The future
on hand
A N N UA L R EP O R T 2020
Key Figures
V O L K SWA G E N G R O U P
Volume Data1 in thousands
Deliveries to customers (units)
Vehicle sales (units)
Production (units)
Employees at Dec. 31
Financial Data (IFRSs), € million
Sales revenue
Operating result before special items
Operating return on sales before special items (%)
Special items
Operating result
Operating return on sales (%)
Earnings before tax
Return on sales before tax (%)
Earnings after tax
Automotive Division2
Total research and development costs
R&D ratio (%)
Cash flows from operating activities
Cash flows from investing activities attributable to operating activities3
of which: capex
capex/sales revenue (%)
Net cash flow
Net liquidity at Dec. 31
Return on investment (ROI) in %
Financial Services Division
Return on equity before tax4 (%)
V O L K SWA G E N A G
Volume Data in thousands
Employees at Dec. 31
Financial Data (HGB), € million
Sales revenue
Net income for the fiscal year
Dividends (€)
per ordinary share
per preferred share
2020
2019
%
9,305
9,157
8,900
662.6
222,884
10,607
4.8
– 931
9,675
4.3
11,667
5.2
8,824
13,885
7.6
24,721
18,364
11,065
6.1
6,357
26,796
6.5
10,975
10,956
10,823
671.2
252,632
19,296
7.6
– 2,336
16,960
6.7
18,356
7.3
14,029
14,306
6.7
30,733
19,898
14,007
6.6
10,835
21,276
11.2
– 15.2
– 16.4
– 17.8
– 1.3
– 11.8
– 45.0
– 60.1
– 43.0
– 36.4
– 37.1
– 2.9
– 19.6
– 7.7
– 21.0
– 41.3
+ 25.9
8.8
10.8
2020
2019
%
118.7
119.2
– 0.4
67,535
6,338
4.80
4.86
80,621
4,958
4.80
4.86
– 16.2
+ 27.8
1 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.
2 Including allocation of consolidation adjustments between the Automotive and Financial Services divisions.
3 Excluding acquisition and disposal of equity investments: €17,175 (19,182) million.
4 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 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.
Specified vehicle ranges correspond to results obtained through the Worldwide Harmonized Light vehicles Test Procedure (WLTP) on the chassis dynamometer. WLTP value ranges for
series-produced vehicles may vary depending on the equipment. The actual range will deviate in practice depending on various other factors.
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
23
26
28
30
32
34
36
38
40
42
Brands and Business Fields
Volkswagen Passenger Cars
Audi
ŠKODA
SEAT
Bentley
Porsche
3
CORPORATE GOVERNANCE
53
Group Corporate Governance
Declaration
62
Members of the Board of
Management
63
Members of the Supervisory
Board and Composition of the
Committees
Volkswagen Commercial Vehicles
66
Remuneration Report (part of the
TRATON GROUP
Scania
Group Management Report)
44 MAN
46
48
Volkswagen Group China
Volkswagen Financial Services
4
5
6
GROUP MANAGEMENT REPORT
CONSOLIDATED FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
Goals and Strategies
207
Income Statement
364 Five-Year Review
Internal Management System and
208 Statement of Comprehensive Income
365
Financial Key
Key Performance Indicators
210 Balance Sheet
Performance Indicators
Structure and Business Activities
212 Statement of Changes in Equity
366 Glossary
85
89
91
94
Disclosures Required
Under Takeover Law
96
Business Development
110 Shares and Bonds
116 Results of Operations,
Financial Position and Net Assets
132
Volkswagen AG (condensed,
in accordance with the
German Commercial Code)
136 Sustainable Value Enhancement
166 Report on Expected Developments
173 Report on Risks and Opportunities
202 Prospects for 2021
214 Cash Flow Statement
368 Scheduled Dates
215 Notes
351 Responsibility Statement
352 Auditor’s Report
This annual report was published
on the occasion of the Annual Media
Conference on March 16, 2021.
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
Letter to our Shareholders
7
Letter to our Shareholders
We have had to perform the greatest balancing act in the Com-
pany’s history in recent months – addressing the Covid-19
pandemic while pushing our transformation into a technol-
ogy company. Of these two challenges, developing of new
digital products, services and customer interfaces was and still
is of greater existential significance for our Group.
Data and electricity are driving us now. We are improving the
charging experience for our electric vehicles. We are providing
over-the-air software updates – including new functions and
assistance systems. We are establishing new sales processes,
primarily online, and communicating directly with our
customers – around the clock, if desired.
Data is the new driving force of prosperity for economies. Its
usage strengthens customer orientation and provides safer
and more convenient mobility. Digital upgrades and addi-
tional services relating to the entire vehicle are creating new
areas of business that we are developing. Particularly in fully
connected traffic, data will become the basis for autonomous
driving, thus redefining individual mobility. This is why we are
planning to invest €27 billion, representing about one-fifth of
the Group’s total capex expenditure, in digitalization over the
next five years.
Two flagship projects will greatly speed up the new focus on
software and data in the Volkswagen world. Audi will launch a
new Group-wide software platform as part of the Artemis
project in 2024, starting with the premium segment. The
Volkswagen brand will follow suit in 2026 with the Trinity
project in the volume segment. These two projects stand for
entirely new and completely digitalized electric models. Since
July 2020, our Car.Software Organisation has been program-
ming the new vw.os operating system, which will be used for
the first time in Artemis. Today, over 3,500 IT experts work in
this organization and this number will rise to 10,000 in five
years: coding is becoming part of the Volkswagen DNA. In the
future, we will continue to keep all activities relating to the
brains of the car in-house.
We find ourselves in a new playing field – up against com-
panies that are entering the mobility market from the world of
technology, often with virtually unlimited access to resources
through the capital markets. Stock market players still regard
the Volkswagen Group as part of the “old auto” world. By
focusing consistently on software and efficiency, we are
working to change this view. The world’s most valuable com-
pany will become a mobility company once more – and
Volkswagen enjoys one of the best starting positions in the
“new auto” competition.
In the “old world” of vehicle construction, we have achieved an
excellent standard: the construction quality, appeal and
functionality of our vehicles are better than ever. The only way
to successfully transform Volkswagen into a digital company
is by maximizing the return from our traditional business. We
intend to reduce the Group’s fixed costs by 5% by 2023.
Another area of focus is procurement, where we are working
to reduce material costs by 7% over the next two years. The
brands are improving their profitability through cost-cutting
programs. And we are simplifying our portfolio – which is
more diversified than ever before – in the right places.
Moreover, our focus on sustainable action will strengthen the
Group’s resilience. By 2050 at the latest, our Group will achieve
net carbon neutrality worldwide – from supply chains to our
plants and divisions up to the use of the vehicles by our
customers. We have made substantial progress during the
pandemic. This means one thing in particular – bringing out
more electric vehicles. Overall, the Group tripled its sales of all-
electric vehicles to 231,600 units.
The premiere of Volkswagen’s ID. family played an important
part in this sales growth. Production of the ID.3 and ID.4 began
in Zwickau. Since November 2020, the ID.4 is also being
manufactured at two newly constructed factories in China.
When production of the ID.4 begins in the United States in
2022, the electric SUV will live up to its claim of being the
electric ‘world car’.
8
Letter to our Shareholders
To our Shareholders
Data and electricity
are driving us now.
– Herbert Diess –
To our Shareholders
Letter to our Shareholders
9
With 56,000 units delivered, the Volkswagen ID.3 was the
Group’s most successful electric vehicle in 2020, followed by
the Audi e-tron and the Porsche Taycan. We intend to invest
around €35 billion in e-mobility over the next five years, plus
another €11 billion in the hybridization of our model port-
folio. Five years ago we gave the green light for e-mobility in
the Group through the decision to develop the Modular
Electric Drive Toolkit (MEB). Now this is a core business.
Last year, we significantly lowered the emissions of the
Group’s fleet in Europe compared with the previous year. In
2021, when the electric campaign is well underway with
models such as the ŠKODA Enyaq iV, we will meet the EU’s CO2
fleet targets and will go from strength to strength in sub-
sequent years – until we can trade our excess carbon credits for
a profit in the near future.
We continued our 40-year success story in China, primarily
with a view to achieving zero-emission mobility. By increasing
our stake in the Volkswagen (Anhui) joint venture to 75%, we
are accelerating electrification in our largest market. We
announced our intention to become the largest shareholder in
Chinese battery maker Gotion by acquiring 26% of this
company. These and other endeavors are helping us to expand
our battery expertise at a global level.
The new European Green Deal will increase Volkswagen’s
battery requirements in 2030. To achieve the political climate
targets, all-electric vehicles will have to make up 55% of our
deliveries in Europe – significantly more than previously
projected. This also means that in addition to our battery
manufacturing facility in Salzgitter, we will need two more
battery plants in Europe. Volkswagen is prepared for this – and
supports the Green Deal as well as the Paris Climate Agree-
ment.
Our commercial vehicle division TRATON is planning to invest
€1 billion in electrification by 2025. It is important to note that
emissions can be reduced faster in freight transport and local
public transport than in the car fleet – using only a fraction of
the resources. The global champion strategy was advanced in
2020: TRATON established an e-mobility joint venture in Japan
and announced the acquisition of US manufacturer Navistar,
while Scania launched its first production facility in China. The
groundwork for enhanced efficiency in Germany is being laid
at the same time: MAN started to increase its competitiveness
through restructuring to be better positioned for the trans-
formation, because there will also be electric and self-driving
trucks and buses.
into a hospital. In Spain, SEAT manufactured respiratory
equipment. ŠKODA in the Czech Republic and Lamborghini in
Italy produced surgical masks and face shields. The Group
provided €40 million worth of relief supplies, sought out
producers in China and arranged transport to Europe.
At the same time, we were able to ensure safe working
conditions in production with a 100-point plan, maintain
global supply chains, and safeguard our liquidity, primarily
through targeted warehouse management. Volkswagen
showed itself to be robust and capable of excellent perfor-
mance in a year that saw the biggest crisis in decades. As of the
close of the year, the Group recorded around 15% fewer
deliveries year-on-year, but saw its global market share
increase slightly. Operating profit before special items came to
€10.6 billion in 2020. Net liquidity of €26.8 billion – an
increase of 25.9% year-on-year – underscores the Group’s
outstanding solidity.
I am very proud of what our more than 660,000 employees
have achieved in these challenging times. While balancing the
pandemic and our transformation, we achieved the best
sentiment rating in the annual employee survey. We have
implemented positive changes in our corporate culture. This
was also confirmed in September 2020 by the final report of
the team of the US Monitorship, with which we worked for four
years on improving processes, creating more transparency
and reducing hierarchical thinking in the Group. I would like
to sincerely thank our employees for their hard work. Thanks
also to you, our shareholders, for your support.
In 2021, following changes on the boards of management of
our brands and with Murat Aksel, Arno Antlitz and Thomas
Schmall as new members of the Group Board of Management,
we are starting out with a new, powerful team. I will consis-
tently remain committed to securing a higher return from our
traditional business and concentrating fully on software
expertise. There is a lot to do at Volkswagen, to decide, to
change – for we will undergo more transformation in the next
ten years than we did in the last fifty.
The transformation to a climate-neutral, software-driven
mobility group will progress quickly in 2021. I look forward to
your continued support on this journey!
Sincerely,
In 2020, a year overshadowed by Covid-19, many of our
employees worked for the common good to help contain the
pandemic. Volkswagen South Africa converted a former factory
Herbert Diess
10
The Board of Management
To our Shareholders
The Board of Management
of Volkswagen Aktiengesellschaft
Dr.-Ing. Herbert Diess
Chairman of the Board of Management
of Volkswagen Aktiengesellschaft,
Volume brand group,
China
Hiltrud Dorothea Werner
Integrity and Legal Affairs
Murat Aksel
Purchasing
To our Shareholders
The Board of Management
11
Gunnar Kilian
Human Resources and Truck & Bus
Oliver Blume
Chairman of the Board of Management
of Dr. Ing. h.c. F. Porsche AG,
Sport & Luxury brand group
Frank Witter
Finance and IT
Markus Duesmann
Markus Duesmann
Markus Duesmann
Chairman of the Board of Management
Chairman of the Board of Management
Chairman of the Board of Management
of AUDI AG, Premium brand group
of AUDI AG, Premium brand group
of AUDI AG, Premium brand group
Thomas Schmall-von Westerholt
Technology,
Chairman of the Board of Management
of Volkswagen Group Components
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,
The work of the Supervisory Board of Volkswagen AG and its
committees in fiscal year 2020 focused on the Volkswagen
Group’s strategic direction. The Supervisory Board regularly
deliberated on the Company’s position and development in
the reporting period. We supervised and supported the Board
of Management in its running of the business and advised it
on issues relating to the management of the Company in
accordance with our duties under the law, the Articles of
Association 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 Man-
agement at regular intervals.
The Board of Management complied with its disclosure obli-
gations, which are set out in the information policy adopted
by the Supervisory Board in 2018. The Board of Management
provided us with information regularly, promptly and
comprehensively both in writing and orally, particularly on all
matters of relevance to the Company relating to its strategy,
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 compliance
and other topical issues by the Board of Management on an
ongoing basis. 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 Manage-
ment on the current business 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. The Board of Management reported extensively
and promptly, particularly on the impacts of the Covid-19
pandemic. It established a crisis management team to deal
with this issue. Minutes of the meetings of the crisis
management team were provided to the Chairman of the
Supervisory Board without delay. The Supervisory Board was
also provided with detailed information on the effects of the
Covid-19 pandemic and action taken by the Board of Manage-
ment. 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 work to address the diesel issue, these
included the Volkswagen Group’s strategy and planning, its
business development, and the risk situation and risk man-
agement, including integrity and compliance issues in the
Volkswagen Group. Within reason, the Chairman of the Super-
visory Board discussed Supervisory Board-specific topics with
investors and, in consultation with the Board of Management,
also discussed non-Supervisory Board-specific topics. The
Chairman of the Supervisory Board informed the Supervisory
Board of such discussions after they had taken place.
The Supervisory Board held a total of 13 meetings in fiscal year
2020. The average attendance rate was around 90.0%. In addi-
tion, resolutions on particularly urgent matters were adopted
in writing or using electronic communications media.
Particularly the challenges and restrictions resulting from the
Covid-19 pandemic necessitated additional flexibility for the
meetings of the Supervisory Board in fiscal year 2020. The
Covid-19 pandemic also resulted in travel restrictions and
presented additional challenges for the Supervisory Board
members, who have special responsibilities in business and
To our Shareholders
Report of the Supervisory Board
13
politics. Nevertheless, all members of the Supervisory Board
except for Dr. Al Abdulla attended over half of the meetings of
the Supervisory Board and the committees of which they are
members. Supervisory Board members who could not attend
a meeting were able to engage with the meeting topics using
the preparatory documents.
supervision of financial reporting and the financial reporting
process, and the examination thereof by the auditors. The
Audit Committee also discussed the creation of a system to
monitor related-party transactions in line with new require-
ments of the Aktiengesetz (AktG – German Stock Corporation
Act).
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 Supervisory
Board has established five committees: the Executive
Committee, the Nomination Committee, the Mediation Com-
mittee 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 Supervisory Board
resolved on May 28, 2020 to increase the number of members
of the Executive Committee in light of its growing responsi-
bilities. Since May 29, 2020, the Executive Committee has been
comprised of four shareholder representatives and four
employee representatives (previously three). The shareholder
representatives on the Executive Committee make up the
Nomination Committee. The Special Committee on Diesel
Engines is comprised of three shareholder representatives and
three employee representatives. The remaining two com-
mittees are each composed of two shareholder representatives
and two employee representatives. The members of these
committees as of December 31, 2020 are given in the Group
Corporate Governance Declaration.
The Executive Committee met 20 times in the reporting
period. At its meetings, the Executive Committee meticulously
prepared the resolutions of the Supervisory Board, discussed
the composition of the Board of Management and took
decisions on matters such as contractual issues concerning
the Board of Management other than remuneration and
consent to ancillary activities by members of the Board of
Management.
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 conse-
quences of the findings. The Chairman of the Special Com-
mittee on Diesel Engines reports regularly on its work to the
Supervisory Board. In 2020, the Special Committee on Diesel
Engines met on two occasions to discuss, among other things,
reports from the Board of Management on the state of affairs
with respect to the diesel issue as well as the latest develop-
ments in the consumer action for model declaratory judg-
ment brought by the Verbraucherzentrale Bundesverband
(Federation of Consumer Organizations) and in various other
legal proceedings.
Furthermore, as a rule, the shareholder and employee repre-
sentatives met for separate preliminary discussions before
each of the Supervisory Board meetings.
In connection with their seat on the Supervisory Board,
members of the Supervisory Board receive support from the
Company upon induction as well as with respect to education
and training; the Company particularly supports the organi-
zation of seminars and bears the costs thereof. Supervisory
Board members appointed for the first time are also provided
with a detailed introduction to topics that apply specifically to
the Supervisory Board of Volkswagen AG.
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 2020.
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 first Supervisory Board meeting of the reporting year took
place on January 30, 2020 and focused on the strategic
direction of the Truck & Bus brand group, especially the sale of
shares in RENK AG.
The Mediation Committee did not have to be convened in the
reporting period.
The Audit Committee held five meetings in 2020. 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
The agenda of the Supervisory Board meeting on February 14,
2020 included a report on the latest developments in the
model declaratory proceedings involving the Verbraucher-
zentrale Bundesverband e.V.
The Supervisory Board held its next meeting on February 28,
2020. Following a detailed examination, we approved the
consolidated financial statements and the annual financial
statements of Volkswagen AG for 2019 prepared by the Board
of Management. We examined the combined management
report, the combined separate nonfinancial report for 2019
14
Report of the Supervisory Board
To our Shareholders
Hans Dieter Pötsch
and the precautionary 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 depen-
dent 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, financing measures at the
Volkswagen Group, full acquisition of the shares of AUDI AG
(squeeze out) and the agenda for the 60th Annual General
Meeting of Volkswagen AG, particularly resolutions proposed
by the Supervisory Board.
At the Supervisory Board meetings on April 27 and May 12,
2020, we discussed the status of the criminal proceedings
against the Chairman of the Supervisory Board of Volks-
wagen AG, Hans Dieter Pötsch, and the Chairman of the Board
of Management of Volkswagen AG, Dr. Herbert Diess, on sus-
picion of violation of the Securities Trading Act in connection
with the diesel issue.
The Supervisory Board convened for its next meeting on
May 28, 2020. In addition to the composition of the Board of
Management and Supervisory Board, particularly with regard
to the enlargement of the Executive Committee and the
appointment of further Executive Committee members, there
were also strategic issues on the agenda. These related to
e-mobility and autonomous driving, including the stepping
up of the electric campaign in China through an increased
shareholding in the JAC Volkswagen joint venture and the
global alliance with the Ford Motor Company. The agenda also
covered the latest news on the diesel issue.
The main topic on the agenda of the Supervisory Board
meeting on June 8, 2020 was the composition of the Board of
Management, particularly the departure of Dr. Stefan Sommer
from the Board of Management by mutual agreement.
At the Supervisory Board meeting on July 7, 2020, we discussed
the composition of the Board of Management, especially the
departure of Andreas Renschler from the Board of Manage-
ment by mutual agreement. We also discussed strategic issues
pertaining to the Truck & Bus brand group.
The Supervisory Board meeting on July 29, 2020 concentrated
on minor amendments to the rules of procedure for the Audit
Committee and a resolution on conducting the 60th Annual
General Meeting of Volkswagen AG as a virtual Annual General
Meeting on September 30, 2020.
At the Supervisory Board meeting on September 25, 2020, we
discussed in detail the final report of the independent monitor
and received an updated overview of the integrity and
compliance program Together4Integrity. We discussed and
decided on strategic decisions for which our consent was
required, particularly the acquisition of the image processing
business of Hella and the Artemis project (development of
next-generation electric cars). We also prepared the 2020
Annual General Meeting. In addition, we deliberated on the
current state of affairs with respect to the diesel issue and the
Investigations against a number of individuals relating to
To our Shareholders
Report of the Supervisory Board
15
remuneration granted to the Chairman of the General and
Group Works Councils that might have been excessive under
the provisions of the Betriebsverfassungsgesetz (BetrVG – Ger-
man Works Constitution Act). We also discussed the moni-
toring of related-party transactions in line with new require-
ments of the AktG.
On November 7, 2020, the Supervisory Board held a meeting
largely to discuss the strategic direction of the Truck & Bus
brand group, particularly with regard to the takeover of
Navistar, Inc. by TRATON SE as part of the TRATON Global
Championship strategy.
At the Supervisory Board meeting on November 13, 2020, we
discussed the principles of the enhanced remuneration
system for Board of Management members. We also held in-
depth discussions on the Volkswagen Group’s investment and
financial planning for the period from 2021 to 2025. Another
agenda item for the meeting was 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.
The last Supervisory Board meeting of the reporting year took
place on December 14, 2020. At this meeting, we adopted the
enhanced remuneration system for Board of Management
members and discussed additional issues in relation to Board
of Management remuneration. We also covered the com-
position of the Board of Management, especially the appoint-
ment of Mr. Murat Aksel, Dr. Arno Antlitz and Mr. Thomas
Schmall-von Westerholt as Board of Management members
and a redistribution of responsibilities.
In the reporting period, we voted in writing on matters such as
the extension of Mr. Frank Witter’s appointment as a member
of the Board of Management, the principles for answering
questions at the virtual Annual General Meeting and the
request for the court appointment of Ernst & Young GmbH
Wirtschaftsprüfungsgesellschaft (EY) as the auditor for the
half-yearly financial report and the interim report for the third
quarter, necessitated by the postponement of the Annual
General Meeting.
The following table shows the number of meetings of the full Board and the committees as well as the individual participation
of the members of the Supervisory Board in 2020:
Hans Dieter Pötsch
Jörg Hofmann
Dr. Hussain Ali Al Abdulla
Dr. Hessa Sultan Al Jaber
Dr. Bernd Althusmann
Kai Bliesener (since June 20, 2020)
Dr. Hans-Peter Fischer
Marianne Heiß
Johan Järvklo (until May 29, 2020)
Ulrike Jakob
Dr. Louise Kiesling
Peter Mosch
Bertina Murkovic
Bernd Osterloh
Dr. Hans Michel Piëch
Dr. Ferdinand Oliver Porsche
Dr. Wolfgang Porsche
Conny Schönhardt
Athanasios Stimoniaris
Stephan Weil
Werner Weresch
Meetings of the full
Supervisory Board Meetings of the Committees
11 out of 13
13 out of 13
3 out of 13
9 out of 13
12 out of 13
6 out of 6
13 out of 13
12 out of 13
4 out of 6
13 out of 13
13 out of 13
13 out of 13
13 out of 13
12 out of 13
13 out of 13
13 out of 13
13 out of 13
13 out of 13
13 out of 13
9 out of 13
13 out of 13
17 out of 21
19 out of 20
–
–
2 out of 2
–
–
5 out of 5
–
–
–
22 out of 22
15 out of 15
27 out of 27
13 out of 13
7 out of 7
23 out of 23
5 out of 5
–
18 out of 21
–
16
Report of the Supervisory Board
To our Shareholders
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 13, 2020
focused on the implementation of the recommendations and
suggestions of the Code in the Volkswagen Group. We dis-
cussed the Code’s guidance in detail and issued the annual
declaration of conformity with the recommendations of the
Code in accordance with section 161 of the AktG together with
the Board of Management.
The joint declarations of conformity by the Board of
Management and the Supervisory Board are permanently
available at www.volkswagenag.com/en/InvestorRelations/
corporate-governance/declaration-of-conformity.html. Addi-
tional information on the implementation of the recom-
mendations and suggestions of the Code can be found in the
Group Corporate Governance Declaration.
The Supervisory Board, and particularly the Audit Committee,
also discussed the new provisions of the German Act on the
Implementation of the Second Shareholders' Rights Directive
(ARUG II – Gesetz zur Umsetzung der zweiten Aktionärsrechte-
richtlinie) regarding the treatment of related-party trans-
actions. To this end, the Audit Committee agreed a suitable
procedure with the Board of Management for ongoing moni-
toring of the Volkswagen Group’s related party transactions.
The Audit Committee commissioned EY to regularly review, on
a spot check basis, whether related-party transactions were
conducted at arm’s length in accordance with proper business
practice. No disclosures or approval decisions on the part of
the Supervisory Board were required for related-party trans-
actions under statutory provisions in the reporting year.
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. In particular, Mr. Pötsch did not participate in the
Supervisory Board meetings on April 27, 2020 and May 12,
2020, in which we discussed the status of the criminal
proceedings against the Chairman of the Supervisory Board
and the Chairman of the Board of Management of Volks-
wagen AG on suspicion of violation of the Securities Trading
Act in connection with the diesel issue. Mr. Pötsch left the
room when additional information was provided on this topic
at the Supervisory Board meeting on May 28, 2020. At the
meeting of the Supervisory Board on February 28, 2020,
Mr. Pötsch and Mr. Stephan Weil did not take part in the
deliberations and resolution on the termination of the
proceedings brought by the Verbraucherzentrale für Kapital-
anleger e.V. against resolutions of the 2017 Annual General
Meeting approving the actions of Mr. Pötsch and Mr. Weil
among other Board members.
Starting in autumn 2016, the public prosecutor’s office in
Braunschweig launched criminal investigations against a
number of individuals relating to remuneration granted to the
Chairman of the General and Group Works Councils of
Volkswagen AG Mr. Bernd Osterloh, and other works council
members that might have been excessive under the provisions
of the Betriebsverfassungsgesetz (BetrVG – German Works
Constitution Act). In order to avoid conceivable conflicts of
interest, Mr. Osterloh always left the meeting room prior to
discussions and resolutions adopted by the Supervisory Board
that related to remuneration granted to him that might have
been excessive under the provisions of the German Works
Constitution Act. This included the Supervisory Board
meeting on September 25, 2020, for example.
No other conflicts of interest were reported or were discernible
in the reporting period.
To our Shareholders
Report of the Supervisory Board
17
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
Mr. Johan Järvklo, Secretary-General of the European and
Global Group Works Council of Volkswagen AG, stepped down
from his post on the Supervisory Board of Volkswagen AG
effective May 29, 2020. Mr. Järvklo had been a member of the
Supervisory Board since November 22, 2015. He has been suc-
ceeded by Mr. Kai Bliesener, Head of Vehicle Construction and
Automotive and Supplier Industry Coordinator at IG Metall,
who was appointed by the court to succeed Mr. Järvklo
effective June 20, 2020.
The term of office of Dr. Hussain Ali Al Abdulla on the Super-
visory Board of Volkswagen AG duly ended at the close of the
60th Annual General Meeting. The Annual General Meeting
elected Dr. Al Abdulla to the Supervisory Board for another full
term of office as a shareholder representative.
