dec. 31, 2018
Current
Noncurrent
Dec. 31, 2017
C A R R Y I N G A M O U N T
C A R R Y I N G A M O U N T
Positive fair value
of derivatives
Marketable securities
Receivables from loans,
bonds, profit participation
rights (excluding interest)
Miscellaneous financial assets
2,047
–
5,513
4,026
11,586
1,932
–
3,441
1,149
6,521
3,979
–
8,953
5,175
18,107
2,845
–
5,367
3,786
11,998
4,091
3
2,531
1,829
8,455
6,936
3
7,898
5,615
20,453
Other financial assets include receivables from related parties of €8.8 billion (previous year: €7.7 billion). Other
financial assets amounting to €89 million (previous year: €75 million) were furnished as collateral for financial
liabilities and contingent liabilities. There is no original right of disposal or pledge for the furnished collateral
on the part of the collateral taker.
In addition, the miscellaneous financial assets include cash and cash equivalents that serve as collateral
(mainly under asset-backed securities transactions).
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
259
The positive fair values of derivatives relate to the following items:
€ million
Transactions for hedging
foreign currency risk from assets using fair value hedges
foreign currency risk from liabilities using fair value hedges
interest rate risk using fair value hedges
interest rate risk using cash flow hedges
foreign currency and price risk from future cash flows (cash flow hedges)
Hedging transactions Total
Assets related to derivatives not included in hedging relationships
Total
Dec. 31, 2018
Dec. 31, 2017
109
77
561
54
2,049
2,851
1,128
3,979
228
108
400
86
4,401
5,224
1,712
6,936
Positive fair values of €24 million (previous year: €17 million) were recognized from transactions for hedging
interest rate risk (fair value hedges) used in portfolio hedges.
Further details on derivative financial instruments as a whole are given in the section entitled “Financial
risk management and financial instruments".
18. Noncurrent and current other receivables
€ million
Current
Noncurrent
Dec. 31, 2018
Current
Noncurrent
Dec. 31, 2017
C A R R Y I N G A M O U N T
C A R R Y I N G A M O U N T
Other recoverable income
taxes
Miscellaneous receivables
4,189
2,015
6,203
773
1,835
2,608
4,962
3,849
8,811
3,881
1,465
5,346
896
1,356
2,252
4,777
2,821
7,598
Miscellaneous receivables include assets to fund post-employment benefits in the amount of €76 million (pre-
vious year: €64 million). This item also includes the share of the technical provisions attributable to reinsurers
amounting to €60 million (previous year: €73 million).
Current other receivables are predominantly non-interest-bearing.
19. Tax assets
€ million
Current
Noncurrent
Dec. 31, 2018
Current
Noncurrent
Dec. 31, 2017
C A R R Y I N G A M O U N T
C A R R Y I N G A M O U N T
Deferred tax assets
Tax receivables
−
1,879
1,879
10,131
476
10,606
10,131
2,355
12,486
−
1,339
1,339
9,810
407
10,217
9,810
1,746
11,557
€6,036 million (previous year: €7,456 million) of the deferred tax assets are due within one year.
260
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
20. Inventories
€ million
Dec. 31, 2018
Dec. 31, 2017
Raw materials, consumables and supplies
Work in progress
Finished goods and purchased merchandise
Current lease assets
Prepayments
Hedges on inventories
5,543
4,382
30,553
5,107
168
–8
4,858
4,143
26,514
4,774
127
–
45,745
40,415
At the same time as the relevant revenue was recognized, inventories in the amount of €179 billion (previous
year: €173 billion) were included in cost of sales. Loss allowances (excluding lease assets) recognized as expens-
es in the reporting period amounted to €902 million (previous year: €878 million). Vehicles amounting to
€316 million (previous year: €271 million) were assigned as collateral for partial retirement obligations.
21. Trade receivables
€ million
Trade receivables from
third parties
unconsolidated subsidiaries
joint ventures
associates
other investees and investors
Dec. 31, 2018
Dec. 31, 2017
13,356
206
3,958
51
317
9,667
220
3,341
44
86
17,888
13,357
The fair values of the trade receivables correspond to the carrying amounts.
In connection with the revised classification of financial instruments required by IFRS 9, receivables from
dealer financing of €2.9 billion were reclassified to trade receivables as of January 1, 2018.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
261
The trade receivables include contingent receivables from long-term construction contracts recognized using
the percentage of completion (PoC) method. They correspond to the contract assets recognized under contracts
with customers; they changed as follows:
€ million
Contingent construction contract receivables Balance at Jan. 1
Additions and disposals
Changes in consolidated Group
Change in loss allowances
Changes in estimates and assumptions as well as contract modifications
Foreign exchange differences
Contingent construction contract receivables at Dec. 31
22. Marketable securities
2018
338
4
–
10
–
0
352
The marketable securities serve to safeguard liquidity. They are short-term fixed-income securities and shares.
Most securities are measured at fair value. Noncurrent marketable securities amounting to €997 million (previ-
ous year: €1,744 million) were pledged as collateral for financial liabilities and contingent liabilities. There is no
original right of disposal or pledge for the furnished collateral on the part of the collateral taker.
23. Cash, cash equivalents and time deposits
€ million
Bank balances
Checks, cash-in-hand, bills and call deposits
Dec. 31, 2018
Dec. 31, 2017
28,522
416
28,938
18,343
114
18,457
Bank balances are held at various banks in different currencies and include time deposits, for example.
24. Equity
The subscribed capital of Volkswagen AG is composed of no-par value bearer shares with a notional value of
€2.56. As well as ordinary shares, there are preferred shares that entitle the bearer to a €0.06 higher dividend
than ordinary shares, but do not carry voting rights.
Authorized capital of up to €110 million created by a resolution of the Annual General Meeting on April 19,
2012 for the issue of new ordinary bearer shares or preferred shares expired on April 18, 2017. Apart from an
amount of €83 million, the authorized capital was utilized.
The Annual General Meeting on May 5, 2015 resolved to create authorized capital of up to €179 million, ex-
piring on May 4, 2020, to issue new preferred bearer shares.
262
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
In June 2017, Volkswagen AG placed unsecured subordinated hybrid notes with an aggregate principal amount
of €3.5 billion via a subsidiary, Volkswagen International Finance N.V. Amsterdam, the Netherlands (VIF). The
perpetual hybrid notes were issued in two tranches and can be called by VIF. The first call date for the first
tranche (€1.5 billion and a coupon of 2.700 %) is after 5.5 years, and the first call date for the second tranche
(€2.0 billion and a coupon of 3.875 %) is after ten years.
In June 2018, Volkswagen AG placed unsecured subordinated hybrid notes with an aggregate principal
amount of €2.8 billion via a subsidiary, Volkswagen International Finance N.V. Amsterdam, the Netherlands
(VIF). The perpetual hybrid notes were issued in two tranches and can be called by VIF. The first call date for the
first tranche (€1.3 billion and a coupon of 3.375 %) is after 6 years, and the first call date for the second tranche
(€1.5 billion and a coupon of 4.625 %) is after ten years.
Interest may be accumulated depending on whether a dividend is paid to Volkswagen AG shareholders. Un-
der IAS 32, these hybrid notes must be classified in their entirety as equity. The capital raised was recognized in
equity, less a discount and transaction costs and net of deferred taxes. The interest payments payable to the
noteholders will be recognized directly in equity, net of income taxes. IAS 32 only allows these hybrid notes to
be classified as debt once the respective hybrid note was called.
In July 2018, Volkswagen AG called the first tranche of hybrid notes with an aggregate principal amount of
€1.3 billion placed in 2013 via a subsidiary, Volkswagen International Finance N.V., Amsterdam, the Netherlands,
(issuer). In this figure, effects of €14 million were considered in equity.
C H A N G E I N O R D I N A R Y A N D P R E F E R R E D S H A R E S A N D S U B S C R I B E D C A P I TA L
Balance at January 1
Capital increase
Balance at December 31
S H A R E S
2018
2017
€
2018
2017
501,295,263
501,295,263
1,283,315,873
1,283,315,873
–
–
–
–
501,295,263
501,295,263
1,283,315,873
1,283,315,873
The capital reserves comprise the share premium totaling €14,225 million (previous year: €14,225 million)
from capital increases, the share premium of €219 million from the issuance of bonds with warrants and an
amount of €107 million appropriated on the basis of the capital reduction implemented in 2006. No amounts
were withdrawn from the capital reserves.
D I V I D E N D P R O P O S A L
In accordance with section 58(2) of the Aktiengesetz (AktG – German Stock Corporation Act), the dividend pay-
ment by Volkswagen AG is based on the net retained profits reported in the annual financial statements of
Volkswagen AG prepared in accordance with the German Commercial Code. Based on these annual financial
statements of Volkswagen AG, net retained profits of €2,419 million are eligible for distribution following the
transfer of €2,204 million to the revenue reserves. The Board of Management and Supervisory Board will pro-
pose to the Annual General Meeting that a total dividend of €2,419 million, i.e. €4.80 per ordinary share and
€4.86 per preferred share, be paid from the net retained profits. Shareholders are not entitled to a dividend
payment until it has been resolved by the Annual General Meeting.
A dividend of €3.90 per ordinary share and €3.96 per preferred share was distributed in fiscal year 2018.
N O N C O N T R O L L I N G I N T E R E ST S
As of December 31, 2018, total noncontrolling interests amounted to €225 million (previous year:
€229 million). The noncontrolling interests in equity are attributable primarily to shareholders of RENK AG and
AUDI AG and are immaterial individually and in the aggregate.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
263
25. Noncurrent and current financial liabilities
The details of noncurrent and current financial liabilities are presented in the following table:
€ million
Bonds
Commercial paper and notes
Liabilities to banks
Deposits business
Loans and miscellaneous
liabilities
Finance lease liabilities
C A R R Y I N G A M O U N T
C A R R Y I N G A M O U N T
Current
Noncurrent
Dec. 31, 2018
Current
Noncurrent
Dec. 31, 2017
19,132
22,381
18,455
28,555
1,183
51
89,757
62,416
18,975
15,447
1,455
2,433
399
81,549
41,356
33,903
30,010
3,617
449
101,126
190,883
14,146
22,506
14,487
29,291
1,363
51
81,844
48,971
13,399
15,357
2,114
1,358
428
81,628
63,118
35,905
29,844
31,405
2,721
479
163,472
26. Noncurrent and current other financial liabilities
€ million
Current
Noncurrent
Dec. 31, 2018
Current
Noncurrent
Dec. 31, 2017
C A R R Y I N G A M O U N T
C A R R Y I N G A M O U N T
Negative fair values of
derivative financial
instruments
Interest payable
Miscellaneous financial
liabilities
1,439
661
7,316
9,416
1,134
113
1,972
3,219
2,573
774
9,288
12,635
1,212
570
6,788
8,570
1,034
44
1,586
2,665
2,246
614
8,374
11,234
264
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
The negative fair values of derivatives relate to the following items:
€ million
Transactions for hedging
foreign currency risk from assets using fair value hedges
foreign currency risk from liabilities using fair value hedges
interest rate risk using fair value hedges
interest rate risk using cash flow hedges
foreign currency and price risk from future cash flows (cash flow hedges)
Hedging transactions Total
Liabilities related to derivatives not included in hedging relationships
Total
Dec. 31, 2018
Dec. 31, 2017
65
10
61
17
936
1,088
1,484
2,573
58
19
64
24
542
706
1,540
2,246
Negative fair values of €22 million (previous year: €22 million) were recognized from transactions for hedging
interest rate risk (fair value hedges) used in portfolio hedges.
Further details on derivative financial instruments as a whole are given in the section entitled “Financial
risk management and financial instruments".
27. Noncurrent and current other liabilities
€ million
Current
Noncurrent
Dec. 31, 2018
Current
Noncurrent
Dec. 31, 2017
C A R R Y I N G A M O U N T
C A R R Y I N G A M O U N T
Payments received on account
of orders
Liabilities relating to
other taxes
social security
wages and salaries
Miscellaneous liabilities
6,936
4,300
11,235
5,427
2,789
8,216
2,273
546
5,299
2,539
17,593
112
43
947
1,046
6,448
2,384
589
6,247
3,585
2,301
564
4,941
2,728
24,041
15,961
249
38
844
2,280
6,199
2,550
601
5,785
5,009
22,160
The liabilities from payments on account received under contracts with customers correspond to contract
liabilities under contracts with customers.
During the implementation of IFRS 15, adjustments were made to the structure of payments received on
account within noncurrent and current other liabilities. In this context, amounts were reclassified from “mis-
cellaneous liabilities” to “payments received on account of orders”. The prior-year figures were adjusted by an
amount of €3,437 million.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
265
The “payments received on account of orders” item includes liabilities from payments on account received
under contracts with customers. They changed as follows:
C H A N G E S I N L I A B I L I T I E S F R O M PAYM E N T S O N A C C O U N T R E C E I V E D U N D E R C O N T R A C T S W I T H C U ST O M E R S I N 2 0 1 8
€ million
Liabilities from advance payments received under contracts with customers at Jan. 1
Additions and disposals
Changes in consolidated Group
Changes in estimates and assumptions as well as contract modifications
Foreign exchange differences
Liabilities from advance payments received under contracts with customers at Dec. 31
28. Tax liabilities
2018
7,261
2,395
4
–
8
9,669
€ million
Current
Noncurrent
Dec. 31, 2018
Current
Noncurrent
Dec. 31, 2017
C A R R Y I N G A M O U N T
C A R R Y I N G A M O U N T
Deferred tax liabilities
Provisions for taxes
Tax payables
−
1,412
456
1,867
5,030
3,047
–
8,077
5,030
4,458
456
9,944
−
1,397
430
1,827
5,636
3,030
–
8,666
5,636
4,427
430
10,492
€407 million (previous year: €320 million) of the deferred tax liabilities are due within one year.
29. Provisions for pensions and other post-employment benefits
Provisions for pensions are recognized for commitments in the form of retirement, invalidity and dependents’
benefits payable under pension plans. The benefits provided by the Group vary according to the legal, tax and
economic circumstances of the country concerned, and usually depend on the length of service and remunera-
tion of the employees.
Volkswagen Group companies provide occupational pensions under both defined contribution and defined
benefit plans. In the case of defined contribution plans, the Company makes contributions to state or private
pension schemes based on legal or contractual requirements, or on a voluntary basis. Once the contributions
have been paid, there are no further obligations for the Volkswagen Group. Current contributions are recog-
nized as pension expenses of the period concerned. In 2018, they amounted to a total of €2,385 million (previ-
ous year: €2,214 million) in the Volkswagen Group. Of this figure, contributions to the compulsory state pen-
sion system in Germany amounted to €1,745 million (previous year: €1,634 million).
In the case of defined benefit plans, a distinction is made between pensions funded by provisions and ex-
ternally funded plans.
The pension provisions for defined benefits are measured by independent actuaries using the internation-
ally accepted projected unit credit method in accordance with IAS 19, under which the future obligations are
measured on the basis of the ratable benefit entitlements earned as of the balance sheet date. Measurement
reflects actuarial assumptions as to discount rates, salary and pension trends, employee turnover rates, longevi-
ty and increases in healthcare costs, which were determined for each Group company depending on the eco-
nomic environment. Remeasurements arise from differences between what has actually occurred and the prior-
266
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
year assumptions as well as from changes in assumptions. They are recognized in other comprehensive in-
come, net of deferred taxes, in the period in which they arise.
Multi-employer pension plans exist in the Volkswagen Group in the United Kingdom, Switzerland, Sweden
and the Netherlands. These plans are defined benefit plans. A small proportion of them are accounted for as
defined contribution plans, as the Volkswagen Group is not authorized to receive the information required in
order to account for them as defined benefit plans. Under the terms of the multi-employer plans, the
Volkswagen Group is not liable for the obligations of the other employers. In the event of its withdrawal from
the plans or their winding-up, the proportionate share of the surplus of assets attributable to the Volkswagen
Group will be credited or the proportionate share of the deficit attributable to the Volkswagen Group will have
to be funded. In the case of the defined benefit plans accounted for as defined contribution plans, the
Volkswagen Group’s share of the obligations represents a small proportion of the total obligations. No probable
significant risks arising from multi-employer defined benefit pension plans that are accounted for as defined
contribution plans have been identified. The expected contributions to those plans will amount to €20 million
for fiscal year 2019.
Owing to their benefit character, the obligations of the US Group companies in respect of post-employment
medical care in particular are also carried under provisions for pensions and other post-employment benefits.
These post-employment benefit provisions take into account the expected long-term rise in the cost of
healthcare. In fiscal year 2018, €14 million (previous year: €17 million) was recognized as an expense for health
care costs. The related carrying amount as of December 31, 2018 was €231 million (previous year:
€210 million).
The following amounts were recognized in the balance sheet for defined benefit plans:
€ million
Dec. 31, 2018
Dec. 31, 2017
Present value of funded obligations
Fair value of plan assets
Funded status (net)
Present value of unfunded obligations
Amount not recognized as an asset because of the ceiling in IAS 19
Net liability recognized in the balance sheet
of which provisions for pensions
of which other assets
15,606
10,920
4,686
28,312
23
33,022
33,097
76
15,605
11,192
4,413
28,224
29
32,666
32,730
64
S I G N I F I C A N T P E N S I O N A R R A N G E M E N T S I N T H E V O L K SWA G E N G R O U P
For the period after their active working life, the Volkswagen Group offers its employees benefits under attrac-
tive, modern occupational pension arrangements. Most of the arrangements in the Volkswagen Group are
pension plans for employees in Germany classified as defined benefit plans under IAS 19. The majority of these
obligations are funded solely by recognized provisions. These plans are now largely closed to new members. To
reduce the risks associated with defined benefit plans, in particular longevity, salary increases and inflation, the
Volkswagen Group has introduced new defined benefit plans in recent years whose benefits are funded by
appropriate external plan assets. The above-mentioned risks have been largely reduced in these pension plans.
The proportion of the total defined benefit obligation attributable to pension obligations funded by plan assets
will continue to rise in the future. The significant pension plans are described in the following.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
267
German pension plans funded solely by recognized provisions
The pension plans funded solely by recognized provisions comprise both contribution-based plans with guar-
antees and final salary plans. For contribution-based plans, an annual pension expense dependent on income
and status is converted into a lifelong pension entitlement using annuity factors (guaranteed modular pension
entitlements). The annuity factors include a guaranteed rate of interest. At retirement, the modular pension
entitlements earned annually are added together. For final salary plans, the underlying salary is multiplied at
retirement by a percentage that depends on the years of service up until the retirement date.
The present value of the guaranteed obligation rises as interest rates fall and is therefore exposed to interest
rate risk.
The pension system provides for lifelong pension payments. The companies bear the longevity risk in this
respect. This is accounted for by calculating the annuity factors and the present value of the guaranteed obli-
gation using the latest generational mortality tables – the “Heubeck 2018 G” (previous year: "Heubeck 2005 G")
mortality tables – which already reflect future increases in life expectancy.
To reduce the inflation risk from adjusting the regular pension payments by the rate of inflation, a pension
adjustment that is not indexed to inflation was introduced for pension plans where this is permitted by law.
German pension plans funded by external plan assets
The pension plans funded by external plan assets are contribution-based plans with guarantees. In this case, an
annual pension expense dependent on income and status is either converted into a lifelong pension entitle-
ment using annuity factors (guaranteed modular pension entitlement) or paid out in a single lump sum or in
installments. In some cases, employees also have the opportunity to provide for their own retirement through
deferred compensation. The annuity factors include a guaranteed rate of interest. At retirement, the modular
pension entitlements earned annually are added together. The pension expense is contributed on an ongoing
basis to a separate pool of assets that is administered independently of the Company in trust and invested in
the capital markets. If the plan assets exceed the present value of the obligations calculated using the guaran-
teed rate of interest, surpluses are allocated (modular pension bonuses).
Since the assets administered in trust meet the IAS 19 criteria for classification as plan assets, they are de-
ducted from the obligations.
The amount of the pension assets is exposed to general market risk. The investment strategy and its im-
plementation are therefore continuously monitored by the trusts’ governing bodies, on which the companies
are also represented. For example, investment policies are stipulated in investment guidelines with the aim of
limiting market risk and its impact on plan assets. In addition, asset-liability management studies are conduct-
ed if required so as to ensure that investments are in line with the obligations that need to be covered. The
pension assets are currently invested primarily in fixed-income or equity funds. The main risks are therefore
interest rate and equity price risk. To mitigate market risk, the pension system also provides for cash funds to
be set aside in an equalization reserve before any surplus is allocated.
The present value of the obligation is the present value of the guaranteed obligation after deducting the
plan assets. If the plan assets fall below the present value of the guaranteed obligation, a provision must be
recognized in that amount. The present value of the guaranteed obligation rises as interest rates fall and is
therefore exposed to interest rate risk.
In the case of lifelong pension payments, the Volkswagen Group bears the longevity risk. This is accounted
for by calculating the annuity factors and the present value of the guaranteed obligation using the latest gener-
ational mortality tables – the “Heubeck 2018 G” (previous year: "Heubeck 2005 G") mortality tables – which
already reflect future increases in life expectancy. In addition, the independent actuaries carry out annual risk
monitoring as part of the review of the assets administered by the trusts.
268
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
To reduce the inflation risk from adjusting the regular pension payments by the rate of inflation, a pension
adjustment that is not indexed to inflation was introduced for pension plans where this is permitted by law.
Calculation of the pension provisions was based on the following actuarial assumptions:
%
Discount rate at December 31
Payroll trend
Pension trend
Employee turnover rate
Annual increase in healthcare costs
G E R M A N Y
A B R O A D
2018
1.97
3.48
1.50
1.17
–
2017
1.88
3.56
1.50
1.15
–
2018
3.16
2.66
2.41
3.93
5.50
2017
3.52
3.00
2.48
3.25
4.98
These assumptions are averages that were weighted using the present value of the defined benefit obligation.
With regard to life expectancy, consideration is given to the latest mortality tables in each country.
The discount rates are generally defined to reflect the yields on prime-rated corporate bonds with matching
maturities and currencies. The iBoxx AA 10+ Corporates index was taken as the basis for the obligations of
German Group companies. Similar indices were used for foreign pension obligations.
The payroll trends cover expected wage and salary trends, which also include increases attributable to
career development.
The pension trends either reflect the contractually guaranteed pension adjustments or are based on the
rules on pension adjustments in force in each country.
The employee turnover rates are based on past experience and future expectations.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
269
The following table shows changes in the net defined benefit liability recognized in the balance sheet:
€ million
2018
2017
Net liability recognized in the balance sheet at January 1
Current service cost
Net interest expense
Actuarial gains (–)/losses (+) arising from changes in demographic assumptions
Actuarial gains (–)/losses (+) arising from changes in financial assumptions
Actuarial gains (–)/losses (+) arising from experience adjustments
Income/expenses from plan assets not included in interest income
Change in amount not recognized as an asset because of the ceiling in IAS 19
Employer contributions to plan assets
Employee contributions to plan assets
Pension payments from company assets
Past service cost (including plan curtailments)
Gains (–) or losses (+) arising from plan settlements
Changes in consolidated Group
Other changes
Foreign exchange differences from foreign plans
Net liability recognized in the balance sheet at December 31
32,666
1,410
620
399
–957
–105
–530
3
708
–9
842
24
2
10
–5
–30
33,022
32,967
1,372
600
33
–616
–88
117
–6
582
–8
841
7
–1
0
–44
–37
32,666
The change in the amount not recognized as an asset because of the ceiling in IAS 19 contains an interest com-
ponent, part of which was recognized in the financial result in profit or loss, and part of which was recognized
outside profit or loss directly in equity.
270
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
The change in the present value of the defined benefit obligation is attributable to the following factors:
€ million
2018
2017
Present value of obligations at January 1
Current service cost
Interest cost
Actuarial gains(–)/losses (+) arising from changes
in demographic assumptions
Actuarial gains(–)/losses (+) arising from changes
in financial assumptions
Actuarial gains(–)/losses (+) arising from
experience adjustments
Employee contributions to plan assets
Pension payments from company assets
Pension payments from plan assets
Past service cost (including plan curtailments)
Gains (–) or losses (+) arising from plan settlements
Changes in consolidated Group
Other changes
Foreign exchange differences from foreign plans
Present value of obligations at December 31
43,829
1,410
901
399
–957
–105
19
842
237
24
0
10
–460
–73
43,918
43,689
1,372
883
33
–616
–88
33
841
307
7
–3
0
–41
–290
43,829
Actuarial gains/losses arising from changes in demographic assumptions are mainly the result of the first-time
application of the "Heubeck 2018 G" (previous year: "Heubeck 2005 G") mortality tables.
Following the regular review of our pension plans, one plan used by South American subsidiaries had to be
classified as a defined contribution plan in fiscal year 2018, and this led to a change in the pension obligation
reported in the above table. The decrease in the present value of the defined benefit obligation in the amount of
€460 million is shown under other changes. This does not have any effect on the amount recognized in the
balance sheet, because the present value of plan assets goes down by the same amount.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
271
Changes in the relevant actuarial assumptions would have had the following effects on the defined benefit
obligation:
Present value of defined benefit obligation if
€ million
Change in percent
€ million
Change in percent
D E C . 3 1 , 2 0 1 8
D E C . 3 1 , 2 0 1 7
Discount rate
Pension trend
Payroll trend
Longevity
is 0.5 percentage
points higher
is 0.5 percentage
points lower
is 0.5 percentage
points higher
is 0.5 percentage
points lower
is 0.5 percentage
points higher
is 0.5 percentage
points lower
increases by
one year
40,048
48,398
46,147
–8.81
10.20
39,979
48,290
5.07
46,055
41,892
–4.61
41,801
44,382
1.05
44,398
43,507
–0.94
43,304
45,311
3.17
45,106
–8.79
10.18
5.08
–4.63
1.30
–1.20
2.91
The sensitivity analysis shown above considers the change in one assumption at a time, leaving the other as-
sumptions unchanged versus the original calculation, i.e. any correlation effects between the individual as-
sumptions are ignored.