2018 and was most recently responsible for Components and
Procurement. He left the Company at his own request and by
mutual agreement. Mr. Frank Witter, member of the Board of
Management responsible for Finance and IT, took over
Components and Procurement on an acting basis. Effective
January 1, 2021, the Supervisory Board appointed Mr. Murat
Aksel and Mr. Thomas Schmall-von Westerholt as new
members of the Board of Management. The Supervisory Board
also decided to split the Components and Procurement Board
of Management position into two new Board positions:
Technology and Purchasing. Mr. Schmall-von Westerholt is
responsible for Technology effective January 1, 2021. Mr. Aksel
took over the Purchasing Board position on the same date. In
addition, the Supervisory Board decided to appoint Dr. Arno
Antlitz as a member of the Board of Management to replace
Frank Witter, who is due to leave the Board of Management.
Dr. Arno Antlitz will be responsible for his divisions.
Effective April 1, 2020, Mr. Markus Duesmann took up his post
as a member of the Board of Management of Volkswagen AG
and as a member and the Chairman of the Board of Manage-
ment of AUDI AG. He succeeded Abraham Schot, who left the
Company by mutual agreement effective March 31, 2020. On
the Volkswagen AG Board of Management, Mr. Duesmann is
responsible, in particular, for the Premium brand group.
Effective July 15, 2020, Mr. Andreas Renschler left the manage-
ment boards of Volkswagen AG and TRATON SE by mutual
agreement. The Truck & Bus brand group, for which
Mr. Renschler was responsible on the Volkswagen AG Board
of Management, was taken over by Mr. Gunnar Kilian,
member of the Board of Management for Human Resources
and Truck & Bus.
Effective June 30, 2020, Dr. Stefan Sommer left the Volks-
wagen AG Board of Management. Dr. Sommer had been a
member of the Board of Management since September 1,
Our sincere thanks go to all of the departing members of the
Supervisory Board and the Board of Management for their
work.
18
Report of the Supervisory Board
To our Shareholders
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 September 30, 2020 elected Ernst & Young
GmbH Wirtschaftsprüfungsgesellschaft (EY) as auditors and
Group auditors for fiscal year 2020. The auditors audited the
annual financial statements of Volkswagen AG, the con-
solidated financial statements of the Volkswagen Group and
the combined management report and issued unqualified
audit reports in each case.
The Supervisory Board also commissioned EY to conduct an
external limited assurance review of the content of the
combined separate nonfinancial report for 2020.
In addition, the auditors analyzed the risk management and
internal control system, 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 (dependent company
report) for the period from January 1 to December 31, 2020
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 with the documentation
relating to the annual and consolidated financial statements,
including the dependent company report, the document-
tation relating to the combined management report, and also
the audit reports prepared by the auditors and the report from
EY on the external content-related audit of the combined
separate nonfinancial report for 2020 in good time for their
meetings on February 25 and February 26, 2021, respectively.
The auditors reported extensively at both meetings on the
material findings of their audit and were available to provide
additional information. The Chairman of the Audit Com-
mittee was also in close contact with the auditors, including
between the meetings and during preparation for the Audit
Committee meetings.
Taking into consideration the audit reports and the 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 com-
bined management report, the dependent company report
and the combined separate nonfinancial report for 2020, and
reported on these at the Supervisory Board meeting on
February 26, 2021. 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 the documents are due and proper and that
the assessment of the position of the Company and the Group
presented by the Board of Management in the combined
management report corresponds to the assessment by the
Supervisory Board.
To our Shareholders
Report of the Supervisory Board
19
We therefore concurred with the auditors’ findings and
approved the annual financial statements and the consoli-
dated financial statements prepared by the Board of Man-
agement at our meeting on February 26, 2021, which the
auditors also attended for the agenda items relating to the
annual and consolidated financial statements, the dependent
company report and the combined management report. The
annual financial statements are thus adopted. Upon com-
pletion of our examination of the dependent company report,
there are no objections to be raised to the concluding
declaration by the Board of Management in the dependent
company report. We reviewed the proposal on the appro-
priation 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. EY conducted
an external audit of the content in the combined separate
nonfinancial report for 2020 to attain limited assurance and
issued an unqualified report. At our meeting on February 26,
2021, EY also took part in the discussions on the agenda items
relating to the combined separate nonfinancial report for
2020. Upon completion of its own independent examination
of the combined separate nonfinancial report for 2020, the
Supervisory Board did not have any objections.
We would like to express our thanks and particular appre-
ciation to the Board of Management, the Works Council, the
management teams and all the employees of Volkswagen AG
and its affiliated companies for their work in 2020. In the face
of the new and unprecedented challenges brought by the
Covid-19 pandemic, they all showed great personal commit-
ment and responsibility, thereby making a decisive contri-
bution to the successful 2020 fiscal year that the Volkswagen
Group can look back on.
Wolfsburg, February 26, 2021
Hans Dieter Pötsch
Chairman of the Supervisory Board
2
Divisions
DIVISIONS
23
26
28
30
32
34
36
38
40
42
Brands and Business Fields
Volkswagen Passenger Cars
Audi
ŠKODA
SEAT
Bentley
Porsche
Volkswagen Commercial Vehicles
TRATON GROUP
Scania
44 MAN
46
48
Volkswagen Group China
Volkswagen Financial Services
Divisions
Brands and Business Fields
23
Brands and Business Fields
The Volkswagen Group was heavily impacted by the Covid-19 pandemic in
fiscal year 2020, which led to lower unit sales, sales revenue and profit.
The diesel issue resulted in negative special items.
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. Activities of the Automotive Division comprise in particular the development of vehicles, engines and
vehicle software, and the production and sale of passenger cars, light commercial vehicles, trucks, buses and
motorcycles, as well as businesses for genuine parts, large-bore diesel engines, turbomachinery, special gear
units and propulsion components. Mobility solutions are gradually being added to the range. The Ducati brand
is allocated to the Audi brand and thus to the Passenger Cars Business Area. The Financial Services Division’s
activities comprise dealer and customer financing, vehicle leasing, direct banking and insurance activities, fleet
management and mobility services.
24
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 vehicle brands and their models
that carry the corresponding brand logo. Unit sales figures contain vehicles sold by respective brand com-
panies, 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 2020, the Covid-19 pandemic had a strong impact on business at the Volkswagen Group and its brands; this
led to lower figures in terms of unit sales, sales revenue and profit throughout the Group. The Volkswagen Group
generated an operating profit before special items of €10.6 (19.3) billion in the reporting year. Special items
resulting from the diesel issue weighed on operating profit in the amount of €– 0.9 (– 2.3) billion.
The Volkswagen Group’s unit sales fell to 9.2 (11.0) million vehicles in the past fiscal year due to the
pandemic. Sales revenue declined by 11.8% to €222.9 billion.
In the Europe/Other markets region, unit sales decreased by 19.1% year-on-year to 3.9 million vehicles. The
impact of the Covid-19 pandemic acted as a drag on business, particularly from the end of the first quarter
onwards. Sales revenue fell to €133.5 (154.0) billion due to volume effects. Moreover, exchange rate effects had a
negative impact, while a favorable mix made a positive contribution.
In the North American markets, the negative effects caused by the spreading of the SARS-CoV-2 virus
became apparent somewhat later, namely at the beginning of the second quarter. At 744 thousand vehicles in
the reporting period, our unit sales there were down 22.1% on the previous year’s figure. Sales revenue
amounted to €36.8 (43.4) billion.
In the markets of the South America region, we sold 471 thousand vehicles in the year 2020. This was 22.4%
less than in the previous year. The Covid-19 pandemic dampened demand in the second and third quarter in
particular. Declining volumes and an unfavorable exchange rate trend resulted in sales revenue falling by 23.6%
to €8.6 billion.
In the Asia-Pacific region, the first to be affected by the Covid-19 pandemic at the beginning of the
year, demand increased again as the year went on. In fiscal year 2020, the Volkswagen Group’s unit sales
– including those of the Chinese joint ventures – amounted to 4.0 (4.5) million vehicles. Sales revenue rose to
€44.3 (44.0) billion. This figure does not include the sales revenue of our equity-accounted Chinese joint
ventures.
Hedging transactions relating to sales revenue in foreign currency decreased the Volkswagen Group’s sales
revenue by €345 million in the reporting year. In the previous year, they increased sales revenue by €11 million.
Divisions
Brands and Business Fields
25
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
Thousand vehicles/€ million
2020
2019
2020
2019
2020
2019
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
Volkswagen Passenger Cars
Audi
ŠKODA
SEAT
Bentley
Porsche Automotive1
Volkswagen Commercial Vehicles
Scania Vehicles and Services2
MAN Commercial Vehicles
Power Engineering
VW China3
Other4
Volkswagen Financial Services
Volkswagen Group before special items
Special items
Volkswagen Group
Automotive Division5
of which: Passenger Cars Business Area
Commercial Vehicles Business Area
Power Engineering Business Area
Financial Services Division
2,835
1,017
849
484
11
265
345
73
118
–
3,577
–418
–
–
–
9,157
9,157
8,965
191
–
–
3,677
1,200
1,062
667
12
277
456
101
143
–
4,048
–685
–
–
–
10,956
10,956
10,713
243
–
–
71,076
49,973
17,081
9,198
2,049
26,086
9,358
11,521
10,838
3,640
–
88,407
55,680
19,806
11,496
2,092
26,060
11,473
13,934
12,663
3,997
–
–26,573
38,637
–30,931
37,957
–
–
222,884
182,106
156,311
22,156
3,640
40,778
–
–
252,632
212,473
182,031
26,444
3,997
40,160
454
2,739
756
–339
20
4,021
–454
748
–631
–268
–
759
2,803
10,607
–931
9,675
6,664
7,224
–79
–482
3,012
3,785
4,509
1,660
445
65
4,210
510
1,506
402
159
–
–917
2,960
19,296
–2,336
16,960
13,748
12,188
1,653
–93
3,212
1 Porsche (including Financial Services): sales revenue €28,695 (28,518) million, operating profit before special items €4,176 (4,396) million.
2 Scania (including Financial Services): sales revenue €11,950 (14,391) million, operating profit €855 (1,648) million.
3 The sales revenues 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 €3,602 (4,425) million.
4 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, as well as companies not allocated to the brands.
5 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
2020
2019
2020
2019
V E H I C L E S A L E S
S A L E S R E V E N U E
Europe/Other markets
North America
South America
Asia-Pacific1
Hedges on sales revenue
Volkswagen Group1
3,929
744
471
4,012
–
9,157
4,856
956
607
4,538
–
10,956
133,499
153,999
36,810
8,632
44,288
–345
43,351
11,297
43,974
11
222,884
252,632
1 The sales revenue of the joint venture companies in China is not included in the figures for the Group and the Asia-Pacific market.
26
Volkswagen Passenger Cars
Divisions
In 2020, Volkswagen Passenger Cars celebrated the debut of the ID.3, the first model
based on the Modular Electric Drive Toolkit. The brand also expanded its portfolio of
electric vehicles through the addition of an all-electric SUV, the ID.4.
B U S I N E S S D E V E L O P M E N T
The Volkswagen Passenger Cars brand aims to move you, and as such the TRANSFORM 2025+ strategy centers on
a global model initiative through which the brand aims to lead innovation, technology and quality in the
volume segment.
In fiscal year 2020, Volkswagen Passenger Cars launched the ID.3, the first model based on the Modular
Electric Drive Toolkit (MEB). This efficient and fully connected all-electric car represents a milestone on the path
towards zero-emission mobility for a broad customer base. Following on its heels in late 2020 was the ID.4, the
brand’s first fully electric SUV. Powerful proportions, sleek lines and a sculptured rear are the hallmarks of its
exterior and give the all-rounder an outstanding aerodynamic quality. The interior impresses with generous
space, puristic design and sustainable upholstery materials. The ID.4 is to be built and sold in the core markets
of Europe and China in the future and later on in the United States as well. There were several additions to the
popular Golf family in the reporting period. These derivatives, based on the eighth generation of the bestselling
model, include the spacious Golf Estate, the robust Golf Alltrack and the sporty, iconic Golf GTI. With the Arteon
Shooting Brake, Volkswagen Passenger Cars brought out a new body version of the Arteon series in 2020 that is
a completely new interpretation of the estate concept and expands the brand’s model range in the mid-size
segment. In addition, the brand pushed the electrification of its portfolio with the introduction of plug-in
hybrid versions of the Golf, Tiguan, Arteon, Arteon Shooting Brake and Touareg models.
The Volkswagen Passenger Cars brand delivered 5.3 million vehicles worldwide in fiscal year 2020 (–15.1%).
Sales figures were below the previous year’s level in almost all markets due to the pandemic. Sales of the T-Cross
increased, thus bucking the trend, and the new Atlas Cross Sport was also very popular.
The Volkswagen Passenger Cars brand sold 2.8 (3.7) 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
not attributed to the companies in the Volkswagen Passenger Cars brand.
The Volkswagen Passenger Cars brand produced 5.1 (6.2) million vehicles worldwide in 2020. At the Zwickau
plant, the last vehicle with a combustion engine rolled off the assembly line in 2020. With the ID.3 and the ID.4,
only electric models from Volkswagen Passenger Cars are produced there now, and models from the Audi and
SEAT brands are to follow in the future.
S A L E S R E V E N U E A N D E A R N I N G S
The Volkswagen Passenger Cars brand’s sales revenue fell by 19.6% year-on-year in 2020 to €71.1 billion. Oper-
ating profit before special items decreased to €0.5 (3.8) billion. Lower fixed costs and better price positioning
were unable to compensate for the impact of lower volumes due to the Covid-19 pandemic or for negative
exchange rate effects. The operating return on sales before special items amounted to 0.6 (4.3)%. The diesel
issue gave rise to special items of €–0.8 (–1.9) billion.
5.1 million
Vehicles produced worldwide
Divisions
Volkswagen Passenger Cars
27
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
Units
Tiguan
Passat/Magotan
Polo/Virtus
Jetta/Sagitar
Lavida
Golf
Bora
T-Cross
T-Roc
Atlas/Teramont
Santana
JETTA
Tharu/Taos
Gol
Lamando
ID.3
up!
Touran
Arteon/CC
Saveiro
Touareg
Sharan/Viloran
Fox/Suran
Phideon
ID.4
Beetle
2020
2019
2020
2019
%
–15.1
–22.9
–17.8
–19.6
–88.0
754,276
477,892
467,765
422,908
416,209
408,528
329,263
285,824
285,299
178,954
174,966
165,681
149,781
117,471
65,730
64,259
59,786
56,833
55,899
41,146
41,136
32,142
12,184
10,344
6,487
–
910,926
Deliveries (thousand units)
543,706
Vehicle sales
706,052
Production
5,328
2,835
5,081
6,279
3,677
6,184
541,715
Sales revenue (€ million)
71,076
88,407
Operating result before
special items
Operating return on sales (%)
454
0.6
3,785
4.3
514,698
679,351
345,077
274,071
328,069
183,648
244,132
68,612
136,899
151,241
92,903
50
108,676
90,366
51,868
54,941
52,859
25,681
44,275
13,750
–
20,580
5,080,763
6,184,146
ID.3
D E L I V E R I E S B Y M A R K E T
in percent
Europe/Other markets
Europe/Other markets
North America
North America
South America
South America
Asia-Pacific
Asia-Pacific
28.1 %
28.1 %
8.8 %
8.8 %
7.4 %
7.4 %
55.8 %
55.8 %
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
28
Audi
Divisions
Audi aspires to spearhead the Group both technically and technologically. A fascinating
new electric vehicle – the e-tron Sportback – was presented in the reporting period.
B U S I N E S S D E V E L O P M E N T
“Vorsprung” is Audi’s global brand promise that is currently being redefined by the brand with the four rings, as
it moves away from the narrow focus on technical feasibility and towards a new approach, where the customer
is at the center. In developing innovative technologies, Audi plays an influential role in the Group, not least with
the Premium Platform Electric (PPE) for all-electric premium vehicles. With Artemis, Audi has also created an
agile unit for new vehicle projects. The initial focus of the team of passionate specialists, who have been given a
large degree of freedom, is to develop a highly efficient electric car. As such, Artemis is also to be the pilot and
role model for the future development of vehicle projects in the Group. In the reporting period, Audi rolled out
the second model in its e-tron product line. The Audi e-tron Sportback is a dynamic SUV coupé that combines
the power of a spacious SUV with the elegance of a four-door coupé and the progressive character of an electric
car. The all-electric drive provides up to 300 kW (408 PS) of power, while the high-performance version, the
e-tron S Sportback, is capable of delivering up to 370 kW (503 PS). The e-tron Sportback’s digital matrix LED
headlights are a new optional feature now available for the first time in a large-scale production vehicle. The
light is broken down into tiny pixels and can be controlled with exceptional precision. This makes safe lane
centering easier on narrow stretches of road and shows the position of the vehicle in the lane. Production of the
all-electric e-tron GT commenced at the end of the year 2020. The Q4 e-tron and the Q4 Sportback e-tron will
expand the portfolio of electric vehicles in 2021. New model generations were launched in the popular A3 series
during the reporting year.
Amid a difficult market environment, the Audi brand delivered a total of 1.7 million vehicles to customers
in 2020 (–8.3%). The recovery of important core markets in the second half of the year was able to largely
compensate for the volume losses that occurred in the first half of the year due to the pandemic.
Unit sales made by the Audi brand in the reporting period came to 1.0 (1.2) million vehicles. The Chinese
joint venture FAW-Volkswagen sold a further 656 (620) thousand locally produced Audi vehicles. The Q3, A6 and
e-tron models were in especially high demand. Unit sales at Automobili Lamborghini S.p.A. amounted to
7,460 (8,290) vehicles.
In 2020, Audi produced 1.7 (1.8) million units worldwide. Lamborghini manufactured 7,250 (8,664) vehicles.
S A L E S R E V E N U E A N D E A R N I N G S
The Audi brand’s sales revenue in fiscal year 2020 amounted to €50.0 (55.7) billion. The decrease in volumes and
negative exchange rate effects reduced operating profit before special items to €2.7 (4.5) billion. Reduced fixed
costs, the deconsolidation effect from the divestment of Autonomous Intelligent Driving GmbH (AID) as well as
other effects from the Audi.Zukunft and Audi Transformation Plan programs had a positive effect. The diesel
issue resulted in special items of €–0.2 billion in the reporting year. The operating return on sales before special
items was 5.5 (8.1)%. The financial key performance indicators for the Lamborghini and Ducati brands are
included in the financial figures for the Audi brand.
€50 billion
Sales revenue in 2020
Divisions
Audi
29
P R O D U C T I O N
A U D I B R A N D
Units
Audi
A4
Q5
A3
A6
Q3
Q2
Q7
A1
A5
e-tron
Q8
A8
A7
TT
R8
Lamborghini
Urus
Huracán Coupé
Huracán Spyder
Aventador Roadster
Aventador Coupé
2020
2019
2020
2019
%
1,700
1,693
7
1,017
1,663
49,973
2,739
5.5
1,854
1,846
8
1,200
1,802
55,680
4,509
8.1
–8.3
–8.3
–9.4
–15.2
–7.7
–10.2
–39.3
243,566
275,888
206,482
271,679
219,662
124,346
65,574
62,099
56,786
43,157
37,845
20,591
18,083
8,646
1,517
Deliveries (thousand units)
323,387
286,365
Audi
Lamborghini
240,795
Vehicle sales
232,569
Production
195,566
Sales revenue (€ million)
Operating result before
special items
Operating return on sales (%)
130,225
63,633
81,287
93,077
43,376
44,727
23,826
17,068
14,999
2,121
1,655,921
1,793,021
4,364
1,258
752
595
281
7,250
5,233
1,495
931
219
786
8,664
Audi brand
1,663,171
1,801,685
Ducati, motorcycles
44,827
51,723
e-tron Sportback S
D E L I V E R I E S B Y M A R K E T
in percent
Europe/Other markets
Europe/Other markets
North America
North America
South America
South America
Asia-Pacific
Asia-Pacific
38.7 %
38.7 %
13.2 %
13.2 %
0.8 %
0.8 %
47.3 %
47.3 %
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
30
ŠKODA
Divisions
In 2020, ŠKODA presented its first MEB model, the Enyaq iV, taking the next step
in the Czech brand’s 125-year history in the systematic implementation of its
e-mobility strategy.
B U S I N E S S D E V E L O P M E N T
The ŠKODA models are synonymous with smart understatement, featuring a superior spacious interior, the
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. ŠKODA AUTO
celebrated its 125th anniversary as a company in 2020, as well as the 115th anniversary of when the company
started automobile production. Founded in 1895, ŠKODA is one of the world’s oldest operating automakers.
In fiscal year 2020, ŠKODA took the next step in the systematic implementation of its e-mobility strategy
and presented the brand’s first all-electric production vehicle, the Enyaq iV. The completely battery-electric
MEB-based SUV boasts emotive and dynamic design language, and its striking ŠKODA profile is also available
with an illuminated radiator grille as an option. It combines rear or all-wheel drive with a range of up to 510 km
that is suited for everyday usability. ŠKODA also continues its emotive design language in the interior: the
innovative SUV features the brand’s typical spaciousness and a completely new concept for the interior. ŠKODA
launched another electric model in 2020 – the Octavia iV with a plug-in hybrid drive, which is also available as a
sporty, dynamic RS version. In the Octavia family, the Octavia G-Tec, which runs on compressed natural gas and
the robust off-road Octavia Scout Combi were also brought onto the market.
The ŠKODA brand delivered 1.0 (1.2) million vehicles worldwide in the reporting period. China remained the
largest individual market. However, deliveries there fell by 38.7%. Sales were also down on the previous year’s
levels in the other markets due to the pandemic, with the exception of Turkey (+56.3%) and Russia (+6.8%).
ŠKODA sold 0.8 (1.1) million vehicles in the past fiscal year. The Scala, Kamiq and Octavia Combi models
were in especially high demand. 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 companies.
In fiscal year 2020, ŠKODA produced 0.9 million vehicles worldwide, a decrease of 24.3% versus 2019.
S A L E S R E V E N U E A N D E A R N I N G S
The ŠKODA brand's sales revenue decreased by 13.8% in 2020 to €17.1 billion. Operating profit declined by
€904 million to €756 million. Lower volumes due to Covid-19, negative exchange rate effects and emissions-
related expenses were offset by cost optimization. The operating return on sales amounted to 4.4%, contrasting
with 8.4% in the previous year.
125 years
Company history
Divisions
ŠKODA
31
P R O D U C T I O N
Š KO D A B R A N D
Units
Octavia
Rapid/Scala
Karoq/Kamiq/Yeti
Kodiaq
Fabia
Superb
Citigo
Enyaq iV
2020
2019
2020
2019
%
233,902
219,401
172,999
117,825
100,425
80,880
14,482
939
358,356
Deliveries (thousand units)
207,724
Vehicle sales
203,688
Production
177,163
Sales revenue (€ million)
166,237
Operating result
102,592
Operating return on sales (%)
1,005
849
941
17,081
756
4.4
1,243
1,062
1,243
19,806
1,660
8.4
–19.1
–20.0
–24.3
–13.8
–54.4
27,306
–
940,853
1,243,066
Enyaq iV
D E L I V E R I E S B Y M A R K E T
in percent
Europe/Other markets
Europe/Other markets
North America
North America
South America
South America
Asia-Pacific
Asia-Pacific
80.0 %
80.0 %
0.0 %
0.0 %
0.1 %
0.1 %
19.9 %
19.9 %
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
32
SEAT
Divisions
SEAT is a company with two clearly defined brands: SEAT and CUPRA.
Both brands launched a large product initiative in 2020 with the new Leon family
and the Formentor, the first model developed exclusively for CUPRA.
B U S I N E S S D E V E L O P M E N T
The journey of the world-renowned Spanish car company began 70 years ago: SEAT was founded on May 9, 1950
and quickly brought mobility to the whole of Spain. Throughout its 70-year history, the company has demon-
strated that it is capable of reinventing itself time and again and successfully overcoming challenges. SEAT has
harnessed the power of change to transform itself from a pure car manufacturer into a robust technology and
industrial company. An urban mobility hub was opened in the center of Barcelona in 2020 with CASA SEAT. The
software development center SEAT:CODE was also further expanded and hired around 100 new employees.
SEAT is the Group brand with Europe’s youngest customer profile and offers strikingly designed vehicles
“Created in Barcelona.” In 2020, SEAT brought out the new Leon, the brand’s biggest seller. The vehicle impres-
ses with a fresh design, clear lines, harmonious proportions and innovative lighting. The wide range of
advanced drive concepts make the SEAT Leon even more efficient and for the first time, it offers PHEV and mild
hybrid versions. In addition, the Leon is SEAT’s first vehicle with complete digital connectivity.
CUPRA is an unconventional and emotionally-charged brand, which is defined by the progressive design
and the performance of its electric models. Numerous new vehicles were launched in the reporting year:
the CUPRA Leon family, the CUPRA Ateca and the CUPRA Formentor – a powerful SUV and coupé crossover and
the first model developed specifically for CUPRA. With a total of seven high-performance and efficient drive
systems, including two plug-in hybrid versions, its comprehensive connectivity functions and modern safety
and comfort systems, the Formentor is equipped with state-of-the-art technology.
As a result of the Covid-19 pandemic, SEAT’s deliveries to customers fell by 25.6% in fiscal year 2020 to
427 thousand vehicles. Sales figures fell year-on-year on almost all markets. The CUPRA brand recorded an
increase of 11.1% to 27 thousand vehicles and was therefore one of the few brands that grew in Europe.
Unit sales at SEAT stood at 484 thousand vehicles in the past fiscal year, down 27.5% on the figure for 2019.
This figure also includes the A1 manufactured for Audi. The Arona and Ateca SUV models and the Leon were in
high demand.
In the reporting year, 406 thousand SEAT and CUPRA vehicles were manufactured; a decrease of 31.3% year-
on-year.
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 for SEAT in 2020 came to €9.2 billion, falling 20.0% short of the record figure achieved in the
previous year. Operating result decreased to €–339 (445) million, mainly due to lower volumes as a result of the
pandemic. Emissions-related expenses were also an adverse factor. The SEAT brand’s operating return on sales
declined to – 3.7 (3.9)%.
70 years
SEAT company
Divisions
SEAT
33
P R O D U C T I O N
S E AT
Units
Leon
Arona
Ateca
Ibiza
Tarraco
Alhambra
CUPRA Formentor
Mii
Toledo
2020
2019
2020
2019
%
124,323
153,837
Deliveries (thousand units)
78,823
76,710
74,564
18,726
14,672
11,041
7,593
–
406,452
134,611
Vehicle sales
98,397
Production
130,243
Sales revenue (€ million)
38,721
Operating result
23,015
Operating return on sales (%)
–
11,479
1,506
591,809
427
484
406
9,198
–339
–3.7
574
667
592
11,496
445
3.9
–25.6
–27.5
–31.3
–20.0
x
CUPRA Formentor
D E L I V E R I E S B Y M A R K E T
in percent
Europe/Other markets
Europe/Other markets
North America
North America
South America
South America
Asia-Pacific
Asia-Pacific
95.9 %
95.9 %
3.5 %
3.5 %
0.5 %
0.5 %
0.1 %
0.1 %
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
34
Bentley
Divisions
In 2020, Bentley presented the extensively upgraded and popular Bentayga, which
was rolled out by the British brand five years ago as the first luxury SUV on the market.