To examine the sensitivity of the defined benefit obligation to a change in assumed longevity, the estimates
of mortality were reduced as part of a comparative calculation to the extent that doing so increases life expec-
tancy by approximately one year.
The average duration of the defined benefit obligation weighted by the present value of the defined benefit
obligation (Macaulay duration) is 19 years (previous year: 19 years).
The present value of the defined benefit obligation is attributable as follows to the members of the plan:
€ million
Active members with pension entitlements
Members with vested entitlements who have left the Company
Pensioners
2018
2017
25,783
2,580
15,555
43,918
26,067
2,233
15,530
43,829
272
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
The maturity profile of payments attributable to the defined benefit obligation is presented in the following
table, which classifies the present value of the obligation by the maturity of the underlying payments:
€ million
Payments due within the next fiscal year
Payments due between two and five years
Payments due in more than five years
Changes in plan assets are shown in the following table:
€ million
Fair value of plan assets at January 1
Interest income on plan assets determined using the discount rate
Income/expenses from plan assets not included in interest income
Employer contributions to plan assets
Employee contributions to plan assets
Pension payments from plan assets
Gains (+) or losses (–) arising from plan settlements
Changes in consolidated Group
Other changes
Foreign exchange differences from foreign plans
Fair value of plan assets at December 31
2018
2017
1,160
5,251
37,508
43,918
1,151
4,994
37,685
43,829
2018
2017
11,192
10,749
281
–530
708
9
237
2
0
–455
–46
10,920
283
117
582
25
307
2
–1
3
–258
11,192
Other changes are attributable to the change in the presentation of a plan used by South American subsidiaries.
The investment of the plan assets to cover future pension obligations resulted in expenses in the amount of
€250 million (previous year: income of €400 million).
Employer contributions to plan assets are expected to amount to €769 million (previous year: €617 million)
in the next fiscal year.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
273
Plan assets are invested in the following asset classes:
D E C . 3 1 , 2 0 1 8
D E C . 3 1 , 2 0 1 7
€ million
Quoted prices
in active markets
No quoted prices
in active markets
Cash and cash equivalents
Equity instruments
Debt instruments
Direct investments in
real estate
Derivatives
Equity funds
Bond funds
Real estate funds
Other funds
Other instruments
666
375
1,041
11
–21
1,433
5,443
193
890
80
2
–
4
100
–17
26
118
–
6
568
Total
669
375
1,044
112
–38
1,459
5,561
193
896
648
Quoted prices
in active markets
No quoted prices
in active markets
585
337
1,578
2
38
1,532
5,233
207
864
40
5
–
0
101
–60
34
114
–
4
577
Total
590
337
1,578
104
–23
1,567
5,348
207
868
617
53.3 % (previous year: 49.1 %) of the plan assets are invested in German assets, 27.4 % (previous year: 27.6 %) in
other European assets and 19.3 % (previous year: 23.4 %) in assets in other regions.
Plan assets include €3 million (previous year: €15 million) invested in Volkswagen Group assets and
€12 million (previous year: €18 million) in Volkswagen Group debt instruments.
The following amounts were recognized in the income statement:
€ million
Current service cost
Net interest on the net defined benefit liability
Past service cost (including plan curtailments)
Gains (–) or losses (+) arising from plan settlements
Net income (–) and expenses (+) recognized in profit or loss
2018
2017
1,410
623
24
2
2,059
1,372
602
7
–1
1,981
The above amounts are generally included in the personnel costs of the functional areas in the income state-
ment. Net interest on the net defined benefit liability is reported in interest expenses.
274
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
30. Noncurrent and current other provisions
€ million
Balance at Jan. 1, 2017
Foreign exchange differences
Changes in consolidated Group
Utilization
Additions/New provisions
Unwinding of discount/effect of change in
discount rate
Reversals
Balance at Dec. 31, 2017
of which current
of which noncurrent
Balance at Jan. 1, 2018¹
Foreign exchange differences
Changes in consolidated Group
Utilization
Additions/New provisions
Unwinding of discount/effect of change in
discount rate
Reversals
Balance at Dec. 31, 2018
of which current
of which noncurrent
Obligations
arising from sales
Employee
expenses
Litigation and
legal risks
Miscellaneous
provisions
33,027
–689
13
17,546
14,990
–50
1,881
27,865
14,821
13,044
27,867
39
–2
10,437
12,179
–108
2,503
27,035
13,986
13,050
4,546
–61
3
1,450
2,030
11
193
4,886
2,069
2,817
4,886
–17
–7
1,632
2,019
5
99
5,155
2,248
2,906
11,717
–119
–13
7,444
2,190
–25
504
5,802
2,999
2,802
5,802
–88
–1
2,396
2,131
–19
516
4,913
2,349
2,563
7,904
–169
–27
2,334
3,217
6
962
7,634
5,458
2,176
7,631
–21
–44
2,415
3,153
9
662
7,651
5,291
2,360
Total
57,193
–1,038
–24
28,774
22,426
–57
3,540
46,186
25,347
20,839
46,185
–88
–53
16,880
19,483
–114
3,780
44,754
23,874
20,879
1 Value in the opening balance adjusted (see disclosures on IFRS 9 and IFRS 15).
The obligations arising from sales contain provisions covering all risks relating to the sale of vehicles, compo-
nents and genuine parts through to the disposal of end-of-life vehicles. They primarily comprise warranty
obligations, calculated on the basis of losses to date and estimated future losses. They also include provisions
for discounts, bonuses and similar allowances which are incurred after the balance sheet date, but for which
there is a legal or constructive obligation attributable to sales revenue before the balance sheet date.
Provisions for employee expenses are recognized for long-service awards, time credits, partial retirement
arrangements, severance payments and similar obligations, among other things.
The decline in provisions for obligations regarding litigation and legal risks result primarily from the utili-
zation of the provisions recognized in connection with the diesel issue. In addition to residual provisions relat-
ing to the diesel issue, the provisions for litigation and legal risks contain amounts related to a large number of
legal disputes and official proceedings in which Volkswagen Group companies become involved in Germany
and internationally in the course of their operating activities. In particular, such legal disputes and other pro-
ceedings may occur in relation to suppliers, dealers, customers, employees, or investors. Please refer to the
“Litigation” section for a discussion of the legal risks.
Miscellaneous provisions relate to a wide range of identifiable specific risks, price risks and uncertain obli-
gations, which are measured in the amount of the expected settlement value.
Miscellaneous provisions additionally include provisions amounting to €562 million (previous year:
€534 million) relating to the insurance business.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
275
31. Put options and compensation rights granted to noncontrolling interest shareholders
This balance sheet item consists primarily of the present value of the cash settlement of €90.29 per share in
accordance with section 305 of the Aktiengesetz (AktG – German Stock Corporation Act) offered to MAN share-
holders in connection with the control and profit and loss transfer agreement.
Further information can be found in the “Litigation” section.
32. Trade payables
€ million
Trade payables to
third parties
unconsolidated subsidiaries
joint ventures
associates
other investees and investors
Dec. 31, 2018
Dec. 31, 2017
22,928
22,661
235
327
113
4
187
64
127
7
23,607
23,046
276
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Additional balance sheet disclosures in accordance with IFRS 7
(Financial Instruments)
The tables below show the carrying amounts of financial instruments by measurement category:
C A R R Y I N G A M O U N T O F F I N A N C I A L I N ST R U M E N T S B Y I A S 3 9 M E A S U R E M E N T C AT E G O R Y I N 2 0 1 7
€ million
Financial assets at fair value through profit or loss
Loans and receivables
Available-for-sale financial assets
Financial liabilities at fair value through profit or loss
Financial liabilities measured at amortized cost
C A R R Y I N G A M O U N T O F F I N A N C I A L I N ST R U M E N T S B Y I F R S 9 M E A S U R E M E N T C AT E G O R Y I N 2 0 1 8
€ million
Financial assets at fair value through profit or loss
Financial assets at fair value through other comprehensive income (debt instruments)
Financial assets at fair value through other comprehensive income (equity instruments)
Financial assets measured at amortized cost
Financial liabilities at fair value through profit or loss
Financial liabilities measured at amortized cost
C L A S S E S O F F I N A N C I A L I N ST R U M E N T S
Financial instruments are divided into the following classes at the Volkswagen Group:
> financial instruments measured at fair value;
> financial instruments measured at amortized cost;
> derivative financial instruments within hedge accounting;
> not allocated to any measurement category; and
> credit commitments and financial guarantees (off-balance sheet).
Dec. 31, 2017
1,712
125,550
16,182
1,540
198,821
Dec. 31, 2018
15,556
3,542
148
143,466
1,484
225,989
R E C O N C I L I AT I O N O F B A L A N C E S H E E T I T E M S TO C L A S S E S O F F I N A N C I A L I N ST R U M E N T S
The following table shows the reconciliation of the balance sheet items to the relevant classes of financial
instruments, broken down by the carrying amount and fair value of the financial instruments.
The fair value of financial instruments measured at amortized cost, such as receivables and liabilities, is
calculated by discounting using a market rate of interest for a similar risk and matching maturity. For reasons
of materiality, the fair value of current balance sheet items is generally deemed to be their carrying amount.
As a result of the initial application of IFRS 9 and IFRS 15, the carrying amounts of contract assets, lease
receivables and liabilities and equity-accounted associates and joint ventures have been classified as “not allo-
cated to any measurement category” since fiscal year 2018. Apart from those, other amounts (excluding finan-
cial instruments) may also be included here for reconciliation to the carrying amounts.
The risk variables governing the fair value of the receivables are risk-adjusted interest rates.
Financial instruments measured at fair value also include shares in partnerships and corporations.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
277
R E C O N C I L I AT I O N O F B A L A N C E S H E E T I T E M S TO C L A S S E S O F F I N A N C I A L I N ST R U M E N T S A S O F D E C E M B E R 3 1 , 2 0 1 7
M E A S U R E D
A T F A I R
V A L U E
D E R I V A T I V E
N O T
F I N A N C I A L
A L L O C A T E D T O
I N S T R U M E N T S
A
B A L A N C E
M E A S U R E D A T
W I T H I N H E D G E
M E A S U R E M E N T
S H E E T I T E M A T
A M O R T I Z E D C O S T
A C C O U N T I N G
C A T E G O R Y
D E C . 3 1 , 2 0 1 7
€ million
Carrying amount
Carrying amount
Fair value
Carrying amount
Carrying amount
Noncurrent assets
Equity-accounted
investments
Other equity investments
Financial services receivables
Other financial assets
Current assets
Trade receivables
Financial services receivables
Other financial assets
Marketable securities
Cash, cash equivalents and
time deposits
Assets held for sale
Noncurrent liabilities
Noncurrent financial
liabilities
Other noncurrent
financial liabilities
Current liabilities
Put options and
compensation rights granted
to noncontrolling
interest shareholders
Current financial liabilities
Trade payables
Other current
financial liabilities
–
243
–
776
–
–
936
15,939
–
–
–
–
–
43,096
4,364
13,357
37,142
9,153
–
18,457
–
–
–
44,093
4,391
13,357
37,142
9,153
–
18,457
–
81,200
82,108
–
–
–
3,315
–
–
1,909
–
–
–
–
774
1,630
1,633
261
–
–
–
3,795
81,793
23,046
3,811
81,793
23,046
–
–
–
766
7,358
7,358
446
8,205
1,075
30,153
–
–
16,003
–
–
–
90
428
–
–
51
–
–
8,205
1,318
73,249
8,455
13,357
53,145
11,998
15,939
18,457
90
81,628
2,665
3,795
81,844
23,046
8,570
The classes of financial instruments have been added as part of the implementation of IFRS 9 (see the section
on “Accounting policies”). The principal movement in this context was the reclassification of lease receivables
and liabilities in the “measured at amortized cost” category to “not allocated to any measurement category”.
Prior-year values under financial services receivables and financial liabilities have been restated. The carrying
amount of lease receivables was €49,166 million (previous year: €46,156 million) and their fair value (fair value
hierarchy level 3) was €49,791 million (previous year: €46,959 million). The carrying amount of lease liabilities
was €449 million (previous year: €479 million) and their fair value (fair value hierarchy level 2) was €466 mil-
lion (previous year: €510 million).
278
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
R E C O N C I L I AT I O N O F B A L A N C E S H E E T I T E M S TO C L A S S E S O F F I N A N C I A L I N ST R U M E N T S A S O F D E C E M B E R 3 1 , 2 0 1 8
M E A S U R E D
A T F A I R
V A L U E
D E R I V A T I V E
F I N A N C I A L
N O T A L L O C A T E D
B A L A N C E
I N S T R U M E N T S
T O A
S H E E T I T E M
M E A S U R E D A T
W I T H I N H E D G E
M E A S U R E M E N T
A T
A M O R T I Z E D C O S T
A C C O U N T I N G
C A T E G O R Y
D E C . 3 1 , 2 0 1 8
€ million
Carrying amount
Carrying amount
Fair value
Carrying amount
Carrying amount
Noncurrent assets
Equity-accounted
investments
Other equity investments
Financial services receivables
Other financial assets
Current assets
Trade receivables
Financial services receivables
Other financial assets
Marketable securities
Cash, cash equivalents and
time deposits
Noncurrent liabilities
Noncurrent financial
liabilities
Other noncurrent
financial liabilities
Current liabilities
Put options and
compensation rights granted
to noncontrolling
interest shareholders
Current financial liabilities
Trade payables
Other current
financial liabilities
–
134
286
772
–
22
1,094
16,940
–
–
–
–
46,905
4,240
17,537
36,529
9,179
140
–
–
47,789
4,252
17,537
36,529
9,179
140
28,938
28,938
100,727
100,964
–
–
–
1,510
–
–
1,341
–
–
–
8,434
1,340
31,501
–
352
17,665
1
–
–
8,434
1,474
78,692
6,521
17,888
54,216
11,615
17,080
28,938
399
101,126
767
2,085
2,087
368
–
3,219
–
–
–
1,853
89,707
23,607
1,853
89,707
23,607
–
–
–
718
8,010
8,010
721
–
51
–
–
1,853
89,757
23,607
9,449
Uniform valuation techniques and inputs are used to measure fair value. The fair value of Level 2 and 3 finan-
cial instruments is measured in the individual divisions on the basis of Group-wide specifications. The mea-
surement techniques used are explained in the section on “Accounting policies”. The fair value of Level 3 receiv-
ables was measured by reference to individual expectations of losses; these are based to a significant extent on
the Company’s assumptions about counterparty credit quality. The inputs used are not observable in an active
market.
Other financial assets include receivables from tax allocations of €29 million, and other financial liabilities
include liabilities from tax allocations of €33 million.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
279
The following tables contain an overview of the financial assets and liabilities measured at fair value by
level:
F I N A N C I A L A S S E T S A N D L I A B I L I T I E S M E A S U R E D AT F A I R VA L U E B Y L E V E L
€ million
Dec. 31, 2017
Level 1
Level 2
Level 3
Noncurrent assets
Other equity investments
Other financial assets
Current assets
Other financial assets
Marketable securities
Noncurrent liabilities
Other noncurrent financial liabilities
Current liabilities
Other current financial liabilities
243
776
936
15,939
774
766
103
–
–
15,939
–
–
–
705
933
–
242
533
140
71
3
–
532
233
€ million
Dec. 31, 2018
Level 1
Level 2
Level 3
Noncurrent assets
Other equity investments
Financial services receivables
Other financial assets
Current assets
Financial services receivables
Other financial assets
Marketable securities
Noncurrent liabilities
Other noncurrent financial liabilities
Current liabilities
Other current financial liabilities
134
286
772
22
1,094
16,940
767
718
56
–
–
–
–
16,940
–
–
25
–
357
–
880
–
250
419
53
286
415
22
214
–
516
299
280
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
F A I R VA L U E O F F I N A N C I A L A S S E T S A N D L I A B I L I T I E S M E A S U R E D AT A M O R T I Z E D C O S T B Y L E V E L
€ million
Dec. 31, 2017
Level 1
Level 2
Level 3
Fair value of financial assets measured at amortized cost
Financial services receivables¹
Trade receivables
Other financial assets
Cash, cash equivalents and time deposits
Fair value of financial assets measured at amortized cost
Fair value of financial liabilities measured at amortized cost
Put options and compensation rights granted to
noncontrolling interest shareholders
Trade payables
Financial liabilities¹
Other financial liabilities
Fair value of financial liabilities measured at amortized cost
1 Prior-year figures adjusted.
81,236
13,357
13,544
18,457
126,594
3,811
23,046
163,901
8,992
199,749
–
–
170
18,043
18,213
–
–
50,970
596
51,566
–
13,184
5,925
414
19,523
–
23,046
111,096
8,184
142,326
81,236
173
7,449
–
88,858
3,811
–
1,835
212
5,857
€ million
Dec. 31, 2018
Level 1
Level 2
Level 3
Fair value of financial assets measured at amortized cost
Financial services receivables
Trade receivables
Other financial assets
Cash, cash equivalents and time deposits
Fair value of financial assets measured at amortized cost
Fair value of financial liabilities measured at amortized cost
Put options and compensation rights granted to
noncontrolling interest shareholders
Trade payables
Financial liabilities
Other financial liabilities
Fair value of financial liabilities measured at amortized cost
84,319
17,537
13,432
28,938
144,226
1,853
23,607
190,671
10,097
226,228
–
–
378
28,115
28,493
–
–
59,089
1,297
60,386
–
17,537
5,033
823
23,394
–
23,607
131,316
8,568
163,491
84,319
–
8,020
–
92,339
1,853
–
266
233
2,352
Other financial assets include receivables from tax allocations of €29 million, and other financial liabilities
include liabilities from tax allocations of €33 million.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
281
D E R I VAT I V E F I N A N C I A L I N ST R U M E N T S W I T H I N H E D G E A C C O U N T I N G B Y L E V E L
€ million
Dec. 31, 2017
Level 1
Level 2
Level 3
Noncurrent assets
Other financial assets
Current assets
Other financial assets
Noncurrent liabilities
Other noncurrent financial liabilities
Current liabilities
Other current financial liabilities
3,315
1,909
261
446
–
–
–
–
3,315
1,909
261
445
–
–
–
0
€ million
Dec. 31, 2018
Level 1
Level 2
Level 3
Noncurrent assets
Other financial assets
Current assets
Other financial assets
Noncurrent liabilities
Other noncurrent financial liabilities
Current liabilities
Other current financial liabilities
1,510
1,341
368
721
–
–
–
–
1,510
1,341
368
721
–
–
0
–
The allocation of fair values to the three levels in the fair value hierarchy is based on the availability of observa-
ble market prices. Level 1 is used to report the fair value of financial instruments for which a price is directly
available in an active market. Examples include marketable securities and other equity investments measured
at fair value that are listed and traded on a public market. Fair values in Level 2, for example of derivatives, are
measured on the basis of market inputs using market-based valuation techniques. In particular, the inputs used
include exchange rates, yield curves and commodity prices that are observable in the relevant markets and
obtained through pricing services. Fair Values in Level 3 are calculated using valuation techniques that incorpo-
rate inputs that are not directly observable in active markets. In the Volkswagen Group, long-term commodity
futures are allocated to Level 3 because the prices available on the market must be extrapolated for measure-
ment purposes. This is done on the basis of observable inputs obtained for the different commodities through
pricing services. Options on equity instruments, residual value protection models, customer financing receiva-
bles, receivables from vehicle financing programs and other equity investments are also reported in Level 3.
Equity instruments are measured primarily using the relevant business plans and entity-specific discount rates.
The significant inputs used to measure fair value for the residual value protection models include forecasts and
estimates of used vehicle residual values for the appropriate models. The measurement of vehicle financing pro-
grams requires in particular the use of the corresponding vehicle price.
282
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
The table below provides a summary of changes in level 3 balance sheet items measured at fair value:
C H A N G E S I N B A L A N C E S H E E T I T E M S M E A S U R E D AT F A I R VA L U E B A S E D O N L E V E L 3
€ million
Balance at Jan. 1, 2017
Foreign exchange differences
Total comprehensive income
recognized in profit or loss
recognized in other comprehensive income
Additions (purchases)
Sales and settlements
Transfers into Level 2
Balance at Dec. 31, 2017
Total gains or losses recognized in profit or loss
Net other operating expense/income
of which attributable to assets/liabilities held at the reporting date
Financial result
of which attributable to assets/liabilities held at the reporting date
€ million
Balance at Jan. 1, 2018
Foreign exchange differences
Changes in consolidated Group
Total comprehensive income
recognized in profit or loss
recognized in other comprehensive income
Additions (purchases)
Sales and settlements
Transfers into Level 2
Balance at Dec. 31, 2018
Total gains or losses recognized in profit or loss
Net other operating expense/income
of which attributable to assets/liabilities held at the reporting date
Financial result
of which attributable to assets/liabilities held at the reporting date
1 Value in the opening balance adjusted (see disclosures on IFRS 9).
Financial assets
measured at fair value
Financial liabilities
measured at fair value
152
–9
68
72
–4
47
–11
–31
215
72
–
–
72
32
230
–1
526
526
0
115
–104
–2
765
–526
–
–
–526
–525
Financial assets
measured at fair value
Financial liabilities
measured at fair value
8231
–33
–184
78
27
51
339
–2
–32
990
27
31
58
–4
–5
765
–3
–
204
204
–
28
–183
5
816
–204
–203
–235
0
–
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
283
The transfers between the levels of the fair value hierarchy are reported at the respective reporting dates. The
transfers out of Level 3 into Level 2 comprise commodity futures for which observable quoted prices are now
available for measurement purposes due to the decline in their remaining maturities; consequently, no extrap-
olation is required. There were no transfers between other levels of the fair value hierarchy.
Commodity prices are the key risk variable for the fair value of commodity futures. Sensitivity analyses are
used to present the effect of changes in commodity prices on earnings after tax and equity.
If commodity prices for commodity futures classified as Level 3 had been 10 % higher (lower) as of Decem-
ber 31, 2018, earnings after tax would have been €59 million (previous year: €10 million) higher (lower). The
equity is not affected.
The key risk variable for measuring options on equity instruments held by the Company is the relevant
enterprise value. Sensitivity analyses are used to present the effect of changes in risk variables on earnings after
tax.
If the assumed enterprise values at December 31, 2018 had been 10 % higher, earnings after tax would have
been €3 million (previous year: €3 million) higher. If the assumed enterprise values at December 31, 2018 had
been 10 % lower, earnings after tax would have been €3 million (previous year: €3 million) lower.
Residual value risks result from hedging agreements with dealers under which earnings effects caused by
market-related fluctuations in residual values that arise from buyback obligations under leases are borne in
part by the Volkswagen Group.
The key risk variable influencing the fair value of the options relating to residual value risks is used car prices.
Sensitivity analyses are used to quantify the effects of changes in used car prices on earnings after tax.
If the prices of the used cars covered by the residual value protection model had been 10 % higher as of
December 31, 2018, earnings after tax would have been €325 million (previous year: €319 million) higher. If the
prices of the used cars covered by the residual value protection model had been 10 % lower as of December 31,
2018, earnings after tax would have been €352 million (previous year: €333 million) lower.
If the risk-adjusted interest rates applied to receivables measured at fair value had been 100 basis points
higher as of December 31, 2018, earnings after tax would have been €1 million lower. If the risk-adjusted inter-
est rates as of December 31, 2018 had been 100 basis points lower, earnings after tax would have been
€4 million higher.
If the corresponding vehicle price used in the vehicle financing programs had been 10 % higher as of
December 31, 2018, earnings after tax would have been €8 million higher. If the corresponding vehicle prices
used in the vehicle financing programs had been 10 % lower as of December 31, 2018, earnings after tax would
have been €8 million lower.
If the result of operations of equity investments measured at fair value had been 10% better as of December 31,
2018, the equity would have been €3 million higher. If the result of operations had been 10% worse, the equity
would have been €3 million lower.
284
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
O F F S E T T I N G O F F I N A N C I A L A S S E T S A N D L I A B I L I T I E S
The following tables contain information about the effects of offsetting in the balance sheet and the potential
financial effects of offsetting in the case of instruments that are subject to a legally enforceable master netting
arrangement or a similar agreement.