In spite of the pandemic, deliveries rose year-on-year.
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. In 2020, Bentley unveiled the update to its
successful Bentayga, which was rolled out by the British brand around five years ago as the first luxury SUV on
the market. Like its predecessor, the new Bentayga combines the abilities of a high-performance grand tourer
with the characteristics of a luxury limousine, a spacious family car and an off-roader. The exterior design of
the front and rear adopts the current Bentley design DNA, giving the vehicle a fascinatingly dynamic appear-
ance and an air of elegance. The interior impresses with a next-generation infotainment system that is
seamlessly integrated into the handcrafted dashboard. In addition to the V8 version that features a 405 kW
(550 PS) twin-turbocharged 4.0 l petrol engine, the Bentayga is also available as the range-topping Bentayga
Speed model with a 467 kW (635 PS) 6.0 l W12 engine, as well as an efficient plug-in hybrid. Bentley likewise
attracted attention in 2020 with the exclusive and strictly limited Bacalar. The two-seater was presented by
Bentley Mulliner, a specialist customization company whose roots date back to the 16th century. The roofless
luxury grand tourer, whose design draws upon the spectacular EXP 100 GT concept car from the year 2019, offers
open-air motoring with a powerful double-turbocharged W12 engine producing 485 kW (659 PS). Exquisite
materials and smart use of technology round off this exclusive vehicle concept.
In spite of the pandemic, deliveries by the Bentley brand in 2020 rose slightly to 11,206 (11,006) units, a new
record figure. Bentley saw growth in the USA (+5.7%) and China (+48.5%).
In fiscal year 2020, Bentley sold 11,296 (11,631) vehicles worldwide. Demand for the new Flying Spur was
particularly strong.
The Bentley brand produced 10,693 vehicles in the reporting period, 14.0% less than in the previous year.
S A L E S R E V E N U E A N D E A R N I N G S
In 2020, Bentley’s sales revenue fell by 2.1% year-on-year to €2.0 billion. Operating profit decreased to
€20 (65) million, mainly due to higher depreciation and amortization charges, one-off expenses for restruc-
turing measures and exchange rate effects. The operating return on sales was 1.0 (3.1)%.
1.8%
Increase in deliveries in 2020
Divisions
Bentley
35
P R O D U C T I O N
B E N T L E Y B R A N D
Units
Bentayga
Flying Spur
Continental GT Coupé
Continental GT Convertible
Mulsanne
2020
2019
2020
2019
%
3,946
3,381
1,995
1,244
127
5,232
Deliveries (units)
102
Vehicle sales
3,903
2,750
Production
Sales revenue (€ million)
443
Operating result
10,693
12,430
Operating return on sales (%)
11,206
11,296
10,693
2,049
20
1.0
11,006
11,631
12,430
2,092
65
3.1
+1.8
–2.9
–14.0
–2.1
–70.1
Bentayga
D E L I V E R I E S B Y M A R K E T
in percent
Europe/Other markets
Europe/Other markets
North America
North America
South America
South America
Asia-Pacific
Asia-Pacific
36.3 %
36.3 %
27.0 %
27.0 %
0.0 %
0.0 %
36.6 %
36.6 %
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
36
Porsche
Divisions
Porsche launched the new Panamera in fiscal year 2020. In spite of the challenges
presented by the Covid-19 pandemic, the sports car manufacturer achieved its strategic
target return.
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
functionality – these are the brand values of sports car manufacturer Porsche. In fiscal year 2020, Porsche
presented its extensively revamped Panamera, which combines the performance of a sports car with the
comfort of an exclusive saloon and now covers an even wider range: with its top model, the 463 kW (630 PS)
Panamera Turbo S, the sports car manufacturer is underscoring its high standard of best-in-class performance.
The Panamera 4S E-Hybrid is a consistent continuation of Porsche’s E-Performance strategy and constitutes a
new addition to the range of plug-in hybrids, offering a completely new drive system with 412 kW (560 PS).
Compared with the previous hybrid models, the all-electric range has been boosted by up to 30%. Porsche
celebrated the world premiere of the 911 Targa 4 and 911 Targa 4S models in 2020, completing its new
generation of the 911 with the third vehicle body variant. The innovative, fully automatic roof system remains a
distinguishing feature on all versions of the Targa; and just like the legendary original Targa model from 1965,
it features the characteristic wide bar as well as an automated retractable roof section above the front seats and
a wraparound rear window. An eight-speed dual-clutch transmission and intelligent all-wheel drive Porsche
Traction Management deliver compelling performance and sporty driving pleasure. In the 911 series, the new
generation of the 911 Turbo S has also been available in Coupé and Cabriolet versions since 2020. The new
range-topping 911 offers unprecedented power, driving dynamics and luxury. It is being launched with a new
3.8 l boxer engine that delivers 478 kW (650 PS) of power, a whopping 51 kW (70 PS) more than its predecessor.
The 911 Turbo S sprints from 0 to 100 km/h in just 2.7 seconds, while top speed is 330 km/h.
Porsche delivered 272 thousand sports vehicles to customers in fiscal year 2020, 3.1% fewer than in the
previous year. China remained the largest single market, and Porsche was able to increase its sales there by 2.6%
to 89 thousand vehicles.
Porsche’s unit sales amounted to 265 thousand vehicles in the reporting period. This was 4.2% fewer than in
the previous year. The 718 and the Taycan saw growth.
Porsche produced a total of 263 thousand vehicles in 2020, 4.1% fewer than in fiscal year 2019.
S A L E S R E V E N U E A N D E A R N I N G S
Porsche Automotive’s sales revenue was on a level with the previous year at €26.1 (26.1) billion in fiscal year
2020. Operating profit decreased by 4.5% to 4.0 billion (prior-year figure before special items); this was
attributable to lower vehicle sales and to cost increases, especially for digitalization and electrification. Changes
in exchange rates also had a negative impact. Despite the Covid-19 pandemic, early countermeasures, cost
discipline and very good market performance in the second half of the year meant it was possible to achieve an
operating return of 15.4 (16.2)% (prior-year figure before special items), which even slightly exceeded the target
return.
15.4%
Operating return on sales in 2020
Divisions
Porsche
37
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
Units
Cayenne
Macan
Taycan
911 Coupé/Cabriolet
718 Boxster/Cayman
Panamera
2020
2019
2020
2019
82,137
78,490
29,450
28,672
22,655
21,832
263,236
95,293
Deliveries (thousand units)
89,744
Vehicle sales
1,386
Production
272
265
263
281
277
274
37,585
Sales revenue (€ million)
26,086
26,060
19,263
31,192
274,463
Operating result before
special items
Operating return on sales (%)
4,021
15.4
4,210
16.2
%
–3.1
–4.2
–4.1
+0.1
–4.5
1 Porsche (Automotive and Financial Services): sales revenue €28,695 (28,518) million,
operating profit (in the prior-year before special items) €4,176 (4,396) million.
Panamera
D E L I V E R I E S B Y M A R K E T
in percent
Europe/Other markets
Europe/Other markets
North America
North America
South America
South America
Asia-Pacific
Asia-Pacific
32.2 %
32.2 %
24.2 %
24.2 %
1.3 %
1.3 %
42.3 %
42.3 %
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
38
38
Volkswagen Commercial Vehicles
Volkswagen Commercial Vehicles
Divisions
Divisions
The Volkswagen Commercial Vehicles brand celebrated its 25th anniversary in 2020.
The Volkswagen Commercial Vehicles brand celebrated its 25th anniversary in 2020.
The new Caddy was introduced as a completely new version of the bestselling model,
The new Caddy was introduced as a completely new version of the bestselling model,
also available for the first time as a California compact camper van.
also available for the first time as a California compact camper van.
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-
mental and sustainable changes to the way goods and services are distributed in cities in order to improve
mental and sustainable changes to the way goods and services are distributed in cities in order to improve
quality of life, especially in inner city areas. That is why the brand is the Volkswagen Group’s leader in autono-
quality of life, especially in inner city areas. That is why the brand is the Volkswagen Group’s leader in autono-
mous driving as well as in mobility services such as Mobility-as-a-Service and Transport-as-a-Service. For these
mous driving as well as in mobility services such as Mobility-as-a-Service and Transport-as-a-Service. For these
solutions, Volkswagen Commercial Vehicles will develop special-purpose vehicles such as robo-taxis and robo-
solutions, Volkswagen Commercial Vehicles will develop special-purpose vehicles such as robo-taxis and robo-
vans in the future to keep the world of tomorrow moving with all its requirements for clean, intelligent and
vans in the future to keep the world of tomorrow moving with all its requirements for clean, intelligent and
sustainable mobility. This is what Volkswagen Commercial Vehicle stands for with its brand promise: We trans-
sustainable mobility. This is what Volkswagen Commercial Vehicle stands for with its brand promise: We trans-
port success, freedom and the future.
port success, freedom and the future.
The establishment of Volkswagen Commercial Vehicles was announced in Hanover on November 9, 1995
The establishment of Volkswagen Commercial Vehicles was announced in Hanover on November 9, 1995
– then the Group’s fifth brand along with Volkswagen Passenger Cars, Audi, SEAT and ŠKODA. The idea was to
– then the Group’s fifth brand along with Volkswagen Passenger Cars, Audi, SEAT and ŠKODA. The idea was to
sharpen the focus of the Volkswagen Group’s commercial vehicle activities, bringing product planning, devel-
sharpen the focus of the Volkswagen Group’s commercial vehicle activities, bringing product planning, devel-
opment, purchasing, production and sales together under the umbrella of Volkswagen Commercial Vehicles. In
opment, purchasing, production and sales together under the umbrella of Volkswagen Commercial Vehicles. In
2020, the brand looked back at 25 years of success. Its product highlight was the launch of the new Caddy. The
2020, the brand looked back at 25 years of success. Its product highlight was the launch of the new Caddy. The
completely new all-rounder excels as a transporter and family van with high versatility. It is based on the MQB
completely new all-rounder excels as a transporter and family van with high versatility. It is based on the MQB
for the first time. The MQB brings new technologies to the model range such as Travel Assist, Trailer Assist and
for the first time. The MQB brings new technologies to the model range such as Travel Assist, Trailer Assist and
the lane-change assistant. For the first time, the Caddy is also available as a Caddy California compact camper
the lane-change assistant. For the first time, the Caddy is also available as a Caddy California compact camper
van. This multi-functional, comfortable travel companion with many innovative and detailed solutions com-
van. This multi-functional, comfortable travel companion with many innovative and detailed solutions com-
pletes the series of camper vans along with the California and the Crafter-based Grand California. With the new
pletes the series of camper vans along with the California and the Crafter-based Grand California. With the new
generation of the Multivan, the Amarok’s successor and the all-electric ID. BUZZ, many exciting vehicle projects
generation of the Multivan, the Amarok’s successor and the all-electric ID. BUZZ, many exciting vehicle projects
are planned in the years to come.
are planned in the years to come.
At 372 thousand units, deliveries by Volkswagen Commercial Vehicles in fiscal year 2020 were below the
At 372 thousand units, deliveries by Volkswagen Commercial Vehicles in fiscal year 2020 were below the
prior-year (– 24.4%). Turkey (+31.7%) and Argentina (+1.9%) registered growth.
prior-year (– 24.4%). Turkey (+31.7%) and Argentina (+1.9%) registered growth.
Volkswagen Commercial Vehicles sold 345 thousand vehicles in the reporting period, 24.3% fewer than in
Volkswagen Commercial Vehicles sold 345 thousand vehicles in the reporting period, 24.3% fewer than in
the previous year.
the previous year.
In 2020, the Volkswagen Commercial Vehicles brand produced 344 thousand vehicles, falling 28.0% short of
In 2020, the Volkswagen Commercial Vehicles brand produced 344 thousand vehicles, falling 28.0% short of
the figure for 2019. Production of the Amarok pickup at the main plant in Hanover ended.
the figure for 2019. Production of the Amarok pickup at the main plant in Hanover ended.
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 by Volkswagen Commercial Vehicles in fiscal year 2020 amounted to €9.4 (11.5) billion. Operating
Sales revenue by Volkswagen Commercial Vehicles in fiscal year 2020 amounted to €9.4 (11.5) billion. Operating
result declined to €–454 (510) million due to the pandemic-related fall in volume and the excess emissions
result declined to €–454 (510) million due to the pandemic-related fall in volume and the excess emissions
premium that entered into force this year. Moreover, higher upfront expenditures and write-downs for new
premium that entered into force this year. Moreover, higher upfront expenditures and write-downs for new
products as well as less favorable exchange rates had a negative effect on the operating result. However, product
products as well as less favorable exchange rates had a negative effect on the operating result. However, product
cost optimizations and mix effects had a positive impact. The operating return on sales fell to – 4.9 (4.4)%.
cost optimizations and mix effects had a positive impact. The operating return on sales fell to – 4.9 (4.4)%.
25 years
25 years
Volkswagen Commercial Vehicles brand
Volkswagen Commercial Vehicles brand
Divisions
Volkswagen Commercial Vehicles
39
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
Units
2020
2019
2020
2019
%
Caravelle/Multivan, Kombi
Transporter
Caddy Kombi
Crafter
Caddy
Amarok
71,813
66,357
61,998
58,235
48,799
36,343
96,533
Deliveries (thousand units)
91,585
Vehicle sales
81,466
Production
72,906
Sales revenue (€ million)
66,780
Operating result
68,010
Operating return on sales (%)
372
345
344
9,358
–454
–4.9
492
456
477
11,473
510
4.4
–24.4
–24.3
–28.0
–18.4
x
343,545
477,280
Caddy
D E L I V E R I E S B Y M A R K E T
in percent
Europe/Other markets
Europe/Other markets
North America
North America
South America
South America
Asia-Pacific
Asia-Pacific
86.3 %
86.3 %
1.9 %
1.9 %
7.6 %
7.6 %
4.3 %
4.3 %
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-commercial-vehicles.com
www.volkswagen-commercial-vehicles.com
40
TRATON GROUP
Divisions
The TRATON GROUP aims to become a global champion of the commercial vehicle
industry and consistently pursued this goal in 2020. New partnerships are making
future technologies workable for the commercial vehicle business.
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
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”.
The TRATON GROUP reached new milestones in its global champion strategy in 2020. In the all-important
North American market, a strategic partnership with the US manufacturer of commercial vehicles Navistar has
existed since 2017. At the end of January 2020, the board of management of the TRATON GROUP decided to take
the next logical step in the US market by submitting a takeover bid for Navistar, thus rising to the challenges
posed by new regulations and dynamically evolving technologies in the fields of digital connectivity, drive
systems and autonomous driving. Combining TRATON’s strong position in Europe and substantial presence in
South America with Navistar’s status in North America provides the opportunity to create a leading company
with global reach and complementary capabilities. In November 2020, the two partners reached an agreement
that TRATON SE would acquire all outstanding shares of Navistar at a cash price of USD 44.50 per share.
Expected to be completed in mid-2021, the transaction is subject to the approval of Navistar shareholders, the
usual closing conditions and regulatory approvals.
Driving innovation is another pillar of the global champion strategy. In the forward-looking field of alter-
native drive technologies and as part of their strategic partnership, TRATON and Hino Motors signed a joint
venture agreement in 2020 in order to plan and provide e-mobility products. The aim is to persue the devel-
opment of electric mobility including battery electric vehicles, fuel cell vehicles and relevant components and
to create a common platform for electric vehicles including software and interfaces. Through their collabo-
ration TRATON and Hino Motors hope to shorten lead times for future e-mobility products with battery and
fuel cell technology.
To play a leading part in the autonomous transport of the future, TRATON also entered into a global
partnership with the US start-up TuSimple in 2020. The partnership is the first of its kind in Europe, bringing
together a global commercial vehicle manufacturer and a producer of technology for highly automated driving
at level 4 autonomy. In a joint development program, TRATON and TuSimple aim to operate a test route
between Södertälje and Jönköping in Sweden where Scania trucks are to drive using level 4 driverless systems
that almost exclusively take over the driving permanently. As part of the partnership, TRATON has also taken a
minority stake in TuSimple.
190 thousand
Commercial vehicles delivered in 2020
Divisions
TRATON GROUP
41
P R O D U C T I O N
D E L I V E R I E S
Units
Trucks
Buses
Light Commercial Vehicles
2020
2019
Units
2020
2019
156,297
16,729
18,340
191,366
201,115
Trucks
21,387
Buses
15,903
Light Commercial Vehicles
238,405
156,378
16,174
17,635
190,187
205,936
21,496
14,789
242,221
Strong brands
D E L I V E R I E S B Y M A R K E T
in percent
Europe/Other markets
Europe/Other markets
North America
North America
South America
South America
Asia-Pacific
Asia-Pacific
67.2 %
67.2 %
0.8 %
0.8 %
26.0 %
26.0 %
6.0 %
6.0 %
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
42
Scania
Divisions
Scania unveiled its first fully electric truck in 2020, underpinning its position
as one of the leading companies in the commercial vehicle industry
for alternative drive technologies.
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 waste”,
“Determination”, “Team Spirit” and “Integrity”. In rolling out its first fully electric truck, Scania underpinned its
position as one of the leading companies in the commercial vehicle industry for alternative drive technologies
in 2020. Scania’s E-Truck was designed for urban operation and has an electric range of up to 250 km. In the
reporting year, Scania also presented a hybrid truck with an electric range of up to 60 km. The new products will
help Scania achieve its climate targets of reducing the carbon footprint from its business activities by 50% by
2025, and cutting emissions from Scania products by 20% in the same period. Vehicles with hydrogen technol-
ogy are also playing their part: the Norwegian wholesaler ASKO is currently testing hydrogen-powered Scania
trucks with fuel cell electric drives.
To electrify its model range, Scania plans to invest well over SEK 1 billion in a battery assembly plant in
Södertälje, Sweden, in the coming years. The plant, which will be built adjacent to the chassis assembly plant in
Södertälje, is to assemble battery modules and packs tailored to Scania vehicles.
To gain a firmer foothold in the Asian and especially the Chinese market, Scania is investing in a wholly
owned truck production facility in Rugao in Jiangsu Province. Series production is scheduled to start in early
2022. In the long term, the company also plans to step up its research and development activities in the world’s
largest commercial vehicle market.
The key figures presented in this chapter encompass Scania’s truck and bus, industrial and marine engine
businesses.
Orders received at the Scania brand increased by 4.7% year-on-year to 93 thousand vehicles in fiscal year
2020. The number of vehicles delivered worldwide fell to 72 (99) thousand due to the pandemic; the number of
buses delivered included in this figure declined to 5 (8) thousand units. Demand for services and replacement
parts was also impacted by the Covid-19 pandemic, but the drop was comparatively smaller. New contracts
signed at Scania Financial Services were also down on the prior-year figure, due mainly to lower unit sales.
Scania manufactured 73 (97) thousand commercial vehicles in the past fiscal year, including 5 (8) thousand
buses.
S A L E S R E V E N U E A N D E A R N I N G S
Scania Vehicles and Services generated sales revenue of €11.5 (13.9) billion in fiscal year 2020. Operating profit
fell by 50.3% to €0.7 billion owing to the pandemic and exchange rate effects; in addition, steps were taken to
realign the production facilities. A favorable product mix and cost savings had a positive effect. The operating
return on sales amounted to 6.5 (10.8)% in the reporting period.
4.7%
Increase in orders received
Divisions
Scania
43
P R O D U C T I O N
S C A N I A V E H I C L E S A N D S E R V I C E S 1
Units
Trucks
Buses
2020
2019
2020
2019
%
67,106
5,430
72,536
89,276
7,719
96,995
Orders received
(thousand units)
Deliveries
Vehicle sales
Production
Sales revenue (€ million)
Operating result
Operating return on sales (%)
93
72
73
73
11,521
748
6.5
89
99
101
97
13,934
1,506
10.8
+4.7
–27.5
–27.1
–25.2
–17.3
–50.3
1 Scania (including Financial Services): sales revenue €11,950 (14,391) million, operating
profit €855 (1,648) million.
BEV Truck
D E L I V E R I E S B Y M A R K E T
in percent
Europe/Other markets
Europe/Other markets
North America
North America
South America
South America
Asia-Pacific
Asia-Pacific
68.4 %
68.4 %
0.6 %
0.6 %
19.3 %
19.3 %
11.7 %
11.7 %
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
44
MAN
Divisions
MAN revealed its extensively upgraded truck generation in 2020 and received
the prestigious International Truck of the Year 2021 award for the TGX.
The MAN Lion’s City 18 E all-electric articulated bus starts scheduled operations.
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 fiscal year 2020 , MAN
revealed its extensively upgraded truck generation, which is consistently designed to meet the changing needs
of the transportation industry, setting the standards for assistance systems, driver orientation and digital
connectivity. The improvements to the drivetrain, aerodynamics and the MAN EfficientCruise efficiency
assistant reduce fuel consumption in the new truck generation by up to 8% compared with the previous gene-
ration. The MAN TGX was named International Truck of the Year 2021 by 24 industry journalists. The award is
one of the most prestigious in the transportation industry.
In the bus segment, the all-electric MAN Lion’s City 18 E optimized for urban transportation was launched
in 2020. The 18-meter articulated bus can carry up to 120 passengers and generates zero local emissions. The
MAN Lion’s City 18 E will begin scheduled operations in 2021 in Barcelona, Spain, and Cologne, Germany.
MAN teamed up with partner companies during the Covid-19 pandemic to convert its TGE model into an
innovative diagnostic vehicle. With the molecular diagnostic PCR test equipment on board the MAN TGE, the
results of nasal or throat swabs are available in just 39 minutes. Up to 800 tests can be carried out per day and
analyzed directly in the vehicle.
In South America, Volkswagen Caminhões e Ônibus expanded its product portfolio in 2020 with its largest
truck model to date. The Meteor is used in the heavy-duty sector, which is enjoying especially strong growth in
the Brazilian market. In addition to the new Meteor, the successful VW Constellation model also celebrated its
premiere with the new generation of the 13 l D26 engine. In 2021 in the field of alternative drive systems,
Volkswagen Caminhões e Ônibus plans to begin with the supply of 100 “e-Delivery” electric trucks to Ambev,
Latin America’s largest beverage company. Ambev intends to deploy the e-Delivery in São Paulo and Rio de
Janeiro starting in the second half of the year.
Incoming orders at MAN Commercial Vehicles decreased in fiscal year 2020 by 11.0% year-on-year to
123 thousand vehicles; the market decline anticipated for 2020 – especially in the EU27+3 region – was exac-
erbated by the Covid-19 pandemic. In America, MAN Commercial Vehicles recorded lower demand with its
Volkswagen Caminhões e Ônibus brand, particularly in Brazil and Mexico. A total of 118 (143) thousand com-
mercial vehicles were delivered to customers, of which 11 (14) thousand were buses.
MAN produced a total of 119 (141) thousand commercial vehicles in 2020, including 11 (14) thousand buses.
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 MAN Commercial Vehicles decreased by 14.4% in 2020 to €10.8 billion. The operating result
dropped to €–631 (402) million as a consequence of the pandemic. This was attributable not only to lower
vehicle sales but also to depreciation and amortization charges, as well as additional costs incurred in
connection with the launch of the new truck generation. Measures to achieve consistent cost savings in all
areas were unable to compensate for this decline. The operating return on sales was – 5.8 (3.2)%.
8%
Fuel savings in the new truck generation
Divisions
MAN
45
P R O D U C T I O N
M A N C O M M E R C I A L V E H I C L E S
Units
Trucks
Buses
Light Commercial Vehicles
2020
2019
2020
2019
%
89,191
11,299
18,340
118,830
111,839
13,668
15,903
141,410
Orders received
(thousand units)
Deliveries
Vehicle sales
Production
Sales revenue (€ million)
Operating result
Operating return on sales (%)
123
118
118
119
10,838
–631
–5.8
139
143
143
141
12,663
402
3.2
–11.0
–17.3
–17.3
–16.0
–14.4
x
TGX
D E L I V E R I E S B Y M A R K E T
in percent
Europe/Other markets
Europe/Other markets
North America
North America
South America
South America
Asia-Pacific
Asia-Pacific
66.6 %
66.6 %
0.9 %
0.9 %
30.0 %
30.0 %
2.5 %
2.5 %
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 Nwww.man.eu
www.man.eu
46
Volkswagen Group China
Divisions
Volkswagen Group China
In the Chinese market, Volkswagen continued to put all its energies into the strategic
direction of e-mobility in 2020. The negative impact of the Covid-19 pandemic on
business operations remained limited.
B U S I N E S S D E V E L O P M E N T
China remained the largest single market for Volkswagen in 2020. In the Chinese market, the Group offers more
than 160 imported and locally produced models from the Volkswagen Passenger Cars, JETTA, Audi, ŠKODA,
Porsche, Bentley, Lamborghini, Bugatti, Volkswagen Commercial Vehicles, MAN, and Scania brands as well as
motorcycles by the Ducati brand. At 3.8 (4.2) million units (including imports), we delivered fewer vehicles to
customers in 2020 than in the previous year in a Chinese market distinctly weakened by the pandemic.
However, the Volkswagen Group remained the clear number one with Chinese customers with a market share
of 19.3%. New models achieved a good market performance, including the new Volkswagen Passenger Cars
flagship Touareg e-hybrid, the Viloran, the JETTA SUV VS7, the Porsche Taycan and the Audi Q2 and Q3 models.
The new Tayron and Tharu models quickly took the lead in the A-SUV market. As part of the SUV campaign, we
launched ten new models in 2020. They contributed to increased deliveries in the SUV segment and helped us
to maintain our number one position. The new energy vehicle (NEV) segment was the fastest growing segment
in China in 2020. The seven new NEV models increased the Group’s portfolio to 22 electrified models in China.
The premium brands Audi, Porsche and Bentley again delivered strong sales figures, and the young entry-level
brand JETTA also attracted a large number of customers in its first full year of sales.
In spite of the Covid-19 pandemic, Volkswagen continued to put all its energies into the strategic direction
of e-mobility in China in 2020: the two MEB plants in Foshan and Anting celebrated the start of production on
schedule, adding a production capacity of 600,000 units per year to the Group. The ID.4 X model from
SAIC VOLKSWAGEN and the ID.4 CROZZ model from FAW-Volkswagen are the first vehicles whose production
started in 2020. Three further models in the ID. family are to follow in 2021. By 2023, Volkswagen Passenger
Cars will offer eight models in the ID. family on the Chinese market, which plays a decisive role in the Group’s
global e-mobility strategy. In 2020, Volkswagen increased its stake in Volkswagen (Anhui), formerly JAC Volks-
wagen, from 50 to 75%. The investment also included the acquisition of 50% of the shares in JAG, the parent
company of Volkswagen’s joint venture partner JAC. The Volkswagen (Anhui) plant for all-electric vehicles has a
maximum production capacity of 350 thousand units per year and should be finished by the end of 2022.