A M O U N T S T H A T A R E N O T S E T
O F F I N T H E B A L A N C E S H E E T
Gross amounts of
recognized
financial assets
Gross amounts of
recognized
financial liabilities
set off in the
balance sheet
Net amounts of
financial assets
presented in the
balance sheet
Financial
instruments
Collateral received
Net amount at
Dec. 31, 2017
6,936
0
6,936
–1,036
–197
5,704
126,877
13,356
15,939
18,457
13,780
–482
0
–
–
–20
126,395
13,356
15,939
18,457
13,760
–
0
–
–
–
–67
–1
–
–
–
126,328
13,355
15,939
18,457
13,760
€ million
Derivatives
Financial services
receivables
Trade receivables
Marketable securities
Cash, cash equivalents and
time deposits
Other financial assets
A M O U N T S T H A T A R E N O T S E T
O F F I N T H E B A L A N C E S H E E T
Gross amounts of
recognized
financial assets
Gross amounts of
recognized
financial liabilities
set off in the
balance sheet
Net amounts of
financial assets
presented in the
balance sheet
Financial
instruments
Collateral received
Net amount at
Dec. 31, 2018
3,979
132,909
17,537
17,080
28,938
14,307
0
–
0
–
–
–15
3,979
–1,819
132,909
17,537
17,080
28,938
14,291
–
0
–
–
–
–171
–77
–
–
–
–
1,989
132,831
17,536
17,080
28,938
14,291
€ million
Derivatives
Financial services
receivables
Trade receivables
Marketable securities
Cash, cash equivalents and
time deposits
Other financial assets
Other financial assets include receivables from tax allocations of €29 million.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
285
A M O U N T S T H A T A R E N O T S E T
O F F I N T H E B A L A N C E S H E E T
Gross amounts of
recognized
financial liabilities
Gross amounts of
recognized
financial assets set
off in the
balance sheet
Net amounts of
financial liabilities
presented in the
balance sheet
Financial
instruments
Collateral pledged
Net amount at
Dec. 31, 2017
3,795
2,254
163,472
23,046
9,483
–
–7
–
0
–495
3,795
2,246
163,472
23,046
8,988
–
–904
–
0
–
–
–12
–2,795
–
–
3,795
1,330
160,677
23,045
8,988
A M O U N T S T H A T A R E N O T S E T
O F F I N T H E B A L A N C E S H E E T
Gross amounts of
recognized
financial liabilities
Gross amounts of
recognized
financial assets set
off in the
balance sheet
Net amounts of
financial liabilities
presented in the
balance sheet
Financial
instruments
Collateral pledged
Net amount at
Dec. 31, 2018
1,853
2,573
190,883
23,607
10,111
–
0
–
0
–15
1,853
2,573
190,883
23,607
10,095
–
–1,738
–
0
–
–
–1
–1,953
–
–
1,853
834
188,931
23,607
10,095
€ million
Put options and
compensation rights
granted to noncontrolling
interest shareholders
Derivatives
Financial liabilities
Trade payables
Other financial liabilities
€ million
Put options and
compensation rights
granted to noncontrolling
interest shareholders
Derivatives
Financial liabilities
Trade payables
Other financial liabilities
The Financial instruments column shows the amounts that are subject to a master netting arrangement but
were not set off because they do not meet the criteria for offsetting in the balance sheet. The Collateral received
and Collateral pledged columns show the amounts of cash collateral and collateral in the form of financial
instruments received and pledged for the total assets and liabilities that do not meet the criteria for offsetting
in the balance sheet.
Other financial liabilites include receivables from tax allocations of €33 million.
286
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
A S S E T - B A C K E D S E C U R I T I E S T R A N S A C T I O N S
Asset-backed securities transactions with financial assets amounting to €27,906 million (previous year:
€24,561 million) entered into to refinance the financial services business are included in bonds, commercial
paper and notes, and liabilities from loans. The corresponding carrying amount of the receivables from the
customer and dealer financing and the finance lease business amounted to €32,669 million (previous year:
€26,689 million). Collateral of €47,884 million (previous year: €41,799 million) in total was furnished as part of
asset-backed securities transactions. The expected payments were assigned to structured entities and the equi-
table liens in the financed vehicles were transferred. These asset-backed securities transactions did not result in
the receivables from financial services business being derecognized, as the Group retains nonpayment and late
payment risks. The difference between the assigned receivables and the related liabilities is the result of differ-
ent terms and conditions and the share of the securitized paper and notes held by the Volkswagen Group itself,
as well as the proportion of vehicles financed within the Group.
Most of the public and private asset-backed securities transactions of the Volkswagen Group can be repaid
in advance (clean-up call) if less than 9 % or 10 %, as appropriate, of the original transaction volume is out-
standing. The assigned receivables cannot be assigned again or pledged elsewhere as collateral. The claims of
the holders of commercial paper and notes are limited to the assigned receivables and the receipts from those
receivables are earmarked for the repayment of the corresponding liability.
As of December 31, 2018, the fair value of the assigned receivables still recognized in the balance sheet was
€32,944 million (previous year: €27,089 million). The fair value of the related liabilities was €30,122 million
(previous year: €24,511 million) at that reporting date.
Companies of the Volkswagen Financial Services subgroup are contractually obliged, under certain condi-
tions, to transfer funds to the structured entities that are included in its financial statements. Since the receiva-
bles are transferred to the special purpose entity by way of undisclosed assignment, the situation may occur in
which the receivable has already been reduced in a legally binding manner at the originator, for example if the
obligor effectively offsets it against receivables owed to it by a company belonging to the Volkswagen Group. In
this case, collateral must be furnished for the resulting compensation claims against the special purpose entity,
for example if the rating of the Group company concerned declines to a contractually agreed reference value.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
287
Other disclosures
33. Cash flow statement
Cash flows are presented in the cash flow statement classified into cash flows from operating activities, investing
activities and financing activities, irrespective of the balance sheet classification.
Cash flows from operating activities are derived indirectly from earnings before tax. Earnings before tax are
adjusted to eliminate noncash expenditures (mainly depreciation, amortization and impairment losses) and
income. Other noncash income and expense results mainly from measurement effects in connection with
financial instruments and to fair value changes relating to hedging transactions (see section entitled “Other
financial result”). This results in cash flows from operating activities after accounting for changes in working
capital, which also include changes in lease assets and in financial services receivables.
Investing activities include additions to property, plant and equipment and equity investments, additions
to capitalized development costs and investments in securities, loans and time deposits.
Financing activities include outflows of funds from dividend payments and redemption of bonds, inflows
from the capital increases and issuance of bonds, and changes in other financial liabilities. Please refer to the
“Equity” section for information on the in-/outflows from the issuance/repayment of hybrid capital contained
in the capital contributions.
The changes in balance sheet items that are presented in the cash flow statement cannot be derived directly
from the balance sheet, as the effects of currency translation and changes in the consolidated Group are non-
cash transactions and are therefore eliminated.
In 2018, cash flows from operating activities include interest received amounting to €7,047 million (previ-
ous year: €6,641 million) and interest paid amounting to €1,857 million (previous year: €2,332 million). Cash
flows from operating activities also include dividend payments received from joint ventures and associates of
€3,493 million (previous year: €3,653 million).
Dividends amounting to €1,967 million (previous year: €1,015 million) were paid to Volkswagen AG share-
holders.
€ million
Cash, cash equivalents and time deposits as reported in the balance sheet
Time deposits
Cash and cash equivalents as reported in the cash flow statement
Dec. 31, 2018
Dec. 31, 2017
28,938
–825
28,113
18,457
–420
18,038
Time deposits are not classified as cash equivalents. Time deposits have a contractual maturity of more than
three months. The maximum default risk corresponds to its carrying amount.
288
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
The following table shows the classification of changes in financial liabilities into cash and non-cash transac-
tions:
€ million
Bonds
Other total third-party
borrowings
Finance lease liabilities
Total third-party borrowings
Put options and
compensation rights granted
to noncontrolling interest
shareholders
Other financial assets and
liabilities
Financial assets and liabilities
in financing activities
Jan. 1, 2017
Cash-effective
changes
Foreign exchange
differences
Changes in
consolidated
group
Changes in
fair values
Dec. 31, 2017
N O N - C A S H C H A N G E S
52,022
12,402
–1,018
102,259
539
154,819
3,849
87
3,501
–28
15,875
–118
–274
–5,273
–25
–6,316
–
17
–
–370
–16
–386
–
–
–289
–240
9
–520
64
10
63,118
99,875
479
163,472
3,795
–160
158,755
15,483
–6,299
–386
–446
167,107
€ million
Bonds
Other total third-party
borrowings
Finance lease liabilities
Total third-party borrowings
Put options and
compensation rights granted
to noncontrolling interest
shareholders
Other financial assets and
liabilities
Financial assets and liabilities
in financing activities
Jan. 1, 2018
Cash-effective
changes
Foreign exchange
differences
Changes in
consolidated
group
N O N - C A S H C H A N G E S
63,118
20,018
99,875
479
163,472
7,740
–29
27,730
3,795
–2,132
–160
–121
–193
–414
–1
–607
–
27
167,107
25,477
–581
–
11
–
11
–
–
11
Changes in
fair values
Dec. 31, 2018
–1,395
81,549
1,674
0
279
190
72
541
108,886
449
190,883
1,853
–182
192,555
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
289
34. Financial risk management and financial instruments
1 . H E D G I N G G U I D E L I N E S A N D F I N A N C I A L R I S K M A N A G E M E N T P R I N C I P L E S
The principles and responsibilities for managing and controlling the risks that could arise from financial in-
struments are defined by the Board of Management and monitored by the Supervisory Board. General rules
apply to the Group-wide risk policy; these are oriented on the statutory requirements and the “Minimum
Requirements for Risk Management by Credit Institutions”.
Group Treasury is responsible for operational risk management and control of risks from financial instru-
ments. The main functions of the MAN and PHS subgroups are included in Group Treasury’s operational risk
management and control for risks relating to financial instruments, while the Scania subgroup is only includ-
ed to a limited extent. Subgroups have their own risk management structures. The Risk Management Group
Executive Committee is regularly informed about current financial risks. In addition, the Group Board of
Management and the Supervisory Board are regularly updated on the current risk situation.
For more information, please see the management report on page 185-186.
2 . C R E D I T A N D D E F A U LT R I S K
The credit and default risk arising from financial assets involves the risk of default by counterparties, and there-
fore comprises at a maximum the amount of the claims under carrying amounts receivable from them and the
irrevocable credit commitments. The maximum potential credit and default risk is reduced by collateral held
and other credit enhancements. Collateral is held predominantly for financial assets in the “at amortized cost”
category. It relates primarily to collateral for financial services receivables and trade receivables. Collateral com-
prises vehicles and assets transferred as security, as well as guarantees and real property liens. Cash collateral is
also used in hedging transactions.
For level 3 and 4 financial assets with objective indications of impairment as of the reporting date, the col-
lateral provided led to a reduction in risk by €1.3 billion. Collateral of €15 million has been accepted for assets
measured at fair value through profit or loss.
Significant cash and capital investments, as well as derivatives, are only entered into with national and
international banks. Risk is additionally limited by a limit system based primarily on the equity base of the
counterparties concerned and on credit assessments by international rating agencies. Financial guarantees
issued also give rise to credit and default risk. The maximum potential credit and default risk is calculated from
the amount Volkswagen would have to pay if claims were to be asserted under the guarantees. The correspond-
ing amounts are presented in the Liquidity risk section.
There were no material concentrations of risk at individual counterparties or counterparty groups in the
past fiscal year due to the global allocation of the Group’s business activities and the resulting diversification.
There was a slight change in the concentration of credit and default risk exposures to the German public bank-
ing sector as a whole that has arisen from Group-wide cash and capital investments as well as derivatives: the
portion attributable to this sector was 9.7 % at the end of 2018 compared with 7.4 % at the end of 2017. Any
existing concentration of risk is assessed and monitored both at the level of individual counterparties or coun-
terparty groups and with regard to the countries in which these are based, in each case using the share of all
credit and default risk exposures accounted for by the risk exposure concerned.
For China, credit and default risk exposures accounted for 25.4 % at the end of 2018, as against 29.5 % at the
end of 2017. There were no other concentrations of credit and default risk exposures in individual countries.
290
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
C H A N G E S I N C R E D I T R I S K L O S S A L L O WA N C E S O N F I N A N C I A L A S S E T S
F R O M J A N U A R Y 1 TO D E C E M B E R 3 1 , 2 0 1 7
€ million
Balance at Jan. 1, 2017
Exchange rate and other changes
Changes in consolidated Group
Additions
Utilization
Reversals
Reclassification
Balance at Dec. 31, 2017
Specific
valuation
allowances
Portfolio-based
valuation
allowances
2,092
2,175
–87
–18
853
427
339
20
–46
0
525
–
676
–20
2,094
1,959
2017
4,268
–132
–18
1,378
427
1,014
–
4,054
L O S S A L L O WA N C E
The Volkswagen Group consistently uses the expected credit loss model of IFRS 9 for all financial assets and
other risk exposures.
Regarding this, IFRS 9 differentiates between the general approach and the simplified approach. The ex-
pected credit loss model under IFRS 9 takes in both loss allowances for financial assets for which there are no
objective indications of impairment and loss allowances for financial assets that are already impaired. For the
calculation of impairment losses, IFRS 9 distinguishes between the general approach and the simplified ap-
proach.
Under the general approach, financial assets are allocated to one of three stages, plus an additional stage for
financial assets that are already impaired when acquired (stage 4). Stage 1 comprises financial assets that are
recognized for the first time or for which the probability of default has not increased significantly. The expected
credit losses for the next twelve months are calculated at this stage. Stage 2 comprises financial assets with a
significantly increased probability of default, while financial assets with objective indications of default are
allocated to stage 3. The lifetime expected credit losses are calculated at these stages. Stage 4 financial assets,
which are already impaired when acquired, are subsequently measured by recognizing a loss allowance on the
basis of the accumulated lifetime expected losses. Financial assets classified as impaired on acquisition remain
in this category until they are derecognized.
The Volkswagen Group applies the simplified approach to trade receivables and contract assets with a sig-
nificant financing component in accordance with IFRS 15. The same applies to receivables under operating or
finance leases accounted for under IAS 17. Under the simplified approach, the expected losses are consistently
determined for the entire life of the asset.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
291
The tables below show the reconciliation of the loss allowance for various financial assets and financial guaran-
tees and credit commitments:
C H A N G E S I N L O S S A L L O WA N C E F O R F I N A N C I A L A S S E T S M E A S U R E D AT A M O R T I Z E D C O ST
F R O M J A N U A R Y 1 TO D E C E M B E R 3 1 , 2 0 1 8
€ million
Stage 1
Stage 2
Stage 3
Simplified
approach
Stage 4
Total
Carrying amount at Jan. 1, 2018
Foreign exchange differences
Changes in consolidated group
Newly extended/purchased financial assets (additions)
Other changes within a stage
Transfers to
Stage 1
Stage 2
Stage 3
800
–2
4
253
–69
22
–102
–33
802
–7
6
–
132
–67
275
–51
Financial instruments derecognized during the period
(disposals)
Utilization
Changes to models or risk parameters
Carrying amount at Dec. 31, 2018
–120
–148
–
–1
750
–
4
946
1,002
–35
15
–
195
–13
–39
445
–226
–459
10
896
622
–15
8
176
1
–
–
–
–127
–34
3
634
138
3,364
–4
0
30
16
–
–
–
–33
–1
–2
146
–63
33
459
275
–58
134
361
–653
–493
13
3,372
C H A N G E S I N L O S S A L L O WA N C E F O R F I N A N C I A L G U A R A N T E E S A N D C R E D I T C O M M I T M E N T S
F R O M J A N U A R Y 1 TO D E C E M B E R 3 1 , 2 0 1 8
€ million
Stage 1
Stage 2
Stage 3
Stage 4
Total
Carrying amount at Jan. 1, 2018
Foreign exchange differences
Changes in consolidated group
Newly extended/purchased financial assets (additions)
Other changes within a stage
Transfers to
Stage 1
Stage 2
Stage 3
Financial instruments derecognized during the period (disposals)
Utilization
Changes to models or risk parameters
Carrying amount at Dec. 31, 2018
11
0
–
11
0
0
–1
0
–4
–
0
18
4
0
–
–
0
0
0
0
–4
–
0
1
1
0
–
–
0
0
0
1
0
0
0
1
0
–
–
1
0
–
–
–
–1
–
0
0
16
0
–
12
0
0
0
1
–9
0
0
19
292
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
C H A N G E S I N L O S S A L L O WA N C E F O R L E A S E R E C E I VA B L E S
F R O M J A N U A R Y 1 TO D E C E M B E R 3 1 , 2 0 1 8
€ million
Carrying amount at Jan. 1, 2018
Foreign exchange differences
Changes in consolidated group
Newly extended/purchased financial assets (additions)
Other changes
Financial instruments derecognized during the period (disposals)
Utilization
Changes to models or risk parameters
Carrying amount at Dec. 31, 2018
Simplified approach
1,250
–6
–
450
0
–465
–54
18
1,193
The loss allowance on “assets measured at fair value” amounted to €2 million in January 2018 (Stage 1) and did
not change in the course of the fiscal year.
The amount contractually outstanding for financial assets that have been derecognized in the current year
and are still subject to enforcement proceedings is €293 million.
M O D I F I C AT I O N S
There were contract modifications to financial assets in the reporting period that did not lead to the derecogni-
tion of the asset. They were primarily attributable to credit ratings and relate to financial assets for which loss
allowances were measured in the amount of the lifetime credit losses. For trade and lease receivables, the
treatment is simplified by considering the credit rating-based modifications where the receivables are more
than 30 days past due. Before the modification, amortized cost amounted to €147 million. In the reporting
period, contract modifications resulted in net income/net expenses of €2 million.
As of the reporting date, the gross carrying amounts of financial assets that have been modified since initial
recognition and were simultaneously reclassified from stage 2 or 3 to stage 1 in the reporting period amounted
to €19 million. As a result, the measurement of the loss allowance for these financial assets was changed from
lifetime expected credit losses to 12-month expected credit losses.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
293
M A X I M U M C R E D I T R I S K
The table below shows the maximum credit risk to which the Volkswagen Group was exposed as of the report-
ing date, broken down by class to which the impairment model is applied:
M A X I M U M C R E D I T R I S K B Y C L A S S
A S O F D E C E M B E R 3 1 , 2 0 1 8
€ million
Financial instruments measured at fair value
Financial instruments measured at amortized cost
Financial guarantees and credit commitments
not within the scope of IFRS 7
Total
Dec. 31, 2018
3,542
143,466
4,640
49,518
201,166
R AT I N G C AT E G O R I E S
The Volkswagen Group performs a credit assessment of borrowers in all loan and lease agreements, using scor-
ing systems for the high-volume business and rating systems for corporate customers and receivables from
dealer financing. Receivables rated as good are contained in risk class 1. Receivables from customers whose
credit rating is not good but have not yet defaulted are contained in risk class 2. Risk class 3 comprises all
defaulted receivables.
The table below presents the gross carrying amounts of financial assets by rating category as of Decem-
ber 31, 2018:
G R O S S C A R R Y I N G A M O U N T S O F F I N A N C I A L A S S E T S B Y R AT I N G C AT E G O R Y
A S O F D E C E M B E R 3 1 , 2 0 1 8
€ million
Stage 1
Stage 2
Stage 3
Simplified
approach
Stage 4
Credit risk rating grade 1
(receivables with no credit risk – standard loans)
Credit risk rating grade 2
(receivables with credit risk – intensified loan management)
Credit risk rating grade 3
(cancelled receivables – non-performing loans)
Total
116,912
8,007
2,243
4,787
–
–
–
–
119,155
12,794
1,719
1,719
58,537
5,687
1,017
65,241
93
37
467
597
294
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Furthermore, the default risk exposure for financial guarantees and credit commitments is presented below:
D E F A U LT R I S K F O R F I N A N C I A L G U A R A N T E E S A N D C R E D I T C O M M I T M E N T S
A S O F D E C E M B E R 3 1 , 2 0 1 8
€ million
Stage 1
Stage 2
Stage 3
Stage 4
Credit risk rating grade 1
(receivables with no credit risk – standard loans)
Credit risk rating grade 2
(receivables with credit risk – intensified loan management)
Credit risk rating grade 3
(cancelled receivables – non-performing loans)
Total
4,243
76
–
4,318
304
15
–
319
–
–
17
17
1
0
4
5
In addition, the credit and default risk relating to financial assets, the credit rating of financial assets that are
neither past due nor impaired, and the maturities of financial assets that are past due and not impaired are pre-
sented for the previous year in the table below:
C R E D I T A N D D E F A U LT R I S K R E L AT I N G T O F I N A N C I A L A S S E T S B Y G R O S S C A R R Y I N G A M O U N T
A S O F D E C E M B E R 3 1 , 2 0 1 7
€ million
Measured at amortized cost
Financial services receivables
Trade receivables
Other receivables
Measured at fair value
Neither
past due nor impaired
Past due
and not impaired
Impaired
Dec. 31, 2017
124,044
10,395
13,403
16,862
164,704
2,888
2,833
102
–
5,822
2,900
562
196
290
3,948
129,832
13,791
13,700
17,152
174,475
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
295
C R E D I T R AT I N G O F T H E G R O S S C A R R Y I N G A M O U N T S O F F I N A N C I A L A S S E T S
T H AT A R E N E I T H E R PA ST D U E N O R I M PA I R E D A S O F D E C E M B E R 3 1 , 2 0 1 7
€ million
Risk class 1
Risk class 2
Dec. 31, 2017
Measured at amortized cost
Financial services receivables
Trade receivables
Other receivables
Measured at fair value
104,143
10,259
13,313
22,086
149,802
19,901
124,044
136
90
–
10,395
13,403
22,086
20,127
169,928
M AT U R I T Y A N A LY S I S O F T H E G R O S S C A R R Y I N G A M O U N T S O F F I N A N C I A L A S S E T S
T H AT A R E PA ST D U E A N D N O T I M PA I R E D A S O F D E C E M B E R 3 1 , 2 0 1 7
€ million
up to 30 days
within 30 to 90 days
more than 90 days
Dec. 31, 2017
P A S T D U E B Y
G R O S S C A R R Y I N G
A M O U N T
Measured at amortized cost
Financial services receivables
Trade receivables
Other receivables
Measured at fair value
2,148
1,164
43
–
3,355
728
689
21
–
1,438
12
980
37
–
1,029
2,888
2,833
102
–
5,822
Collateral that was accepted for financial assets in the current fiscal year was recognized in the balance sheet in
the amount of €134 million (previous year: €109 million). This mainly relates to vehicles.
3 . L I Q U I D I T Y R I S K
The solvency and liquidity of the Volkswagen Group are ensured at all times by rolling liquidity planning, a
liquidity reserve in the form of cash, confirmed credit lines and the issuance of securities on the international
money and capital markets. The volume of confirmed bilateral and syndicated credit lines stood at €16.8 billion
as of December 31, 2018 (previous year: €19.9 billion), of which €3.4 billion (previous year: €3.4 billion) was
drawn down.
Local cash funds in certain countries (e.g. China, Brazil, Argentina, South Africa and India) are only available
to the Group for cross-border transactions subject to exchange controls. There are no significant restrictions
over and above these.
296
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
The following overview shows the contractual undiscounted cash flows from financial instruments:
M AT U R I T Y A N A LY S I S O F U N D I S C O U N T E D C A S H F L O W S F R O M F I N A N C I A L I N ST R U M E N T S
€ million
Put options and
compensation
rights granted to
noncontrolling
interest
shareholders
Financial liabilities
Trade payables
Other financial
liabilities
Derivatives
R E M A I N I N G
R E M A I N I N G
C O N T R A C T U A L M A T U R I T I E S
C O N T R A C T U A L M A T U R I T I E S
up to
one year
within one
to five years
more than
five years
2018
up to
one year
within one
to five years
more than
five years
2017
1,853
91,891
23,607
8,010
63,059
–
–
1,853
84,965
23,380
200,235
0
–
23,607
1,916
42,984
154
10,080
3,036
109,078
3,379
83,867
23,041
7,360
72,635
–
–
3,379
69,968
16,113
169,949
5
–
23,046
1,557
47,414
86
332
9,003
120,381
325,758
188,419
129,865
26,570
344,854
190,281
118,945
16,531
When calculating cash outflows related to put options and compensation rights, it was assumed that shares
would be tendered at the earliest possible date. The cash outflows on other financial liabilities include outflows
on liabilities for tax allocations amounting to €33 million.
Derivatives comprise both cash flows from derivative financial instruments with negative fair values and
cash flows from derivatives with positive fair values for which gross settlement has been agreed. Derivatives
entered into through offsetting transactions are also accounted for as cash outflows. The cash outflows from
derivatives for which gross settlement has been agreed are matched in part by cash inflows. These cash inflows
are not reported in the maturity analysis. If these cash inflows were also recognized, the cash outflows present-
ed would be substantially lower. This applies in particular also if hedges have been closed with offsetting trans-
actions.
The cash outflows from irrevocable credit commitments are presented in section entitled "Other financial
obligations”, classified by contractual maturities.
As of December 31, 2018, the maximum potential liability under financial guarantees amounted to
€315 million (previous year: €261 million). Financial guarantees are assumed to be due immediately in all
cases.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
297
4 . M A R K E T R I S K
4.1 Hedging policy and financial derivatives
During the course of its general business activities, the Volkswagen Group is exposed to foreign currency, inter-
est rate, commodity price, equity price and fund price risk. Corporate policy is to limit or eliminate such risk by
means of hedging. Generally, all necessary hedging transactions with the exception of the Scania, MAN and
Porsche Holding GmbH (Salzburg) subgroups are executed or coordinated centrally by Group Treasury.
D I S C L O S U R E S O N G A I N S A N D L O S S E S F R O M F A I R VA L U E H E D G E S
Fair value hedges involve hedging against the risk of changes in the carrying amount of balance sheet items. As
of the reporting date, both hedging instruments and hedged items are measured at fair value in relation to the
hedged risk, and the resulting changes in value are recognized on a net basis in the corresponding income
statement item. In the previous year, income from fair value hedges amounted to €7 million.