Series production of MEB-based models should start there in 2023. Volkswagen has found another partner to
secure future requirements for battery capacity for its Chinese e-models: with a 26% stake, Volkswagen (China)
Investment Co. Ltd. wants to become the largest shareholder in Gotion High-Tech Co., Ltd. and thus the first
international automotive manufacturer to directly invest in a Chinese battery supplier. The Audi brand is
working with joint venture partner FAW to jointly establish a company for the production of all-electric vehicles
based on the Premium Platform Electric (PPE) from 2024, the next major step for local production of e-vehicles.
The Group also strengthened the production of electric drive components in China in 2020 in order to be
prepared for rapidly growing demand for e-mobility.
19.3%
The Group’s share of the market in China
Divisions
Volkswagen Group China
47
E A R N I N G S
Thousand units
2020
2019
%
€ million
2020
2019
Deliveries
Vehicle sales1
Production
1 Produced locally.
3,849
3,577
3,575
4,234
4,048
3,948
–9.1
Operating result (100%)
–11.6
Operating result (proportionate)
9,744
3,602
11,110
4,425
–9.5
Our joint ventures produced a total of 3.6 (3.9) million vehi-
cles in fiscal year 2020. The joint ventures produce both
established Group models and those specially modified for
Chinese customers (e.g. with extended wheelbases), as well as
vehicles developed exclusively for the Chinese market (such
as the Volkswagen Lamando, Lavida, New Bora, New Santana
and Teramont).
The proportionate operating result of the joint ventures in
the reporting year stood at €3.6 (4.4) billion. The negative
impacts of pandemic-related lower unit sales and more intense
market competition were offset by improvements in the mix
and cost optimization.
The figures of the Chinese joint venture companies are
not included in the operating profit of the Group as they are
accounted for using the equity method. Their profits are
included solely in the Group’s financial result on a propor-
tionate basis.
ID.4 family
L O C A L P R O D U C T I O N
Units
2020
2019
Volkswagen Passenger Cars
2,751,717
3,066,807
Audi
ŠKODA
Total
671,659
151,245
614,753
266,377
3,574,621
3,947,937
48
Volkswagen Financial Services
Divisions
Volkswagen Financial Services delivered a robust performance in 2020, which proved to
be a difficult year. The diverse product portfolio has been enhanced by the addition of
interesting alternatives for individual mobility.
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
activities, fleet management and mobility services in 48 countries. The key companies are Volkswagen Finan-
cial Services AG and its affiliated companies such as Volkswagen Leasing GmbH, as well as Volkswagen Bank
GmbH, Porsche Financial Services and the financial services companies in the United States and Canada, the
only exceptions being the financial services business of the Scania brand and of Porsche Holding Salzburg.
B U S I N E S S D E V E L O P M E N T
Volkswagen Financial Services and Naturschutzbund Deutschland e.V. (NABU) are expanding their successful
collaboration in the field of nature conservation and climate action. To this end, the provider of financial and
mobility services in the Volkswagen Group is providing €450 thousand for the nature conservation organi-
zation to restore the Aller river in the district of Verden between Hülsen and the mouth of the Weser River. The
aim is to create more natural conditions for the riverbed and floodplain to increase biodiversity, but also to
improve flood protection. Along with moorland protection, the restoration of watercourses is a further focus of
the financial services provider’s involvement.
Volkswagen Financial Services introduced a car subscription service (Auto-Abo) to its customers in 2020,
and in doing so further expanded its mobility offering. Customers can book various vehicle classes and
conclude a contract for a minimum of three months. Thereafter, this contract can be terminated on a monthly
basis. Subscribers pay only for the use of the vehicle and for fuel. All other relevant costs such as registration,
servicing, insurance and taxes are covered by the monthly mobility rate. In the dynamic market for mobility
products, the financial service provider is responding to the customer’s desire for a high degree of flexibility
and comprehensive cost control with its Auto-Abo car subscription service.
Volkswagen Financial Services is supporting the Volkswagen Group’s electric mobility offensive with its
Lease&Care package solution, starting with the sales launch of the ID.3. This product offers customers a choice
of various modular service options, allowing them to maintain full cost transparency when running their new
electric vehicle. Volkswagen Financial Services is deliberately focusing on the advantages of leasing for electric
mobility and assumes that around 80% of Volkswagen Group electric vehicles will be leased or financed through
Financial Services.
Volkswagen Financial Services took over the business travel start-up Voya in 2020, adding business travel
management to its mobility offering for fleet customers. Voya offers a digital travel assistant for companies as a
smartphone app and for desktop use. Given that fleet and travel management are gradually converging in many
companies, Volkswagen Financial Services aims to provide its fleet customers with a corresponding offering
based on Voya in the future.
€2.8 billion
Operating profit for 2020
Divisions
Volkswagen Financial Services
49
Following its launch in Germany and the United Kingdom, the online platform heycar was successfully rolled
out in Spain in fiscal year 2020. Guaranteed used cars of all major automobile brands will now also be offered in
Spain under the umbrella of Mobility Trader Spain S.L..
The main refinancing sources for Volkswagen Financial Services are money market and capital market
instruments, asset-backed securities (ABS) transactions, customer deposits from the direct banking business
and bank credit lines.
In 2020, Volkswagen Financial Services AG issued three bonds with different terms and a total volume of
€2.15 billion. Due to the Covid-19 pandemic and the related turmoil in the money and capital markets, risk
premiums were higher than in previous issuances. However, the high demand from investors attests to
confidence in the business model.
Other bond transactions were conducted in countries such as the United Kingdom, Japan, Sweden and
Norway. In addition to this, private placements were issued in various currencies.
Volkswagen Bank did not enter into any transactions with unsecured bonds in the reporting period.
In fiscal year 2020, Volkswagen Leasing GmbH placed two ABS transactions secured by lease receivables
with a volume of €1 billion and €1.1 billion, respectively. The issuances met the quality criteria of the STS
Securitization Regulation for particularly high-value securitizations and were oversubscribed several times.
Outside Germany, Volkswagen Financial Services issued a total of six ABS transactions in the United States,
China, Spain and Japan. Driver China eleven represented the successful placement by Volkswagen Financial
Services of its largest-ever auto ABS in Chinese renminbi (RMB). The transaction has a volume of over
RMB 8 billion (around €1.0 billion) in receivables and is backed by financing contracts concluded with Volks-
wagen Finance (China). China is one of the most important markets for Volkswagen Financial Services with a
current contract portfolio of more than 1.2 million units.
Auto-Abo
50
Volkswagen Financial Services
Divisions
Volkswagen Financial Services was heavily impacted by the Covid-19 pandemic in fiscal year 2020. To avert and
cushion the economic impact of the pandemic for customers, pinpointed stabilization measures were put in
place together with the Group brands; these included payment deferrals and support for the dealer
organization. The measures taken with the brands to promote sales had a positive effect on vehicle sales as well
as on new contracts at Volkswagen Financial Services.
The number of new financing, leasing, service and insurance contracts signed in fiscal year 2020 fell by
6.9% year-on-year to 7.9 million. As of December 31, 2020, the total number of contracts was 21.9 million, up
1.9% from the year before. The number of contracts in the Customer Financing/Leasing area increased by 1.1%
to 11.3 million. There were 10.6 million contracts in the Service/Insurance area, 2.7% more than in the previous
year. 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
35.2 (34.2)%.
At the end of the reporting period, Volkswagen Bank GmbH managed 1.4 (1.3) million deposit accounts.
Volkswagen Financial Services employed 14,560 people worldwide, including 7,299 in Germany, as of year-end
2020.
S A L E S R E V E N U E A N D E A R N I N G S
The sales revenue of Volkswagen Financial Services in the reporting year amounted to €38.6 billion, a slight
increase of 1.8% on the previous year. Operating profit decreased to €2.8 (3.0) billion, particularly due to risk
costs.
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
thousands
€ million
€ million
€ million
€ million
€ million
€ million
%
%
€ million
€ million
2020
2019
21,907
6,635
4,692
10,580
49,653
69,380
18,448
45,379
27,734
225,608
29,406
187,545
13.0
8.9
6.4
2,803
2,577
14,560
21,498
6,585
4,616
10,297
47,222
68,517
23,093
46,276
31,330
223,536
28,428
187,092
12.7
10.8
6.6
2,960
2,968
14,394
%
+1.9
+0.8
+1.6
+2.7
+5.1
+1.3
–20.1
–1.9
–11.5
+0.9
+3.4
+0.2
+2.6
–17.5
–3.4
–5.3
–13.2
+1.2
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
3
Corporate Governance
CORPORATE GOVERNANCE
53
Group Corporate Governance
Declaration
62
Members of the Board of
Management
63
Members of the Supervisory
Board and Composition of the
Committees
66
Remuneration Report (part of the
Group Management Report)
Corporate Governance
Group Corporate Governance Declaration
53
Group Corporate Governance
Declaration
The following chapter contains the content of the Group Corporate Governance Declaration
required by sections 289f and 315d of the HGB and the recommendations
and principles of the German Corporate Governance Code.
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 com-
pany’s organization and values, and the principles and guide-
lines for its business policy. The German Corporate Governance
Code (the Code) contains principles, recommendations and
suggestions for corporate management and supervision. Its
recommendations and suggestions were prepared by a dedi-
cated government commission on the basis of the material
provisions and nationally and
internationally accepted
standards of sound, responsible corporate governance. In the
interests of best practice, the government commission regu-
larly reviews the Code’s relevance in light of current develop-
ments and updates it as necessary. The Board of Management
and the Supervisory Board of Volkswagen AG base their work
on the principles, recommendations and suggestions of the
Code. We consider good corporate governance to be a key pre-
requisite for achieving a lasting increase in the Company’s
value. It helps strengthen the trust of our shareholders, cus-
tomers, employees, business partners and investors in our
work and enables us to meet the steadily increasing demand
for information from national and international 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 13,
2020 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 2017 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 15 November 2019 until the entry into
force of the reformed Code in the version dated 16 December
2019 on 20 March 2020, with the exception of the sections
and the stated reasons and periods listed below.
> a) 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 section 5.3.2(3) sentence 2
of the 2017 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 inter-
est in Porsche Automobil Holding SE, and business rela-
tions with other members of the Porsche and Piëch
families who also have an indirect interest in Porsche
Automobil Holding SE. However, it is our opinion that
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.
> b) 5.4.1(6 to 8) (disclosure regarding election proposals)
With regard to the recommendation in section 5.4.1(6 to 8)
of the 2017 Code according to which certain circumstances
shall be disclosed when the Supervisory Board makes
election proposals to the General Meeting, the guidelines
in the Code are vague and the definitions unclear. Purely as
a precautionary measure, we therefore declare a deviation
from the Code in this respect.
> c) 5.4.5 sentence 2 (a maximum of three supervisory board
mandates in non-group listed corporations or comparable
companies)
54
Group Corporate Governance Declaration
Corporate Governance
The Chairman of the Supervisory Board is on the super-
visory boards of three listed companies of the VOLKS-
WAGEN Group, namely VOLKSWAGEN AG, AUDI AG and
TRATON SE, as well as on the Supervisory Board of Bertels-
mann SE & Co. KGaA. He is also Chairman of the Board of
Management of Porsche Automobil Holding SE. Porsche
Automobil Holding SE is not part of the same group as
AUDI AG, VOLKSWAGEN AG and TRATON SE. As it cannot be
ruled out that the supervisory board mandate at Bertels-
mann SE & Co. KGaA would involve similar requirements
to those of a supervisory board mandate in a listed com-
pany, and as the precise method of counting the mandates
is unclear, we therefore declare a deviation from section
5.4.5 sentence 2 of the 2017 Code as a precautionary mea-
sure. We are, however, confident that the Chairman of the
Supervisory Board of VOLKSWAGEN AG has sufficient time
at his disposal to fulfil the duties related to his mandate.
The Board of Management and the Supervisory Board also
declare the following:
The recommendations of the Government Commission of
the German Corporate Governance Code in the version dated
16 December 2019 (the 2020 Code) that was published by the
German Ministry of Justice in the official section of the
Federal Gazette (Bundesanzeiger) on 20 March 2020 was
complied with in the period since the entry into force of this
version of the Code and will continue to be complied with,
with the exception of the recommendations and their stated
reasons and periods listed below.
> a) Recommendation B.3 (Duration of first-time appoint-
ments to the Board of Management)
As it has done in the past, the Supervisory Board will
determine the duration of first-time appointments to the
Board of Management as it deems fitting for each indi-
vidual case and the good of the company.
> b) Recommendation C.5 (Mandate ceiling regarding Board
of Management mandate)
The Chairman of the Supervisory Board is on the super-
visory boards of three listed companies of the VOLKS-
WAGEN Group, namely VOLKSWAGEN AG, AUDI AG and
TRATON SE (also as Chairman), as well as on the Super-
visory Board of Bertelsmann SE & Co. KGaA. He is also
Chairman of the Board of Management of Porsche
Automobil Holding SE. Porsche Automobil Holding SE is
not part of the same group as AUDI AG, VOLKSWAGEN AG
and TRATON SE. We are, however, confident that the
Chairman of the Supervisory Board of VOLKSWAGEN AG
has sufficient time at his disposal to fulfil the duties related
to his mandate.
agement Board. According to the criteria listed in Recom-
mendation C.7, there is indication of a lack of inde-
pendence if a member of the Supervisory Board was a
member of the Management Board in the two years prior
to their appointment to the Supervisory Board. The
Chairman of the Supervisory Board, who is also the Chair-
man of the committee that addresses Board of Manage-
ment remuneration, transferred directly from the Board of
Management to the Supervisory Board at the time of his
appointment to the Supervisory Board.
> d) Recommendation C.10 sentence 2 (Farther-reaching
independence of the Chair of the Audit Committee)
It is unclear from the wording of this recommendation
whether the Chair of the Audit Committee is “independent
from the controlling shareholder” within the meaning of
this recommendation. Such “independence” could be
considered lacking in view of the fact that the Chair of the
Audit Committee, in addition to other members of the
Porsche and Piëch families, who are also related to each
other, has an indirect interest in Porsche Automobil
Holding SE. However, it is our opinion that these relation-
ships 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.
> e) Recommendation C.13 (Disclosure regarding election
proposals)
With regard to this recommendation, according to which
certain circumstances shall be disclosed when the Super-
visory Board makes election proposals to the General
Meeting, the guidelines in the Code are vague and the defini-
tions unclear. Purely as a precautionary measure, we there-
fore 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.
> f) Recommendation D.1 (Rules of Procedure for the
Supervisory Board)
The Rules of Procedure for the Supervisory Board were
published on the Company’s internet site on 6 April 2020.
> g) Recommendation D.4 (Independence of the Chair of the
Audit Committee)
Regarding justification, we refer to the statements made
above regarding Recommendation C.10 sentence 2. If the
Chair of the Audit Committee is not independent from the
controlling shareholder, according to the definition of
Recommendation C.6, sentence 2, he/she is also not inde-
pendent within the meaning of Recommendation D.4.
> h) Recommendations G.1 and G.2 (Remuneration system
> c) Recommendation C.10 sentence 1 (Independence of the
Chair of the Supervisory Board and Chair of the committee)
According to this recommendation of the 2020 Code, the
Chair of the Supervisory Board and the Chair of the com-
mittee that addresses Management Board remuneration
shall be independent from the company and the Man-
and target total remuneration)
The Supervisory Board introduced a new remuneration
system in 2017, which takes into account all recommen-
dations of the 2017 Code. The recommendations are sig-
nificantly different in the reformed 2020 Code. The remu-
neration system from 2017 does not comply with these
Corporate Governance
Group Corporate Governance Declaration
55
amended recommendations in some aspects. The Super-
visory Board is planning to introduce a new remuneration
system that complies with the amended recommendations
of the 2020 Code. Until this has been carried out, the
deviations will be described here and in the following text.
The Supervisory Board has not yet passed a resolution on a
remuneration system within the meaning of Recommen-
dation G.1. The justification from the Commission on
Recommendation G.1 also establishes the following: the
total remuneration is the sum of all remuneration com-
ponents for the year in question, including the past service
cost within the meaning of IAS 19. This will also apply to
the maximum remuneration. The remuneration ceilings
within our remuneration system were established without
taking into account pension scheme expenses or fringe
benefits and therefore do not represent maximum remune-
ration within the meaning of Recommendation G.1. Using
the remuneration system in place to date, it is not possible
to deduce the relative proportions of the individual
remuneration components of target total remuneration,
within the meaning of the recommendation. Furthermore,
contrary to Recommendation G.2, the Supervisory Board
has not yet passed a resolution on specific target total
remuneration for the individual members of the Board of
Management within the meaning of Recommendation G.1.
> i) Recommendation G.10 sentence 2 (Four-year commit-
ment period)
According to this recommendation, granted long-term vari-
able remuneration components shall be accessible to mem-
bers of the Board of Management only after a period of four
years. As our current Performance Share Plan has a three-
year term and there is a cash settlement at the end of this
term, this remuneration component is available to the mem-
bers of the Board of Management after only three years.
> j) Recommendation G.11 sentence 2 (Clawback provision)
Contrary to sentence 2 of this recommendation, the
current remuneration system makes no provision for the
company to retain or reclaim variable remuneration from
the members of the Board of Management. ”
The current declaration of conformity and previous
declarations of conformity are also published on our website
www.volkswagenag.com/en/InvestorRelations/corporate-gover
nance/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 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 T R ATO N S E
https://ir.traton.com/websites/traton/English/5000/corporate-governance.html
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
https://www.corporate.man.eu/en/investor-relations/corporate-
governance/corporate-governance-at-man/Corporate-Governance-at-MAN.html
Our listed indirect subsidiaries TRATON SE and MAN SE have
also each issued declarations of conformity with the German
Corporate Governance Code. These can be accessed at the
websites shown below.
The suggestions of the 2020 Code are complied with. The
following applies to the suggestions that were not imple-
mented in the past under the 2017 Code: The suggestions
previously contained in section 5.1.2(2) sentence 1 (“Duration
of first-time appointments”) and section 4.2.3(2) sentence 9
(“No early disbursements of variable remuneration compo-
nents”) of the 2017 Code have been turned into recommen-
dations in the 2020 Code. The deviation from the recommen-
dation on the duration of first-time appointments to the
Management Board (B.3 in the 2020 Code) is included in the
above declaration of conformity. The recommendation that
variable remuneration components should not be disbursed
early (G.12 in the 2020 Code) is now complied with. The
suggestions previously contained in section 2.3.2 sentence 2
(“Accessibility of the voting proxy during the Annual General
Meeting”) and section 2.3.3 (“Broadcast of the Annual General
Meeting”) of the 2017 Code have not been included in the
2020 Code.
B O A R D O F M A N A G E M E N T
The Volkswagen AG Board of Management has sole responsi-
bility for managing the Company in the Company’s best
interests, in accordance with the Articles of Association and
the rules of procedure for the Board of Management issued
by the Supervisory Board.
Accordingly, responsibilities were divided between eight
Board of Management positions until December 31, 2020. In
addition to the Chairman of the Board of Management, which
also includes the Volume brand group, the other Board
positions were: Components and Procurement, Finance and
IT, Human Resources and Truck & Bus, Integrity and Legal
Affairs, Premium, Sport & Luxury as well as China. As of
December 31, 2020, the board member for Finance & IT was
also responsible for Components and Procurement on a
temporary basis, and the Chairman of the Board of Manage-
ment was also responsible for China.
In December 2020, the Supervisory Board decided to split
up the responsibility for Components and Procurement from
January 1, 2021, replacing it with two new Board positions:
Purchasing and Technology. The new Technology Board
position will be responsible for all Group Components activi-
ties worldwide, the marketing of the Volkswagen toolkits to
third parties, the development and manufacturing of battery
cells as well as the associated procurement, the areas of
charging and charging systems and the corresponding joint
ventures worldwide.
Information on the composition of the Board of Man-
agement can be found in the "Members of the Board of
Management" section.
56
Group Corporate Governance Declaration
Corporate Governance
Working procedures of the Board of Management
In accordance with Article 6 of the Articles of Association,
Volkswagen AG’s Board of Management consists of at least
three people, with the precise number determined by the
Supervisory Board. As of December 31, 2020, there were six
members of the Board of Management.
The Board of Management generally meets weekly. Its
rules of procedure require it to meet at least twice a month.
Meetings of the Board of Management are convened by the
Chairman of the Board of Management. The Chairman is
required to convene a meeting if requested by any member of
the Board of Management. The Chairman of the Board of
Management chairs the Board of Management meetings. In
matters of general or fundamental importance, the decisions
are taken by the entire Board of Management. The Board of
Management takes decisions only after prior debate and/or
using the written circulation procedure. Resolutions of the
Board of Management are adopted by a majority vote. In the
event of a tie, the Chairman of the Board of Management
casts the deciding vote.
Each Board of Management member manages his Board
position independently, without prejudice to the collective
responsibility of the Board of Management. All Board of
Management members must keep each other informed of
events within their Board position.
The Volkswagen Group companies are managed solely by
their respective managements. The management of each
individual company takes into account not only the interest
of its own company but also the interests of the Group and
the individual brands in accordance with the framework laid
down by law.
Board of Management committees
Board of Management committees exist at Group level on the
following topic areas: investments, digital transformation,
management issues, human resources, integrity and com-
pliance, risk management, products and technology. Along-
side the responsible members of the Board of Management,
the relevant central departments and the relevant functions
of the divisions are represented on the committees.
Cooperation with the Supervisory Board
The Supervisory Board advises and monitors the Board of
Management with regard to the management of the Com-
pany. Through the requirement for the Supervisory Board to
provide consent, it is directly involved in decisions of funda-
mental importance to the Company. In addition, the Super-
visory Board of Volkswagen AG and the Board of Manage-
ment regularly discuss
factors affecting the strategic
orientation of the Volkswagen Group. The two bodies jointly
assess, at regular intervals, the progress made in imple-
menting the corporate strategy. The Board of Management
reports to the Supervisory Board regularly, promptly and
comprehensively in both written and oral form on all issues
of relevance for the Company particularly with regard to
strategy, planning, the development of the business, the risk
situation, risk management and compliance.
The Chairman of the Board of Management is responsible
for dealings with the Supervisory Board. He is in regular
contact with the Chairman of the Supervisory Board and
reports to him on all matters of particular significance with-
out delay.
The Supervisory Board has set out the Board of Manage-
ment’s obligations to provide information and reports in an
information policy. The Board of Management must report
conscientiously and faithfully to the Supervisory Board or its
committees. With the exception of the immediate reports
from the Chairman of the Board of Management to the
Chairman of the Supervisory Board on matters of particular
importance, the Board of Management reports to the Super-
visory Board in writing as a rule.
For transactions of fundamental importance, the Super-
visory Board must provide its consent. The documents
required for decision-making purposes are provided to the
Supervisory Board members in good time in advance of the
meeting.
Diversity concept and succession planning for the Board of Management
The Supervisory Board has laid down the following diversity
concept for the composition of the Board of Management
(section 289f(2) no. 6 HGB):
The Supervisory Board must also take diversity into account
when considering who would be the best persons to appoint
to the Board of Management as a body. The Supervisory
Board understands diversity, as an assessment criterion, to
mean in particular different yet complementary specialist
profiles and professional and general experience, also in the
international domain, with both genders being appropriately
represented. The Supervisory Board will also take the
following aspects into account in this regard, in particular:
> Members of the Board of Management should have many
years of management experience.
> Members of the Board of Management should, if possible,
have experience based on different training and profes-
sional backgrounds.
> The Board of Management as a whole should have tech-
nical expertise, especially knowledge of and experience in
the manufacture and sale of vehicles and engines of any
kind as well as other technical products, and experience in
the international domain.
> The Board of Management as a whole should have many
years of experience in research and development, pro-
duction, sales, finance and human resources management,
as well as law and compliance.
> Women should comprise a certain proportion of the Board
of Management. Based on the statutory provisions, the
Supervisory Board regularly sets targets for the proportion
of women and deadlines for achieving them.
Corporate Governance
Group Corporate Governance Declaration
57
> The Board of Management should also have a sufficient
mix of ages.
The aim of the diversity concept is for the Board of Manage-
ment members to embody a range of expertise and perspec-
tives. This diversity promotes a good understanding of
Volkswagen AG’s organizational and business affairs. Partic-
ularly, it enables the members of the Board of Management
to be open to new ideas by avoiding groupthink. In this way, it
contributes to the successful management of the Company.
In deciding who should be appointed to a specific Board
of Management position, the Supervisory Board takes into
account the interests of the Company and all the circum-
stances of the specific case. In taking this decision and in
long-term succession planning, the Supervisory Board orients
itself on the diversity concept. The Supervisory Board is of
the view that the diversity concept is reflected by the current
composition of the Board of Management. The members of
the Board of Management have many years of professional
experience, particularly in an international context, and
cover a broad spectrum of educational and professional back-
grounds. The Board of Management as a whole has out-
standing technical knowledge and many years of collective
experience in research and development, production, sales,
finance and human resources management, as well as law
and compliance. There is also a sufficient mix of ages and a
gender balance that meets the requirements set by the Super-
visory Board.
The Supervisory Board also took into account the
diversity concept that it had laid down upon appointing both
of the new members of the Board of Management Murat
Aksel and Thomas Schmall-von Westerholt with effect from
January 1, 2021. Both of the new members of the Board of
Management complement the existing broad spectrum of
educational and professional backgrounds and have out-
standing knowledge and expertise in the areas that have been
assigned to them – Purchasing and Technology.
Long-term succession planning within the meaning of
Recommendation B.2 of the 2020 Code is achieved through
regular discussions between the Chairman of the Board of
Management and the Chairman of the Supervisory Board as
well as regular discussions in the Executive Committee. The
contract terms for existing Board of Management members
are discussed, along with potential extensions and potential
successors. In particular, the discussions look at what know-
ledge, experience and professional and personal competen-
cies should be represented on the Board of Management with
regard to the corporate strategy and current challenges, and
to what extent the current composition of the Board of Man-
agement already reflects this. Long-term succession planning
is based on the corporate strategy and corporate culture and
takes into account the diversity concept determined by the
Supervisory Board.
As a rule, members of the Board of Management should
be appointed for a term of office ending no later than their
65th birthday. Board of Management members may be
appointed to serve beyond their 65th birthday until no later
than their 68th birthday, provided this is agreed by a two-
thirds majority of the Supervisory Board.
S U P E R V I S O R Y B O A R D
The Volkswagen AG Supervisory Board performs its role
through its members working together. It advises and moni-
tors the Board of Management with regard to the manage-
ment of the Company and, through the requirement for the
Supervisory Board to provide consent, is directly involved in
decisions of fundamental importance to the Company.