The following table shows the gains and losses from (fair value) hedges by risk type during the fiscal year:
D I S C L O S U R E S O N G A I N S A N D L O S S E S F R O M F A I R VA L U E H E D G E S I N 2 0 1 8
€ million
Hedging interest rate risk
Other financial result
Other operating result
Hedging currency risk
Other financial result
Other operating result
Combined interest rate and currency risk hedging
Other financial result
Other operating result
Hedge ineffectiveness in
hedging relationships
–
34
–
–30
0
5
298
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
D I S C L O S U R E S O N G A I N S A N D L O S S E S F R O M C A S H F L O W H E D G E S
Cash flow hedges are used to hedge against risks of fluctuations in future cash flows. These cash flows may arise
from a recognized asset or liability, or from a highly probable forecast transaction. The following table shows
the gains and losses from cash flow hedges by risk type:
D I S C L O S U R E S O N G A I N S A N D L O S S E S F R O M C A S H F L O W H E D G E S I N 2 0 1 8
€ million
Hedging interest rate risk
Gains or losses from changes in fair value of hedging instruments within hedge accounting
Recognized in equity
Recognized in profit or loss
Reclassification from the cash flow hedge reserve to profit or loss
Due to early discontinuation of the hedging relationships
Due to realization of the hedged item
Hedging currency risk
Gains or losses from changes in fair value of hedging instruments within hedge accounting
Recognized in equity
Recognized in profit or loss
Reclassification from the cash flow hedge reserve to profit or loss
Due to early discontinuation of the hedging relationships
Due to realization of the hedged item
Combined interest rate and currency risk hedging
Gains or losses from changes in fair value of hedging instruments within hedge accounting
Recognized in equity
Recognized in profit or loss
Reclassification from the cash flow hedge reserve to profit or loss
Due to early discontinuation of the hedging relationships
Due to realization of the hedged item
Hedging commodity price risk
Gains or losses from changes in fair value of hedging instruments within hedge accounting
Recognized in equity
Recognized in profit or loss
Reclassification from the cash flow hedge reserve to profit or loss
Due to early discontinuation of the hedging relationships
Due to realization of the hedged item
The table presents effects taken to equity, reduced by deferred taxes.
2018
–38
0
–
2
–1,367
–7
–1
–1,074
8
0
–
–8
–5
–
–
1
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
299
The gain or loss from changes in the fair value of hedging instruments used in hedge accounting corresponds
to the basis for determining hedge ineffectiveness. The ineffective portion of a cash flow hedge is the income or
expense resulting from changes in the fair value of the hedging instrument that exceed the changes in the fair
value of the hedged item. This hedge ineffectiveness is attributable to parameter differences between the hedg-
ing instrument and the hedged item. Such income and expenses are recognized in other operating income/
expenses or in the financial result. In fiscal year 2017, ineffectiveness amounting to €–11 million was recog-
nized in the income statement. The Volkswagen Group uses two different methods to present market risk from
nonderivative and derivative financial instruments in accordance with IFRS 7. For quantitative risk measure-
ment, interest rate and foreign currency risk in the Volkswagen Financial Services subgroup are measured using
a value-at-risk (VaR) model on the basis of a historical simulation, while market risk in the other Group compa-
nies is determined using a sensitivity analysis. The value-at-risk calculation indicates the size of the maximum
potential loss on the portfolio as a whole within a time horizon of 40 days, measured at a confidence level of
99 %. To provide the basis for this calculation, all cash flows from nonderivative and derivative financial in-
struments are aggregated into an interest rate gap analysis. The historical market data used in calculating value
at risk covers a period of 1,000 trading days. The sensitivity analysis calculates the effect on equity and profit or
loss by modifying risk variables within the respective market risks.
D I S C L O S U R E S O N H E D G I N G I N ST R U M E N T S I N H E D G E A C C O U N T I N G
The Volkswagen Group regularly enters into hedging instruments to hedge against changes in the carrying
amount of balance sheet items. The summary below shows the notional amounts, fair values and base varia-
bles for determining the ineffectiveness of hedging instruments entered into to hedge against the risk of
changes in carrying amounts in fair value hedges:
D I S C L O S U R E S O N H E D G I N G T R A N S A C T I O N S I N F A I R VA L U E H E D G E S I N 2 0 1 8
€ million
Notional amount
Other assets
Other liabilities
Fair value changes
to determine
hedge
ineffectiveness
Hedging interest rate risk
Interest rate swaps and interest rate options contracts
48,609
Hedging currency risk
Currency forwards, currency options, cross-currency swaps
Combined interest rate and currency risk hedging
Cross-currency interest rate swaps
6,811
901
467
222
58
61
75
0
309
95
108
In addition, hedging instruments are entered into to hedge against the risk of fluctuations in future cash flows.
The table below shows the notional amounts, fair values and base variables for determining the ineffectiveness
of hedging instruments designated as cash flow value hedges.
300
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
D I S C L O S U R E S O N H E D G I N G T R A N S A C T I O N S I N C A S H F L O W H E D G E S I N 2 0 1 8
€ million
Notional amount
Other assets
Other liabilities
Fair value changes
to determine
hedge
ineffectiveness
Hedging interest rate risk
Interest rate swaps
Hedging currency risk
Currency forwards and cross-currency swaps
Currency options
Combined interest rate and currency risk hedging
12,477
66,505
17,956
39
1,834
187
Cross-currency interest rate swaps
1,424
44
15
836
91
11
17
2,794
69
35
The change in the fair value to determine ineffectiveness corresponds to the change in fair value of the desig-
nated component.
D I S C L O S U R E S O N H E D G E D I T E M S I N H E D G E A C C O U N T I N G
In addition to disclosures on hedging instruments, disclosures are also required on the hedged items, broken
down by risk category and type of designation for hedge accounting. Below follows a list of hedged items
designated in fair value hedges, separately from those designated in cash flow hedges:
D I S C L O S U R E S O N H E D G E D I T E M S I N F A I R VA L U E H E D G E S I N 2 0 1 8
€ million
Hedging interest rate risk
Financial services receivables
Other financial assets
Financial liabilities
Other financial liabilities
Hedging currency risk
Trade receivables
Financial services receivables
Other financial assets
Financial liabilities
Other financial liabilities
Trade payables
Other provisions
Combined interest rate and currency risk hedging
Financial services receivables
Other financial assets
Financial liabilities
Other financial liabilities
Carrying amount
Cumulative hedge
adjustments
Hedge adjustments
(current period/
fiscal year)
Cumulative hedge
adjustments from
discontinued hedging
relationships
19,311
–
31,670
–
–
–
640
26
–
–
–
–
714
166
–
–10
17
220
–
–
–
28
36
–
–
–
4
–32
1
–
20
17
127
–
–
–
77
38
–
–
–
4
–4
1
–
–
–
–
–
–
3
–
–
–
–
–
–
–
–
–
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
301
D I S C L O S U R E S O N H E D G E D I T E M S I N C A S H F L O W H E D G E S I N 2 0 1 8
€ million
Hedging interest rate risk
Designated components
Non-designated components
Deferred taxes
Total hedging interest rate risk
Hedging currency risk
Designated components
Non-designated components
Deferred taxes
Total hedging currency risk
Combined interest rate and currency risk hedging
Designated components
Non-designated components
Deferred taxes
Total hedging combined interest rate and currency risk
Hedging commodity price risk
Designated components
Non-designated components
Deferred taxes
Total hedging commodity price risk
R E S E R V E F O R
Changes in
fair value to
determine hedge
ineffectiveness
Active cash flow
hedges
Discontinued cash
flow hedges
26
–
–
26
2,526
–
–
2,526
27
–
–
27
–
–
–
–
19
–
–1
19
2,524
–885
–478
1,162
2
–
0
1
–
–
–
–
0
–
0
0
0
–9
1
–8
–26
–
8
–18
7
–
–2
5
C H A N G E S I N T H E R E S E R V E
When accounting for cash flow hedges, the designated effective portions of a hedging relationship are recog-
nized in OCI I. Any changes in excess of the fair value of the designated component are recognized as ineffec-
tiveness through profit or loss.
The table below shows a reconciliation to the reserve:
C H A N G E S I N T H E R E S E R V E F O R C A S H F L O W H E D G E S ( O C I I )
F R O M J A N U A R Y 1 TO D E C E M B E R 3 1 , 2 0 1 8
€ million
Interest rate risk
Currency risk
Interest rate/
currency risk
Commodity
price risk
Balance at Jan. 1, 2018
Gains or losses from effective hedging
relationships
Reclassifications due to changes in whether the
hedged item is expected to occur
Reclassifications due to realization of the
hedged item
Balance at Dec. 31, 2018
55
–38
–
2
19
3,533
–414
–1
–1,335
1,783
–16
8
–
–8
–17
9
–5
–
1
5
Total
3,581
–450
–1
–1,341
1,790
302
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
If expectations about the occurrence of the hedged item change, the arrangement is reclassified by terminating
the hedging relationship prematurely. Changed expectations are primarily caused by a change in projections
for hedging sales revenue.
Changes in the fair values of non-designated components of a derivative are likewise always recognized
immediately through profit or loss. An exception from this principle is any change in the fair value attributable
to non-designated time values of options, to the extent that they relate to the hedged item. Moreover, the
Volkswagen Group initially recognizes in equity (hedging costs) changes in the fair values of non-designated
forward components in currency forwards and currency hedges attributed to cash flow hedges. This means that
the Volkswagen Group recognizes changes in the fair value of the non-designated component or parts thereof
immediately through profit or loss only if there is ineffectiveness.
The tables below show a summary of changes in the reserve for hedging costs resulting from the non-
designated portions of options and currency hedges:
C H A N G E S I N T H E R E S E R V E F O R H E D G I N G C O ST S – N O N - D E S I G N AT E D T I M E VA L U E S O F O P T I O N S
F R O M J A N U A R Y 1 TO D E C E M B E R 3 1 , 2 0 1 8
€ million
Balance at Jan. 1, 2018
Gains and losses from non-designated time value of options
Hedged item is recognized at a point in time
Reclassification due to realization of the hedged item
Hedged item is recognized at a point in time
Balance at Dec. 31, 2018
Currency risk
63
–86
23
–1
C H A N G E S I N T H E R E S E R V E F O R H E D G I N G C O ST S – N O N - D E S I G N AT E D F O R WA R D C O M P O N E N T A N D C R O S S C U R R E N C Y
B A S I S S P R E A D ( C C B S ) F R O M J A N U A R Y 1 TO D E C E M B E R 3 1 , 2 0 1 8
€ million
Balance at Jan. 1, 2018
Gains and losses from non-designated forward elements and CCBS
Hedged item is recognized at a point in time
Reclassification due to realization of the hedged item
Hedged item is recognized at a point in time
Reclassification due to changes in whether the hedged item is expected to occur
Hedged item is recognized at a point in time
Balance at Dec. 31, 2018
Currency risk
–
–866
238
0
–628
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
303
4.2 Market risk in the Volkswagen Group (excluding Volkswagen Financial Services subgroup)
4.2.1 Foreign currency risk
Foreign currency risk in the Volkswagen Group (excluding Volkswagen Financial Services subgroup) is attribut-
able to investments, financing measures and operating activities. Currency forwards, currency options, currency
swaps and cross-currency interest rate swaps are used to limit foreign currency risk. These transactions relate to
the exchange rate hedging of all material payments covering general business activities that are not made in
the functional currency of the respective Group companies. The principle of matching currencies applies to the
Group’s financing activities.
Hedging transactions entered into in 2018 as part of foreign currency risk management were amongst others
in Argentine pesos, Australian dollars, Brazilian real, sterling, Chinese renminbi, Hong Kong dollars, Indian
rupees, Japanese yen, Canadian dollars, Mexican pesos, Norwegian kroner, Polish zloty, Russian rubles, Swedish
kronor, Swiss francs, Singapore dollars, South African rand, South Korean won, Taiwan dollars, Czech koruna,
Hungarian forints and US dollars.
All nonfunctional currencies in which the Volkswagen Group enters into financial instruments are included
as relevant risk variables in the sensitivity analysis in accordance with IFRS 7.
If the functional currencies concerned had appreciated or depreciated by 10 % against the other currencies,
the exchange rates shown below would have resulted in the following effects on the hedging reserve in equity
and on earnings after tax. It is not appropriate to add together the individual figures, since the results of the
various functional currencies concerned are based on different scenarios.
304
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
The following table shows the sensitivities of the main currencies in the portfolio as of December 31, 2018:
€ million
Exchange rate
EUR/USD
Hedging reserve
Earnings after tax
EUR/GBP
Hedging reserve
Earnings after tax
EUR/CNY
Hedging reserve
Earnings after tax
EUR/CHF
Hedging reserve
Earnings after tax
EUR/JPY
Hedging reserve
Earnings after tax
EUR/CAD
Hedging reserve
Earnings after tax
CZK/GBP
Hedging reserve
Earnings after tax
EUR/AUD
Hedging reserve
Earnings after tax
EUR/SEK
Hedging reserve
Earnings after tax
EUR/PLN
Hedging reserve
Earnings after tax
EUR/CZK
Hedging reserve
Earnings after tax
EUR/TWD
Hedging reserve
Earnings after tax
EUR/BRL
Hedging reserve
Earnings after tax
EUR/HUF
Hedging reserve
Earnings after tax
GBP/USD
Hedging reserve
Earnings after tax
D E C . 3 1 , 2 0 1 8
D E C . 3 1 , 2 0 1 7
+10%
–10%
+10%
–10%
1,329
–449
960
–205
729
–159
312
12
287
–18
117
–30
135
–1
97
–32
94
–35
–54
–52
65
–38
77
–6
8
–65
0
–63
61
1
–1,272
449
–959
205
–725
159
–298
–12
–285
18
–113
30
–135
1
–97
32
–92
35
54
52
–65
38
–77
6
–8
65
0
63
–61
–1
1,627
–365
1,126
–73
–1,303
193
–1,124
75
515
–58
246
16
271
–40
121
–51
91
0
164
–36
105
–22
0
–60
69
–20
72
–10
6
–20
0
–54
63
–2
–491
62
–232
–20
–244
20
–113
48
–91
0
–164
37
–100
18
0
60
–69
20
–72
10
–6
20
0
54
–63
2
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
305
4.2.2 Interest rate risk
Interest rate risk in the Volkswagen Group (excluding Volkswagen Financial Services subgroup) results from
changes in market interest rates, primarily for medium- and long-term variable interest receivables and liabili-
ties. Interest rate swaps and cross-currency interest rate swaps are sometimes entered into to hedge against this
risk primarily under fair value or cash flow hedges, and depending on market conditions. Intragroup financing
arrangements are mainly structured to match the maturities of their refinancing. Departures from the Group
standard are subject to centrally defined limits and monitored on an ongoing basis.
Interest rate risk within the meaning of IFRS 7 is calculated for these companies using sensitivity analyses.
The effects of the risk-variable market rates of interest on the financial result and on equity are presented, net
of tax.
If market interest rates had been 100 bps higher as of December 31, 2018, equity would have been €131 mil-
lion (previous year: €88 million) lower. If market interest rates had been 100 bps lower as of December 31, 2018,
equity would have been €66 million (previous year: €24 million) higher.
If market interest rates had been 100 bps higher as of December 31, 2018, earnings after tax would have
been €24 million higher (previous year: €76 million lower). If market interest rates had been 100 bps lower as of
December 31, 2018, earnings after tax would have been €26 million lower (previous year: €64 million higher).
4.2.3 Commodity price risk
Commodity price risk in the Volkswagen Group (excluding Volkswagen Financial Services subgroup) primarily
results from price fluctuations and the availability of ferrous and non-ferrous metals, precious metals, com-
modities required in connection with the Group’s digitalization and electrification strategy, as well as of coal,
CO2 certificates and rubber.
Commodity price risk is limited by entering into forward transactions and swaps.
Commodity price risk within the meaning of IFRS 7 is presented using sensitivity analyses. These show the
effect on earnings after tax of changes in the risk variable commodity prices.
If the commodity prices of the hedged nonferrous metals, coal and rubber had been 10 % higher (lower) as
of December 31, 2018, earnings after tax would have been €197 million (previous year: €101 million) higher
(lower).
4.2.4 Equity and bond price risk
The special funds launched using surplus liquidity and the equity interests measured at fair value are subject in
particular to equity price and bond price risk, which can arise from fluctuations in quoted market prices, stock
exchange indices and market rates of interest. The changes in bond prices resulting from variations in the mar-
ket rates of interest are quantified in sections 4.2.1 and 4.2.2, as are the measurement of foreign currency and
other interest rate risks arising from the special funds and the equity interests measured at fair value. As a rule,
risks arising from the special funds are countered by ensuring a broad diversification of products, issuers and
regional markets when investing funds, as stipulated by the Investment Guidelines of the Group. In addition,
we hedge exchange rates when market conditions are appropriate.
As part of the presentation of market risk, IFRS 7 requires disclosures on how hypothetical changes in risk
variables affect the price of financial instruments. Potential risk variables here are in particular quoted market
prices or indices, as well as interest rate changes as bond price parameters.
If share prices had been 10 % higher as of December 31, 2018, earnings after tax would have been
€16 million higher and equity would have been €4 million (previous year: €28 million effect on equity) higher.
If share prices had been 10 % lower as of December 31, 2018, earnings after tax would have been €25 million
lower and the equity €4 million (previous year: €108 million effect on equity) lower.
4.3 Market risk at Volkswagen Financial Services subgroup
Exchange rate risk in the Volkswagen Financial Services subgroup is mainly attributable to assets that are not
denominated in the functional currency and from refinancing within operating activities. Interest rate risk
relates to refinancing without matching maturities and the varying interest rate elasticity of individual asset
and liability items. The risks are limited by the use of currency and interest rate hedges.
306
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Microhedges and portfolio hedges are used for interest rate hedging. Fixed-rate assets and liabilities included in
the hedging strategy are recognized at fair value, as opposed to their original subsequent measurement at
amortized cost. The resulting effects in the income statement are offset by the corresponding gains and losses
on the interest rate hedging instruments (swaps). Currency hedges (currency forwards and cross-currency
interest rate swaps) are used to mitigate foreign currency risk. All cash flows in foreign currency are hedged.
As of December 31, 2018, the value at risk was €122 million (previous year: €167 million) for interest rate
risk and €187 million (previous year: €165 million) for foreign currency risk.
The entire value at risk for interest rate and foreign currency risk at the Volkswagen Financial Services sub-
group was €214 million (previous year: €167 million).
5 . M E T H O D S F O R M O N I TO R I N G H E D G E E F F E C T I V E N E S S
Since the implementation of IFRS 9, the Volkswagen Group determines hedge effectiveness mainly on a pro-
spective basis using the critical terms match method. Retrospective analysis of effectiveness uses effectiveness
tests in the form of the dollar offset method. Under the dollar offset method, the changes in value of the hedged
item expressed in monetary units are compared with the changes in value of the hedging instrument
expressed in monetary units.
To this end, the accumulated changes in the fair value of the designated spot component of the hedging
instrument and hedged item are compared. If the critical terms do not match, the same procedure is applied to
the non-designated component.
N OT I O N A L A M O U N T O F D E R I VAT I V E S
The summary below presents the remaining maturities profile of the notional amounts of the hedging instru-
ments, which are accounted for under the Volkswagen Group’s hedge accounting rules, and of derivatives to
which hedge accounting is not applied:
N OT I O N A L A M O U N T O F D E R I VAT I V E S I N 2 0 1 7
€ million
up to one year
five years more than five years
Dec. 31, 2017
R E M A I N I N G T E R M
within one to
T O T A L
N O T I O N A L
A M O U N T
Notional amount of hedging instruments
used in cash flow hedges
Interest rate swaps
Currency forwards
Currency options
Currency swaps
Cross-currency interest rate swaps
Commodity futures contracts
Notional amount of other derivatives
Interest rate swaps
Interest rate option contracts
Currency forwards
Other currency options
Currency swaps
Cross-currency interest rate swaps
Commodity futures contracts
3,490
32,329
8,128
–
387
–
20,483
–
19,592
10
20,825
3,350
798
8,999
35,538
11,435
–
165
–
38
–
–
–
–
–
48,067
20,125
–
2,942
–
1,451
6,025
477
–
2
–
–
293
–
12,527
67,867
19,563
–
551
–
88,675
–
22,535
10
22,276
9,667
1,275
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
307
N OT I O N A L A M O U N T O F D E R I VAT I V E S I N 2 0 1 8
€ million
up to one year
five years more than five years
Dec. 31, 2018
R E M A I N I N G T E R M
within one to
T O T A L
N O T I O N A L
A M O U N T
Notional amount of hedging instruments
within hedge accounting
Hedging interest rate risk
Interest rate swap
Hedging currency risk
Currency forwards/Cross-currency swaps
Currency forwards/Cross-currency swaps in CNY
Currency forwards/Cross-currency swaps in GBP
Currency forwards/Cross-currency swaps in USD
Currency forwards/Cross-currency swaps
in other currencies
Currency options
Currency options in USD
Currency options in CNY
Currency options in other currencies
Combined interest rate and currency risk hedging
Cross-currency interest rate swaps
Notional amount of other derivatives
Hedging Interest rate risk
Interest rate swap
Hedging Currency risk
Currency forwards/Cross-currency swaps
Currency forwards/Cross-currency swaps in USD
Currency forwards/Cross-currency swaps
in other currencies
Currency options
Currency options
Combined interest rate and currency risk hedging
Cross-currency interest rate swaps
Hedging Commodity price risk
Forward commodity contracts aluminum
Forward commodity contracts copper
Forward commodity contracts other
11,136
43,360
6,590
61,086
6,857
11,524
7,451
16,905
5,903
2,539
1,295
1,090
2,555
6,746
11,412
9,866
3,781
1,523
2,915
1,235
–
–
–
–
–
–
–
–
9,412
18,270
18,863
26,770
9,683
4,062
4,210
2,325
20,303
26,293
19,762
66,358
8,626
15,732
215
5,930
923
241
131
3,777
1,804
–
5,594
1,208
445
304
1
0
–
12,403
17,537
215
926
12,450
–
–
–
2,131
686
436
Both derivatives closed with offsetting transactions and the offsetting transactions themselves are included in
the respective notional amount. The offsetting transactions cancel out the effects of the original hedging trans-
actions. If the offsetting transactions were not included, the respective notional amount would be significantly
lower. In addition to the derivatives used for hedging foreign currency, interest rate and price risk, the Group
held options and other derivatives on equity instruments at the reporting date with a notional amount of
€3,762 million (previous year: €29 million) whose remaining maturity is under one year, as well as credit
default swaps in connection with fund investments with a notional amount of €21 billion.
308
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Existing cash flow hedges in the notional amount of €53 million (previous year: €361 million) were discon-
tinued because of a reduction in the projections. €3 million was transferred from the cash flow hedge reserve to
the financial result in the previous year, reducing earnings. In addition, hedges were to be terminated due to
internal risk regulations.
Items hedged under cash flow hedges are expected to be realized in accordance with the maturity buckets of
the hedges reported in the table. For cash flow hedges, the Volkswagen Group achieved an average hedging
interest rate of 1.65% for hedging interest rate risk. In addition, currency risk was hedged at the following hedging
exchange rates for the major currency pairs: EUR/USD at 1.19; EUR/GBP at 0.86; EUR/CNY at 8.20.
The fair values of the derivatives are estimated using market data at the balance sheet date as well as by
appropriate valuation techniques. The following term structures were used for the calculation:
in %
EUR
AUD
CHF
CNY
GBP
JPY
PLN
SEK
USD
Interest rate for
six months
Interest rate for
one year
Interest rate for
five years
Interest rate for
ten years
–0.3061
1.9938
–0.5510
3.2700
0.9170
0.0868
1.7892
–0.1043
2.7736
–0.2631
1.9515
–0.5517
3.2174
0.9836
0.0087
1.7754
–0.0659
2.7653
0.1970
2.2188
–0.1390
3.6600
1.3050
0.0238
2.1250
0.5080
2.5942
0.8150
2.5563
0.2950
4.1500
1.4365
0.1763
2.4810
1.1280
2.7330
35. Capital management
The Group’s capital management ensures that its goals and strategies can be achieved in the interests of share-
holders, employees and other stakeholders. In particular, management focuses on generating the minimum
return on invested assets in the Automotive Division that is required by the capital markets, and on increasing
the return on equity in the Financial Services Division. In the process, it aims overall to achieve the highest
possible growth in the value of the Group and its divisions for the benefit of all the Company’s stakeholder
groups.
In order to maximize the use of resources in the Automotive Division and to measure the success of this, we
have for a number of years been using a value-based management system, with value contribution as an abso-
lute performance measure and return on investment (ROI) as a relative indicator.
Value contribution is defined as the difference between operating profit after tax and the opportunity cost of
invested capital. The opportunity cost of capital is calculated by multiplying the market cost of capital by average
invested capital. Invested capital is calculated by taking the operating assets reported in the balance sheet (prop-
erty, plant and equipment, intangible assets, lease assets, inventories and receivables) and deducting non-
interest-bearing liabilities (trade payables and payments on account received). Average invested capital is derived
from the balance sheet at the beginning and the end of the reporting period. Despite the charges relating to the
special items recognized in the operating result, the Automotive Division disclosed a positive value contribution
of €4,964 million in the reporting period which, due to the improvement in the operating result before special
items and an only slight increase in the cost of capital, was significantly higher than the prior-year figure.
The return on investment is defined as the return on invested capital for a particular period based on the
operating result after tax. If the return on investment exceeds the market cost of capital, there is an increase in
the value of the invested capital and a positive value contribution. In the Group, a minimum required rate of
return on invested capital of 9 % is defined, which applies to both the business units and the individual prod-
ucts and product lines. Our goal of generating a sustained return on investment of over 15 % is anchored in
Strategy 2025. The return on investment therefore serves as a consistent target in operational and strategic
management and is used to measure target attainment for the Automotive Division, the individual business
units, and projects and products. The return on investment achieved for the Automotive Division was 11.0 %,
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
309
which is above our minimum rate of return on invested capital of 9 % and significantly exceeds the current cost
of capital of 6.2%.
Due to the specific features of the Financial Services Division, its management focuses on return on equity,
a special target linked to invested capital. This measure is calculated as the ratio of earnings before tax to aver-
age equity. Average equity is calculated from the balance at the beginning and the end of the reporting period.
In addition, the goals of the Financial Services Division are to meet the banking supervisory authorities’ regula-
tory capital requirements, to procure equity for the growth planned in the coming fiscal years and to support
its external rating by ensuring capital adequacy. To ensure compliance with prudential requirements at all
times, a planning procedure integrated into internal reporting has been put in place at the Volkswagen Bank,
allowing the required equity to be continuously determined on the basis of actual and expected business per-
formance. In the reporting period, this again ensured that regulatory minimum capital requirements were
always met both at Group level and at the level of subordinate companies’ individual, specific capital require-
ments.
The return on investment and value contribution in the Automotive Division as well as the return on equity
and the equity ratio in the Financial Services Division are shown in the following table:
€ million
Automotive Division¹
Operating result after tax
Invested capital (average)
Return on investment (ROI) in %
Cost of capital in %
Opportunity cost of invested capital
Value contribution²
Financial Services Division
Earnings before tax
Average equity
Return on equity before tax in %
Equity ratio in %
2018
2017
11,438
104,424
11.0
6.2
6,474
4,964
2,782
27,982
9.9
12.7
11,756
97,021
12.1
6.0
5,821
5,935
2,502
25,626
9.8
13.7
1 Including proportionate inclusion of the Chinese joint ventures and allocation of consolidation adjustments between the Automotive and Financial Services
Divisions; excluding effects on earnings and assets from purchase price allocation.
2 The value contribution corresponds to the Economic Value Added (EVA®). EVA® is a registered trademark of Stern Stewart & Co.
310
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
36. Contingent liabilities
€ million
Dec. 31, 2018
Dec. 31, 2017
Liabilities under guarantees
Liabilities under warranty contracts
Assets pledged as security for third-party liabilities
Other contingent liabilities
511
138
18
8,607
9,274
423
60
21
7,909
8,413
The trust assets and liabilities of the savings and trust entities belonging to the South American subsidiaries
not included in the consolidated balance sheet amount to €558 million (previous year: €768 million).
In the case of liabilities from guarantees, the Group is required to make specific payments if the debtors fail
to meet their obligations.
The other contingent liabilities primarily comprise potential liabilities arising from matters relating to taxes
and customs duties, as well as litigation and proceedings relating to suppliers, dealers, customers, employees
and investors. The contingent liabilities recognized in connection with the diesel issue totaled €5.4 billion
(previous year: €4.3 billion), of which €3.4 billion (previous year: €3.4 billion) was attributable to investor law-
suits. Also included are certain elements of the class action lawsuits and proceedings/misdemeanor proceed-
ings relating to the diesel issue as far as these can be quantified. As some of these proceedings are still at a very
early stage, the plaintiffs have in a number of cases so far not specified the basis of their claims and/or there is
insufficient certainty about the number of plaintiffs or the amounts being claimed. These lawsuits meet the
definition of a contingent liability but cannot, as a rule, be disclosed because it is impossible to measure the
amount involved. The administrative fine proceedings in accordance with section 30, 130 of the Gesetz über
Ordnungswidrigkeiten (OWiG – Act on Regulatory Offenses) instituted against Porsche AG on January 21, 2019
are likewise at a very early stage. In the absence of measurable data, no contingent liability has therefore been
recognized for these proceedings.
In addition, other contingent liabilities include an amount of €0.7 billion for potential liabilities resulting
from the risk of tax proceedings instituted by the Brazilian tax authorities against MAN Latin America.
On May 5, 2016, the U.S. National Highway Traffic Safety Administration (NHTSA) announced, jointly with
the Takata company, a further extension of the recall for various models from different manufacturers contain-
ing certain airbags produced by the Takata company. Recalls were also ordered by the local authorities in indi-
vidual countries. The recalls also included models manufactured by the Volkswagen Group. Appropriate provi-
sions have been recognized. Currently, the possibility of further extensions to the recalls that could also affect
Volkswagen Group models cannot be ruled out. It is not possible at the moment to provide further disclosures
in accordance with IAS 37.86 in relation to this matter because the technical investigations and consultations
with the authorities are still being carried out.
As permitted by IAS 37.92, in order not to prejudice the outcomes of the proceedings and the interests of
the Company, we have not made any further disclosures about estimates in connection with the financial
effects of, and disclosures about, uncertainty regarding the timing or amount of contingent liabilities in con-
nection with the diesel issue and investigations by the European Commission. Further information can be
found under the section entitled “Litigation”.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
311
37. Litigation
In the course of their operating activities, Volkswagen AG and the companies in which it is directly or indirectly
invested are involved in a great number of legal disputes and governmental proceedings in Germany and
abroad. Such legal disputes and other proceedings occur in relation to employees, dealers, investors, customers,
or suppliers, among others, or in relation to relevant public authorities. For the companies involved, these may
result in payment or other obligations. In particular, substantial compensatory or punitive damages may have
to be paid and cost-intensive measures may have to be implemented. In this context, specific quantification of
the objectively likely consequences is often possible only to a very limited extent, if at all.
Risks may also emerge in connection with the adherence to regulatory requirements. This particularly
applies in the case of regulatory vagueness that may be interpreted differently by Volkswagen and the authori-
ties responsible for the respective regulations. In addition, legal risks can arise from the criminal activities of
individual persons, which even the best compliance management system can never completely prevent.
Where transparent and economically viable, adequate insurance coverage was taken out for these risks. For
the identifiable and measurable risks, provisions considered appropriate based on existing information were
recognized and information about contingent liabilities disclosed. As some risks cannot be assessed or can only
be assessed to a limited extent, the possibility of loss or damage not covered by the insured amounts and provi-
sions cannot be ruled out. This applies particularly to legal risk assessment regarding the diesel issue.
Diesel issue
In the USA Volkswagen AG and certain affiliates reached settlement agreements (including various consent
decrees) with the US Department of Justice (DOJ), the US Environmental Protection Agency (EPA), the State of
California, the California Air Resources Board (CARB), the California Attorney General, the US Federal Trade
Commission, and private plaintiffs represented by a Plaintiffs' Steering Committee in a multi- district litigation
in California. These settlement agreements resolved certain civil claims made in relation to affected diesel
vehicles in the United States of America.
Volkswagen AG also entered into agreements to resolve US federal criminal liability and certain civil penal-
ties and claims relating to the diesel issue. As part of its plea agreement, Volkswagen AG agreed to plead guilty
to three felony counts under US law – including conspiracy to commit fraud, obstruction of justice and using
false statements to import cars into the United States of America – and has been sentenced to three years' pro-
bation.
A description of the diesel issue can be found starting on page 92. In connection with the diesel issue,
potential consequences for Volkswagen’s results of operations, financial position and net assets could emerge
primarily in the following legal areas:
1. Coordination with the authorities on technical measures worldwide
In agreement with the respective responsible authorities, the Volkswagen Group is making technical measures
available worldwide for virtually all diesel vehicles with type EA 189 engines.
Within its area of responsibility, the German Federal Motor Transport Authority (Kraftfahrt-Bundesamt or
KBA) ascertained for all clusters (groups of vehicles) that implementation of the technical measures would not
bring about any adverse changes in fuel consumption figures, CO2 emission figures, engine power, maximum
torque, and noise emissions.
AUDI AG has worked intensively for many months to check all relevant diesel concepts for possible discre-
pancies and retrofit potentials. The measures proposed by AUDI AG have been adopted and mandated in vari-
ous recall notices issued by the KBA for vehicle models with V6 and V8 TDI engines.
312
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Currently, AUDI AG assumes that the total cost, including the amount based on recalls, of the ongoing largely
software-based retrofit program that began in July 2017 will be manageable and has recognized corresponding
balance-sheet risk provisions. The measures submitted by AUDI AG are being examined by the KBA and can
only be made available to customers after corresponding approval by the KBA.
The Ministry of Environment in South Korea qualified certain emissions strategies in the engine control
software of various diesel vehicles with V6 or V8-TDI engines meeting the Euro 6 emission standard as an
unlawful defeat device and ordered a recall on April 4, 2018; the same applies to the Dynamic Shift Program
(DSP) in the transmission control of a number of Audi models.
In the USA, in fiscal year 2018, the EPA and CARB issued the outstanding official approvals needed for the
technical solutions for the affected vehicles with 2.0 l TDI and with V6 3.0 l TDI engines. In the case of 2.0 l
Generation 2 diesel vehicles with manual transmissions, Volkswagen Group of America, Inc. elected to withdraw
the approved emissions modification proposal, whereby owners were given the option of a buyback and lessees
were given the option of early lease termination.
On October 31, 2018, after discussions with DOJ, EPA, and CARB, the parties agreed to modify the First and
Second Partial Consent Decrees to clarify that Volkswagen may repair certain technical issues with approved
emissions modifications through an “AEM Correction” (Approved Emissions Modifications).
2. Criminal and administrative proceedings worldwide (excluding the USA/Canada)
Criminal investigations, regulatory offense proceedings, and/or administrative proceedings (in Germany for
example by the Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin – Federal Financial Supervisory Autho-
rity) have been opened in some countries. The public prosecutor’s offices in Braunschweig and Munich are
investigating the core issues of the criminal investigations.
The Braunschweig Office of the Public Prosecutor is investigating approximately 40 (current and former)
employees and a former member of the Board of Management for possible fraud, among other things. The
investigations are ongoing. The defendants and Volkswagen AG were permitted to inspect the investigation
files.
The regulatory offense proceeding that was opened against Volkswagen AG in this connection in April 2016
has been terminated by the administrative fine order issued against Volkswagen AG by the Braunschweig Office
of the Public Prosecutor on June 13, 2018. The administrative fine order is based on a negligent breach in the
Powertrain Development department of the obligation to supervise, relating to the period from mid-2007 to
2015 and a total of 10.7 million vehicles with diesel engines of types EA 189 worldwide and EA 288 (Generation
3) in the USA and Canada. The administrative order imposes a total fine of €1.0 billion, consisting of a penalty
payment of €5 million and the forfeiture of economic benefits in the amount of €995 million. After thorough
examination, the fine has been accepted and paid in full by Volkswagen AG, rendering the administrative fine
order legally final. The administrative fine order terminates the regulatory offense proceeding against Volks-
wagen AG. Further sanctions against or forfeitures by Volkswagen AG and its Group companies are therefore
not expected in Germany in connection with the unitary factual situation covered by the administrative order
concerning diesel engines of types EA 189 worldwide and EA 288 (Generation 3) in the USA and Canada. As a
result, Volkswagen expects that the conclusion of this proceeding will have a substantially positive impact on
other governmental proceedings being conducted in Europe against Volkswagen AG and its Group companies.
The Braunschweig Office of the Public Prosecutor is conducting another proceeding against three (current
or former) members of the Board of Management for alleged market manipulation with respect to capital mar-
ket disclosure obligations in connection with the diesel issue. In this context, the Office of the Public Prosecutor
has been conducting a regulatory offense proceeding against Volkswagen AG under § 30 OWiG (German Regula-
tory Offenses Act) since July 30, 2018. Volkswagen AG has since been permitted to inspect the public prosecut-
or's investigation files several times. The investigations are ongoing.
The Munich II Office of the Public Prosecutor is conducting investigations against 24 persons, including the
former Chairman of the Board of Management of AUDI AG (who is also a former member of the Board of Ma-
nagement of Volkswagen AG) and another active member of the Board of Management of AUDI AG. The investi-
gations are ongoing. AUDI AG has appointed two renowned major law firms to clarify the matters underlying
the public prosecutor’s accusations. The Board of Management and Supervisory Board of AUDI AG are being
regularly updated on the current state of affairs.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
313
The administrative fine order issued on October 16, 2018 by the Munich II Office of the Public Prosecutor ter-
minates the regulatory offense proceeding conducted against AUDI AG in this connection. The administrative
fine order is based on a negligent breach of the obligation to supervise occurring in the organizational unit
“Emissions Service/Engine Type Approval”. The administrative order imposes a total fine of €800 million, con-
sisting of a penalty payment of €5 million and the forfeiture of economic benefits in the amount of €795 mil-
lion. After thorough examination, the fine has been accepted and paid in full by AUDI AG, rendering the admin-
istrative fine order legally final. The administrative fine order terminates the regulatory offense proceeding
against AUDI AG. Further sanctions against or forfeitures by AUDI AG are therefore not to be expected in Europe
in connection with the unitary factual situation underlying the administrative fine order.
The Stuttgart Office of the Public Prosecutor has commenced a criminal investigation relating to the diesel
issue against one board member, one employee, and one former employee of Dr. Ing. h.c. F. Porsche AG on
suspicion of fraud and illegal advertising as well as an analogous regulatory offense proceeding against
Dr. Ing. h.c. F. Porsche AG under § 30 OWiG. Dr. Ing. h.c. F. Porsche AG has appointed two renowned major law
firms to clarify the matter underlying the public prosecutor’s accusations. The Board of Management and
Supervisory Board of Dr. Ing. h.c. F. Porsche AG are being regularly updated on the current state of affairs.
On July 6, 2018, the Federal Constitutional Court rendered its decision on the constitutional complaints
filed in connection with the search of the premises of the law firm Jones Day, holding that the lower court
ruling affirming the provisional seizure of client engagement documents and data of Volkswagen AG did not
violate constitutional law. The companies of the Volkswagen Group will continue to cooperate with the German
government authorities with due regard for the ruling of the German Federal Constitutional Court.
Whether the criminal and administrative proceedings will ultimately result in fines for the Company, and if
so in what amount, is currently subject to estimation risks. According to Volkswagen’s estimates so far, the
likelihood that a sanction will be imposed is 50 % or less in the majority of these proceedings. Contingent liabi-
lities have therefore been disclosed where the amount of such liabilities could be measured and the likelihood
of a sanction being imposed was assessed at not lower than 10 %. Provisions were recognized to a small extent.
3. Product-related lawsuits worldwide (excluding the USA/Canada)
In principle, it is possible that customers in the affected markets will file civil lawsuits or that importers and
dealers will assert recourse claims against Volkswagen AG and other Volkswagen Group companies. Besides
individual lawsuits, various forms of collective actions (i.e. assertion of individual claims by plaintiffs acting
jointly or as representatives of a class) are available in various jurisdictions. Furthermore, in a number of mar-
kets it is possible for consumer and/or environmental organizations to bring suit to enforce alleged rights to
injunctive relief, declaratory judgment, or damages.
Customer class action lawsuits and actions brought by consumer and/or environmental associations are
pending against Volkswagen AG and other companies of the Volkswagen Group in various countries including
Argentina, Austria, Australia, Belgium, Brazil, Chile, China, the Czech Republic, Germany, Israel, Italy, Mexico,
the Netherlands, Poland, Portugal, Spain, South Africa, South Korea, Switzerland, Taiwan, and the United King-
dom. Alleged rights to damages and other relief are asserted in these actions.
The actions pending in the aforementioned countries include in particular the following:
Various class action lawsuits with opt-out mechanism, one individual lawsuit, and two civil suits by the
Australian Competition and Consumer Commission are currently pending in Australia against Volkswagen AG
and other Group companies, including the Australian subsidiaries. These proceedings have been joined with
each other. Given the opt-out rule, the class actions have the potential to automatically cover all vehicles with
type EA 189 engines unless the right to opt out is actively exercised. In all, approximately 100 thousand vehicles
in the Australian market with type EA 189 engines are affected. An initial court hearing lasting several weeks
was held in March 2018 on technical questions; further issues are to be argued in September 2019.
314
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
In Belgium, the Belgian consumer organization Test Aankoop VZW has filed a class action to which an opt-out
mechanism has been held to apply. The class action pertains to vehicles purchased by consumers on the Belgi-
an market after September 1, 2014. The asserted claims are based on purported violations of unfair competition
and consumer protection law as well as on alleged breach of contract. An initial hearing for oral argument has
yet to take place in this matter. The court has extended the statutorily mandated negotiation phase until July 8,
2019.
In Brazil two class actions are pending. One of them pertains to approximately 17 thousand vehicles. In this
proceeding, a judgment, which is not yet final, has been rendered holding Volkswagen do Brasil liable in an
amount of €0.3 billion plus interest. The judgment has been appealed. In the second class action alleged com-
pensation claims are made based on purported breaches of environmental regulations.
In Germany, the Verbraucherzentrale Bundesverband e. V. (Federation of Consumer Organizations) filed an
action on November 1, 2018 with the Braunschweig Higher Regional Court for model declaratory judgment
against Volkswagen AG. The complaint is seeking a ruling that certain preconditions for potential consumer
claims against Volkswagen AG are met; however, no specific payment obligations would result from any deter-
minations the court may make. Individual claims then would have to be enforced afterwards in subsequent
separate proceedings.
In addition, various actions have been brought against companies of the Volkswagen Group in several
German Regional Courts (Landgericht) by financialright GmbH, which is asserting rights assigned to it by a
total of approximately 46 thousand customers in Germany, Slovenia, and Switzerland.
In England and Wales, suits filed in court by various law firms have been joined in a single collective action
(group litigation). Roughly 117 thousand claimants joined the group litigation prior to expiration of the opt-in
deadline on December 19, 2018; around 40 thousand additional plaintiffs not currently covered by the group
litigation could still be added. Because of the opt-in mechanism, not all vehicles with type EA 189 engines are
automatically covered by the group litigation; potential claimants must instead take action in order to join. A
judicial case management conference is scheduled for March 2019. No oral argument on the substantive merits
of the claims has as yet taken place.
In Italy, two class action lawsuits have been filed with the Venice Regional Court by two consumer associa-
tions (Altroconsumo and Codacons) acting on behalf of Italian customers. Damage claims based on alleged
breach of contract as well as claims based on purported violations of Italian consumer protection law are being
asserted in these proceedings. In the Codacons proceeding, the court dismissed the class action as inadmissible
on December 18, 2018. In the Altroconsumo proceeding, the deadline for the filing of claims has passed and
those filed are currently being tabulated by an appointed expert.
In the Netherlands, Stichting Volkswagen Car Claim has brought an opt-in class action seeking declaratory
rulings. Any individual claims would then have to be reduced to judgment afterwards in a separate proceeding.
Several lawsuits filed by the Austrian consumer protection organization (VKI Verein für Konsumenten-
schutz) and by the Cobin Claims platform are pending in Austria. In these actions, damage claims assigned for
collection to VKI or to the Cobin Claims platform are being asserted on behalf of roughly 10 thousand custo-
mers.
A Portuguese consumer organization has filed a class action with opt-out mechanism in Portugal. There are
approximately 126 thousand affected vehicles in the Portuguese market. The complaint seeks vehicle return
and alleges damages as well.
Volkswagen estimates the likelihood that the plaintiffs will prevail to be 50 % or less for the majority of the
customer class actions and the complaints filed by consumer and/or environmental organizations. Contingent
liabilities are disclosed for these proceedings where the amount of such liabilities can be measured and the
chance that the plaintiff will prevail was assessed as not implausible. Since most of these proceedings are still in
an early stage, it is in many cases not yet possible to quantify the realistic risk exposure. Provisions were recog-
nized to a small extent.
Furthermore, individual lawsuits and similar proceedings are pending against Volkswagen AG and other
Volkswagen Group companies in various countries, most of which are seeking damages or rescission of the
purchase contract. In Germany, there are around 46 thousand such individual lawsuits. A total of approxi-
mately one thousand additional individual lawsuits are pending in other countries. According to Volkswagen’s
estimates, the likelihood that the plaintiffs will prevail is 50 % or less in the vast majority of the individual
lawsuits. Contingent liabilities are disclosed for these actions where the amount of such liabilities can be mea-
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
315
sured and the chance that the plaintiff will prevail was assessed as not implausible. In addition, provisions were
recognized to the extent necessary based on the current assessment.
At this time it cannot be estimated how many customers will choose to file lawsuits in the future in additi-
on to those already pending given the action for model declaratory judgment in Germany, among other things,
and what their prospect of success will be.
4. Lawsuits filed by investors worldwide (excluding the USA/Canada)
Investors from Germany and abroad have filed claims for damages against Volkswagen AG – in some cases
along with Porsche Automobil Holding SE (Porsche SE) as joint and several debtors – based on purported losses
due to alleged misconduct in capital market communications in connection with the diesel issue.
The vast majority of these investor lawsuits are currently pending at the Regional Court in Braunschweig.
On August 5, 2016, the Regional Court in Braunschweig ordered that common questions of law and fact rele-
vant to the lawsuits pending at the Regional Court in Braunschweig be referred to the Higher Regional Court
(Oberlandesgericht) in Braunschweig for binding declaratory rulings pursuant to the German Act on Model
Case Proceedings in Disputes Regarding Capital Market Information (Kapitalanleger-Musterverfahrensgesetz –
KapMuG). In this proceeding, common questions of law and fact relevant to these actions are to be adjudicated
in a consolidated manner by the Higher Regional Court in Braunschweig (model case proceedings). All lawsuits
at the Regional Court in Braunschweig will be stayed pending resolution of the common issues, unless the cases
can be dismissed for reasons independent of the common issues that are to be adjudicated in the model case
proceedings. The resolution in the model case proceedings of the common questions of law and fact will be
binding for all pending cases that have been stayed in the described manner. In the model case action, hearing
for oral argument before the Braunschweig Higher Regional Court began on September 10, 2018 and was conti-
nued in subsequent sessions. Tracking the objects of declaratory judgment, the Court gave indications as to its
preliminary assessment. Oral argument is to continue in 2019.
At the Regional Court in Stuttgart, further investor lawsuits have been filed against Volkswagen AG, in some
cases along with Porsche SE as joint and several debtor. On December 6, 2017, the Regional Court in Stuttgart
issued an order for reference to the Higher Regional Court in Stuttgart in relation to procedural issues, particu-
larly for clarification of jurisdiction. An action for model declaratory judgment concerning the diesel issue is
also pending against Porsche SE before the Stuttgart Higher Regional Court; as the case currently stands, Volks-
wagen AG is model case defendant in this action as well.
Further investor lawsuits have been filed at various courts in Germany and the Netherlands. In Austria, the
first-instance dismissal of the last investor complaint pending in connection with the diesel issue became
binding in the reporting period.
Worldwide (excluding USA and Canada), investor lawsuits, judicial applications for dunning procedures and
conciliation proceedings, and claims under the KapMuG are currently pending against Volkswagen AG in
connection with the diesel issue, with the claims totaling roughly €9.6 billion. Volkswagen AG remains of the
opinion that it duly complied with its capital market obligations. Therefore, no provisions have been recog-
nized for these investor lawsuits. Insofar as the chance of success was estimated at not lower than 10%, contin-
gent liabilities have been disclosed.
5. Proceedings in the USA/Canada
Following the publication of the EPA’s “Notices of Violation,” Volkswagen AG and other Volkswagen Group
companies have been the subject of intense scrutiny, ongoing investigations (civil and criminal), and civil litiga-
tion. Volkswagen AG and other Volkswagen Group companies have received subpoenas and inquiries from state
attorneys general and other governmental authorities.
Volkswagen AG and other Volkswagen Group companies are facing litigation in the USA/Canada on a num-
ber of different fronts relating to the matters described in the EPA’s “Notices of Violation”. In that respect, inves-
tigations by various US and Canadian regulatory and government authorities are ongoing, particularly in areas
relating to securities, financing and tax. Additionally, in the USA and Canada, certain putative class actions by
customers, investors, salespersons and dealers; individual customers’ lawsuits and claims by state, provincial or
municipal authorities have been filed in various courts, including state and provincial courts. A large number
of these putative class action lawsuits have been filed in US federal courts and consolidated for pretrial coordi-
nation purposes in the federal multidistrict litigation proceeding in the State of California.
316
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
In the USA, Volkswagen has reached separate agreements with the attorneys general of 49 states, the District of
Columbia and Puerto Rico to resolve their existing or potential consumer protection and unfair trade practices
claims in connection with both 2.0 l TDI and 3.0 l TDI vehicles in the USA. New Mexico still has consumer pro-
tection claims outstanding. Volkswagen has also reached separate agreements with the attorneys general of
thirteen US states (California, Connecticut, Delaware, Maine, Maryland, Massachusetts, New Jersey, New York,
Oregon, Pennsylvania, Rhode Island, Vermont, and Washington) to resolve their existing or potential future
claims for civil penalties and injunctive relief for alleged violations of environmental laws. The attorneys gene-
ral of eight other US states (Alabama, Illinois, Montana, New Hampshire, New Mexico, Ohio, Tennessee, and
Texas) and some municipalities have suits pending in state and federal courts against Volkswagen AG, Volks-
wagen Group of America, Inc. and certain affiliates, alleging violations of environmental laws. The environmen-
tal claims of eight states – Alabama, Illinois, Missouri, Minnesota, Ohio, Tennessee, Texas, and Wyoming – as
well as Hillsborough County (Florida), Salt Lake County (Utah), and two Texas counties, have been dismissed in
full or in part by trial or appellate courts as preempted by federal law. Alabama, Illinois, Ohio, Tennessee, Hills-
borough County, and Salt Lake County have appealed or may still appeal the dismissal of their claims.
The U.S. Securities and Exchange Commission (the “SEC”) has requested information from Volkswagen
regarding potential violations of securities laws in connection with issuances of bonds and asset-backed securi-
ties, as a result of nondisclosure of certain Volkswagen diesel vehicles' noncompliance with US emission stan-
dards. The SEC informed Volkswagen that it had issued a formal order of investigation in January 2017; this
investigation is ongoing. The SEC Staff subsequently informed Volkswagen that the SEC might bring an enforce-
ment action against Volkswagen arising out of this investigation.
On August 28, 2018, Volkswagen AG and a putative class of purchasers of Volkswagen AG American Deposi-
tary Receipts agreed to settle the class’ claims alleging a drop in price purportedly resulting from the matters
described in the EPA’s “Notices of Violation” in exchange for a cash payment of USD 48 million. The proposed
settlement was granted preliminary approval by the court in November 2018.