Information on the composition of the Supervisory Board
and the Supervisory Board committees and their chairs as
well as on the terms of office of the individual Supervisory
Board members can be found in the "Members of the Super-
visory Board and committees" section. Further information
on support for Supervisory Board members upon induction
and with respect to education and training as well as on the
work of the Supervisory Board and the Chairman of the
Supervisory Board’s discussions with investors can be found
in the Report of the Supervisory Board.
Overview
The Supervisory Board of Volkswagen AG 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 indirectly holds at least 15% of the Company’s
ordinary shares. The remaining shareholder representatives
on the Supervisory 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
workforce; the other three employee representatives are trade
union representatives elected by the workforce.
The Chairman of the Supervisory Board is generally a
shareholder representative, and the Deputy Chairman is
generally an employee representative. Both are elected by the
other members of the Supervisory Board.
The business of the Supervisory Board is managed by a
dedicated office of the Supervisory Board Chairman. The
Chairman of the Supervisory Board ensures the indepen-
dence of the office of the Supervisory Board Chairman and its
staff and exercises the right to appoint and supervise staff in
consultation with the responsible Board of Management
members.
The Supervisory Board appoints the Board of Manage-
ment members and, on the basis of the Executive Commit-
tee’s recommendations, decides on a clear and compre-
58
Group Corporate Governance Declaration
Corporate Governance
hensible system of remuneration for the Board of Man-
agement members. It presents this system to the Annual
General Meeting for approval every time there is a material
change, but at least once every four years.
Each member of the Supervisory Board of Volkswagen AG
is obliged to act in the Company’s best interests. Supervisory
Board members are not permitted to delegate their respon-
sibilities to others.
Every Supervisory Board member is obliged to disclose
any conflicts of interest to the Chairman of the Supervisory
Board without delay. In its report to the Annual General
Meeting, the Supervisory Board informs the Annual General
Meeting of any conflicts of interest that have arisen and how
these were dealt with. Material and not merely temporary
conflicts of interest on the part of a Supervisory Board mem-
ber should result in a termination of the member’s mandate.
Supervisory Board members should not hold board or
advisory positions at major competitors of Volkswagen AG or
major competitors of a company dependent on Volks-
wagen AG and should not be in a personal relationship
involving a major competitor.
Members of the Supervisory Board receive appropriate
support from the Company upon induction as well as with
respect to education and training. Education and training
measures are outlined in the Report of the Supervisory Board.
Working procedures of the Supervisory Board
As a rule, the Supervisory Board adopts its resolutions in
meetings of all its members. It must hold at least two
meetings in both the first and second halves of the calendar
year. The Supervisory Board generally holds five meetings a
year. The main topics of these meetings are described in the
Report of the Supervisory Board.
The Chairman of the Supervisory Board coordinates the
work within the Supervisory Board. He represents the
interests of the Supervisory Board externally and represents
the Company to the Board of Management on behalf of the
whole Supervisory Board. Within reason, the Chairman of the
Supervisory Board discusses Supervisory Board-specific
topics with investors and, in consultation with the Board of
Management, may also discuss non-Supervisory Board-
specific topics. More details can be found in the Report of the
Supervisory Board.
To underline the importance of environmental sustain-
ability, social responsibility and good corporate governance,
the Supervisory Board has appointed an ESG (environmental,
social and governance) officer. This role is currently per-
formed by Hans Dieter Pötsch.
The Supervisory Board should meet regularly also
without the Board of Management. Each Supervisory Board
meeting generally ends in a debate. Board of Management
members are not present during this part of the meeting. The
Chairman of the Supervisory Board convenes and chairs the
Supervisory Board meetings. If he is unable to do so, the
Deputy Chairman performs these tasks.
The Supervisory Board is only quorate if at least ten
members participate in passing the resolution. The Chairman
of the Supervisory Board or of the relevant committee
decides the form of the meeting and the voting procedure for
the Supervisory Board and its committees. Should the Chair-
man so decide in individual cases, meetings may also be held
using telecommunications technology, or members may
participate in meetings using this technology. The Chairman
may also decide that members can participate in the Super-
visory Board’s decision making in writing, by telephone or in
another, similar form. Supervisory Board resolutions require
a majority of votes cast, unless legislative provisions or the
Articles of Association stipulate otherwise. Decisions to estab-
lish or relocate production sites require a two-thirds majority
of the Supervisory Board members. If a vote results in a tie,
the vote is repeated. If this vote is also tied, the Chairman of
the Supervisory Board casts two votes. Minutes must be taken
of each meeting of the Supervisory Board and its committees.
Minutes of a meeting must record the time and location of
the meeting, the participants, the items on the agenda, the
material content of the discussions and the resolutions
adopted.
In individual cases, the Supervisory Board may decide to
call upon experts and other appropriate individuals to advise
on individual matters.
Supervisory Board committees
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 Codeter-
mination Act), the Audit Committee and, since October 2015,
the Special Committee on Diesel Engines. The Executive
Committee currently comprises four shareholder represen-
tatives and four employee representatives and the Special
Committee on Diesel Engines three shareholder represen-
tatives and three employee representatives, respectively. The
shareholder representatives on the Executive Committee
make up the Nomination Committee. The remaining two
committees are each composed of
two shareholder
representatives and two employee representatives.
At its meetings, the Executive Committee meticulously
prepares the resolutions of the Supervisory Board, discusses
the composition of the Board of Management and takes
decisions on matters such as contractual issues concerning
the Board of Management other than remuneration and
consent to ancillary activities by members of the Board of
Management. The Executive Committee supports and advises
the Chairman of the Supervisory Board. It works with the
Corporate Governance
Group Corporate Governance Declaration
59
Chairman of the Board of Management to ensure long-term
succession planning for the Board of Management.
The Nomination Committee proposes suitable candidates
for the Supervisory Board to recommend to the Annual
General Meeting for election. Before presenting such pro-
posals, it ensures that the candidates can commit the
expected time to their role and identifies the personal and
business relationships of the candidates to Volkswagen AG
and its Group companies, to Volkswagen AG’s corporate
bodies and to shareholders who directly or indirectly hold
more than 10% of the voting shares in Volkswagen AG. In its
proposals to the Supervisory Board, the Nomination Com-
mittee also takes into account the requirement for the Super-
visory Board to adhere, in its proposals to the Annual General
Meeting, to the specific targets it has set for the composition
of the Supervisory Board and to the profile of skills and
expertise it has decided on for the Board as a whole; the
Nomination Committee also takes into account the diversity
concept for the composition of the Supervisory Board.
The Mediation Committee has the task of submitting
proposals to the Supervisory Board for an appointment or
revocation of appointment if there is no majority for the
relevant measure on the Supervisory Board in the first vote.
The majority involves at least two-thirds of all Supervisory
Board members.
Among other things, the Audit Committee discusses the
auditing of financial accounting, including the annual and
consolidated financial statements, as well as monitoring of
the accounting process, and the examination thereof by the
auditors. It also discusses compliance, the effectiveness of the
risk management system, internal control system and
internal audit system. In addition, the Audit Committee par-
ticularly concerns itself with the Volkswagen Group’s quar-
terly reports and half-yearly financial report.
The Special Committee on Diesel Engines is responsible
for supporting the investigations in connection with the
manipulation of emissions figures for Volkswagen Group
diesel engines and preparing Supervisory Board resolutions
for necessary consequences at Supervisory Board level. To
this end, the Special Committee on Diesel Engines is provided
with regular information by the Board of Management. The
Chairman of the Special Committee on Diesel Engines reports
regularly on the Committee’s work to the Supervisory Board.
Objectives for the composition of the Supervisory Board, profile of
skills and expertise and diversity concept
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.
> In addition, at least four of the shareholder representatives
should be persons who, in line with the criteria of Recom-
mendations C.7 to C.9 of the 2020 Code, are independent
within the meaning of Recommendation C.6 of the 2020
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.
> Proposals for election should not normally include persons
who have reached the age of 75 on the date of the election.
The above criteria have been met. Numerous members of the
Supervisory Board embody the criterion of internationality
to a particularly high degree; various nationalities are repre-
sented on the Supervisory Board and numerous members
have international professional experience. Several members
of the Supervisory Board contribute to the Board’s diversity
to a particularly high degree, especially Ms. Hessa Sultan
Al Jaber, Ms. Marianne Heiß, Ms. Bertina Murkovic and
Mr. Hussain Ali Al Abdulla. The Supervisory Board comprises
members of various generations. Independent Supervisory
Board members within the meaning of Recommendation C.6
of the 2020 Code currently comprise at least the following:
Ms. Hessa Sultan Al Jaber, Mr. Hussain Ali Al Abdulla,
Mr. Bernd Althusmann and Mr. Stephan Weil.
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 conducted by the company. 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
products,
> 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
remuneration systems for the Board of Management,
60
Group Corporate Governance Declaration
Corporate Governance
> Detailed knowledge or experience in the areas of codeter-
mination, employee matters and the working environment
in the Company.
The Supervisory Board has also specified the following
diversity concept for its composition:
> The Supervisory Board must be comprised such that its
members collectively have the knowledge, skills, and
professional experience needed to properly perform their
duties.
> It has therefore set targets for its composition that also
take into account the recommendations of the German
Corporate Governance Code. The targets set by the Super-
visory Board for its composition also describe the concept
through which the Supervisory Board as a whole strives to
achieve a diverse composition (diversity concept in accor-
dance with section 289f(2) no. 6 of the HGB). Attention
should also be generally paid to diversity when seeking
qualified individuals to strengthen the specialist and
managerial expertise of the Supervisory Board as a whole
in line with these targets. In preparing proposals for
appointments to the Supervisory Board, it should be con-
sidered in each case how the work of the Supervisory Board
will benefit from a diversity of expertise and perspectives
among its members, from professional profiles and
experience that complement one another (including in the
international domain) and from an appropriate gender
balance. A wide range of experience and specialist know-
ledge should be represented on the Supervisory Board. In
addition, the Supervisory Board should collectively have an
extensive range of opinions and knowledge in order to
develop a good understanding of the status quo and the
longer-term opportunities and risks in connection with the
Company’s business activities.
> In proposing candidates to the Annual General Meeting for
the election of shareholder representatives to the Super-
visory Board, the Supervisory Board should take its diver-
sity concept into account in such a way that the corres-
ponding election of these candidates by the Annual
General Meeting would contribute to the implementation
of this concept. However, the Annual General Meeting is
not obliged to accept the candidates nominated.
> The aim of the diversity concept is for the Supervisory
Board to embody a range of expertise and perspectives.
This diversity promotes a good understanding of Volks-
wagen AG’s organizational and business affairs. It also
enables the Supervisory Board members to challenge the
Board of Management’s decisions constructively and to be
more open to new ideas by avoiding groupthink. In this
way, it contributes to the effective supervision of the
management.
> The Supervisory Board and Nomination Committee, in
particular, are called upon to implement the profile of skills
and expertise and the diversity concept within the context
of their candidate proposals to the Annual General
Meeting. The Supervisory Board also recommends to
employee representatives and unions (which have the right
to submit proposals in employee representative elections)
and the State of Lower Saxony (which has a right to appoint
Supervisory Board members) that the diversity concept,
composition targets and profile of skills and expertise
should be taken into account. The same applies to individu-
als entitled to make proposals should a court-appointed
replacement be necessary.
The current composition of the Supervisory Board fulfills
both the diversity concept and the profile of skills and
expertise. The Supervisory Board collectively has outstanding
knowledge of the manufacture and sale of vehicles and
engines, of the automotive sector and of the technologies
relevant for Volkswagen AG. Moreover, numerous Super-
visory Board members have extensive experience in manage-
rial and supervisory functions. All the relevant expertise in
the further individual areas specified in the profile of skills
and expertise is represented on the Supervisory Board.
Further details can be found in the curriculum vitae of the
Supervisory Board members. The curriculum vitae of the
members of the Supervisory Board are available online at
www.volkswagenag.com/en/group/executive-bodies.html.
In their proposal to the Annual General Meeting in 2020
for the election of a new Supervisory Board member, the
Nomination Committee and Supervisory Board took into
account the diversity concept, specific composition targets
and profile of skills and expertise. The composition targets,
diversity concept and profile of skills and expertise were also
taken into account in the appointment of a new Supervisory
Board member by the employee representatives in 2020.
Self-evaluation of the Supervisory Board
The Supervisory Board regularly evaluates every two years
how effectively the Board and its committees are performing
their tasks. This initially involves distributing a questionnaire
to all Supervisory Board members, in which they are able to
give their view of the effectiveness of the work of the Super-
visory Board and its committees and suggest possible improve-
ments. Following analysis of the questionnaires, the findings
and potential improvements are usually discussed at the next
regular meeting of the full Board. The most recent self-evalu-
ation took place from late 2019 to early 2020.
D I S C L O S U R E S U N D E R T H E E Q U A L PA R T I C I PAT I O N A C T
The statutory quota of at least 30% women and at least 30%
men has applied to new appointments to the Supervisory
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 Privatwirtschaft und
im öffentlichen Dienst (Führpos-GleichberG – German Act on
the Equal Participation of Women and Men in Leadership
Positions in the Private and Public Sectors). Shareholder and
employee representatives have resolved that each side will
Corporate Governance
Group Corporate Governance Declaration
61
meet this quota separately. The shareholder representatives
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 representatives
fulfilled the quota on December 31, 2020.
In accordance with the rules pertaining to the proportion
of females on the Board of Management as defined by the
FührposGleichberG, the Supervisory Board set a target quota
of 11.1% for the period after December 31, 2016. The new
deadline set for achievement of this target is December 31,
2021. The proportion of female members on the Board of
Management at Volkswagen AG as of December 31, 2020 was
16.7%, 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
management and 16.9% women in the second level of
management for the period up to the end of 2021. As of
December 31, 2020, the proportion of women in the active
workforce at the first level of management was 10.9 (11.4)%
and at the second level of management it was 16.7 (16.4)%.
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 of the 2020 annual report, in the notes
to Volkswagen’s 2020 consolidated financial statements and
in the notes to the 2020 annual financial statements of Volks-
wagen AG.
C O R P O R AT E P R A C T I C E S A P P L I E D I N A D D I T I O N T O STAT U TO R Y
R E Q U I R E M E N T S
Compliance & risk management
To ensure the Volkswagen Group’s lasting success, we use
forward-looking risk management and a uniform Group-wide
framework based on the compliance management system.
This includes:
> Compliance. Adherence to statutory provisions, internal
company policies, ethical principles and our own values in
order to protect the Company and its brands.
> Whistleblower system. The Volkswagen whistleblower sys-
tem is the central point of contact for reporting potential
cases of serious rule-breaking in the Volkswagen Group. It
focuses on investigating serious infringements that could
cause major damage to the Company’s reputation or finan-
cial interests or that involve major breaches of the Volks-
wagen Group’s ethical principles.
> Business and human rights. Volkswagen fully recognizes its
corporate responsibility for human rights. We essentially
orient ourselves on the UN (United Nations) Guiding
Principles on Business and Human Rights that are available
on the website of the UN (United Nations Global Compact),
the content of which particularly relates to the Universal
Declaration of Human Rights and the core conventions of
the ILO (International Labor Organization) that can be
accessed on the website of the ILO.
> Risk management and internal control system. A compre-
hensive risk management and internal control system
(RMS/ICS) helps the Volkswagen Group deal with risks in a
responsible manner. The organizational design of the
Volkswagen Group’s RMS/ICS is based on the internation-
ally recognized COSO framework for enterprise risk man-
agement (COSO: Committee of Sponsoring Organizations
of the Treadway Commission) and can be accessed on the
COSO website. Uniform Group principles are used as the
basis for managing risks in a transparent and appropriate
manner.
Voluntary commitments and principles
The Volkswagen Group has committed itself to sustainable,
transparent and responsible corporate governance.
We coordinate our sustainability activities across the
entire Group and have put in place a forward-looking system
of risk management and a clear framework for dealing with
environmental issues in a future-oriented manner, for
employee responsibility and for social commitment across
our brands and in the regions in which we operate.
Voluntary commitments and principles that apply across
the Group are the basis and backbone of our sustainability
management. These documents are publicly accessible on the
Company’s internet site in the section entitled “Sustain-
ability.”
Code of Collaboration and Together4Integrity
The Code of Collaboration, along with our integrity and
compliance program Together4Integrity (T4I), is a central
pillar of the Group strategy TOGETHER 2025+. 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”, “straight-
forward”, “open-minded”, “as equals” and “united”. T4I brings
together all activities relating to integrity, culture, compli-
ance, risk management and human resources management,
creating a common path toward a new corporate culture.
62
Group Corporate Governance Declaration
Group Management Report
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
(Appointments: as of December 31, 2020
or the leaving date from the Board of
Management of Volkswagen AG)
DR.-ING. HERBERT DIESS (*1958)
GUNNAR KILIAN (*1975)
ABRAHAM SCHOT (*1961)
Chairman (since April 13, 2018),
Human Resources and Truck & Bus
Chairman of the Board of Management of AUDI AG,
Chairman of the Brand Board of Management
(since July 15, 2020)
Premium brand group
of Volkswagen Passenger Cars (until June 30, 2020),
April 13, 20181, appointed until 2023
January 1, 2019 – March 31, 20201
Volume brand group,
China
Nationality: German
APPOINTMENTS:
July 1, 20151, appointed until 2023
Wolfsburg AG, Wolfsburg
Nationality: Austrian
Appointments:
ANDREAS RENSCHLER (*1958)
Nationality: Dutch
DR.-ING. STEFAN SOMMER (*1963)
Components and Procurement
September 1, 2018 – June 30, 20201
FC Bayern München AG, Munich
Chairman of the Board of Management of TRATON SE,
Nationality: German
MURAT AKSEL (*1972)
Truck & Bus brand group
February 1, 2015 – July 15, 20201
HILTRUD DOROTHEA WERNER (*1966)
Purchasing (since January 1, 2021),
Nationality: German
Integrity and Legal Affairs
January 1, 20211, appointed until 2023
Nationality: German
Appointments (as of July 15, 2020):
Deutsche Messe AG, Hanover
February 1, 20171, appointed until 2022
Nationality: German
OLIVER BLUME (*1968)
THOMAS SCHMALL-VON WESTERHOLT (*1964)
FRANK WITTER (*1959)
Chairman of the Executive Board of
Technology (since January 1, 2021),
Finance and IT,
Dr. Ing. h.c. F. Porsche AG,
Sport & Luxury brand group
Chairman of the Board of Management of
Components and Procurement
Volkswagen Group Components,
(acting, July 1 – December 31, 2020)
April 13, 20181, appointed until 2023
January 1, 20211, appointed until 2023
October 7, 20151, appointed until 2021
Nationality: German
Nationality: German, Brazilian
Nationality: German
MARKUS DUESMANN (*1969)
Chairman of the Board of Management of AUDI AG,
Premium brand group
April 1, 20201, appointed until 2025
Nationality: German
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.
boards of consolidated Group companies and other
significant investees.
Corporate Governance
Group Corporate Governance Declaration
63
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
A N D C O M P O S I T I O N O F T H E C O M M I T T E E S
(Appointments: as of December 31, 2020
or the leaving date from the Supervisory Board
of Volkswagen AG)
HANS DIETER PÖTSCH (*1951)
DR. HUSSAIN ALI AL ABDULLA (*1957)
DR. BERND ALTHUSMANN (*1966)
Chairman (since October 7, 2015),
Board Member of the Qatar Investment Authority
Minister of Economic Affairs, Labor, Transport and
Chairman of the Executive Board and
April 22, 20101, elected until 2025
Digitalization for the Federal State of Lower Saxony
Chief Financial Officer of Porsche Automobil
Nationality: Qatari
December 14, 20171, delegated until 2022
Holding SE
Appointments:
Nationality: German
October 7, 20151, elected until 2021
Gulf Investment Corporation, Safat/Kuwait
Appointments:
Nationality: Austrian
Appointments:
AUDI AG, Ingolstadt
(Board member)
Deutsche Messe AG, Hanover (Deputy Chairman)
Qatar Investment Authority, Doha
Container Terminal Wilhelmshaven JadeWeserPort-
(Board member)
Marketing GmbH & Co. KG, Wilhelmshaven
Autostadt GmbH, Wolfsburg
Qatar Supreme Council for Economic Affairs and
(Chairman)
Bertelsmann Management SE, Gütersloh
Bertelsmann SE & Co. KGaA, Gütersloh
Dr. Ing. h.c. F. Porsche AG, Stuttgart
TRATON SE, Munich (Chairman)
Investment, Doha
(Board member)
JadeWeserPort Realisierungs GmbH & Co. KG,
Wilhelmshaven (Chairman)
JadeWeserPort Realisierungs-Beteiligungs GmbH,
DR. HESSA SULTAN AL JABER (*1959)
Wilhelmshaven (Chairman)
Wolfsburg AG, Wolfsburg
Former Minister of Information and Communications
Niedersachsen Ports GmbH & Co. KG, Oldenburg
Porsche Austria Gesellschaft m.b.H., Salzburg
Technology, Qatar
(Chairman)
(Chairman)
June 22, 20161, elected until 2024
Porsche Holding Gesellschaft m.b.H., Salzburg
Nationality: Qatari
(Chairman)
Appointments:
KAI BLIESENER (*1971)
Head of Vehicle Construction and
Porsche Retail GmbH, Salzburg (Chairman)
Malomatia, Doha (Chairwoman)
Automotive and Supplier Industry Coordinator
VfL Wolfsburg-Fußball GmbH, Wolfsburg
MEEZA, Doha
at IG Metall
(Deputy Chairman)
Qatar Satellite Company (Es'hailSat), Doha
June 20, 20201, appointed until 2022
JÖRG HOFMANN (*1955)
Trio Investment, Doha (Chairwoman)
(Chairwoman)
Nationality: German
Deputy Chairman (since November 20, 2015),
First Chairman of IG Metall
November 20, 20151, appointed until 2022
Nationality: German
Appointments:
Robert Bosch GmbH, Stuttgart
DR. JUR. HANS-PETER FISCHER (*1959)
Chairman of the Board of Management of Volkswagen
Management Association e.V.
January 1, 20131, appointed until 2022
Nationality: German
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.
64
Group Corporate Governance Declaration
Corporate Governance
MARIANNE HEIß (*1972)
BERTINA MURKOVIC (*1957)
DR. JUR. FERDINAND OLIVER PORSCHE (*1961)
Chief Executive Officer of BBDO Group
Chairwoman of the Works Council of Volkswagen
Member of the Board of Management of Familie
Germany GmbH, Düsseldorf
Commercial Vehicles
Porsche AG Beteiligungsgesellschaft
February 14, 20181, elected until 2023
May 10, 20171, appointed until 2022
August 7, 20091, elected until 2024
Nationality: Austrian
Appointments:
AUDI AG, Ingolstadt
Porsche Automobil Holding SE, Stuttgart
Nationality: German
Appointments:
MOIA GmbH, Berlin
BERND OSTERLOH (*1956)
Nationality: Austrian
Appointments:
AUDI AG, Ingolstadt
Dr. Ing. h.c. F. Porsche AG, Stuttgart
Porsche Automobil Holding SE, Stuttgart
JOHAN JÄRVKLO (*1973)
Chairman of the General and Group Works Councils
Porsche Holding Gesellschaft m.b.H., Salzburg
Secretary-General of the European and
of Volkswagen AG
Porsche Lizenz- und
Global Group Works Council of Volkswagen AG
January 1, 20051, appointed until 2022
Handelsgesellschaft mbH & Co. KG, Ludwigsburg
November 22, 2015 – May 29, 20201
Nationality: Swedish
ULRIKE JAKOB (*1960)
Nationality: German
Appointments:
Autostadt GmbH, Wolfsburg
TRATON SE, Munich
Deputy Chairwoman of the Works Council of
Wolfsburg AG, Wolfsburg
DR. RER. COMM. WOLFGANG PORSCHE (*1943)
Chairman of the Supervisory Board of
Porsche Automobil Holding SE;
Chairman of the Supervisory Board of
Volkswagen AG,
Kassel plant
Allianz für die Region GmbH, Braunschweig
Dr. Ing. h.c. F. Porsche AG
Porsche Holding Gesellschaft m.b.H., Salzburg
April 24, 20081, elected until 2023
May 10, 20171, appointed until 2022
SEAT, S.A., Martorell
Nationality: German
ŠKODA Auto a.s., Mladá Boleslav
Nationality: Austrian
Appointments:
VfL Wolfsburg-Fußball GmbH, Wolfsburg
AUDI AG, Ingolstadt
DR. LOUISE KIESLING (*1957)
Volkswagen Group Services GmbH
Dr. Ing. h.c. F. Porsche AG, Stuttgart (Chairman)
Chairman of the General Works Council of AUDI AG
Nationality: Austrian
Entrepreneur
April 30, 20151, elected until 2021
Nationality: Austrian
PETER MOSCH (*1972)
January 18, 20061, appointed until 2022
Nationality: German
Appointments:
Volkswagen Immobilien GmbH, Wolfsburg
Porsche Automobil Holding SE, Stuttgart
DR. JUR. HANS MICHEL PIËCH (*1942)
Familie Porsche AG Beteiligungsgesellschaft,
(Chairman)
Lawyer in private practice
August 7, 20091, elected until 2024
Appointments:
AUDI AG, Ingolstadt
Salzburg (Chairman)
Porsche Cars Great Britain Ltd., Reading
Porsche Cars North America Inc., Atlanta
Porsche Greater China, consisting of:
Porsche (China) Motors Limited, Shanghai
Dr. Ing. h.c. F. Porsche AG, Stuttgart
Porsche Hong Kong Limited, Hong Kong
AUDI AG, Ingolstadt (Deputy Chairman)
Porsche Automobil Holding SE, Stuttgart
Porsche Holding Gesellschaft m.b.H., Salzburg
Audi Pensionskasse – Altersversorgung der
(Deputy Chairman)
Schmittenhöhebahn AG, Zell am See
AUTO UNION GmbH, VVaG, Ingolstadt
Porsche Cars Great Britain Ltd., Reading
Audi Stiftung für Umwelt GmbH, Ingolstadt
Porsche Cars North America Inc., Atlanta
Porsche Greater China, consisting of:
Porsche (China) Motors Limited, Shanghai
Porsche Hong Kong Limited, Hong Kong
Porsche Holding Gesellschaft m.b.H., Salzburg
Schmittenhöhebahn AG, Zell am See
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.