On December 21, 2017, Volkswagen announced an agreement in principle on a proposed consumer settle-
ment in Canada involving 3.0 l diesel vehicles that was approved by the courts in Ontario and Quebec in April
2018. Also in Canada, a criminal enforcement-related investigation related to 2.0 l and 3.0 l diesel vehicles by
the federal environmental regulator is ongoing, and a quasi-criminal enforcement-related offense has been
charged by the Ontario provincial environmental regulator related to 2.0 l diesel vehicles. Additionally, in
Quebec, a certified environmental class action on behalf of residents is pending. This environmental class action
was authorized on the sole issue of whether punitive damages could be recovered. Volkswagen is seeking leave
to appeal this authorization ruling. Class action and joinder lawsuits have also been filed in Canada, including
alleged consumer protection and securities claims asserting damages among other things.
To the extent a matter is not separately described above, an assessment is not yet possible at the current
stage of the proceedings or has, in accordance with IAS 37.92, not been presented so as not to compromise the
results of the proceedings and the interests of the Company.
6. Additional proceedings
With its ruling of November 8, 2017, the Higher Regional Court of Celle ordered, upon the request of three US
funds, the appointment of a special auditor for Volkswagen AG. The special auditor is to examine whether there
was a breach of duties on the part of the members of the Board of Management and Supervisory Board of
Volkswagen AG in connection with the diesel issue on or after June 22, 2006 and, if so, whether this resulted in
damages for Volkswagen AG. The ruling by the Higher Regional Court of Celle is formally unappealable. How-
ever, Volkswagen AG has filed a constitutional complaint with the German Federal Constitutional Court alle-
ging infringement of its constitutionally guaranteed rights. It is currently unclear when the German Federal
Constitutional Court will reach a decision on this matter. Following the formally unappealable ruling from the
Higher Regional Court of Celle, the special auditor appointed by the court indicated that he was not available to
conduct the special audit on grounds of age. The US funds then applied to the Regional Court of Hanover to
appoint another special auditor. Volkswagen AG is of the opinion that replacing the court-appointed special
auditor in this manner is impermissible and has requested that the application for the appointment of a new
special auditor be denied. A decision by the Regional Court of Hanover is expected in the course of 2019.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
317
In addition, a second motion seeking appointment of a special auditor for Volkswagen AG to examine matters
relating to the diesel issue has been filed with the Regional Court of Hanover. This proceeding has been suspen-
ded until the German Federal Constitutional Court renders its decision in the first special auditor litigation.
7. Risk assessment regarding the diesel issue
An amount of around €2.4 billion has been included in the provisions for litigation and legal risks as of Decem-
ber 31, 2018 to protect against the currently known legal risks related to the diesel issue based on existing
information and current assessments. Insofar as these can be adequately measured at this stage, contingent
liabilities relating to the diesel issue were disclosed in the notes in an aggregate amount of €5.4 billion (previ-
ous year: €4.3 billion), whereby approximately €3.4 billion (previous year: €3.4 billion) of this amount results
from lawsuits filed by investors in Germany. The provisions recognized and the contingent liabilities disclosed
as well as the other latent legal risks in the context of diesel issue are in part subject to substantial estimation
risks given that the fact finding efforts have not yet been concluded, the complexity of the individual relevant
factors and the ongoing coordination with the authorities. Should these legal or estimation risks materialize,
this could result in further considerable financial charges.
In line with IAS 37.92, no further statements have been made concerning estimates of financial impact or
about uncertainty regarding the amount or maturity of provisions and contingent liabilities in relation to the
diesel issue. This is so as to not compromise the results of the proceedings or the interests of the Company.
Additional important legal cases
In 2011, ARFB Anlegerschutz UG (haftungsbeschränkt) brought an action against Volkswagen AG and Porsche SE
for claims for damages for allegedly violating disclosure requirements under capital market law in connection
with the acquisition of ordinary shares in Volkswagen AG by Porsche SE in 2008. The damages currently being
sought based on allegedly assigned rights amounted to approximately €2.26 billion plus interest. In April 2016, the
Regional Court in Hanover had formulated numerous objects of declaratory judgment that the cartel senate of the
Higher Regional Court in Celle will decide on in model case proceedings under the KapMuG. In the first hearing on
October 12, 2017, the Court already indicated that it currently does not see claims against Volkswagen AG as justi-
fied, both for want of sufficiently specific pleadings and for reasons of law. Volkswagen AG sees the statements of
the court’s senate as confirmation that the claims made against the Company have absolutely no basis.
At the time in question (2010/2011), other investors had also asserted claims – including claims against
Volkswagen AG – arising out of the same circumstances in an approximate total amount of €4.6 billion and initi-
ated conciliation proceedings. Volkswagen AG always refused to participate in these conciliation proceedings;
since then, these claims have not been pursued further.
In June 2013, the Annual General Meeting of MAN SE approved the conclusion of a control and profit and loss
transfer agreement between MAN SE and TRATON SE (at that time Truck & Bus GmbH), a subsidiary of Volks-
wagen AG. In July 2013, an award proceeding was instituted to review the appropriateness of the cash settlement
set out in the agreement in accordance with § 305 of the Aktiengesetz (AktG – German Stock Corporation Act)
and the cash compensation in accordance with § 304 of the AktG. By ruling of June 26, 2018 (supplemented and
amended by the rulings of July 30, 2018 and December 17, 2018), the Munich Higher Regional Court rendered a
final decision increasing the annual compensation claim under § 304 AktG to €5.47 gross per share (less any
corporate income tax and any solidarity surcharge at the respective tax rate applicable to these taxes for the
financial year in question). The cash settlement in the amount of €90.29 per share, increased in the first
instance by the Munich I Regional Court, was affirmed. The decisions by the Munich Higher Regional Court are
final and were published in the German Federal Gazette on August 6, 2018 and January 10, 2019.
318
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
In Brazil, the Brazilian tax authorities commenced tax proceedings against MAN Latin America; at issue in
these proceedings are the tax consequences of the acquisition structure chosen for MAN Latin America in 2009.
In December 2017, a second instance judgment that was negative for MAN Latin America was rendered in
administrative court proceedings. MAN Latin America initiated proceedings against this judgment before the
regular court in 2018. Due to the difference in the penalties plus interest which could potentially apply under
Brazilian law, the estimated size of the risk in the event that the tax authorities are able to prevail overall with
their view is laden with uncertainty. However, a positive outcome continues to be expected for MAN Latin
America. Should the opposite occur, this could result in a risk of about €0.7 billion for the contested period
from 2009 onwards, which has been stated within the contingent liabilities in the notes.
In 2011, the European Commission conducted searches at European truck manufacturers on suspicion of an
unlawful exchange of information during the period 1997–2011 and issued a statement of objections to MAN,
Scania and the other truck manufacturers concerned in November 2014. With its settlement decision in July
2016, the European Commission fined five European truck manufacturers. MAN’s fine was waived in full as the
company had informed the European Commission about the irregularities as a key witness.
In September 2017, the European Commission fined Scania €0.88 billion. Scania has appealed to the Euro-
pean Court of Justice in Luxembourg and will use all means at its disposal to defend itself. Scania had already
recognized a provision of €0.4 billion in 2016.
Furthermore, antitrust lawsuits for damages from customers were received. As is the case in any antitrust
proceedings, this may result in further lawsuits for damages. Neither provisions nor contingent liabilities were
stated because the early stage of proceedings makes an assessment currently impossible.
As part of the cartel investigations in the automotive industry already known to the public, the European
Commission took the procedural step of initiating formal proceedings against affected undertakings on Sep-
tember 18, 2018. The investigations have been ongoing for some time. As the European Commission’s press
statement indicates, the European Commission is now restricting the scope of the investigation to the subject
of emissions. The formal initiation of proceedings is standard and is a purely procedural step in the process,
which was expected by Volkswagen. The Volkswagen Group and the relevant Group brands have been coopera-
ting fully with the European Commission and will continue to cooperate.
In addition, the Italian Competition Authority initiated proceedings to investigate potential competition law
infringements (alleged exchange of competitively sensitive information) by a number of captive automotive
finance companies, including Volkswagen Bank GmbH. The proceedings were later extended to the relevant
parent companies, including Volkswagen AG. In October 2018, Volkswagen Bank GmbH and Volkswagen AG
received a statement of objections summarizing the findings by the authority and describing the alleged
infringement. Volkswagen AG and Volkswagen Bank GmbH transmitted their respective replies to the Italian
Competition Authority in November 2018. In January 2019, the Italian Competition Authority imposed a fine of
€163 million against Volkswagen AG and Volkswagen Bank GmbH. Provisions were recognized by Volkswagen
Bank GmbH. Volkswagen AG and Volkswagen Bank GmbH intend to appeal this decision. Lawsuits seeking
damages are possible in this proceeding as well.
In 2017, plaintiffs filed numerous complaints in various US jurisdictions on behalf of putative classes of
purchasers of German luxury vehicles against several automobile manufacturers, including Volkswagen AG
and other Group companies, that are now pending in two consolidated class actions in the multidistrict litiga-
tion in the State of California. The complaints allege that since the 1990s, defendants engaged in a conspiracy to
unlawfully increase the prices of German luxury vehicles in violation of US antitrust and consumer protection
law. Plaintiffs in Canada filed claims with similar allegations on behalf of putative classes of purchasers of German
luxury vehicles against several automobile manufacturers, including Volkswagen Canada Inc., Audi Canada Inc.,
and other Group companies. Neither provisions nor contingent liabilities were stated because the early stage of
proceedings makes an assessment currently impossible.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
319
In addition, a few national and international authorities have initiated antitrust investigations. Volkswagen is
cooperating closely with the responsible authorities in these investigations. An assessment of the underlying
situation is not possible at this early stage.
For certain T6 models (M1 class) with Euro 6 diesel engines registered as passenger cars, the inspection regarding
the conformity of the current production of new vehicles with the approved type (conformity of production)
identified that certain technical data could not be fully confirmed. To ensure this conformity of production for
new vehicles, Volkswagen AG developed a software measure, which was approved by the KBA at the end of
February 2018 and was applied to newly produced vehicles as well as to new vehicles (approximately 30 thou-
sand in all) that had not been delivered by then. Volkswagen AG also conducted in-use tests (tests to verify the
conformity of vehicles in use to their type approval) to determine whether the roughly 200 thousand T6 used
vehicles already on the market conform to the technical data. The tests carried out on the proposal of Volks-
wagen AG were taking place in close collaboration with the KBA, which included this process in a decision dated
March 1, 2018. Following further tests in August 2018, at the proposal of Volkswagen AG and in accordance with
this decision, there is also a software measure for used T6 vehicles to ensure conformity with the approved
vehicle type.
Since November 2016, Volkswagen has been responding to information requests from the EPA and CARB related
to automatic transmissions in certain vehicles with gasoline engines.
Additionally, putative class actions filed against Audi AG and certain affiliates have been transferred to the
federal multidistrict litigation proceeding in the State of California and consolidated. The lawsuits allege that
defendants concealed the existence of defeat devices in Audi brand vehicles with automatic transmissions.
Other actions alleging similar claims are also pending in the Northern District of California and two provincial
courts in Canada.
In the summer of 2017, plaintiffs filed a complaint, on behalf of a putative class of purchasers of Volks-
wagen AG’s American Depositary Receipts, against Volkswagen AG and against three former and one current
member of Volkswagen AG’s Board of Management, in the US District Court for the Eastern District of New York.
On July 13, 2018, plaintiffs filed an amended complaint, which defendants moved to dismiss. Plaintiffs assert
securities claims alleging that defendants made material misstatements and omissions concerning Volks-
wagen AG’s compliance measures, in particular those relating to competition and antitrust law as well as alle-
gations in an antitrust litigation against Volkswagen AG in the Northern District of California. Defendants
believe that the alleged claims are without merit.
Provisions were recognized by Volkswagen Bank GmbH and Volkswagen Leasing GmbH for possible claims in
connection with financial services provided to consumers.
In addition, various proceedings are pending worldwide, particularly in the USA, in which customers are asserting
purported claims either individually or in class actions. These claims are as a rule based on alleged vehicle
defects, including defects alleged in vehicle parts supplied to the Volkswagen Group (for instance, in the Takata
case).
Risks may also result from patent infringement actions, particularly in Germany and the USA. These actions
seeking injunctive relief and damages pertain among other things to patents for semiconductor technology
used in vehicles.
320
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
In line with IAS 37.92, no further statements have been made concerning estimates of financial impact or about
uncertainty regarding the amount or maturity of provisions and contingent liabilities in relation to additional
important legal cases. This is so as to not compromise the results of the proceedings or the interests of the
Company.
38. Other financial obligations
€ million
2018
2019 – 2022
from 2023
Dec. 31, 2017
P A Y A B L E
P A Y A B L E
P A Y A B L E
T O T A L
Purchase commitments in respect of
property, plant and equipment
intangible assets
investment property
Obligations from
loan commitments to unconsolidated subsidiaries
irrevocable credit commitments to customers¹
long-term leasing and rental contracts
7,347
946
41
186
2,655
1,026
1,394
479
–
21
0
2,389
–
–
–
–
44
2,133
8,740
1,425
41
207
2,699
5,548
Miscellaneous other financial obligations
2,476
1,469
929
4,874
1 Prior-year figures adjusted.
€ million
2019
2020 – 2023
from 2024
Dec. 31, 2018
P A Y A B L E
P A Y A B L E
P A Y A B L E
T O T A L
Purchase commitments in respect of
property, plant and equipment
intangible assets
investment property
Obligations from
loan commitments to unconsolidated subsidiaries
irrevocable credit commitments to customers
long-term leasing and rental contracts
8,362
1,022
39
326
3,010
1,190
1,621
85
–
–
70
0
–
–
–
5
2,847
2,334
9,983
1,107
39
326
3,085
6,372
Miscellaneous other financial obligations
2,971
1,762
966
5,699
As part of the implementation of IFRS 9, obligations under irrevocable credit commitments to customers
were analyzed. This led to an adjustment of the data applied. The prior-year figures were adjusted in the
amount of € –997 million.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
321
Other financial obligations from long-term leasing and rental contracts are partly offset by expected income
from subleases of €1,535 million (previous year: €1,467 million).
Other financial obligations include an amount of €1.3 billion for investments to which the Group has
committed itself, in the infrastructure for zero-emission vehicles and in initiatives to promote access to and
awareness of these technologies. These commitments were made as part of the settlement agreements in the
USA in connection with the diesel issue.
39. Total audit fees of the Group auditor
Under the provisions of the Handelsgesetzbuch (HGB – German Commercial Code), Volkswagen AG is obliged to
disclose the total audit fee of the Group auditor, PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesell-
schaft.
€ million
Financial statement audit services
Other assurance services
Tax advisory services
Other services
2018
2017
20
6
1
26
52
17
2
1
13
33
The financial statement audit services were attributable to the audit of the consolidated financial statements of
Volkswagen AG and of annual financial statements of German Group companies as well as to reviews of the
interim consolidated financial statements of Volkswagen AG and of interim financial statements of German
Group companies. The auditors provided assurance services and tax advice only to a small extent. Other ser-
vices provided by the auditors in the reporting period focused on advice on how to implement new legal stand-
ards and on support for measures in connection with the diesel issue.
40. Personnel expenses
€ million
Wages and salaries
Social security, post-employment and other employee benefit costs
2018
2017
33,368
7,791
41,158
31,432
7,518
38,950
322
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
41. Average number of employees during the year
Performance-related wage-earners
Salaried staff
of which in the passive phase of partial retirement
Vocational trainees
Employees of Chinese joint ventures
2018
2017
256,684
302,554
559,238
(8,791)
17,905
577,143
78,579
655,722
253,469
288,478
541,947
(7,156)
17,891
559,838
74,558
634,396
42. Events after the balance sheet date
There were no events with a significant effect on net assets, financial position and results of operations after the
end of fiscal year 2018.
43. Remuneration based on performance shares and phantom shares
(share-based payment)
At the beginning of 2017, the Supervisory Board of Volkswagen AG resolved to adjust the remuneration system
of the Board of Management with effect from January 1, 2017. The remuneration system of the Board of Man-
agement comprises non-performance-related and performance-related components. The performance-related
remuneration consists of a performance-related annual bonus with a one-year assessment period and a long-
term incentive (LTI) in the form of a performance share plan with a forward-looking three-year term (share-
based payment). In addition, a bonus was converted into phantom preferred shares (phantom shares) in 2016.
The group of beneficiaries of the performance share plan was expanded at the end of 2018 by including
members of top management. At the beginning of 2019, they will be granted performance shares for the first
time for the 2019-2021 performance period. The way the performance shares allocated to them work is essen-
tially the same as the performance shares allocated to members of the Board of Management.
P E R F O R M A N C E S H A R E S
Each performance period of the performance share plan has a term of three years. At the time the LTI is granted,
the annual target amount under the LTI is converted, on the basis of the initial reference price of Volkswagen’s
preferred shares, into performance shares of Volkswagen AG, which are allocated to the respective beneficiary
as a pure calculation position. After the end of the three-year term of the performance share plan, a cash set-
tlement shall take place. The payment amount corresponds to the number of determined performance shares,
multiplied by the closing reference price at the end of the three-year period plus a dividend equivalent for the
relevant term. The payment amount under the performance share plan is limited to 200% of the target amount.
If 100% of the targets agreed in each case are achieved, the target amount is €1.8 million for each member of
the Board of Management and €3.8 million for the Chairman of the Board of Management. A total of 276,382
performance shares were allocated to the members of the Board of Management.
The total target amounts of the members of the top management tier for the 2019-2021 performance peri-
od came to €95.2 million on aggregate.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
323
The fair value of the obligation arising from the performance shares amounted to €48.4 million as of Decem-
ber 31, 2018 (previous year: €43.8 million). The compensation cost of €18.2 million (previous year: €43.8 mil-
lion) was recognized under personnel costs. If the beneficiaries of the performance share plan had left the
Company as of December 31, 2018, the obligation (intrinsic value) would have amounted to a total of €33.7 mil-
lion (previous year: €20.3 million).
P H A N T O M S H A R E S
At its meeting on April 22, 2016, Volkswagen AG’s Supervisory Board accepted the offer made by the members
of the Board of Management to withhold 30% of the variable remuneration for fiscal year 2015 for the Board of
Management members active on the date of the resolution and to make its disposal subject to future share
price performance by means of phantom shares. The amount withheld led to the creation of 50,703 phantom
preferred shares. The fair value of the obligation to current and former members of the Board of Management
amounted to €5.0 million as of December 31, 2018 (previous year: €7.0 million). In 2018, Mr. Stadler received a
cash payment of the value of 8,633 shares in an amount of €1.0 million as part of the termination of his con-
tract of service. The decrease in the fair value of all phantom shares by €1.0 million (previous year: increase in
fair value by €2.0 million) was recognized as income (previous year: expense). If the other members of the
Board of Management had also left the Company as of December 31, 2018, the obligation (intrinsic value)
would have amounted to a total of €5.3 million (previous year: €7.3 million). For further details on performance
shares and phantom shares, please refer to our disclosures in the remuneration report, which is part of the
Group management report.
44. Related party disclosures in accordance with IAS 24
Related parties as defined by IAS 24 are natural persons and entities that Volkswagen AG has the ability to con-
trol or on which it can exercise significant influence, or natural persons and entities that have the ability to
control or exercise significant influence on Volkswagen AG, or that are influenced by another related party of
Volkswagen AG.
All transactions with related parties are conducted on an arm’s length basis.
At 52.2 %, Porsche SE held the majority of the voting rights in Volkswagen AG as of the reporting date. The
creation of rights of appointment for the State of Lower Saxony was resolved at the Extraordinary General
Meeting of Volkswagen AG on December 3, 2009. As a result, Porsche SE cannot appoint the majority of the
members of Volkswagen AG’s Supervisory Board for as long as the State of Lower Saxony holds at least 15 % of
Volkswagen AG’s ordinary shares. However, Porsche SE has the power to participate in the operating policy
decisions of the Volkswagen Group and is therefore classified as a related party as defined by IAS 24.
The contribution of Porsche SE’s holding company operating business to Volkswagen AG on August 1, 2012
has the following effects on the agreements between Porsche SE, Volkswagen AG and companies of the Porsche
Holding Stuttgart Group that existed prior to the contribution and were entered into on the basis of the Com-
prehensive Agreement and its related implementation agreements:
> As part of the contribution of Porsche SE’s holding company operating business to Volkswagen AG,
Volkswagen AG undertook to assume standard market liability compensation effective August 1, 2012 for
guarantees issued to external creditors, whereby it is indemnified internally.
> Volkswagen AG continues to indemnify Porsche SE internally against claims by the Einlagensicherungsfonds
(German deposit protection fund) after Porsche SE submitted an indemnification agreement required by the
Bundesverband Deutscher Banken (Association of German Banks) to the Einlagensicherungsfonds in August
2009. Volkswagen AG has also undertaken to indemnify the Einlagensicherungsfonds against any losses
caused by measures taken by the latter in favor of a bank in which Volkswagen AG holds a majority interest.
> Under certain conditions, Porsche SE continues to indemnify Porsche Holding Stuttgart, Porsche AG and their
legal predecessors against tax disadvantages that exceed the obligations recognized in the financial statements
of those companies relating to periods up to and including July 31, 2009. In return, Volkswagen AG has under-
taken to reimburse Porsche SE for any tax advantages of Porsche Holding Stuttgart, Porsche AG and their legal
predecessors and subsidiaries relating to tax assessment periods up to July 31, 2009. Based on the results of
the external tax audit for the assessment periods 2006 to 2008, which has now been completed, and based on
information for the 2009 assessment period available at the date of preparing these consolidated financial
324
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
statements, a compensation obligation in the low triple-digit million euro range would arise for
Volkswagen AG. New information emerging in the future from the external tax audit that commenced at the
end of 2015 for the 2009 assessment period could result in an increase or decrease in the potential compen-
sation obligation.
Under the terms of the Comprehensive Agreement, Porsche SE and Volkswagen AG had granted each other put
and call options with regard to the remaining 50.1 % interest in Porsche Holding Stuttgart held by Porsche SE
until the contribution of its holding company operating business to Volkswagen AG. Both Volkswagen AG (if it
had exercised its call option) and Porsche SE (if it had exercised its put option) had undertaken to bear the tax
burden resulting from the exercise of the options and any subsequent activities in relation to the equity in-
vestment in Porsche Holding Stuttgart (e.g. from recapture taxation on the spin-off in 2007 and/or 2009). If tax
benefits had accrued to Volkswagen AG, Porsche Holding Stuttgart, Porsche AG, or their respective subsidiaries
as a result of recapture taxation on the spin-off in 2007 and/or 2009, the purchase price to be paid by
Volkswagen AG for the transfer of the outstanding 50.1 % equity investment in Porsche Holding Stuttgart if the
put option had been exercised by Porsche SE would have been increased by the present value of the tax benefit.
This arrangement was taken over under the terms of the contribution agreement to the effect that Porsche SE
has a claim against Volkswagen AG for payment in the amount of the present value of the realizable tax benefits
from any recapture taxation of the spin-off in 2007 as a result of the contribution. It was also agreed under the
terms of the contribution that Porsche SE will indemnify Volkswagen AG, Porsche Holding Stuttgart and their
subsidiaries against taxes if measures taken by or not taken by Porsche SE result in recapture taxation for 2012
at these companies in the course of or following implementation of the contribution. In this case, too, Porsche
SE is entitled to assert a claim for payment against Volkswagen AG in the amount of the present value of the
realizable tax benefits that arise at the level of Volkswagen AG or one of its subsidiaries as a result of such a
transaction.
Further agreements were entered into and declarations were issued in connection with the contribution of
Porsche SE’s holding company operating business to Volkswagen AG, in particular:
> Porsche SE indemnifies its contributed subsidiaries, Porsche Holding Stuttgart, Porsche AG and their subsidi-
aries against certain liabilities to Porsche SE that relate to the period up to and including December 31, 2011
and that exceed the obligations recognized in the financial statements of those companies for that period.
> Porsche SE indemnifies Porsche Holding Stuttgart and Porsche AG against obligations arising from certain
legal disputes; this includes the costs of an appropriate legal defense.
> Moreover, Porsche SE indemnifies Volkswagen AG, Porsche Holding Stuttgart, Porsche AG and their subsidi-
aries against half of the taxes (other than taxes on income) arising at those companies in conjunction with
the contribution that would not have been incurred in the event of the exercise of the call option on the
shares of Porsche Holding Stuttgart that continued to be held by Porsche SE until the contribution.
Volkswagen AG therefore indemnifies Porsche SE against half of such taxes that it incurs. In addition, Porsche
Holding Stuttgart is indemnified against half of the land transfer tax and other costs triggered by the merger.
> Additionally, Porsche SE and Porsche AG agreed to allocate any subsequent VAT receivables or liabilities from
transactions in the period up to December 31, 2009 to the company entitled to the receivable or incurring the
liability.
> A range of information, conduct and cooperation obligations were agreed by Porsche SE and the Volkswagen
Group.
According to a notification dated January 8, 2019, the State of Lower Saxony and Hannoversche Beteiligungs-
gesellschaft Niedersachsen mbH, Hanover, held 20.00 % of the voting rights of Volkswagen AG on December 31,
2018. As mentioned above, the General Meeting of Volkswagen AG on December 3, 2009 also resolved that the
State of Lower Saxony may appoint two members of the Supervisory Board (right of appointment).
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
325
The following tables present the amounts of supplies and services transacted, as well as outstanding receivables
and liabilities, between consolidated companies of the Volkswagen Group and related parties:
R E L AT E D PA R T I E S
€ million
2018
2017
2018
2017
S U P P L I E S A N D S E R V I C E S
R E N D E R E D
S U P P L I E S A N D S E R V I C E S
R E C E I V E D
Porsche SE and its majority interests
Supervisory Board members
Board of Management members
Unconsolidated subsidiaries
Joint ventures and their majority interests
Associates and their majority interests
Pension plans
Other related parties
State of Lower Saxony, its majority interests and joint ventures
3
4
0
1,137
16,724
194
1
0
10
7
2
0
1,039
14,294
214
1
0
11
3
2
0
1,649
491
1,267
2
1
8
1
2
0
1,300
1,225
733
0
0
9
€ million
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2018
Dec. 31, 2017
R E C E I V A B L E S F R O M
L I A B I L I T I E S
( I N C L U D I N G O B L I G A T I O N S ) T O
Porsche SE and its majority interests
Supervisory Board members
Board of Management members
Unconsolidated subsidiaries
Joint ventures and their majority interests
Associates and their majority interests
Pension plans
Other related parties
State of Lower Saxony, its majority interests and joint ventures
4
0
0
1,319
11,989
112
1
–
1
13
0
0
1,480
9,889
76
1
–
2
1
205
78
1,869
2,671
487
–
100
2
0
254
72
1,773
2,168
572
–
63
1
The tables above do not contain the dividend payments of €3,493 million (previous year: €3,653 million) re-
ceived from joint ventures and associates and dividends of €601 million (previous year: €308 million) paid to
Porsche SE.
Receivables from joint ventures are primarily attributable to loans granted in an amount of €7,606 million
(previous year: €6,277 million) as well as trade receivables in an amount of €4,045 million (previous year:
€3,354 million). Receivables from non-consolidated subsidiaries also result primarily from loans granted in an
amount of €741 million (previous year: €1,038 million) as well as trade receivables in an amount of
€214 million (previous year: €224 million).
Impairment losses of €56 million (previous year: €56 million) were recognized on the outstanding related
party receivables. In fiscal year 2018, expenses of €29 million (previous year: €36 million) were incurred in this
context.
326
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
In addition, the Volkswagen Group has furnished guarantees to external banks on behalf of related parties in
the amount of €239 million (previous year: €220 million).
In the reporting period, the Volkswagen Group made capital contributions of €298 million (previous year:
€203 million) to related parties.
The changes in supplies and services rendered to joint ventures and their majority interests are primarily at-
tributable to deliveries to the Chinese joint ventures.
As in the previous year, obligations to members of the Supervisory Board relate primarily to interest-
bearing bank balances of Supervisory Board members that were invested at standard market terms and condi-
tions at Volkswagen Group companies.
Obligations to the Board of Management comprise outstanding balances for the annual bonus and the fair
values of the performance shares and phantom shares in the amount of €64.8 million (previous year:
€67.0 million) granted to Board of Management members.
In addition to the amounts shown above, the following expenses were recognized for the members of the
Board of Management and Supervisory Board of the Volkswagen Group in the course of their activities as
members of these bodies:
€
Short-term benefits
Benefits based on performance shares and phantom shares
Post-employment benefits
Termination benefits
2018
2017
32,417,428
33,967,996
10,022,492
45,777,248
10,519,369
10,872,088
12,994,964
6,940,142
65,954,253
97,557,473
Benefits paid on the basis of performance shares include the cost of €10.6 million (previous year: €43.8 million)
attributable to the performance shares granted to Board of Management members under the remuneration
system applicable as from 2017. Pursuant to the guidance of IFRS 2, this requires inclusion of not only the per-
formance share plan for 2017 and 2018, but also of a pro-rated amount for future share plans to be granted
during the current employment contract.
In fiscal year 2018, the share price performance led to the recognition of income of €0.6 million (previous
year: expense of €2.0 million) for the phantom shares.
The employee representatives and the representative of the senior executives on the Supervisory Board are
also entitled to a regular salary as set out in their employment contracts. For members of German works coun-
cils, this is based on the provisions of the Betriebsverfassungsgesetz (BetrVG – German Works Constitution Act).
Investigations by the authorities are currently under way to determine whether the remuneration of some
works council members can be justified. As a precaution, components of the remuneration of some works
council members has been retained in this context until the matter is clarified. Volkswagen AG currently as-
sumes that the proceedings will be completed in fiscal year 2019.
The post-employment benefits relate to additions to pension provisions for current members of the Board
of Management. The termination benefits relate to the severance payment made to Mr. Garcia Sanz and
Mr. Stadler in connection with their early departure from the Board of Management. The payment of a poten-
tial severance payment to Mr. Stadler depends on the development and outcome of the criminal proceedings.
Disclosures on the pension provisions for members of the Board of Management and more detailed expla-
nations of the remuneration of the Board of Management and the Supervisory Board can be found in the sec-
tion entitled “Remuneration of the Board of Management and the Supervisory Board” and in the remuneration
report, which is part of the management report.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
327
45. German Corporate Governance Code
On November 16, 2018, the Board of Management and Supervisory Board of Volkswagen AG issued their
declaration of conformity with the German Corporate Governance Code as required by section 161 of the
Aktiengesetz (AktG – German Stock Corporation Act) and made it permanently available to the shareholders
of Volkswagen AG on the Company’s website at www.volkswagenag.com/en/InvestorRelations/corporate-
governance/declaration-of-conformity.html.
On November 29, 2018, the Board of Management and Supervisory Board of AUDI AG likewise issued their
declaration of conformity with the German Corporate Governance Code and made it permanently available to
the shareholders at www.audi.com/cgk-declaration.
In December 2018, the Executive Board and Supervisory Board of MAN SE issued their declaration of con-
formity with the German Corporate Governance Code as required by section 161 of the AktG and made it per-
manently available to the shareholders at www.corporate.man.eu/en/investor-relations/corporate-governance/
corporate-governance-at-man/Corporate-Governance-at-MAN.html.
The Executive and Supervisory Boards of RENK AG issued a declaration of conformity in December, 2018
and made it permanently available to the shareholders at www.renk-ag.com/en/investor-relations/financial-
reports.
46. Remuneration of the Board of Management and the Supervisory Board
€
2018
2017
Board of Management remuneration
Non-performance-related remuneration
Performance-related remuneration
Long-term incentive component
Supervisory Board remuneration
Non-performance-related remuneration
Performance-related remuneration
13,051,264
14,337,116
14,827,178
15,844,041
22,457,869
20,104,770
50,336,310
50,285,927
4,004,372
3,516,389
534,614
270,450
4,538,986
3,786,839
N O N - P E R F O R M A N C E - R E L AT E D R E M U N E R AT I O N O F T H E B O A R D O F M A N A G E M E N T
The non-performance-related remuneration of the Board of Management comprises fixed remuneration and
fringe benefits. Since 2018, appointments assumed at Group companies have not been remunerated separately;
instead they are deemed to be included in the remuneration. The fringe benefits relate to noncash benefits
granted and include in particular the use of operating assets such as company cars and the payment of insur-
ance premiums. Taxes due on these noncash benefits were mainly borne by Volkswagen AG.
P E R F O R M A N C E - R E L AT E D R E M U N E R AT I O N A N D L O N G - T E R M I N C E N T I V E C O M P O N E N T O F T H E B O A R D O F M A N A G E M E N T
Performance-related remuneration includes the annual bonus with a one-year assessment period. The long-
term incentive component contains the long-term incentive (LTI) in the form of a performance share plan with
a forward-looking three-year term. The performance shares granted to the incumbent members of the Board of
Management under the remuneration system in 2018 (134,956 performance shares) had a fair value of
€22.5 million (previous year: €20.1 million) at the grant date; this amount represents remuneration under
German GAAP.
At its meeting on April 22, 2016, Volkswagen AG’s Supervisory Board accepted the offer made by the mem-
bers of the Board of Management to withhold 30% of the variable remuneration for fiscal year 2015 for the
Board of Management members active on the date of the resolution and to make its disposal subject to future
328
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
share price performance by means of phantom shares. The resulting effects on remuneration were reported as
appropriate in previous years.
In fiscal year 2018, expenses totaling €10.6 million (previous year: €43.8 million) were recognized for the
performance shares, while income for the phantom shares totaled €0.6 million (previous year: expense of
€2.0 million). They do not represent remuneration under German GAAP and are therefore not included in the
tables above.
As in the previous year, no interest-free advances were paid to members of the Board of Management.
S U P E R V I S O R Y B O A R D R E M U N E R AT I O N
As a result of its regular review of the Supervisory Board remuneration, the Supervisory Board proposed a reor-
ganization of the system of Supervisory Board remuneration to the 2017 Annual General Meeting, which was
approved on May 10, 2017 with 99.98 % of the votes cast. The remuneration of the members of the Supervisory
Board of Volkswagen AG then no longer contains any performance-related remuneration components but
consists entirely of non-performance-related remuneration components. Remuneration for supervisory board
work at subsidiaries continues to comprise a mix of non-performance-related and performance-related com-
ponents.
P E N S I O N E N T I T L E M E N T S
On December 31, 2018, the pension provisions for members of the Board of Management amounted to
€55.8 million (previous year: €125.4 million). Current pensions are index-linked in accordance with the index-
linking of the highest collectively agreed salary insofar as the application of section 16 of the Gesetz zur
Verbesserung der betrieblichen Altersversorgung (BetrAVG – German Company Pension Act) does not lead to a
higher increase.
In connection with their departure from the Board of Management Mr. Blessing, Mr. Garcia Sanz, Mr. Müller
and Mr. Stadler were promised the following amounts:
For Mr. Blessing
a non-performance-related component of €3.8 million,
a performance-related component of €4.2 million and
a long-term incentive component of €3.9 million were recognized.
For Mr. Garcia Sanz
a non-performance-related component of €1.6 million,
a performance-related component of €1.8 million and
a long-term incentive component of €1.6 million were recognized.
For Mr. Müller
For Mr. Stadler
a non-performance-related component of €4.0 million,
a performance-related component of €6.6 million and
a long-term incentive component of €7.2 million were recognized.
a non-performance-related component of €3.2 million,
a performance-related component of €1.9 million and
a long-term incentive component of €1.8 million were recognized.
The payment of the amounts mentioned above for Mr. Stadler is linked to the development and outcome of
the criminal proceedings. For the amounts promised, in general, Volkswagen AG and AUDI AG are jointly and
severally liable.
For former members of the Board of Management and their surviving dependents €44.0 million (previous
year: €19.9 million) were granted. Pension provisions in accordance with IFRSs for this group of individuals
amounted to €324.0 million (previous year: €269.0 million).
The individual remuneration of the members of the Board of Management and the Supervisory Board is
explained in the remuneration report in the management report on page 68. A comprehensive assessment of
the individual remuneration components, including the LTI, in the form of the performance share plan can also
be found there.
Consolidated Financial Statements
Responsibility Statement
329
Responsibility Statement
To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated
financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the
Group, and the Group management report includes a fair review of the development and performance of the
business and the position of the Group, together with a description of the material opportunities and risks
associated with the expected development of the Group.
Wolfsburg, February 22, 2019
Volkswagen Aktiengesellschaft
The Board of Management
Herbert Diess
Oliver Blume
Gunnar Kilian
Andreas Renschler
Abraham Schot
Stefan Sommer
Hiltrud Dorothea Werner
Frank Witter
330
Independent Auditor’s Report
Consolidated Financial Statements
Independent Auditor’s Report
On completion of our audit, we issued an unqualified auditor's report dated February 22, 2019 in German lan-
guage. The following text is a translation of this auditor’s report. The German text is authoritative:
To VOLKSWAGEN AKTIENGESELLSCHAFT, Wolfsburg
REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS AND OF THE GROUP MANAGEMENT
REPORT
A U D I T O P I N I O N S
We have audited the consolidated financial statements of VOLKSWAGEN AKTIENGESELLSCHAFT, Wolfsburg, and
its subsidiaries (the Group), which comprise the balance sheet as at December 31, 2018, and the income state-
ment and the statement of comprehensive income, the statement of changes in equity and the cash flow
statement for the financial year from January 1 to December 31, 2018, and notes to the consolidated financial
statements, including a summary of significant accounting policies. In addition, we have audited the group
management report of VOLKSWAGEN AKTIENGESELLSCHAFT, which is combined with the Company’s manage-
ment report, for the financial year from January 1 to December 31, 2018. In accordance with the German legal
requirements, we have not audited the content of those parts of the group management report listed in the
“Other Information” section of our auditor’s report.
In our opinion, on the basis of the knowledge obtained in the audit,
> the accompanying consolidated financial statements comply, in all material respects, with the IFRSs as
adopted by the EU, and the additional requirements of German commercial law pursuant to § [Article] 315e
Abs. [paragraph] 1 HGB [Handelsgesetzbuch: German Commercial Code] and, in compliance with these re-
quirements, give a true and fair view of the assets, liabilities, and financial position of the Group as at De-
cember 31, 2018, and of its financial performance for the financial year from January 1 to December 31, 2018,
and
> the accompanying group management report as a whole provides an appropriate view of the Group’s posi-
tion. In all material respects, this group management report is consistent with the consolidated financial
statements, complies with German legal requirements and appropriately presents the opportunities and
risks of future development. Our audit opinion on the group management report does not cover the content
of those parts of the group management report listed in the “Other Information” section of our auditor’s re-
port.
Pursuant to § 322 Abs. 3 Satz [sentence] 1 HGB, we declare that our audit has not led to any reservations relating
to the legal compliance of the consolidated financial statements and of the group management report.
B A S I S F O R T H E A U D I T O P I N I O N S
We conducted our audit of the consolidated financial statements and of the group management report in ac-
cordance with § 317 HGB and the EU Audit Regulation (No. 537/2014, referred to subsequently as “EU Audit
Regulation”) and in compliance with German Generally Accepted Standards for Financial Statement Audits
promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Our respon-
sibilities under those requirements and principles are further described in the “Auditor’s Responsibilities for
the Audit of the Consolidated Financial Statements and of the Group Management Report” section of our audi-
tor’s report. We are independent of the group entities in accordance with the requirements of European law and
German commercial and professional law, and we have fulfilled our other German professional responsibilities
in accordance with these requirements. In addition, in accordance with Article 10 (2) point (f) of the EU Audit
Regulation, we declare that we have not provided non-audit services prohibited under Article 5 (1) of the EU
Audit Regulation. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinions on the consolidated financial statements and on the group management report.
Consolidated Financial Statements
Independent Auditor’s Report
331
E M P H A S I S O F M AT T E R – D I E S E L I S S U E
We draw attention to the information provided and statements made in section “Key Events“ of the notes to the
consolidated financial statements and in section “Diesel Issue“ of the group management report with regard to
the diesel issue including information about the allegations made and claims filed, the underlying causes, the
non-involvement of members of the board of management as well as the impact on these financial statements.
Based on the results of the various measures taken to investigate the issue presented so far, which underlie
the consolidated financial statements and the group management report, there is still no evidence that mem-
bers of the Company’s board of management were aware of the deliberate manipulation of engine management
software before summer 2015. Nevertheless, should as a result of the ongoing investigation new solid
knowledge be obtained showing that members of the board of management were informed earlier about the
diesel issue, this could eventually have an impact on the consolidated financial statements and on the group
management report for financial year 2018 and prior years.
The provisions for warranties and legal risks recorded so far are based on the presented state of knowledge.
Due to the inevitable uncertainties associated with the current and expected litigation it cannot be excluded
that a future assessment of the risks may be different.
Our opinions on the consolidated financial statements and on the group management report are not modi-
fied in respect of this matter.
K E Y A U D I T M AT T E R S I N T H E A U D I T O F T H E C O N S O L I D AT E D F I N A N C I A L STAT E M E N T S
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit
of the consolidated financial statements for the financial year from January 1 to December 31, 2018. These
matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in
forming our audit opinion thereon; we do not provide a separate audit opinion on these matters.
In our view, the matters of most significance in our audit were as follows:
❶ Accounting treatment of risk provisions for the diesel issue
❷ Recoverability of goodwill and brand names
❸ Recoverability of capitalized development costs
❹ Completeness and measurement of provisions for warranty obligations arising from sales
❺
Financial instruments – hedge accounting
Our presentation of these key audit matters has been structured in each case as follows:
① Matter and issue
② Audit approach and findings
③ Reference to further information
Hereinafter we present the key audit matters:
❶ Accounting treatment of risk provisions for the diesel issue
① Companies of the Volkswagen Group are involved in investigations by government authorities in numer-
ous countries (in particular in Europe, the United States and Canada) with respect to irregularities in the
exhaust gas emissions from diesel engines in certain vehicles of the Volkswagen Group. Different
measures are being implemented in various countries for affected vehicles. These include hardware
and/or software solutions, vehicle repurchases or the early termination of leases and, in some cases, cash
payments to vehicle owners. Furthermore, payments are being made as a result of criminal proceedings
and civil law settlements with various parties. In addition, there are civil lawsuits pending from custom-
ers, dealers and holders of securities. Further direct and indirect effects concern in particular impairment
of assets and customer-specific sales programs.
332
Independent Auditor’s Report
Consolidated Financial Statements
The Volkswagen Group recognizes the expenses directly related to the diesel issue in its operating income.
The special items expensed in financial year 2018 amount to €3.2 billion and relate to fines paid (€1.8 bil-
lion) and to further additions to reserves for legal risks and legal defense cost as well as technical
measures. In addition to provisions, contingent liabilities for legal risks in the amount of €5.4 billion are
reported as of December 31, 2018.
The reported provisions and contingent liabilities are exposed to considerable estimation risk due to
the wide-ranging investigations and proceedings that are ongoing, the complexity of the various negotia-
tions and pending approval procedures by authorities, and developments in market conditions. This mat-
ter was of particular significance for our audit due to the material amounts of the provisions as well as the
scope of assumptions and discretion on the part of the executive directors.
②
In order to audit the recognition and measurement of provisions for field activities and vehicle repur-
chases arising as a result of the diesel issue, we critically examined the processes put in place by the com-
panies of the Volkswagen Group to make substantive preparations to address the diesel issue, and as-
sessed the progress made in implementing the technical solutions developed to remedy it. We compared
this knowledge with the technical and legal substantiations of independent experts, as presented to us.
We used in particular an IT data analysis solution to examine the quantity structure underlying the field
activities and repurchases. We assessed the inputs used to measure the repair solutions and the repur-
chases. We used this as a basis to evaluate the calculation of the provisions.
In order to audit the recognition and measurement of the provisions for legal risks and the disclosure
of contingent liabilities for legal risks resulting from the diesel issue, we assessed both the available offi-
cial documents as well as in particular the work delivered and opinions prepared by experts commis-
sioned by the Volkswagen Group. As part of a targeted selection of key procedures and supplemented by
additional samples, we inspected the correspondence relating to the litigation and, in talks with officials
from the affected companies and the lawyers involved, and including our own legal experts, we discussed
the assessments made.
Taking into consideration the information provided and statements made in the section entitled "Key
events" in the notes to the consolidated financial statements and in the section entitled "Diesel Issue" in
the group management report with regard to the diesel issue including information about the underlying
causes, the non-involvement of members of the board of management as well as the impact on these fi-
nancial statements, we believe that, overall, the assumptions and inputs underlying the calculation of the
risk provisions for the diesel issue are appropriate to properly recognize and measure the provisions.
③ The Company's disclosures on the diesel issue are contained in the sections entitled "Key events" and
"Litigation" in the notes to the consolidated financial statements, and in the sections entitled “Diesel Is-
sue” and “Report on Risks and Opportunities”, sub-sections “Risks from the Diesel Issue” and “Litigation”
in the group management report.
❷ Recoverability of goodwill and brand names
① The intangible assets reported in the consolidated financial statements of VOLKSWAGEN AKTIENGESELL-
SCHAFT include €23.3 billion in goodwill and €16.9 billion purchased brand names (intangible assets with
indefinite useful lives). The Company allocates goodwill and brand names to the subgroups and brands,
respectively, within the Volkswagen Group. As part of the regular impairment testing of goodwill and
brand names, the Company compares the carrying amount of the subgroups and brands, respectively,
against their respective recoverable amount. In general, the recoverable amount is calculated on the basis
of the value in use. The value in use is calculated using discounted cash flow models on the basis of the
Volkswagen Group's five-year operating plan prepared by the executive directors and acknowledged by
the Supervisory Board and extrapolated based on assumptions about long-term growth rates. The dis-
count rate used is the weighted average cost of capital for the relevant reporting segment. The result of
this measurement depends to a large extent on the executive directors’ assessment with regard to the fu-
ture cash inflows of the respective subgroups and brands, respectively, and on the discount rate used, and
is therefore subject to considerable uncertainty. Against this background and due to the underlying com-
plexity of the measurement models, this matter was of particular importance for our audit.
Consolidated Financial Statements
Independent Auditor’s Report
333
② As part of our audit, we assessed, among other things, the method used to perform impairment tests and
the calculation of the weighted cost of capital. We evaluated the appropriateness of the future cash inflows
used in the measurement, including by comparing this data with the five-year operating plan prepared by
the executive directors and acknowledged by the Supervisory Board, and through reconciliation with
general and sector-specific market expectations. We also evaluated that the costs for Group functions not
recognized in a segment were properly included in the impairment test for the respective subgroup and
brand, respectively. With the knowledge that even relatively small changes in the discount rate applied
can have a material impact on the recoverable amounts calculated in this way, we also focused our testing
in particular on the parameters used to determine the discount rate applied, and evaluated the measure-
ment model. Furthermore, due to the materiality of the goodwill and brand names, we also performed
our own sensitivity analyses for the subgroups and brands, respectively, (comparison of carrying amounts
and recoverable amounts) and determined that the respective goodwill and brand names were sufficiently
covered by the discounted future cash flows. Overall, we consider the measurement inputs and assump-
tions used by the executive directors to be in line with our expectations and to lie also within a range that
we consider reasonable.
③ The Company's disclosures on goodwill and brand names are contained in section entitled “Intangible
assets” in the notes to the consolidated financial statements.
❸ Recoverability of capitalized development costs
①
In the consolidated financial statements of VOLKSWAGEN AKTIENGESELLSCHAFT capitalized development
costs amounting to €22.4 billion are reported under the "Intangible assets" balance sheet item. In accord-
ance with IAS 38, research costs are treated as expenses incurred, while development costs for future se-
ries products are capitalized provided that sale of these products is likely to bring an economic benefit.
Until amortization begins, developments must be tested for impairment in accordance with IAS 36 at
least once a year based on the cash-generating units to which they are allocated. To meet this require-
ment, over the period from capitalization until completion of development the Company assesses wheth-
er the costs incurred are covered by future cash flows. Once amortization begins, an assessment must be
carried out at each reporting date as to whether there are indications of impairment. If this is the case, an
impairment test must be performed and any impairment loss recognized. For impairment losses recog-
nized in prior periods, an annual assessment must be carried out as to whether there are indications that
the reason for the impairment has ceased to apply.
The Volkswagen Group generally applies the present value of the future cash flows (value in use) from
the relevant cash-generating units to test these intangible assets for impairment. The value in use is de-
termined using the discounted cash flow method based on the Group’s five-year financial planning pre-
pared by the executive directors. The discount rate used is the weighted average cost of capital (WACC).
The weighted average cost of capital applied in the Volkswagen Group includes the weighted average cost
of equity and debt before taxes.
334
Independent Auditor’s Report
Consolidated Financial Statements
The impairment identified during the impairment testing was recognized under the "Cost of sales" line
item in the income statement as impairment losses amounting to €0.04 billion.
The result of this measurement depends to a large extent on the executive directors’ assessment of
future cash inflows and the discount rate used, and is therefore subject to considerable uncertainty.
Against this background and due to the complex nature of the valuation, this matter was of particular
significance in the context of our audit.
② As part of our audit we assessed whether, overall, the assumptions underlying the measurements particu-
larly in the form of future cash inflows, and the discount rates used provide an appropriate basis by which
to test the individual cash-generating units for impairment. We based our assessment, among other
things, on a comparison with general and sector-specific market expectations as well as the executive di-
rectors’ detailed explanations regarding key planning value drivers. We also evaluated that the costs for
Group functions were properly included in the impairment tests of the respective cash-generating units.
With the knowledge that even relatively small changes in the discount rate applied can in some cases have
material effects on values, we also focused our testing on the parameters used to determine the discount
rate applied, and evaluated the measurement model. We also assessed the consistency of the measure-
ment model applied and evaluated the mathematical accuracy of the calculations. Furthermore, we per-
formed our own additional sensitivity analysis for those cash-generating units with little headroom (pre-
sent value exceeds carrying amount) in order to gauge the impairment risk and enable us to adapt our
audit procedures accordingly. With respect to completed development projects, we inquired the executive
directors about whether or not there were indications of impairment or that reasons for impairment had
ceased to apply, and critically examined these assumptions based on our knowledge of the Group's legal
and economic environment. In the case of impairment losses or a reversal of impairment losses, we as-
sessed that these were properly assigned to the assets allocated to the cash-generating unit. In our view,
the measurement inputs and assumptions used by the executive directors, and the measurement model,
were properly derived for the purposes of conducting impairment tests.
③ Company's disclosures on capitalized development costs and the associated impairment testing are con-
tained in sections entitled “Accounting policies” and “Intangible assets” in the notes to the consolidated
financial statements.
❹ Completeness and measurement of provisions for warranty obligations arising from sales
①
In the consolidated financial statements of the Volkswagen Group €27.0 billion in provisions for obliga-
tions arising from sales are reported under the "Other provisions" balance sheet item. These obligations
primarily relate to warranty claims arising from the sale of vehicles, motorcycles, components and genu-
ine parts. Warranty claims are calculated on the basis of losses to date, estimated future losses and the
policy on ex gratia arrangements. An estimate is also made of the discount rate. In addition, assumptions
must be made about the nature and extent of future warranty and ex gratia claims. These assumptions
are based on qualified estimates.
From our point of view, this matter was of particular significance for our audit because the recogni-
tion and measurement of this material item is to a large extent based on estimates and assumptions
made by the Company's executive directors.