Corporate Governance
Group Corporate Governance Declaration
65
CONNY SCHÖNHARDT (*1978)
COMMITTEES OF THE SUPERVISORY BOARD
Union Secretary to the board of IG Metall
AS OF DECEMBER 31, 2020
June 21, 20191, appointed until 2022
Nationality: German
Members of the Executive Committee
ATHANASIOS STIMONIARIS (*1971)
Jörg Hofmann (Deputy Chairman)
Chairman of the Group Works Council of MAN SE,
Peter Mosch
Hans Dieter Pötsch (Chairman)
MAN Truck & Bus SE and TRATON SE
May 10, 20171, appointed until 2022
Nationality: German
Appointments:
MAN SE, Munich
MAN Truck & Bus SE, Munich
Bertina Murkovic
Bernd Osterloh
Dr. Hans Michel Piëch
Dr. Wolfgang Porsche
Stephan Weil
MAN Truck & Bus Deutschland GmbH, Munich
Members of the Mediation Committee established
Rheinmetall MAN Military Vehicles GmbH, Munich
in accordance with section 27(3) of the
TRATON SE, Munich (Deputy Chairman)
Mitbestimmungsgesetz (German
STEPHAN WEIL (*1958)
Hans Dieter Pötsch (Chairman)
Minister-President of the Federal State of
Jörg Hofmann (Deputy Chairman)
Codetermination Act)
Lower Saxony
February 19, 20131, delegated until 2022
Nationality: German
Bernd Osterloh
Stephan Weil
WERNER WERESCH (*1961)
Dr. Ferdinand Oliver Porsche (Chairman)
Member of the Executive Committee of the Works
Bernd Osterloh (Deputy Chairman)
Members of the Audit Committee
Council of Porsche Automobil Holding SE and
Marianne Heiß
Chairman of the General and Group Works Councils
Conny Schönhardt
of Dr. Ing. h.c. F. Porsche AG
February 21, 20191, appointed until 2022
Members of the Nomination Committee
Nationality: German
Appointments:
Dr. Ing. h.c. F. Porsche AG, Stuttgart
Hans Dieter Pötsch (Chairman)
Dr. Hans Michel Piëch
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.
66
Remuneration Report
Corporate Governance
Remuneration Report
(Part of the Group Management Report)
This chapter describes the main elements of the remuneration system for the Board of
Management. In addition, the Remuneration Report details the individualized remuneration of the
Board of Management and the Supervisory Board, broken down into components, as well as
individualized pension provision disclosures for the members of 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.
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 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, indepen-
dent external remuneration and legal consultants, resulted in
an alignment with the Group strategy. In addition to the
statutory requirements of the Aktiengesetz (AktG – German
Stock Corporation Act), the Supervisory Board took into
account the recommendations of the German Corporate
Governance Code (the Code) in the version dated February 7,
2017 in the existing remuneration system. In particular, the
remuneration structure is focused on ensuring sustainable
business development. The Supervisory Board revised the
remuneration system for the members of the Board of
Management in fiscal year 2020 and adopted the enhanced
remuneration system on December 14, 2020 with effect from
January 1, 2021. The enhanced remuneration system imple-
ments the requirements of the AktG as amended by the
German Act on the Implementation of the Second Share-
holders' Rights Directive (ARUG II – Gesetz zur Umsetzung der
zweiten Aktionärsrechterichtlinie) and takes into account the
recommendations of the Code in the version dated December
19, 2019 (that took effect on March 20, 2020). The Supervisory
Board will submit the revised remuneration system to the
Annual General Meeting for approval in 2021 in line with the
requirements of the AktG as amended by the ARUG II. For
Board of Management members already appointed, sub-
stantial parts of the enhanced remuneration system will
apply from January 1, 2021. The remainder of the enhanced
remuneration system will apply from the time of reappoint-
ment and for first time appointees to the Board of Manage-
ment. The enhanced remuneration system particularly
implements environmental, social and governance targets
(ESG targets), introduces penalty and clawback rules for
variable remuneration components and extends the assess-
ment period for performance share plans to four years.
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 mea-
sured against the peer group and the remuneration structure
that applies to other areas of Volkswagen. In this context,
comparative 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 chapter, we provide an overview of the Board of
Management’s remuneration system in the reporting year
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-
Corporate Governance
Remuneration Report
67
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 targets agreed with each of the members of
the Board of Management are achieved, the annual target
remuneration for each member will amount to a total of
€4,500,000 (corresponding 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 Management amounts to a total of
€9,000,000 (fixed remuneration of €2,125,000, a target amount
from the annual bonus of €3,045,000, and a target amount
from the performance share plan of €3,830,000).
Board of Management members who also have duties as
members of other corporate bodies within the Volkswagen
Group generally do not receive separate remuneration for these.
Annual minimum remuneration of €3.5 million (sum of
fixed remuneration, annual bonus, LTI and any special
payments) was contractually agreed with Mr. Sommer. This
applied pro rata for fiscal year 2020 due to his departure from
the Board of Management.
Non-performance-related remuneration
The non-performance-related remuneration comprises fixed
remuneration and fringe benefits. 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.
Mr. Duesmann received compensation of entitlements lost
due to his change of employer in the amount of €7.3 million.
Performance-related remuneration
The performance-related/variable remuneration consists of
an annual performance-related bonus with a one-year assess-
ment period and a long-term incentive (LTI) in the form of a
performance share plan with a forward-looking three-year
term (long-term incentive components). The components of
performance-related/variable remuneration reflect both posi-
tive and negative 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 compo-
nents of the annual bonus are only payable if certain thresh-
olds are reached or exceeded.
The calculated payment amount may be individually
reduced by up to 20% (multiplier of 0.8) or increased by up to
20% (multiplier of 1.2) 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 Volks-
wagen 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. For
fiscal year 2020, the Supervisory Board has established the
performance factor of 1.2 for existing Board of Management
members. This was primarily due to the Board of Manage-
ment members’ outstanding pandemic management and the
fact that complete attainment of the transformation target
would have been expected under non-pandemic-related
conditions.
The annual bonus is payable following approval of the
consolidated financial statements for the respective financial
year. Deferral is generally not allowed.
68
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Corporate Governance
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
2019
2020
%
2019
2020
Maximum threshold
100% level of target
Minimum threshold
Actual
Target achievement (in %)
25.0
17.0
9.0
21.4
127
25.0
17.0
Maximum threshold
100% level of target
9.0
Minimum threshold
13.3
Actual
53
Target achievement (in %)
8.0
6.0
4.0
6.7
118
8.0
6.0
4.0
4.3
58
Corporate Governance
Remuneration Report
69
Performance share plan – long-term incentive (LTI)
The LTI is granted to the Board of Management annually in
the form of a performance share plan. 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 perfor-
mance shares of Volkswagen AG, which are allocated to the
respective member of the Board of Management purely for
calculation purposes. The conversion is performed based on
the unweighted average of the closing prices of Volkswagen’s
preferred shares for the last 30 trading days preceding
January 1 of a given fiscal year. At the end of each year, the
number of performance shares is determined definitively for
one-third of the three-year performance period based on the
degree of target achievement for the annual earnings per
Volkswagen preferred share (EPS – earnings per share per
preferred share in €). A prerequisite for this is that a threshold
is reached.
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
€
2017
2018
2019
Maximum threshold
100% level of target
Minimum threshold
Actual
Target achievement (in %)
30.0
20.0
10.0
22.69
113
30.0
20.0
10.0
23.63
118
30.0
20.0
10.0
26.66
133
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
€
2018
2019
2020
Maximum threshold
100% level of target
Minimum threshold
Actual
Target achievement (in %)
30.0
20.0
10.0
23.63
118
30.0
20.0
10.0
26.66
133
30.0
20.0
10.0
16.66
83
P E R F O R M A N C E P E R I O D 2 0 1 9 – 2 0 2 1
€
2019
2020
Maximum threshold
100% level of target
Minimum threshold
Actual
Target achievement (in %)
30.0
20.0
10.0
26.66
133
P E R F O R M A N C E P E R I O D 2 0 2 0 – 2 0 2 2
€
Maximum threshold
100% level of target
Minimum threshold
Actual
Target achievement (in %)
30.0
20.0
10.0
16.66
83
2020
30.0
20.0
10.0
16.66
83
70
Remuneration Report
Corporate Governance
After the end of the three-year term of the performance share
plan, a cash settlement takes place. The payment amount
corresponds to the final 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 closing reference price is the unweighted
average of the closing prices for Volkswagen’s preferred
shares for the 30 trading days preceding the last day of the
three-year performance period. The dividend equivalent
corresponds to the dividends distributed during the holding
period on a genuine Volkswagen preferred share.
The performance share plan is focused exclusively on cash
payment. Stock options are not part of the Volkswagen AG
remuneration system. Consequently, there is no obligation to
hold shares for members of the Board of Management.
P E R F O R M A N C E - P E R I O D
2017 – 2019
2018 – 2020
2019 – 2021
2020 – 2022
Initial reference price
Closing reference price
Dividend equivalent
2017
2018
2019
2020
127.84
177.44
169.42
149.14
2.06
3.96
4.86
–
–
3.96
4.86
4.86
147.08
177.44
– 1
–
–
4.86
4.86
– 1
–
–
–
4.86
1 Determined at the end of the performance period.
The payment amount under the performance share plan is
limited to 200% of the target amount. The payment amount
is reduced by 20% if the average ratio of capex to sales
revenue or the R&D ratio in the Automotive Division of the
last three years is smaller than 5%. The Supervisory Board
may cap the LTI in the event of extraordinary developments.
If the employment contract of a member of the Board of
Management concludes prior to the end of the performance
period due to extraordinary termination based on good
cause, or if the member of the Board of Management starts
working for a competitor (also referred to as “bad-leaver
cases”), the non-vested performance shares will expire. For
members of the Board of Management who held their seat as
of December 31, 2016, this rule only applies in the event of a
reappointment or new appointment.
In connection with the appointment of the Chairman of
the Board of Management, the employment contract of
Mr. Diess was terminated by mutual agreement in 2018 and a
new employment contract was entered into, whereby the
expiry rule described above applies from the 2018 to 2020
performance period onwards.
In connection with the
reappointment of Mr. Witter, the expiry rule applies from the
2020 to 2022 performance period onwards.
In the introductory phase of the performance share plan,
the members of the Board of Management who were Board
members as of December 31, 2016 generally received advances
of 80% of their target amount for the 2017 to 2019 and 2018
to 2020 performance periods. Mr. Blume receives corres-
ponding advances for the performance periods 2018 to 2020
(proportionate) and 2019 to 2021. The two advances will each
be paid after the first year of the performance period. Final
settlement is based on actual achievement of targets at the
end of the relevant three-year performance period.
Corporate Governance
Remuneration Report
71
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 D S
L T I
Provisional
performance shares
(number)
Final number determined for 1/3
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
Oliver Blume
Markus Duesmann (since April 1, 2020)
Gunnar Kilian
Andreas Renschler (until July 15, 2020)
Abraham Schot (until March 31, 2020)
Stefan Sommer (until June 30, 2020)
Hiltrud Dorothea Werner
Frank Witter
Total
€
Herbert Diess
Oliver Blume
Markus Duesmann (since April 1, 2020)
Gunnar Kilian
Andreas Renschler (until July 15, 2020)
Abraham Schot (until March 31, 2020)
Stefan Sommer (until June 30, 2020)
Hiltrud Dorothea Werner
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
P E R F O R M A N C E - P E R I O D
2 0 1 9 – 2 0 2 1
P E R F O R M A N C E - P E R I O D
2 0 2 0 – 2 0 2 2
Number of
performance
shares allocated
at the grant date
Number of
performance
shares allocated
at the grant date
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
–
–
12,907
14,080
55,147
19,212
7,614
–
7,614
10,624
–
3,541
10,624
10,624
69,853
26,040
12,238
–
12,238
12,238
12,238
12,238
12,238
12,238
3,350,046
1,574,419
–
1,574,419
1,574,419
1,574,419
1,574,419
1,574,419
1,574,419
111,706
14,370,977
21,585
10,144
7,608
10,144
5,495
2,536
–
10,144
10,144
77,800
3,584,837
1,684,716
1,088,933
1,684,716
912,610
421,179
–
1,684,716
1,684,716
12,746,420
Provision as of
Dec. 31, 2020
Intrinsic value as of
Dec. 31, 2020
6,019,320
775,860
321,159
3,247,860
3,351,992
2,398,671
–
4,025,798
3,550,948
2,060,142
355,226
–
1,387,226
3,351,992
2,398,671
–
1,935,604
2,501,995
Comprehensive
income 2020
arising from
performance
shares
4,300,115
1,231,600
321,159
1,231,600
– 235,112
110,408
– 707,720
1,963,018
– 1,644,971
Provision as of
Dec. 31, 2019
Intrinsic value as of
Dec. 31, 2019
3,504,374
984,260
–
2,016,260
5,572,774
3,925,694
1,415,440
5,019,403
6,981,087
3,687,200
–
–
–
3,879,394
–
–
2,782,969
3,879,394
Comprehensive
income 2019
arising from
performance
shares
3,490,713
1,614,937
–
1,614,937
1,713,961
3,925,694
1,317,674
2,852,956
2,054,256
23,691,608
13,990,856
6,570,097
29,419,292
14,228,957
18,585,127
72
Remuneration Report
Corporate Governance
The number of performance shares equals 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.
To determine the amount of the obligation, the pro-
visional performance shares determined or allocated for the
performance periods 2018 to 2020, 2019 to 2021 and 2020 to
2022 were taken into account. The intrinsic value of the
obligation 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, 2020. 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 last 30 trading days
(Xetra closing prices of Volkswagen’s preferred shares)
preceding December 31, 2020, taking the dividends paid per
preferred share during the performance period into account.
The net value of all amounts recognized in income for the
performance shares in fiscal year 2020 is recorded in
“Comprehensive income 2020 arising from performance
shares” according to the IFRSs. Those members who left
during the year were shown pro rata.
Phantom preferred shares
The phantom preferred shares for the remuneration withheld
for 2015 formed part of the Board of Management remu-
neration until they were paid out in 2019. In fiscal year 2019,
changes in the value of the phantom shares led to the
recognition of expenses of €0.1 million.
Total remuneration cap
In addition to the cap on the individual variable components
of the remuneration for the members of the Board of
Management, the annual benefits received according to the
Code in the version dated February 7, 2017, consisting of
fixed remuneration and the variable remuneration com-
ponents (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 Management. 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, the total remu-
neration cap and the individual targets. Among other things,
the Supervisory Board performs a vertical comparison with
the remuneration and employment terms of the Company’s
employees and a horizontal comparison with the remuner-
ation and employment terms of other companies’ man-
agement board members. The Supervisory Board uses an
appropriate peer group of other companies to assess how
customary the Board of Management members’ specific total
remuneration is when measured against other businesses.
This peer group is regularly reviewed and adjusted, most
recently in February and December 2020. The peer group
currently comprises the following companies: BMW, Daimler,
Ford, General Motors, PSA Groupe, Nissan Motor Corporation,
Toyota, BYD, Tesla (excluding CEO), hp, IBM, Uber, SAP,
Samsung, General Electric, Siemens, Hitachi and Boeing.
Other agreements
Members of the Board of Management are entitled to pay-
ment of their normal remuneration for six months in the
event of illness. 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
agreements – 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.
Members of the Board of Management and the Super-
visory Board generally have the opportunity to obtain loans
from Group companies.
Corporate Governance
Remuneration Report
73
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
Oliver Blume
Markus Duesmann (since April 1, 2020)
Gunnar Kilian
Andreas Renschler (until July 15, 2020)
Abraham Schot (until March 31, 2020)
Stefan Sommer (until June 30, 2020)
Hiltrud Dorothea Werner
Frank Witter
Members of the Board of Management who left in the
previous year
2 0 2 0
2 0 1 9
Non-performance-
related
component
Performance-
related
component
2,322,725
1,420,701
8,475,2362
1,435,899
802,746
417,122
809,815
1,472,776
1,421,549
–
2,027,285
1,038,7961
674,097
898,796
466,563
–
–
898,796
898,796
–
Long-term
incentive
component
3,584,837
1,684,716
1,088,933
1,684,716
912,610
421,179
–
1,684,716
1,684,716
–
Total
remuneration
Total
remuneration
7,934,847
4,144,213
10,238,266
4,019,411
2,181,919
838,301
809,815
4,056,288
4,005,061
–
9,850,742
4,894,440
–
4,938,205
5,085,259
5,285,583
5,344,523
4,940,663
4,888,285
166,574
Total
18,578,569
6,903,129
12,746,420
38,228,118
45,394,272
1 Includes a special bonus by Porsche AG in the amount of €140,000.
2 Includes compensation of entitlements lost due to a change of employer in the amount of €7.3 million.
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 tables in accordance with the Code in the
version dated February 7, 2017 correspond, in principle, to
the amounts paid out for the fiscal year in question.
In 2020, Mr. Blume received an advance on the target
amount for the 2019 to 2021 performance period. In accor-
dance with the Code, this was reported in the tables in 2019
as benefits for the fiscal year.
The amounts shown as “Benefits granted” in the Board of
Management remuneration tables in accordance with the
Code in the version dated February 7, 2017 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. In the case of
the performance share plan, the respective tranches are only
payable to the Board of Management members at the end of
the respective performance period (except for the advance
described above). It is not until this time that the tranches are
available to the Board of Management members. However, the
tranches are shown as “Benefits granted” in the fiscal year in
which they are allocated.
74
Remuneration Report
Corporate Governance
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 I N T H E V E R S I O N D AT E D F E B R U A R Y 7 , 2 0 1 7
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 (until June 30, 2020),
Volume brand group,
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)
LTI (performance share plan 2019–2021)
LTI (performance share plan 2020–2022)
Phanton shares
Total
Pension expense
Total remuneration
Benefits received
Benefits granted
2020
2019
2019
2020
2020 (minimum)
2020 (maximum)
2,125,000
2,125,000
2,125,000
2,125,000
2,125,000
2,125,000
197,725
2,322,725
2,027,285
1,785,168
1,785,168
–
–
–
–
6,135,178
1,568,053
7,703,231
87,694
2,212,694
4,288,002
540,445
–
–
–
–
540,445
7,041,141
1,354,053
8,395,194
87,694
2,212,694
3,045,000
3,350,046
–
–
3,350,046
–
–
8,607,740
1,354,053
9,961,793
197,725
2,322,725
3,045,000
3,584,837
–
–
–
3,584,837
–
8,952,562
1,568,053
10,520,615
197,725
2,322,725
–
–
–
–
–
–
–
2,322,725
1,568,053
3,890,778
197,725
2,322,725
5,481,000
7,660,000
–
–
–
7,660,000
–
15,463,725
1,568,053
17,031,778
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
€
Fixed remuneration
Fringe benefits
Total
One-year performance-related remuneration1
Multiyear performance-related remuneration
LTI (performance share plan 2018–2020)
LTI (performance share plan 2019–2021)
LTI (performance share plan 2020–2022)
Total
Pension expense
Total remuneration
Benefits received
Benefits granted
2020
2019
2019
2020
2020 (minimum)
2020 (maximum)
1,350,000
1,350,000
1,350,000
1,350,000
1,350,000
1,350,000
70,701
1,420,701
1,038,796
–
–
–
–
68,936
1,418,936
1,901,085
1,440,000
–
68,936
1,418,936
1,500,000
1,574,419
–
1,440,000
1,574,419
–
–
2,459,497
4,760,021
4,493,355
997,938
808,544
808,544
70,701
1,420,701
1,350,000
1,684,716
–
–
1,684,716
4,455,417
997,938
70,701
1,420,701
–
–
–
–
–
70,701
1,420,701
2,430,000
7,200,000
–
3,600,000
3,600,000
1,420,701
11,050,701
997,938
997,938
3,457,435
5,568,565
5,301,899
5,453,355
2,418,639
12,048,639
1 In 2019, Mr. Blume was granted a performance-related bonus payment by Porsche AG up to an amount of €150,000, which led to benefits received of €140,000 in 2020. The bonus
payment was not taken into consideration in the remuneration from Volkswagen AG.
Corporate Governance
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 ( 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 I N T H E V E R S I O N D AT E D F E B R U A R Y 7 , 2 0 1 7
M A R K U S D U E S M A N N
Chairman of the Board of Management of AUDI AG,
Premium brand group
Joined: April 1, 2020
€
Fixed remuneration
Fringe benefits
Total
One-year performance-related remuneration
Multiyear performance-related remuneration
LTI (performance share plan 2020–2022)
Total
Pension expense
Total remuneration
Benefits received
Benefits granted
2020
2019
2019
2020
2019 (minimum)
2019 (maximum)
8,277,5831
197,653
8,475,236
674,097
–
–
9,149,333
849,934
9,999,267
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8,277,583
8,277,583
8,277,583
197,653
8,475,236
1,012,500
1,088,933
1,088,933
197,653
8,475,236
–
–
–
197,653
8,475,236
1,822,500
2,700,000
2,700,000
10,576,669
8,475,236
12,997,736
849,934
849,934
849,934
11,426,603
9,325,170
13,847,670
1 Includes compensation for entitlements lost due to a change of employer in the amount of €7.3 million, which is not taken into consideration in the total remuneration cap.
G U N N A R K I L I A N
Human Resources and Truck & Bus (since July 15, 2020)
€
Fixed remuneration
Fringe benefits
Total
One-year performance-related remuneration
Multiyear performance-related remuneration
LTI (performance share plan 2018–2020)
LTI (performance share plan 2019–2021)
LTI (performance share plan 2020–2022)
Total
Pension expense
Total remuneration
Benefits received
Benefits granted
2020
2019
2019
2020
2020 (minimum)
2020 (maximum)
1,350,000
1,350,000
1,350,000
1,350,000
1,350,000
1,350,000
85,899
1,435,899
898,796
112,701
1,462,701
1,901,085
–
–
–
–
–
–
–
–
112,701
1,462,701
1,350,000
1,574,419
–
1,574,419
–
2,334,695
1,170,535
3,505,230
3,363,786
4,387,120
886,559
886,559
4,250,345
5,273,679
85,899
1,435,899
1,350,000
1,684,716
–
–
1,684,716
4,470,615
1,170,535
5,641,150
85,899
1,435,899
–
–
–
–
–
1,435,899
1,170,535
2,606,434
85,899
1,435,899
2,430,000
3,600,000
–
–
3,600,000
7,465,899
1,170,535
8,636,434
76
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Corporate Governance
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 I N T H E V E R S I O N D AT E D F E B R U A R Y 7 , 2 0 1 7
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
Left: July 15, 2020
Benefits received
Benefits granted
2020
2019
2019
2020
2020 (minimum)
2020 (maximum)
731,250
71,496
802,746
466,563
1,785,168
1,785,168
–
–
–
–
3,054,477
–
3,054,477
1,350,000
1,350,000
259,755
1,609,755
1,901,085
990,754
–
–
–
–
990,754
4,501,594
5,025,570
9,527,164
259,755
1,609,755
1,350,000
1,574,419
–
–
1,574,419
731,250
71,496
802,746
731,250
912,610
–
–
–
–
–
912,610
–
731,250
71,496
802,746
–
–
–
–
–
–
–
731,250
71,496
802,746
1,316,250
1,950,000
–
–
–
1,950,000
–
4,534,174
5,025,570
9,559,744
2,446,606
802,746
4,068,996
–
–
–
2,446,606
802,746
4,068,996
A B R A H A M S C H O T
Chairman of the Board of Management of AUDI AG,
Premium brand group
Left: March 31, 2020
Benefits received
Benefits granted
2020
2019
2019
2020
2020 (minimum)
2020 (maximum)
1,350,000
1,350,000
337,500
79,622
417,122
–
–
–
–
460,079
1,810,079
1,901,085
–
–
–
417,122
56,049
473,171
3,711,164
2,222,572
5,933,736
460,079
1,810,079
1,350,000
1,574,419
1,574,419
–
4,734,498
2,222,572
6,957,070
337,500
79,622
417,122
–
421,179
–
421,179
838,301
56,049
894,350
337,500
79,622
417,122
–
–
–
–
417,122
56,049
473,171
337,500
79,622
417,122
–
900,000
–
900,000
1,317,122
56,049
1,373,171
€
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)
LTI (performance share plan 2019–2021)
LTI (performance share plan 2020–2022)
Phanton shares
Total
Pension expense
Total remuneration
€
Fixed remuneration
Fringe benefits
Total
One-year performance-related remuneration
Multiyear performance-related remuneration
LTI (performance share plan 2019–2021)
LTI (performance share plan 2020–2022)
Total
Pension expense
Total remuneration
Corporate Governance
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 I N T H E V E R S I O N D AT E D F E B R U A R Y 7 , 2 0 1 7
S T E F A N S O M M E R
Components and Procurement
Left: June 30, 2020
€
Fixed remuneration
Fringe benefits
Total
One-year performance-related remuneration
Multiyear performance-related remuneration
LTI (performance share plan 2018–2020)
LTI (performance share plan 2019–2021)
LTI (performance share plan 2020–2022)
Total1
Pension expense
Total remuneration
Benefits received
Benefits granted
2020
2019
2019
2020
2020 (minimum)
2020 (maximum)
675,000
134,815
809,815
–
–
–
–
–
1,350,000
1,350,000
519,019
1,869,019
1,901,085
–
–
–
–
519,019
1,869,019
1,350,000
1,574,419
–
1,574,419
–
675,000
134,815
809,815
675,000
134,815
809,815
675,000
134,815
809,815
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
809,815
447,742
4,019,019
4,793,438
761,437
761,437
809,815
447,742
809,815
447,742
809,815
447,742
1,257,557
4,780,456
5,554,875
1,257,557
1,257,557
1,257,557
1 Benefits received for 2019 included a top-up amount on the minimum remuneration of €3.5 million.
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
€
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)
LTI (performance share plan 2019–2021)
LTI (performance share plan 2020–2022)
Total
Pension expense
Total remuneration
Benefits received
Benefits granted
2020
2019
2019
2020
2020 (minimum)
2020 (maximum)
1,350,000
1,350,000
1,350,000
1,350,000
1,350,000
1,350,000
122,776
1,472,776
898,796
2,956,624
2,956,624
–
–
–
115,159
1,465,159
1,901,085
–
–
–
–
–
115,159
1,465,159
1,350,000
1,574,419
–
–
1,574,419
–
5,328,196
1,149,571
6,477,767
3,366,244
4,389,578
956,364
956,364
4,322,608
5,345,942
122,776
1,472,776
1,350,000
1,684,716
–
–
–
1,684,716
4,507,492
1,149,571
5,657,063
122,776
1,472,776
–
–
–
–
–
–
1,472,776
1,149,571
2,622,347
122,776
1,472,776
2,430,000
3,600,000
–
–
–
3,600,000
7,502,776
1,149,571
8,652,347
78
Remuneration Report
Corporate Governance
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 I N T H E V E R S I O N D AT E D F E B R U A R Y 7 , 2 0 1 7
F R A N K W I T T E R
Finance and IT
Components and Procurement (acting July 1, 2020 – December 31, 2020)
€
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)
LTI (performance share plan 2019–2021)
LTI (performance share plan 2020–2021)
Phanton shares
Total
Pension expense
Total remuneration
Benefits received
Benefits granted
2020
2019
2019
2020
2020 (minimum)
2020 (maximum)
1,350,000
1,350,000
1,350,000
1,350,000
1,350,000
1,350,000
71,549
1,421,549
898,796
1,785,168
1,785,168
–
–
–
–
62,781
1,412,781
1,901,085
249,128
–
–
–
–
249,128
62,781
1,412,781
1,350,000
1,574,419
–
–
1,574,419
–
–
4,105,513
1,008,664
5,114,177
3,562,994
4,337,200
886,120
886,120
4,449,114
5,223,320
71,549
1,421,549
1,350,000
1,684,716
–
–
–
1,684,716
–
4,456,265
1,008,664
5,464,929
71,549
1,421,549
–
–
–
–
–
–
–
1,421,549
1,008,664
2,430,213
71,549
1,421,549
2,430,000
3,600,000
–
–
–
3,600,000
–
7,451,549
1,008,664
8,460,213
Corporate Governance
Remuneration Report
79
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 Man-
agement member
in
Mr. Duesmann’s case when he reaches the age of 65. From
July 16, 2022, Mr. Renschler is entitled to a pension of 70% of
his fixed level of remuneration in 2017.
the age of 63, or
reaches
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. Blume, Mr. Diess, Mr. Duesmann, Mr. Kilian,
Mr. Schot, Mr. Sommer and Mr. Witter received a defined con-
tribution plan, which is based in principle on a works agree-
ment 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. Diess and Mr. Witter and
in the amount of 40% of the fixed level of remuneration
for Mr. Blume, Mr. Duesmann, Mr. Kilian, Mr. Schot 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 agreements.