② With the knowledge that estimated values result in an increased risk of accounting misstatements and
that the measurement decisions made by the executive directors have a direct and significant effect on
consolidated net profit/loss, we assessed the appropriateness of the carrying amounts, including by com-
paring these figures with historical data and using the measurement bases presented to us. Furthermore,
we assessed that the interest rates with matching terms were properly derived from market data. We eval-
uated the entire cal-culations (including discounting) for the provisions using the applicable measure-
ment inputs and assessed the planned timetable for utilizing the provisions.
In doing so, we were able to satisfy ourselves that the estimates applied and the assumptions made by the
executive directors were sufficiently documented and supported to justify the recognition and measure-
ment of the provisions for warranty obligations arising from sales.
Consolidated Financial Statements
Independent Auditor’s Report
335
③ The Company's disclosures on other provisions are contained in sections entitled “Accounting policies”
and “Noncurrent and current other provisions” in the notes to the consolidated financial statements.
❺
Financial instruments – hedge accounting
① The companies of the Volkswagen Group use a variety of derivative financial instruments to hedge in
particular against currency and interest rate risks arising from their ordinary business activities. The ex-
ecutive directors’ hedging policy is documented in corresponding internal guidelines and serves as the
basis for these transactions. Currency risk arises primarily from sales and procurement transactions and
financing denominated in foreign currencies. The means of limiting this risk include entering into cur-
rency forwards, currency options and cross-currency interest rate swaps. The companies enter into inter-
est rate hedges for the purpose of achieving an economically sensible ratio of variable to fixed interest
rate exposures. Interest rate risk is minimized by entering into interest rate swaps and cross-currency in-
terest rate swaps.
Derivatives are measured at fair value as of the balance sheet date. The positive fair values of all of the
derivatives used for hedging purposes amount to €4.0 billion as of the balance sheet date, while the nega-
tive fair values amount to €2.6 billion. Insofar the financial instruments used by the Volkswagen Group
are effective hedges of future cash flows in the context of hedging pursuant to the requirements of IFRS 9
(cash flow hedges), the effective portion of the changes in fair value is recognized in other comprehensive
income over the duration of the hedging relationships until the maturity of the hedged cash flows.
Changes in the value of derivative financial instruments caused by changes in the spot price are shown
under the cash flow hedge reserve, as usual. Changes in the value of hedging instruments caused by
changes in forward rates, and in the case of options caused by changes in fair value respectively, and
changes in the value of the so called cross-currency basis spread are shown under the line item “cost of
hedging reserve”, which was newly introduced under IFRS 9. As of the balance sheet date, a cumulative
amount of €1.2 billion was recognized in equity (cash flow hedge reserve of €1.8 billion and in the cost of
hedging reserve €–0.6 billion) net of deferred taxes as the effective portion of fair value changes. Insofar
derivative financial instruments are used to hedge against changes in the carrying amount of balance
sheet items pursuant to the requirements of IFRS 9, changes in the fair value of both the hedged items and
the hedging instruments are recognized on a net basis in the corresponding income statement items (fair
value hedges).
At the time of transitioning from hedge accounting under IAS 39 to IFRS 9 at the beginning of the fi-
nancial year, Volkswagen exercised as far as possible the option of implementing the transition prospec-
tively, without restating prior-period figures. For currency options, the transition was carried out retro-
spectively with restating prior-period figures, as required by the standard. Changes in the fair value of
currency options recognized in the income statement in the prior period were reclassified retrospectively
to the cost of hedging reserve.
From our point of view these matters were of particular significance for our audit due to the high
complexity and number of transactions as well as the extensive accounting and disclosure requirements
of IFRS 9 and IFRS 7.
② As part of our audit, we assessed, with the assistance of our internal specialists, the changes to processes
and systems in connection with the introduction if IFRS 9, among other things. A particular focus was
placed on assessing how the effects from transition and the changes to prior-period figures in relation to
the introduction of IFRS 9 were determined. Both the treasury management system and the correspond-
ing adjustments in the consolidation system were subject to separate examinations. In addition, we as-
sessed the contractual and financial parameters and evaluated the accounting treatment, including the ef-
fects on equity and profit or loss, of the various hedging relationships. Together with our specialists, we
also evaluated the Company’s internal control system with regard to derivative financial instruments, in-
cluding the internal activities to monitor compliance with the hedging policy. In addition, for the purpose
of auditing the fair value measurement of financial instruments, we also assessed the methods of calcula-
tion employed on the basis of market data. In addition to evaluating the internal control system, we ob-
tained bank confirmations for the hedging instruments in order to assess completeness. With regard to
the expected cash flows and the assessment of the effectiveness of hedges, we essentially conducted a ret-
336
Independent Auditor’s Report
Consolidated Financial Statements
rospective assessment of past hedging levels. In doing so, we were able to satisfy ourselves that the esti-
mates and assumptions made by the executive directors were substantiated and sufficiently documented.
③ The Company’s disclosures on hedge accounting are contained in sections entitled “Accounting policies”,
“Noncurrent and current other financial assets”, “Noncurrent and current other financial liabilities”, “Ad-
ditional balance sheet disclosures in accordance with IFRS 7 (Financial Instruments)” in the notes to the
consolidated financial statements.
OT H E R I N F O R M AT I O N
The executive directors are responsible for the other information. The other information comprises the follow-
ing non-audited parts of the group management report:
the statement on corporate governance pursuant to § 289f HGB and § 315d HGB included in section
“Corporate Governance Report” of the group management report the corporate
governance report pursuant to No. 3.10 of the German Corporate Governance Code
the separate non-financial report pursuant to § 289b Abs. 3 HGB and § 315b Abs. 3 HGB
The other information comprises further the remaining parts of the annual report, – excluding cross-references
to external information – with the exception of the audited consolidated financial statements, the audited
group management report and our auditor’s report.
Our audit opinions on the consolidated financial statements and on the group management report do not
cover the other information, and consequently we do not express an audit opinion or any other form of assur-
ance conclusion thereon.
In connection with our audit, our responsibility is to read the other information and, in so doing, to consider
whether the other information
is materially inconsistent with the consolidated financial statements, with the group management report
or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
Responsibilities of the Executive Directors and the Supervisory Board for the Consolidated Financial Statements and the Group
Management Report
The executive directors are responsible for the preparation of the consolidated financial statements that com-
ply, in all material respects, with IFRSs as adopted by the EU and the additional requirements of German com-
mercial law pursuant to § 315e Abs. 1 HGB and that the consolidated financial statements, in compliance with
these requirements, give a true and fair view of the assets, liabilities, financial position, and financial perfor-
mance of the Group. In addition the executive directors are responsible for such internal control as they have
determined necessary to enable the preparation of consolidated financial statements that are free from materi-
al misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the executive directors are responsible for assessing the
Group’s ability to continue as a going concern. They also have the responsibility for disclosing, as applicable,
matters related to going concern. In addition, they are responsible for financial reporting based on the going
concern basis of accounting unless there is an intention to liquidate the Group or to cease operations, or there
is no realistic alternative but to do so.
Consolidated Financial Statements
Independent Auditor’s Report
337
Furthermore, the executive directors are responsible for the preparation of the group management report that,
as a whole, provides an appropriate view of the Group’s position and is, in all material respects, consistent with
the consolidated financial statements, complies with German legal requirements, and appropriately presents
the opportunities and risks of future development. In addition, the executive directors are responsible for such
arrangements and measures (systems) as they have considered necessary to enable the preparation of a group
management report that is in accordance with the applicable German legal requirements, and to be able to
provide sufficient appropriate evidence for the assertions in the group management report.
The supervisory board is responsible for overseeing the Group’s financial reporting process for the prepara-
tion of the consolidated financial statements and of the group management report.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements and of the Group Management Report
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a
whole are free from material misstatement, whether due to fraud or error, and whether the group management
report as a whole provides an appropriate view of the Group’s position and, in all material respects, is consistent
with the consolidated financial statements and the knowledge obtained in the audit, complies with the German
legal requirements and appropriately presents the opportunities and risks of future development, as well as to
issue an auditor’s report that includes our audit opinions on the consolidated financial statements and on the
group management report.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accord-
ance with § 317 HGB and the EU Audit Regulation and in compliance with German Generally Accepted Stand-
ards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer (IDW) will always detect a
material misstatement. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these consolidated financial statements and this group management report. We exercise profes-
sional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements and of the
group management report, whether due to fraud or error, design and perform audit procedures responsive
to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our audit
opinions. The risk of not detecting a material misstatement resulting from fraud is higher than for one re-
sulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or
the override of internal control.
Obtain an understanding of internal control relevant to the audit of the consolidated financial statements
and of arrangements and measures (systems) relevant to the audit of the group management report in or-
der to design audit procedures that are appropriate in the circumstances, but not for the purpose of ex-
pressing an audit opinion on the effectiveness of these systems.
Evaluate the appropriateness of accounting policies used by the executive directors and the reasonableness
of estimates made by the executive directors and related disclosures.
Conclude on the appropriateness of the executive directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events or condi-
tions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude
that a material uncertainty exists, we are required to draw attention in the auditor’s report to the related
disclosures in the consolidated financial statements and in the group management report or, if such disclo-
sures are inadequate, to modify our respective audit opinions. Our conclusions are based on the audit evi-
dence obtained up to the date of our auditor’s report. However, future events or conditions may cause the
Group to cease to be able to continue as a going concern.
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Independent Auditor’s Report
Consolidated Financial Statements
Evaluate the overall presentation, structure and content of the consolidated financial statements, including
the disclosures, and whether the consolidated financial statements present the underlying transactions and
events in a manner that the consolidated financial statements give a true and fair view of the assets, liabili-
ties, financial position and financial performance of the Group in compliance with IFRSs as adopted by the
EU and the additional requirements of German commercial law pursuant to § 315e Abs. 1 HGB.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express audit opinions on the consolidated financial statements and on the
group management report. We are responsible for the direction, supervision and performance of the group
audit. We remain solely responsible for our audit opinions.
Evaluate the consistency of the group management report with the consolidated financial statements, its
conformity with German law, and the view of the Group’s position it provides.
Perform audit procedures on the prospective information presented by the executive directors in the group
management report. On the basis of sufficient appropriate audit evidence we evaluate, in particular, the
significant assumptions used by the executive directors as a basis for the prospective information, and
evaluate the proper derivation of the prospective information from these assumptions. We do not express a
separate audit opinion on the prospective information and on the assumptions used as a basis. There is a
substantial unavoidable risk that future events will differ materially from the prospective information.
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that
we identify during our audit.
We also provide those charged with governance with a statement that we have complied with the relevant
independence requirements, and communicate with them all relationships and other matters that may reason-
ably be thought to bear on our independence, and where applicable, the related safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation pre-
cludes public disclosure about the matter.
Consolidated Financial Statements
Independent Auditor’s Report
339
OT H E R L E G A L A N D R E G U L AT O R Y R E Q U I R E M E N T S
Further Information pursuant to Article 10 of the EU Audit Regulation
We were elected as group auditor by the annual general meeting on May 3, 2018. We were engaged by the su-
pervisory board on May 4, 2018. We have been the group auditor of the VOLKSWAGEN AKTIENGESELLSCHAFT,
Wolfsburg, without interruption since the financial year 1948/1949.
We declare that the audit opinions expressed in this auditor’s report are consistent with the additional re-
port to the audit committee pursuant to Article 11 of the EU Audit Regulation (long-form audit report).
G E R M A N P U B L I C A U D I TO R R E S P O N S I B L E F O R T H E E N G A G E M E N T
The German Public Auditor responsible for the engagement is Frank Hübner.
Hanover, February 22, 2019
PricewaterhouseCoopers GmbH
Wirtschaftsprüfungsgesellschaft
Harald Kayser
Wirtschaftsprüfer
(German Public Auditor)
Frank Hübner
Wirtschaftsprüfer
(German Public Auditor)
340
Five-Year Review
Additional Information
Five-Year Review
Volume Data (thousands)
Vehicle sales (units)
Germany
Abroad
Production (units)
Germany
Abroad
Employees (yearly average)
Germany
Abroad
Financial Data (in € million)
Income Statement
Sales revenue
Cost of sales
Gross profit
Distribution expenses
Administrative expenses
Net other operating result
Operating result
Financial result
Earnings before tax
Income tax expense
Earnings after tax
Personnel expenses
Balance Sheet (at December 31)
Noncurrent assets
Current assets
Total assets
Equity
of which: noncontrolling interests
Noncurrent liabilities
Current liabilities
Total equity and liabilities
2018
20171
2016
2015
2014
10,900
1,236
9,664
11,018
2,303
8,715
656
291
365
235,849
–189,500
46,350
–20,510
–8,819
–3,100
13,920
1,723
15,643
–3,489
12,153
10,777
1,264
9,513
10,875
2,579
8,296
634
285
350
229,550
–186,001
43,549
–20,859
–8,126
–745
13,818
–146
13,673
–2,210
11,463
10,391
1,257
9,135
10,405
2,685
7,720
619
280
339
217,267
–176,270
40,997
–22,700
–7,336
–3,858
7,103
189
7,292
1,912
5,379
10,010
1,279
8,731
10,017
2,681
7,336
604
276
329
213,292
–179,382
33,911
–23,515
–7,197
–7,267
–4,069
2,767
–1,301
–59
–1,361
10,217
1,247
8,970
10,213
2,559
7,653
583
265
318
202,458
–165,934
36,524
–20,292
–6,841
3,306
12,697
2,097
14,794
–3,726
11,068
41,158
38,950
37,017
36,268
33,834
274,620
183,536
458,156
117,342
225
172,846
167,968
458,156
262,081
160,112
422,193
109,077
229
152,726
160,389
422,193
254,010
155,722
409,732
92,910
221
139,306
177,515
409,732
236,548
145,387
381,935
88,270
210
145,175
148,489
381,935
220,106
131,102
351,209
90,189
198
130,314
130,706
351,209
Cash flows from operating activities
7,272
–1,185
9,430
13,679
10,784
Cash flows from investing activities attributable to operating
activities
Cash flows from financing activities
19,386
24,566
18,218
17,625
16,797
9,712
15,523
9,068
16,452
4,645
1 Adjusted; see disclosures about the application of new International Financial Reporting Standards on page 114.
Additional Information
Financial Key Performance Indicators
341
Financial Key Performance
Indicators
%
Volkswagen Group
Gross margin
Personnel expense ratio
Operating return on sales
Return on sales before tax
Return on sales after tax
Equity ratio
Automotive Division2
Change in unit sales year-on-year3
Change in sales revenue year-on-year
Research and development costs as a percentage of sales revenue
Operating return on sales
EBITDA (in € million)4
Return on investment (ROI)5
Cash flows from operating activities as a percentage of sales
revenue
Cash flows from investing activities attributable to operating
activities as a percentage of sales revenue
Capex as a percentage of sales revenue
Net liquidity as a percentage of sales revenue
Ratio of noncurrent assets to total assets6
Ratio of current assets to total assets7
Inventory turnover8
Equity ratio
Financial Services Division
Increase in total assets
Return on equity before tax9
Equity ratio
2018
20171
2016
2015
2014
19.7
17.5
5.9
6.6
5.2
25.6
+1.1
+2.7
6.8
5.5
19.0
17.0
6.0
6.0
5.0
25.8
+3.7
+5.3
6.7
5.7
18.9
17.0
3.3
3.4
2.5
22.7
+3.8
+1.1
7.3
2.5
26,707
11.0
26,094
12.1
18,999
8.2
9.2
9.4
6.6
8.2
23.3
17.6
5.0
37.9
11.2
9.9
12.7
6.0
9.0
6.5
9.7
23.7
16.3
5.1
36.9
6.0
9.8
13.7
10.9
8.6
6.9
12.5
23.4
15.9
5.5
31.4
8.3
10.8
12.5
15.9
17.0
–1.9
–0.6
–0.6
23.1
–2.0
+3.6
7.4
–3.4
7,212
–0.2
12.9
8.1
6.9
11.5
23.1
15.2
5.8
32.6
13.9
12.2
11.9
18.0
16.7
6.3
7.3
5.5
25.7
+5.0
+1.4
7.4
6.1
23,100
14.9
12.2
8.7
6.5
8.7
22.3
14.3
6.2
36.9
15.1
12.5
11.3
1 Adjusted; see disclosures about the application of new International Financial Reporting Standards on page 114.
2 Including allocation of consolidation adjustments between the Automotive and Financial Services divisions.
3 Including the Chinese joint ventures. These companies are accounted for using the equity method.
4 Operating result plus net depreciation/amortization and impairment losses/reversals of impairment losses on property, plant and equipment, capitalized development costs, lease
assets, goodwill and financial assets as reported in the cash flow statement.
5 For details, see Value-based management on page 127.
6 Ratio of property, plant and equipment to total ass.
7 Ratio of inventories to total assets at the balance sheet date.
8 Ratio of sales revenue to average monthly inventories.
9 Earnings before tax as a percentage of average equity.
342
Glossary
Additional Information
Glossary
Selected terms at a glance
Liquefied Natural Gas (LNG)
Test procedure
LNG is needed so that natural gas engines can be
Levels of fuel consumption and exhaust gas
Big Data
used in long-distance trucks and buses, since this
emissions for vehicles registered in Europe were
Big data is a term used to describe new ways of
is the only way of achieving the required energy
previously measured on a chassis dynamometer
analyzing and evaluating data volumes that are
density.
too vast and too complex to be processed using
with the help of the “New European Driving
Cycle (NEDC)”. Since fall 2017, the existing test
manual or conventional methods.
Modular Electric Drive Toolkit (MEB)
procedure for emissions and fuel consumption
The modular system is being developed for the
used in the EU is being gradually replaced by the
Compliance
manufacturing of electric vehicles. The MEB
Worldwide Harmonized Light-Duty Vehicles Test
Adherence to statutory provisions, internal com-
establishes parameters for axles, drive systems,
Procedure (WLTP). This has been in place for new
pany policies and ethical principles.
high-voltage batteries, wheelbases and weight
vehicle types since fall 2017 and will apply to all
ratios to ensure a vehicle optimally fulfills the
new vehicles since fall 2018. The aim of this new
Compressed Natural Gas (CNG)
requirements of e-mobility. The first vehicle
test cycle is to state CO2 emissions and fuel
Burning this compressed natural gas releases
based on the MEB should go into series produc-
consumption in a more practice-oriented man-
approximately 25% less CO2 than petrol because
tion in 2020.
of its low carbon and high energy content.
ner. A further important European regulation is
the Real Driving Emissions (RDE) for passenger
Corporate Governance
As an extension of the modular strategy, this
monitors emissions using portable emission
International term for responsible corporate
platform can be deployed
in vehicles whose
measuring technology in real road traffic.
Modular Transverse Toolkit (MQB)
cars and light commercial vehicles, which also
management and supervision driven by long-
architecture permits a transverse arrangement of
term value added.
the engine components. The modular perspective
Turntable concept
enables high synergies to be achieved between
Concept of flexible manufacturing enabling the
Hybrid drive
the vehicles in the Volkswagen Passenger Cars,
production of different models in variable daily
Drive combining two different types of engine
Volkswagen Commercial Vehicles, Audi, SEAT and
volumes within a single plant, as well as offering
and energy storage systems (usually an internal
ŠKODA brands.
the facility to vary daily production volumes of
combustion engine and an electric motor).
one model between two or more plants.
Plug-in hybrid
Hybrid notes
Performance levels of hybrid vehicles. Plug-in
Vocational groups
Hybrid notes issued by Volkswagen are classified
hybrid electric vehicles (PHEVs) have a larger
For example, electronics, logistics, marketing, or
in their entirety as equity. The issuer has call
battery with a correspondingly higher capacity
finance. A new teaching and learning culture is
options at defined dates during their perpetual
that can be charged via the combustion engine,
gradually being established by promoting
maturities. They pay a fixed coupon until the
the brake system, or an electrical outlet. This
training in the vocational groups. The specialists
first possible call date, followed by a variable
increases the range of the vehicle.
are actively involved in the teaching process by
rate depending on their terms and conditions.
passing on their skills and knowledge to their
Industry 4.0
Systematic assessment of companies in terms of
Describes the fourth industrial revolution and
their credit quality. Ratings are expressed by
Zero-Emissions Vehicle (ZEV)
Rating
colleagues.
the systematic development of real-time and
means of rating classes, which are defined
Vehicles that operate without exhibiting any
intelligent networks between people, objects and
differently by the individual rating agencies.
harmful emissions
from combustion gases.
systems, exploiting all of the opportunities of
information technology along the entire value
added chain.
Intelligent machines,
inventory
systems and operating equipment that inde-
pendently exchange information, trigger actions
and control each other will be integrated into
production and logistics at a technical level. This
offers tremendous versatility, efficient resource
utilization, ergonomics and the integration of
customers and business partners in operational
processes throughout the entire value chain.
Examples of zero-emissions vehicles
include
purely battery-powered electric vehicles (BEV) or
fuel cell vehicles.
Additional Information
Glossary
343
Capitalization ratio
Return on equity before tax
The capitalization ratio is defined as the ratio of
The return on equity shows the ratio of profit before
capitalized development costs to total research and
tax to average shareholders’ equity of a period,
development costs in the Automotive Division. It
expressed as a percentage. It reflects the company’s
shows the proportion of primary research and devel-
profitability per share and indicates the interest rate
opment costs subject to capitalization.
earned on equity.
Distribution ratio
Return on sales before tax
The distribution ratio is the ratio of total dividends
The return on sales is the ratio of profit before tax to
attributable to ordinary and preferred shares to
sales revenue in a period, expressed as a percentage. It
earnings after tax attributable to the shareholders of
shows the level of profit generated for each unit of
Volkswagen AG. The distribution ratio provides infor-
sales revenue. The return on sales provides infor-
mation on how earnings are distributed.
mation on the profitability of all business activities
before deducting income tax expense.
Dividend yield
The dividend yield is the ratio of the dividend for the
Tax rate
reporting year to the closing price per share class on
The tax rate is the ratio of income tax expense to
the last trading day of the reporting year; it represents
profit before tax, expressed in percent. It shows what
the interest rate earned per share. The dividend yield
percentage of the profit generated has to be paid over
is used in particular for measuring and comparing
as tax.
shares.
Equity ratio
The equity ratio measures the percentage of total
assets attributable to shareholders’ equity as of a
reporting date. This ratio indicates the stability and
financial strength of the company and shows the
degree of financial independence.
Gross margin
Gross margin is the percentage of sales revenue
attributable to gross profit in a period. Gross margin
provides information on profitability net of cost of
sales.
Price-earnings ratio
The price-earnings ratio is calculated by dividing the
share price per share class at the end of the year by
the earnings per share. It reflects a company’s profita-
bility per share; a comparison over several years shows
how its performance has developed over time.
344
Index
Additional Information
Index
A
G
Q
Accounting policies
223 ff
Global Compact
135
Quality assurance
141 ff, 172
Group structure
194 f
B
Balance sheet
Basis of consolidation
122 ff, 139 f, 242 ff
I
211 ff
IFRSs
R
Ratings
202 ff
Refinancing
113
112 f
Board of Management
1 ff, 60 ff, 68 ff, 327
Income statement
115 ff, 129, 193
Remuneration
61, 68 ff, 322 f
21 ff
Information technology
153, 173
Report on post-balance sheet date events
155
Investment policy
160
Research and development
131, 135, 169
Brands
C
CO2 emissions
Consolidation methods
Core performance indicators
Corporate Governance
Currency
D
Deliveries
Dividend policy, yield
Dividend proposal
E
Earnings per share
Employees
Environmental
protection
Environmental strategy
Equity
F
Cash flow statement
119 ff, 200, 287
K
145 f, 174 ff
Key figures
221
55
L
59 ff, 327
Litigation
96, 159, 222
M
Return on investment (ROI) and
value contribution
U3
Risk management
55, 126 f, 162
66, 163 ff
S
177 ff, 311 ff
Sales and marketing
Segment reporting
Shareholders
145 ff
114, 234 ff
90, 110
90 ff, 108 ff
Declaration of conformity
59 ff
Models
100 f, 160
Statement of comprehensive income
194 f
Market development
159 ff, 187 ff
Shares
U4, 101 ff
109
N
130, 262
Nonfinancial key performance indicators 133 ff
Strategy
Summaries
Supervisory Board
Sustainability
51 ff, 147 ff, 154 ff
128, 161 f, 187
56 ff, 84 ff, 327 ff
113, 133 ff
O
109, 245
Orders received
107, 131, 151 ff, 162, 274
41, 43, 106
T
131, 154 f, 174 ff
154 ff
198 f, 257 ff
P
Procurement
Production
140 ff, 170
25 ff, 107, 131, 142 ff, 170 f
Proposal on the appropriation of net profit
Prospects
130
188
Target-performance comparison
128
Test procedure
96 ff, 116 ff, 141, 170 ff
V
Value added
Vehicle sales
59, 133 ff
23, 107, 131
Financial data, overview
Financial risk management
326 f
289 ff
Scheduled Dates 2019
FI N ANC IA L CALE N DAR
March 12
Volkswagen AG Annual Media Conference
and Investor Conference, Wolfsburg
May 2
Interim Report January – March
May 14
Volkswagen AG Annual General Meeting (CityCube Berlin)
July 25
Half-Yearly Financial Report
October 30
Interim Report January – September
Contact
Information
Contents
Contact Information
PUBLISHED BY
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Financial Publications, Letterbox 1848-2
38436 Wolfsburg, Germany
Phone + 49 (0) 5361 9-0
Fax + 49 (0) 5361 9-28282
This annual report is published in English and German.
Both versions of the report are available on the Internet
at www.volkswagenag.com/ir.
The German version is legally binding.
I NV ESTO R RE L ATI ONS
Volkswagen AG
Investor Relations, Letterbox 1849
38436 Wolfsburg, Germany
Phone + 49 (0) 5361 9-0
Fax + 49 (0) 5361 9-30411
E-mail investor.relations@volkswagen.de
Internet www.volkswagenag.com/ir
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