The individual pension modules vest immediately upon
payment to Volkswagen Pension Trust e.V. Instead of a life-
long pension, benefits can optionally be paid out as a lump
sum or in installments when the beneficiary reaches retire-
ment 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 Company.
On December 31, 2020, the pension obligations for
members of the Board of Management in accordance with
IAS 19 amounted to €36.6 (60.5) million. €7.7 (13.7) 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 €26.6 (44.8) million. €6.4 (14.5) million
was added to the provision in the reporting year in accor-
dance with German GAAP.
Retired members of the Board of Management and their
surviving dependents received €35.9 (14.5) million in the year
now ended. Obligations for pensions for this group of
persons measured in accordance with IAS 19 amounted to
€396.3 (373.7) million, or €317.8 (300.5) million measured in
accordance with German GAAP.
A one-year post-contractual restraint on competition has
been agreed with Mr. Duesmann. For the duration of this
post-contractual restraint, Mr. Duesmann will receive com-
pensation. The compensation will count towards current
benefits from the pension scheme.
80
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Corporate Governance
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 are limited to a maximum of two years’
remuneration, in accordance with G.13 sentence 1 of the
Code (severance payment cap).
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.
The post-contractual restraint on competition agreed
with Mr. Duesmann will also generally apply in the event of
early termination. The compensation will count towards any
settlement.
Under the termination agreement with Mr. Schot, he will
participate in the 2019 to 2021, 2020 to 2022 and 2021 to
2023 performance periods without any pro rata reductions. It
has been agreed with Mr. Renschler that the tranche for the
2020 to 2022 performance period will be reduced on a pro
rata basis in line with the date of his departure (July 15, 2020)
and that no bad-leaver case will apply. It has been agreed with
Mr. Sommer that the performance shares allocated to him for
the 2018 to 2020, 2019 to 2021 and 2020 to 2022 performance
periods will expire.
Please refer to notes 46 and 48 to the consolidated
financial 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 2020.
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 2 0 ( 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
Oliver Blume
Markus Duesmann (since April 1, 2020)
Gunnar Kilian
Andreas Renschler (until July 15, 2020)
Abraham Schot (until March 31, 2020)
Stefan Sommer (until June 30, 2020)
Hiltrud Dorothea Werner
Frank Witter
Members of the Board of Management who left in the previous year
Total
Pension expense
Present values as of
December 311
1,568,053
(1,354,053)
997,938
(808,544)
849,934
(–)
1,170,535
(886,559)
–
(5,025,570)
56,049
(2,222,572)
447,742
(761,437)
1,149,571
(956,364)
1,008,664
(886,120)
–
(–)
7,248,486
(12,901,219)
7,694,544
(5,592,969)
3,023,360
(1,743,034)
849,934
(–)
3,702,669
(2,102,717)
–
(29,609,167)
–
(2,222,572)
–
(1,228,940)
5,071,366
(3,482,194)
16,277,467
(14,474,204)
–
(–)
36,619,340
(60,455,797)
1 The amount is reported in the total amount for defined benefit plans recognized in the balance sheet (see note 29 to the consolidated financial statements).
Corporate Governance
Remuneration Report
81
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 remunera-
tion, the Supervisory Board proposed a reorganization of the
remuneration system for the members of the Supervisory
Board to the 2017 Annual General Meeting, which was
approved on May 10, 2017 with 99.98% of the votes cast. The
Board of Management and Supervisory Board will submit the
remuneration system for the members of the Supervisory
Board to the Annual General Meeting for approval in 2021 in
line with the requirements of the AktG as amended by the
ARUG II. The remuneration of the members of the Supervi-
sory Board of Volkswagen AG is comprised entirely of non-
performance-related remuneration components. Remunera-
tion for supervisory board work at subsidiaries continues to
comprise partly non-performance-related and partly perfor-
mance-related components.
The following applies to members of the Supervisory
Board of Volkswagen AG with effect from January 1, 2017:
> The members of the Supervisory Board will receive fixed
remuneration of €100,000 per fiscal year.
> The Chairman of the Supervisory Board will receive fixed
remuneration of €300,000, and his deputy will receive
remuneration of €200,000.
> For their work in the Supervisory Board committees, the
members of the Supervisory Board will also receive addi-
tional 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
Nomination and Mediation Committees established in
accordance with section 27(3) of the Mitbestimmungs-
gesetz (MitbestG – German Codetermination Act) are not
taken into account.
> Committee chairpersons receive double this amount, while
deputy chairpersons receive one-and-a-half times the
committee remuneration listed previously.
> The work on a maximum of two committees shall be
included in calculating the remuneration. If this maximum
is exceeded the two most highly remunerated functions
shall be decisive for the respective remuneration.
> Supervisory Board members who belonged to the Super-
visory Board or one of its committees for only part of the
fiscal year receive remuneration on a pro rata temporis
basis.
> 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 take place on the
same 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 2020, the members of the Supervisory Board
received €5,341,196 (5,327,155). Of this figure, €2,294,167
related to the work of the Supervisory Board and €1,008,889
related to the work in the committees.
82
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Corporate Governance
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 Hofmann2
Hussain Ali Al Abdulla
Hessa Sultan Al Jaber
Bernd Althusmann3
Kai Bliesener2 (since June 20, 2020)
Hans-Peter Fischer2
Marianne Heiß
Johan Järvklo2 (until February 29, 2020)
Ulrike Jakob2
Louise Kiesling
Peter Mosch2
Bertina Murkovic2
Bernd Osterloh2
Hans Michel Piëch
Ferdinand Oliver Porsche
Wolfgang Porsche
Conny Schönhardt2 (since June 21, 2019)
Athanasios Stimoniaris2
Stephan Weil3
Werner Weresch2 (since February 21, 2019)
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
2020
2019
300,000
200,000
100,000
100,000
100,000
53,056
100,000
100,000
41,111
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
–
–
50,000
–
–
50,000
–
–
–
100,000
79,444
125,000
29,444
150,000
150,000
50,000
–
50,000
–
–
500,000
24,000
3,000
9,000
13,000
6,000
13,000
89,500
4,000
13,000
13,000
168,500
21,000
172,000
185,000
164,000
192,390
17,000
324,250
20,000
86,500
–
900,000
299,000
103,000
109,000
163,000
59,056
113,000
239,500
45,111
113,000
113,000
368,500
200,444
397,000
314,444
414,000
442,390
167,000
424,250
170,000
186,500
–
925,500
289,000
105,000
107,000
157,000
–
107,000
250,500
107,000
106,000
107,000
390,500
157,000
387,000
289,000
435,000
433,500
81,389
482,040
163,000
165,352
82,374
Total
2,294,167
1,008,889
2,038,140
5,341,196
5,327,155
1 Attendance fees, membership of other Group bodies (non-performance-related: €792,888; performance-related: €571,002).
2 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).
3 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 in so far as it exceeds €6,200 per annum. Remuneration is defined for this purpose as
Supervisory Board remuneration and attendance fees exceeding the amount of €200.
4
Group Management
Report
(Combined Management Repo r t o f th e Vo l kswa gen Gro u p a nd Vol kswage n AG )
GROUP MANAGEMENT REPORT
85
89
91
94
Goals and Strategies
Internal Management System and
Key Performance Indicators
Structure and Business Activities
Disclosures Required
Under Takeover Law
96
Business Development
110
Shares and Bonds
116 Results of Operations,
Financial Position and Net Assets
132
Volkswagen AG (condensed,
in accordance with the
German Commercial Code)
136
Sustainable Value Enhancement
166 Report on Expected Developments
173 Report on Risks and Opportunities
202 Prospects for 2021
Group Management Report
Goals and Strategies
85
Goals and Strategies
With the TOGETHER 2025+ strategy, we aim to step up the pace, sharpen the focus
of our strategic projects and follow through on implementation even more systematically.
In so doing, we aim to make the future of mobility even more sustainable
– for present and future generations.
With the future-oriented program TOGETHER – Strategy 2025
announced in 2016, we are seeking to make the Volkswagen
Group more focused, efficient, innovative, customer-oriented
and sustainable, and systematically geared toward generating
profitable growth.
We at the Volkswagen Group have set ourselves the goal
of continuing to excite our customers in future and meeting
their diverse needs with an appealing product portfolio of
impressive vehicles and forward-looking, tailor-made mobil-
ity solutions. Every day, we actively assume and exercise
responsibility in relation to the environment, safety and
society, and we aim to be a role model in these areas. Integ-
rity, reliability, quality and passion thus form the basis for
our work. Using this approach, we aim for technological
leadership in the industry and competitive profitability, while
also striving to be an excellent employer.
With the TOGETHER 2025+ Group strategy that we
enhanced in 2019, we are increasing the momentum for
achieving our strategic targets and sharpening our focus. To
this end, the strategic vision of the Volkswagen Group was
also revised. By “Shaping mobility – for generations to come”,
we aim to more actively shape the future of mobility while
safeguarding it sustainably – for present and future genera-
tions.
With electric drives, digital connectivity and autonomous
driving, we want to make the automobile cleaner, quieter,
more intelligent and safer. At the same time, our core product
will become more emotive and will offer a completely new
driving experience. In this way, the car can continue to be a
cornerstone of sustainable, individual and affordable mobil-
ity in the future. In addition, we are committed to the Paris
Agreement on climate protection and are one of the first
companies in our industry to commit ourselves to becoming
a carbon-neutral company by 2050. This includes our vehi-
cles, plants and processes.
The automotive industry is being shaped particularly by the
transformation to e-mobility and digitalization. We have
positioned ourselves to successfully tackle this radical
change: the strategies of our brands and regions as well as
those of our functional areas are consistently aligned with
the TOGETHER 2025+ Group strategy.
Under the umbrella of the TOGETHER 2025+ Group stra-
tegy, we have defined five central modules with which we put
the focus on corporate governance, improved performance,
increased brand values, software and excellence in employee
management.
Our Code of Collaboration, along with our integrity and
compliance program Together4Integrity (T4I), is a central
pillar of the Group strategy. This Code describes how collabo-
ration is to take place within the Group and between individ-
uals in their day-to-day work. Its core values are encapsulated
in the terms “genuine”, “straightforward”, “open-minded”, “as
equals” and “united”. T4I brings together all activities relating
to integrity, culture, compliance, risk management and
human resources, creating a common path toward a new
corporate culture.
F I V E M O D U L E S O F T H E T O G E T H E R 2 0 2 5 + ST R AT E G Y
Our TOGETHER 2025+ Group strategy comprises consistent
strategic decisions and specific modules aimed at safe-
guarding the long-term future of the Group and generating
profitable growth.
These modules are namely Best Governance, Best Perfor-
mance, Best Brand Equity, Software-enabled Car Company
and Excellent Leadership. We continuously review the status
and progress of these initiatives in order to analyze the target
achievement, importance and suitability of the measures
defined. This enables us to tailor these modules to the trans-
formation underway within our Company.
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Goals and Strategies
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In the Best Governance module, we are working to create a
focused, streamlined corporate structure to manage the
brands, continually leverage synergies and accelerate deci-
sion-making processes. We want the Group to be perceived as
efficiently managed, trustworthy, sustainable and trans-
parent. To this end, we are intensifying the dialog with our
key stakeholders and systematically reviewing whether we are
still the best owner for our various brands and companies.
We also want our CO2 targets to be measurable and our prog-
ress toward CO2 neutrality in 2050 to be transparent. We will
strive to establish a leading position in our industry in inter-
national ESG rankings – specifically in the fields of environ-
ment, social issues and governance – in the future.
The aim of the Best Performance module is to achieve a
sustainable increase in our enterprise value by increasing
efficiency, productivity and profitability. As a global company,
our size enables us to make increased use of economies of
scale. We remain firmly committed to our ambitious targets,
work consistently on achieving them and strive to exceed
them. This will lay the foundations for extensive investment
in our Company, in our employees and in mobility for
present and future generations.
In the Best Brand Equity module, the focus is on realigning
and refining the brand portfolio to enable a significant
increase in the value of our Group brands. We are defining
the profiles, brand missions and core competitors of the
Volkswagen Group brands in a more nuanced and distinctive
way. This will enable the Group to better serve the market as a
whole. Based on these optimizations, we will decide on the
future design, product portfolio and services of each Group
brand – using the needs of our customers as a starting point.
In the Software-enabled Car Company module, we are
working to make software development one of the Volks-
wagen Group’s core competencies. To achieve this, we are
pooling existing expertise, substantially strengthening our
resources and establishing a dedicated organizational unit.
Going forward, all new vehicle models across the Group will
be based on our own cross-brand software platform. This
approach will provide the opportunity to leverage synergies
between the individual brands and vehicle projects. The aim
is that the Volkswagen Group and its brands will stand not
only for the best vehicles but in equal measure for exciting
digital products and services.
Group Management Report
Goals and Strategies
87
The Excellent Leadership module is based on three main
areas: communication, human resources development and
collaboration. To remain competitive and fit for the future,
we will accelerate the transformation to a more open, more
partnership-based and more value-based leadership culture.
We are developing digital and dialogue-based communi-
cation formats to enable a more timely flow of information
and integrate all brands and regions even more strongly. We
are completely restructuring management development and
training and taking an even more systematic approach to
succession planning so that, at our Group, the right talent is
always in the right position at the right time. We are also
defining clear expectations for the Group’s managers. These
involve greater customer focus, more corporate responsi-
bility, greater effectiveness and focus on results as well as a
culture of constructive dissent and a positive approach in
dealing with mistakes. Volkswagen also wants to increase
diversity at all levels of the company and is pursuing clear,
measurable targets for raising the proportion of female and
international managers.
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 ST R AT E G Y
The five strategic modules describe how we want to achieve
our vision of sustainable mobility for present and future
generations. We are managing our project using four target
dimensions, which are also reflected in the Volkswagen
strategy rhombus. The four target dimensions are as follows:
excited customers, excellent employer, role model for
environment, safety and integrity, and competitive profita-
bility. We want to grow sustainably by consistently pursuing
these objectives.
The target dimensions apply throughout the whole
Group. The strategic KPIs that we use to measure how well we
have implemented our Group strategy are dependent on the
respective business model. After all, the business model for
our passenger car-producing brands is different from the
business model for trucks and buses and also differs from the
business model for our Power Engineering Business Area and
our services business.
The strategic KPIs of the competitive profitability target
dimension have been defined and standardized. As the Group
strategy is currently being specified and enhanced in detail,
the content of some strategic KPIs in the other target dimen-
sions is still being determined. The relevance of the KPIs is
reviewed at Group level and their focus is continuously
monitored and adjusted as necessary. We report on the
defined non-financial strategic KPIs in the chapter entitled
“Sustainable Value Enhancement”.
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, thus generating maxi-
mum customer benefit. This requires not only the best prod-
ucts, the most efficient solutions and the best service, but
also 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
To achieve sustainable success, we need skilled and dedicated
employees. We aim to foster their satisfaction and motivation
by means of equal opportunities, an attractive and modern
working environment, and a forward-looking organization of
work. An exemplary leadership and corporate culture forms
the basis for this, allowing us to retain our core workforce and
attract new talents.
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 the diversity index.
Target dimension: role model for environment, safety and integrity
Every day, we at the Volkswagen Group assume and exercise
responsibility in issues relating to the environment, safety
and society. This commitment should be reflected both in
our thoughts and actions and in all our decisions. We pay
particular attention to the use of resources and the emissions
of our product portfolio as well as those of our sites and
plants, with the goal of continuously improving our carbon
footprint and lowering pollutant emissions. Through innova-
tions and outstanding quality, we aim for maximum product
safety.
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Goals and Strategies
Group Management Report
Our primary objectives in this process include complying
with laws and regulations, establishing 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 suc-
cessful enterprise.
The strategic KPIs of this target dimension consist of the
decarbonization index and fleet CO2 emissions figures, com-
pliance, a culture of dealing openly with mistakes, 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 in the future 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 manage-
ment 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%
~10% of
consolidated
sales revenue
Return on investment (ROI) in the
Automotive Division
–0.2%
>14%
1 2015 before special items.
Group Management Report
Internal Management System and Key Performance Indicators
89
Internal Management System and
Key Performance Indicators
This chapter describes how the Volkswagen Group is managed on the basis of the Group strategy
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 Best Performance module of our
TOGETHER 2025+ Group strategy, we want to improve these
indicators across all areas and along the entire value chain. In
so doing, we aim to sustainably increase the Company’s value
and raise our efficiency, productivity and profitability.
In the following, we first describe the internal manage-
ment process and then explain the Volkswagen Group’s most
significant performance indicators, known as the 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
Consistent, close integration of the Group and brand
strategies with the operational planning process ensures
transparency at the Volkswagen Group when it comes to the
financial assessment and evaluation of strategic decisions.
The operational medium-term planning that is conducted
once a year and generally covers a period of five years is
incorporated into the strategic planning as a key manage-
ment 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, namely
functions/processes, products and markets.
When planning the Company’s future, the
individual
planning components are determined on the basis of the
timescale 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 in the future.
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
necessary, 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.
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Internal Management System and Key Performance Indicators
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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 for 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 custom-
ers. 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 con-
sensus 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
emphasis is placed on the environmentally friendly orien-
tation of our product portfolio, digitalization and new tech-
nologies. The R&D ratio reflects our activities undertaken to
safeguard the Company’s future viability.
investment property and
The ratio of capex (investments in property, plant and
equipment,
intangible assets,
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, electrifying and
digitalizing our product range and for environmentally
friendly drivetrains, as well as for adjusting production
capacities and improving production processes – in relation
to the Automotive Division’s sales revenue.
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.
Group Management Report
Structure and Business Activities
91
Structure and Business Activities
This chapter describes the legal and organizational structure of the Volkswagen Group
and explains the material changes in 2020 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 direct or indirect interests in AUDI AG, SEAT S.A., ŠKODA
AUTO a.s., Dr. Ing. h.c. F. Porsche AG, TRATON 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 Handels-
gesetzbuch (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
electricity sector, Volkswagen AG generates, sells and distri-
butes electricity as a group together with its subsidiaries.
The Volkswagen AG Board of Management has sole
responsibility for managing the Company. 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 and the Volks-
wagen Commercial Vehicles brand. Activities focus on the
development of vehicles, engines and vehicle software, the
production and sale of passenger cars and light commercial
vehicles, and the genuine parts business. The product port-
folio ranges from compact cars to luxury vehicles and also
includes motorcycles, and is supplemented by mobility
solutions.
The Commercial Vehicles Business Area primarily com-
prises the development, production and sale of trucks and
buses from the Scania and MAN brands, the corresponding
genuine parts business and related services. The commercial
vehicles portfolio ranges from light vans to heavy trucks and
buses. The collaboration between the two commercial vehicle
brands is coordinated within TRATON SE, which is listed on
the stock exchange.
The Power Engineering Business Area combines the large-
bore diesel engines, turbomachinery, special gear units, and
propulsion components businesses. Until October 2020, it
also included the business of Renk.
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 key sales markets
currently include Western Europe, China, the USA, Brazil,
Russia, Poland, Turkey and Mexico.
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Structure and Business Activities
Group Management Report
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.
Accordingly, responsibilities were divided between eight
Board of Management positions until December 31, 2020. In
addition to the Chairman of the Board of Management, which
also includes the Volume brand group, the other Board
positions were: Components and Procurement, Finance and
IT, Human Resources and Truck & Bus, Integrity and Legal
Affairs, Premium, Sport & Luxury as well as China. As of
December 31, 2020, the board member for Finance and IT was
also responsible for Components and Procurement on a
temporary basis, and the Chairman of the Board of Manage-
ment was also responsible for China.
In December 2020, the Supervisory Board decided to split
up the responsibility for Components and Procurement from
January 1, 2021, replacing it with two new Board positions:
Purchasing and Technology. The new Technology Board
position will be responsible for all Group Components activi-
ties worldwide, the marketing of the Volkswagen platforms to
third parties, the development and manufacturing of battery
cells as well as the associated procurement, the areas of
charging and charging systems and the corresponding joint
ventures worldwide.
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. Bentley will be allocated to the Premium brand group
as of March 1, 2021. The Truck & Bus brand group is the
umbrella for the Scania and MAN brands.
We are convinced that this management model will allow
better use of existing expertise and economies of scale, boost
synergy effects more systematically and accelerate decision
making. In addition, it will prepare the Volkswagen Group for
a management structure that is simpler, leaner and more
effective, and strengthen 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, improving collaboration between the brands and
the Group as a whole, leveraging synergies and ensuring that
management of the Group is a shared undertaking.
Each brand within the Volkswagen Group is managed by a
brand board of management, which ensures the brand's
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
agreements 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 to be agreed upon, to the
extent permitted by law. The rights and obligations of the
statutory bodies of the relevant brand company remain
unaffected.
The Volkswagen Group companies are managed solely by
their respective managements. The management of each
individual company takes into account not only the interest
of its own company but also the interests of the Group, the
relevant brand group and the individual brands in accor-
dance with the framework laid down by law.
In addition, at Group level, Board of Management com-
mittees address key strategic issues relating to products,
technologies, investments, digital transformation, integrity
and compliance, risk management, human resources and
management issues. We constantly revise and optimize the
committees in order to review their relevance and further
increase the efficiency of their decision making. This reduces
complexity and reinforces governance within the Group.
The Best Governance module of our future program
TOGETHER 2025+ is fostering our Company’s transformation.
One of its aims is to further improve manageability of the
Group and to make even better use of synergy effects. The
establishment of the Car.Software Organisation was just one
way of further enhancing management of the Group in the
reporting year.
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
As part of the planned squeeze-out at AUDI AG under the
German Stock Corporation Act, Volkswagen AG announced
on June 16, 2020 that the cash settlement for the transfer of
shares held by minority shareholders had been set at
€1,551.53 per share. On July 31, 2020, the Annual General
Meeting of AUDI AG approved the squeeze-out under stock
corporation law at AUDI AG and thus the transfer of all
outstanding Audi shares to Volkswagen AG. This resolution
took effect upon its entry in the commercial register on
November 16, 2020. In December 2020, a former shareholder
of AUDI AG initiated award proceedings against Volks-
wagen AG at the Munich I Regional Court, asking the court to
review the amount of the cash settlement offered by Volks-
wagen AG.
On October 6, 2020, the Volkswagen Group completed the
sale of its 76% interest in Renk AG following the required
regulatory approvals. The sale price was €0.5 billion.
Group Management Report
Structure and Business Activities
93
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,
company, commercial, capital market, anti-trust and tax
regulations and regulations relating to labor, banking, state
aid, energy, environmental and insurance law.
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 can be found
in this annual report and is permanently available on our
website at www.volkswagenag.com/en/InvestorRelations/cor-
porate-governance/declaration-of-conformity.html.
VO L K SWAG E N AG S H A R E H O L D I N G S
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/news-and-publications/
Financial_Statements.html
www.volkswagenag.com/en/InvestorRelations/corporate-governance/declaration-
of-conformity.html
94
Disclosures Required Under Takeover Law
Group Management Report
Disclosures Required Under
Takeover Law
This chapter 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, 2020. 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; in particular, it resolves on the appro-
priation 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
Association (Article 11(1)), the State of Lower Saxony is
entitled to appoint two members of the Supervisory Board of
Volkswagen AG for as long as it directly or indirectly holds at
least 15% of Volkswagen AG’s ordinary shares. In addition,
resolutions 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.
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
Group Management Report
Disclosures Required Under Takeover Law
95
State of Lower Saxony is entitled to appoint two of these
shareholder representatives for as long as it directly or
indirectly holds at least 15% of the Company’s ordinary
shares. The remaining shareholder representatives on the
Supervisory 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
and information about its composition are described in the
Group Corporate Governance Declaration.
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 T O
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 14, 2019, a resol-
ution 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 13, 2024 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.
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
At the end of fiscal year 2019, a banking syndicate granted
Volkswagen AG a syndicated line of credit amounting to
€10.0 billion that currently runs until December 2025. With
the new line of credit, the syndicate members were granted
the right to call their portion of the syndicated line of credit
in two cases. A call right exists if one individual or several
individuals acting
jointly who as of the date of this
agreement exercise control over the Company have legal or
economic ownership of shares that together make up more
than 90% of the voting rights of the Company. However, a call
right also exists if one individual or several individuals acting
jointly who as of the date of this agreement do not exercise
control over the Company obtain control over the Company.
Such a call right does not exist, however, if one shareholder or
several shareholders of Porsche Automobil Holding SE or one
or several legal entities from the Porsche or Piëch family
directly or indirectly obtains control over the Company.
Volkswagen AG and the Ford Motor Company entered
into a Master Collaboration Agreement in January 2019. This
agreement sets out a framework of obligations, which are to
apply to the further co-operation agreements entered into
between the parties, including those entered into in fiscal
year 2020. It also covers the Development Agreement
concluded in January 2019 for the development of the next-
generation Amarok. The Master Collaboration Agreement
provides for a right of termination with immediate effect in
the event of a Change of Control. A Change of Control has
been defined to mean a change affecting more than 50% of
the voting rights of one of the companies or a change in the
ability to directly or indirectly control the management of
one company through its decision making bodies. The right
of termination must be exercised within 90 days of the
company becoming aware of a Change of Control.
96
Business Development
Group Management Report
Business Development
The global economy recorded negative growth in fiscal year 2020 due to the impact
of the Covid-19 pandemic. Global demand for vehicles was lower than in the previous year.
Amid these challenging market conditions, the Volkswagen Group delivered
9.3 million vehicles to customers.
G L O B A L S P R E A D O F C O R O N AV I R U S ( S A R S - C O V - 2 )
At the end of 2019, initial cases of a potentially fatal respira-
tory disease became known in Wuhan, in the Chinese prov-
ince of Hubei. This disease is attributable to a novel corona-
virus. Infections also appeared outside China from mid-
January 2020. In Europe, the number of people infected rose
continuously in the course of February, and especially in
March and April 2020. While many European countries
recorded declining numbers of new infections as the second
quarter of 2020 progressed, the rate of new infections
continued to rise in North, Central and South America, Africa
and parts of Asia. In the second quarter, many of the mea-
sures taken to contain the Covid-19 pandemic were gradually
eased, especially in Europe. This included partially lifting
border controls and travel restrictions and easing lockdowns
as well as the reopening of businesses and public facilities. In
addition, the European Commission and numerous European
governments approved aid packages to support the economy.
In other regions, too, governments introduced measures
aimed at shoring up the economy to counteract the enor-
mous disruption to everyday life and economic activity
caused by the Covid-19 pandemic. During the third quarter,
and particularly during the fourth quarter of 2020, many
regions outside China and around the world saw a renewed
– and in some cases very rapid – increase in new infections,
which led to the easing of restrictions being reversed in
certain situations.
Throughout the whole of 2020, the global spread of the
SARS-CoV-2 virus brought enormous disruption to all areas of
everyday life and the economy.
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 spread of the SARS-CoV-2 virus, the associated
restrictions, and the resulting downturn in demand and
supply meant that growth in the world economy was nega-
tive in 2020, at –4.0 (2.6)%. The average rate of expansion of
gross domestic product (GDP) was far below the previous
year’s level in both the advanced economies and the emerg-
ing markets. At country level, performance in the reporting
period depended on the extent to which the negative impact
of the Covid-19 pandemic was already materializing. The
governments and central banks of numerous countries
responded
in some cases with substantial fiscal and
monetary policy measures. This meant cuts in the already
relatively low interest rates. There was a significant drop in
prices for energy resources, while other commodity prices
increased slightly year-on-year on average. On a global
average, consumer prices rose at a slower pace than in 2019,
and global trade in goods declined in the reporting period.
Europe/Other Markets
At –7.2 (1.3)%, the economies of Western Europe as a whole,
recorded a sharp fall in growth in 2020. This trend was seen in
nearly all countries in Northern and Southern Europe. The
impact of national measures to contain the pandemic,
including border closures and physical distancing, caused
deep cuts. In some states, the measures severely restricted
everyday life and also had grave economic consequences.
Governments of many countries in this region subsequently
started to lift some of the restrictions imposed, spawning a
gradual economic recovery.
Group Management Report
Business Development
97
E C O N O M I C G R O W T H
Percentage change in GDP
8
8
4
4
0
0
–4
–4
–8
–8
Global economy
Western Europe
Germany
USA
China
2016
2017
2018
2019
2020
Due to the renewed increase in case numbers in many coun-
tries as the year went on, several of these measures were
tightened again, or at least left in place. In addition, the
uncertain outcome of the Brexit negotiations between the
United Kingdom and the European Union (EU) generated
uncertainty in fiscal year 2020, as did the related question of
what form this relationship would take in the future.
The economies in Central and Eastern Europe reported
a marked decline in the real absolute GDP in 2020 at
–3.7 (2.5)%, with economic output falling by –3.4 (2.9)% in
Central Europe and by –4.0 (2.0)% in Eastern Europe. The
same trend was observed in Russia; economic output in
Eastern Europe’s largest economy contracted by –4.1 (1.3)%.
Turkey was unable to sustain the recovery seen in the first
quarter, with GDP growth declining to 0.2 (1.0)% for 2020 as a
whole but remaining in positive territory. South Africa’s GDP
trend declined sharply in the reporting period to –7.3 (0.2)%
amid persistent structural deficits and political challenges.
enacted to support the economy led to improved confidence
among consumers and companies as the year progressed.
However, it only occasionally matched the previous years’
levels.
North America
US economic output declined by –3.6 (2.2)% in the reporting
year as rates of infection soared. To strengthen the economy
in light of the disruption caused by the Covid-19 pandemic,
the US government passed comprehensive stimulus pack-
ages. The US Federal Reserve cut interest rates twice, along-
side other measures to support the economy. The weekly
number of people filing new claims for unemployment
benefits rose by several million before declining but still
remaining at a relatively high level. This was reflected accord-
ingly in the unemployment rate, which more than doubled
year-on-year to 8.1 (3.7)% in the reporting period. GDP fell by
–5.7 (1.9)% in neighboring Canada and by –9.0 (0.0)% in
Mexico.
Germany
Germany’s economic output showed a significantly negative
trend in the reporting year at –5.3 (0.6)%. The labor market
was in a favorable situation at the start of the year, but the
pandemic led many companies to introduce short-time
working (Kurzarbeit) throughout the course of the year. The
temporary easing of restrictions in everyday life and eco-
nomic activity as well as government assistance packages
South America
Brazil’s economy recorded a decline of –4.6 (1.4)% in 2020,
resulting from the dynamic rate of infection caused by the
Covid-19 pandemic. At –11.1 (–2.1)%, the economic downturn
in Argentina intensified amid continued high inflation and
substantial depreciation of the local currency compared with
the previous year.
98
Business Development
Group Management Report
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 9 T O D E C E M B E R 2 0 2 0
Index based on month-end prices: as of December 31, 2019 = 100
EUR to GBP
EUR to USD
EUR to CNY
EUR to JPY
110
110
105
105
100
100
95
95
D
J
F
M
A
M
J
J
A
S
O
N
D
Asia-Pacific
The Chinese economy, which had been exposed to the nega-
tive effects of the Covid-19 pandemic earlier than other
economies and benefited from a relatively small number of
new infections as the year progressed, recorded positive
growth rates from the second quarter onwards, expanding by
2.1 (6.1)% overall. Growth in India fell sharply to –8.9 (4.2)%
amid relatively high infection rates. Japan also recorded
negative growth of –5.4 (0.3)% compared with the same
period of the previous year owing to the negative impact of
the Covid-19 pandemic.
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
In fiscal year 2020, the global market volume of passenger
cars fell significantly below the prior-year level due to the
Covid-19 pandemic, decreasing to 67.7 million vehicles
(–15.2%). This marked a decline for the third year in a row. All
regions were affected by this slump. The overall markets of
Western Europe, South America and Africa recorded above-
average losses, while the decline in Asia-Pacific and the
Middle East was smaller in percentage terms.
Global demand for light commercial vehicles in the
reporting period was down significantly on the previous year.
the mixed trends in sales volumes in the markets in 2020.
These measures included tax cuts or increases, incentive pro-
grams and sales incentives, as well as import duties.
In addition, non-tariff trade barriers to protect the respec-
tive domestic automotive industries made the movement of
vehicles, parts and components more difficult.
Europe/Other Markets
In Western Europe, the number of new passenger car regis-
trations in the reporting period was down substantially by as
much as –24.5% on the prior-year figure, at 10.9 million
vehicles. The negative impact from the spread of the SARS-
CoV-2 virus was noticeable in all countries in the region as
early as March. After the drastic decline at the beginning of
the second quarter, recovery started in the months that
followed, and by the end of the third quarter, figures even
matched those of the prior year. The fourth quarter of 2020
witnessed a lateral movement in the market, keeping vol-
umes noticeably below the previous year’s level. New regis-
trations saw declines on a similar scale in all major individual
markets and were in negative territory at year-end: France
(–25.4%), Italy (–27.9%), the UK (–29.4%) and Spain (–32.1%).
The volume of new registrations of light commercial
vehicles in Western Europe fell significantly below the prior-
year figure, essentially due to the pandemic.
Sector-specific environment
The sector-specific environment was influenced significantly
by fiscal policy measures, which contributed considerably to
In the Central and Eastern Europe region, the market
volume of passenger cars in fiscal year 2020 was down 15.9%
on the prior-year level at 2.8 million vehicles. Following the
Group Management Report
Business Development
99
slump in the second quarter and the recovery in the third
quarter, the volume of new vehicle registrations flatlined in
the fourth quarter and was moderately short of the previous
year’s figure. The development of demand in the reporting
period differed from market to market. In Central Europe, the
number of new registrations dropped substantially by 23.3%
to 1.1 million units. By contrast, the decline in sales of
passenger cars in Eastern Europe (–10.1%) was weaker, due in
particular to demand in Russia slowing less sharply (–8.8%).
Registration volumes for light commercial vehicles in
Central and Eastern Europe were down significantly year-on-
year. In Russia, the number of vehicles sold in the reporting
period was also significantly lower than in the previous year.
At 0.6 million units, the volume of the passenger car
market in Turkey in the reporting period was up by over 50%
on the very low prior-year level. The increase in demand was
boosted in particular by the strong growth in the third
quarter of 2020. In South Africa, the pandemic meant that the
number of new passenger car registrations was down sharply
on the comparatively poor results of the previous year
(–30.4%).
Germany
New passenger car registrations in Germany in fiscal year
2020 fell significantly short of the previous year’s high level,
declining to 2.9 million units (–19.1%). Exacerbated by the
Covid-19 pandemic and its fallout, demand for passenger cars
fell to its lowest level since the German reunification despite
a temporary reduction in value-added tax and higher pur-
chase premiums for electric vehicles.
Owing to the mandated temporary shutdowns driven by
the pandemic and weak demand in important foreign mar-
kets, domestic production and exports in the reporting
period again fell short of the comparable prior-year figures:
passenger car production decreased by –24.6% to 3.5 million
vehicles, largely due to the –24.1% drop in passenger car
exports to 2.6 million units.
Demand for light commercial vehicles in Germany in the
reporting period was significantly lower than in 2019.
North America
At 17.1 million vehicles, sales of passenger cars and light
commercial vehicles (up to 6.35 tonnes) in North America in
fiscal year 2020 were down significantly on the prior-year
figure (–15.9%). The negative effects of the Covid-19 pan-
demic were also very noticeable in this region. After a drastic
decline in demand at the beginning of the second quarter
and a steady recovery in the months that followed, until the
prior-year level was reached in September, the region
witnessed volatile market performance in the last quarter of
2020. In December, a new recovery set in and the previous
year’s figure was exceeded. The market volume in the USA
remained markedly lower than the 2019 level, falling to
14.6 million units (–14.5%). The decline affected both the
passenger car segment (–28.3%) and light commercial vehi-
cles (–11.9%) such as SUVs and pickup models. In the
Canadian automotive market, the Covid-19 pandemic signifi-
cantly accelerated the downward trend that began in 2018
(–19.7%). In Mexico, sales of passenger cars and light com-
mercial vehicles declined sharply (–28.0%), falling short of the
prior-year figure for the fourth year in a row.
South America
In the markets of the South America region, the volume of
new registrations for passenger cars and light commercial
vehicles in 2020 was much lower (–28.1%) at 3.1 million units
following the drastic decline in the second quarter, a strong
recovery in the third quarter and a lateral movement in the
fourth quarter, though falling short of the levels recorded in
the previous year. The South America region saw the most
severe negative impact of the Covid-19 pandemic on the
automotive markets in terms of percentage. In Brazil, the
recovery in vehicle demand that began in 2017 was inter-
rupted in the reporting year; at 2.0 million vehicles (–26.7%),
the number of new registrations was sharply lower than in
the prior-year period. Exports of vehicles manufactured in
Brazil continued to decline, falling by –24.3% to 324 thou-
sand. In the Argentinian market, too, the spread of the SARS-
CoV-2 virus negatively impacted the demand for passenger
cars and light commercial vehicles. In 2020, there was a sharp
–26.6% fall in sales to 0.3 million units.
Asia-Pacific
In the Asia-Pacific region, too, the reporting period was
adversely impacted by the spread of the SARS-CoV-2 virus.
After the very sharp decline in the first three months, the
rapid rebound in the second quarter and a return to prior-
year levels in the third quarter, demand in the last quarter of
2020 was moderately up on the previous year. The market
volume of passenger cars was noticeably lower than the
prior-year level at 30.9 million units (–9.6%). This was also
partly due to developments in the Chinese passenger car
market, where the volume of demand fell distinctly short of
the previous year to 19.9 million units (–6.5%) as a result of
the Covid-19 pandemic. Following the severe losses in the
first three months of 2020, there were clear signs of a
recovery in the overall market there as the year went on. In
India, sales of passenger cars dwindled significantly year-on-
year, falling by –17.3% to 2.3 million units. In the Japanese
passenger car market, vehicle demand in the reporting period
100
Business Development
Group Management Report
of 3.8 million units (–11.2%) was down markedly on the
previous year due not only to the Covid-19 pandemic, but
also to the increase in VAT as of October 1, 2019.
There was a significant year-on-year decline in demand
for light commercial vehicles in the Asia-Pacific region.
Registration volumes in China, the region’s dominant market
and the largest market worldwide, fell distinctly year-on-year.
The number of new vehicle registrations was significantly
below the previous year’s level in Japan and drastically lower
in India.
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 that are relevant for the Volkswagen Group,
global demand for mid-sized and heavy trucks with a gross
weight of more than six tonnes was down substantially year-
on-year in fiscal year 2020 due to the spread of the SARS-CoV-2
virus: 460 thousand new vehicles were registered (–20.1%).
Despite the ongoing uncertainty generated by the Covid-19
pandemic, a recovery could be seen in almost all of the
markets that are relevant for the Volkswagen Group in the
second half of 2020 compared with the first six months.
In the 27 EU states excluding Malta, but plus the United
Kingdom, Norway and Switzerland (EU27+3), the number of
new truck registrations was sharply down on the prior-year
figure, dropping –27.4% to a total of 273 thousand vehicles.
Registrations in Germany, the largest market in this region,
fell substantially year-on-year. The previously anticipated
downturn in the market for 2020 was amplified by the Covid-
19 pandemic, especially in the second quarter of the year. The
Russian market also deteriorated noticeably as a consequence
of the Covid-19 pandemic and the related economic fallout.
Turkey saw new registrations more than double compared to
an admittedly very low prior-year figure. By contrast, the
South African market declined considerably. In Brazil, the
largest market in the South America region, demand for
trucks was significantly below the level seen in the previous
year as a result of the pandemic.
Demand for buses in the markets that are relevant for the
Volkswagen Group was much lower than in the previous year
as a consequence of the pandemic. All key markets within the
EU27+3 contributed to this trend, with the market for
coaches in particular virtually grinding to a halt. Demand was
very much lower in Brazil and was less than half the prior-
year level in Mexico.
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.
In 2020, the marine market contracted to a significantly
lower level than in the previous year. Demand was curbed
predominantly by the global impact of the Covid-19 pan-
demic and uncertainty about future emissions regulations,
and in merchant shipping by the negative impact of the
ongoing trade disputes between the USA and China. Demand
for cruise ships virtually ceased entirely due to the difficult
liquidity situation, resulting from the Covid-19 pandemic.
The passenger ferry segment – similarly affected by a loss of
revenue resulting in part from project postponements – was
also impacted by a decline in demand. The special market for
government vessels, which is driven by state investment, con-
tinued on a stable trajectory. In the offshore sector, the
existing overcapacity and low oil prices virtually stifled
investment in offshore oil production. China, South Korea
and Japan remained the dominant shipbuilding countries,
accounting for a global market share of around 85% mea-
sured in terms of the number of ships. Since market volumes
are still low, all sectors in the marine market were continuing
to experience significant competition and strong pricing
pressure as a result.
The market for power generation was unable to continue
its growth trend in 2020 due to the Covid-19 pandemic and
declined significantly overall. Most projects were postponed
as a result of the spread of the SARS-CoV-2 virus and the
pandemic-related uncertainty, with some being canceled
altogether. Due to the collapse in oil prices and low equip-
ment prices, there was a short-term rise in demand for stock
engines run on HFO (heavy fuel oil) in developing countries,
though the trend away from oil-fired power plants towards
dual-fuel and gas-fired power plants continued. Demand for
new energy solutions such as hydrogen, battery or solar
technologies remained high, with a strong trend towards
greater flexibility and decentralized availability. Due to the
negative consequences of the SARS-CoV-2 virus, inventories
in the reporting period increased, intensifying continued
pressure from competition and pricing.
In 2020, the market for turbo machinery showed a signifi-
cant deterioration year-on-year. The Covid-19 pandemic had
a delayed negative impact on demand for turbo compressors
in the raw materials, oil, gas and processing industry and
varied in severity depending on market segment and region.
Investments in oil production facilities remained at the prior-
year level despite substantial, short-term price fluctuations.
Demand for turbo compressors for industrial gases also
remained slightly below the previous year’s level. By contrast,
demand in the raw materials and processing industry
dropped substantially. As a consequence of the Covid-19 pan-
demic, nearly all regions except for China recorded a severe
downturn in demand compared with the previous year. The
steam and gas turbine business continued to be dominated
by overcapacity on the part of electricity producers. In
addition, the pandemic-induced uncertainty and the con-
Group Management Report
Business Development
101
tinued pressure from competition and pricing compared
with the prior-year period brought about a substantial dip in
demand.
The after-sales business for diesel engines performed
positively on the whole in 2020 compared with the previous
year, benefiting from a continued increase in interest in long-
term maintenance contracts and retrofitting solutions. The
Covid-19 pandemic reduced demand for standard products,
however, and decisions about capital-intensive modifications
were delayed owing to cash-flow difficulties on the part of the
customers. After undergoing a marked recovery in the pre-
vious year, the after-sales market for turbo machinery col-
lapsed sharply in 2020 due to the Covid-19 pandemic. Here,
too, capital-intensive modifications were postponed or can-
celed due to financial difficulties.
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
Demand for automotive financial services was at a high level
in 2020, particularly in the first three months, due in part to
the persistently low key interest rates in the main currency
areas. Nevertheless, the Covid-19 pandemic put pressure on
the demand for financial services in almost all regions during
the reporting period. The effects of the Covid-19 pandemic
were noticeable worldwide, especially in the second quarter
of 2020. Markets for automotive financial services staged a
partial recovery in the third and fourth quarters.
The European passenger car market was affected by the
Covid-19 pandemic especially in the second quarter of 2020,
which led to a significant decline in demand in the auto-
motive business over the reporting period as a whole. Amid
this challenging market environment, the share of lease and
financing contracts to vehicle sales was expanded further in
the European markets although the absolute number of
contracts declined year-on-year. Demand
increased for
integrated mobility services such as parking, refueling and
charging. The business with after-sales products such as
servicing, maintenance and spare parts agreements, as well
as automotive-related insurance was maintained at the prior-
year level in the current market environment.
Germany saw a year-on-year drop in the number of loan-
financed and leased new vehicles in 2020 due to the chal-
lenges of the Covid-19 pandemic. In the leasing business with
individual customers, the shift from financing to lease
contracts that began in 2019 continued.
period. Lower interest rates led to an increase in cash
purchases. Non-vehicle loans were also used to buy vehicles.
A drop in demand for new vehicles has been seen across
the entire North American region as a consequence of the
Covid-19 pandemic. In the United States, however, demand
for financial services rose slightly and increased as a pro-
portion of vehicle sales. A shift from lease to financing con-
tracts was observed here along with an increase in sales of
used vehicles. The proportion of lease and financing con-
tracts in Canada in 2020 was also up on the prior-year level.
Absolute numbers of contracts decreased, however, due to
the decline in deliveries. A downward trend was observed in
Mexico, both for the absolute number of financing contracts
and for the percentage share, which was attributable in part
to the currently limited fleet business.
In South America, demand for vehicles and automotive
financial services in the reporting year was down on the
previous year. It recovered at the end of 2020 after dipping in
the second and third quarters as a consequence of the
pandemic. In Brazil, the trend toward fleet business and long-
term leases continued to strengthen, with the number of
long-term lease contracts exceeding the prior-year level. In a
difficult macroeconomic environment, customers in Argen-
tina purchased their vehicles mostly in cash; demand for
automotive financial services decreased year-on-year.
China’s passenger car market started to recover from the
Covid-19 pandemic from the second quarter of 2020
onwards. The easing of restrictions continuously led to
increasing numbers of new contracts being signed for auto-
motive-related financial services, which were up slightly
overall on the prior-year level. In Japan, the effects of the
Covid-19 pandemic were perceptible in the form of weaker
new car sales, with a related fall in demand for financing and
leasing products. In India, demand for financial services was
below the previous year but rose again in the course of the
year as lending rates in the new and used vehicle segments
stabilized.
The Covid-19 pandemic also led to substantial declines in
demand for new and used vehicles in the commercial vehi-
cles business area in 2020. As a result, there was an equal fall
in the number of lease and financing contracts in Europe;
however, there was a rise in the penetration rate of these
financial products in Brazil.
In South Africa, demand for financing and insurance
products stabilized in the second half of 2020 after declining
in the first half, but was down year-on-year in the reporting
N E W G R O U P M O D E L S I N 2 0 2 0
Thanks to a broad portfolio of products – from small cars to
super sports cars in the passenger car segment, and from
102
Business Development
Group Management Report
pickups to heavy trucks and buses in the commercial vehicles
segment, as well as motorcycles – covering almost all key
segments and body types, Volkswagen Group customers are
able to choose the vehicle tailored to their needs. In fiscal
year 2020, we added further attractive vehicles to this range,
whereby one focus was on electric vehicles.
In 2020, the Volkswagen Passenger Cars brand brought
out the compact ID.3, the first vehicle based on the Modular
Electric Drive Toolkit (MEB). It also expanded its range of
electric vehicles by adding the new ID.4, an all-electric SUV
designed for urban use. The first vehicles from the ID. family
have suitable ranges and come fitted with forward-looking
equipment such as the augmented reality head-up display.
2020 also saw the launch of the eighth generation of the new
Golf including its derivatives, the Golf GTI, Golf R and Golf
Estate. The up!, the Tiguan and the Arteon all received
product upgrades. The T-Roc Cabriolet and the Arteon
Shooting Brake were also rolled out, the latter combining
exclusivity and practicability at a high level. In addition, the
first Tiguan R model was launched. The Volkswagen Passen-
ger Cars brand continued rolling out its plug-in hybrid
offensive with derivatives of the Golf and Touareg. In the USA,
the successful Atlas received an update and the Atlas Cross
Sport was launched. In the South American market, the Nivus
SUV coupé developed in Brazil was rolled out along with
sporty versions of the Polo and Virtus models. In the Chinese
market, the new Tiguan X and Tayron X crossover models
cater to the growing demand for lifestyle vehicles. The
Viloran seven-seater van, designed to meet the needs of
regional markets and customers, and the Tacqua compact
SUV were also launched. The CC and the Phideon were
upgraded. The electrification offensive was continued with
the electric Tharu, and the Tayron as a plug-in hybrid. JETTA
brought out the VS7 SUV.
The Audi brand also added further all-electric vehicles to
its product range in fiscal year 2020. The Audi e-tron
Sportback, for example, celebrated its market launch with a
new interpretation of the coupé design. The range of plug-in
hybrid vehicles was also expanded. Audi also introduced S
models of the Q7 and Q8 in 2020 and, for the first time, also
of the electric vehicles e-tron and e-tron Sportback. In
addition, successors to models from the A3 series that is
especially popular with customers were brought out. The A5,
Q2 and Q5 model series were updated.
Launched in early 2020, the all-electric Citigoe iV kicked
off the electrification of the ŠKODA portfolio. In addition, the
successor models from the popular Octavia series celebrated
their market launch. The Octavia and the Superb are also
available as plug-in hybrids, both as a saloon and as an estate.
Along with these, the Rapid received an update in China and
Russia.
The SEAT brand launched the successors to the Leon and the
Leon Sportstourer in 2020. Moreover, both the SEAT brand
and CUPRA expanded their product ranges through the
addition of two plug-in hybrid versions of the Leon in each
case. The Ateca received a comprehensive product upgrade at
both SEAT and CUPRA. CUPRA enhanced its model range by
adding its first completely standalone model, the Formentor
SUV coupé.
Following the unveiling of the all-electric Taycan in the
preceding fiscal year, Porsche launched new Taycan deriva-
tives in 2020 including the top-of-the range Turbo S. The
updated Panamera was also released. The Cayenne GTS Coupé
rounds off the Cayenne family.
In the growing SUV segment, Bentley launched the
extensively upgraded Bentayga in fiscal year 2020. Presented
in 2019, the successor to the Flying Spur luxury saloon is now
also available with a V8 engine. The luxurious spearhead of
the model series became available at the end of 2020 with the
Continental GT Mulliner.
Since 2020, Lamborghini’s Huracán RWD with rear-wheel
drive has been on the market as the upgraded EVO model.
Bugatti presented the DIVO hyper sports car in 2020,
limited to only 40 vehicles. The new Chiron Pur Sport also
celebrated its market premiere.
The Volkswagen Commercial Vehicles brand completely
redesigned the Caddy, which now boasts technologies from
the Modular Transverse Toolkit (MQB).
Scania reached a milestone in the electrification of the
brand in 2020: a plug-in hybrid drive is now also available for
the L and P series, a purely electric drive system was pres-
ented for these models.
MAN brought out the visually and technically revamped
TGX, which received the International Truck of the Year 2021
award for its reliability and efficiency.
Ducati introduced the new Streetfighter V4 in 2020 as
well as updated models of the Panigale V2 and V4, the
Multistrada 1260S Grand Tour and the Diavel 1260S. The Icon
Dark expanded the Scrambler family.
V O L K SWA G E N G R O U P D E L I V E R I E S
The Volkswagen Group delivered 9,305,372 vehicles to cus-
tomers worldwide in fiscal year 2020. The decrease of 15.2%
or 1,669,925 units year-on-year was due almost exclusively to
the Covid-19 pandemic and the measures taken worldwide to
contain its spread. Sales figures for both the Passenger Cars
Business Area and the Commercial Vehicles Business Area
declined as a result of the fall in demand. The chart on the
page after next illustrates the trend in deliveries from month
to month, comparing each monthly figure to the same
month of the previous year. Deliveries of passenger cars and
commercial vehicles are reported separately in the following.
Group Management Report
Business Development
103
V O L K SWA G E N G R O U P D E L I V E R I E S 1
2020
2019
%
Passenger Cars
9,115,185
10,733,077
Commercial Vehicles
190,187
242,220
Total
9,305,372
10,975,297
– 15.1
– 21.5
– 15.2
1 Prior-year deliveries have been updated to reflect subsequent statistical trends.
The figures include the Chinese joint ventures.
G L O B A L D E L I V E R I E S B Y 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
With its passenger car brands, the Volkswagen Group is
present in all relevant automotive markets around the world.
The key sales markets currently include Western Europe,
China, the USA, Brazil, Russia, Poland, Turkey and Mexico.
Global demand for Volkswagen Group passenger cars and
light commercial vehicles fell in the reporting year by 15.1%
year-on-year to 9,115,185 units as a consequence of the
debilitating market conditions arising from the uncertainty
and the measures taken worldwide to tackle the Covid-19
pandemic. In connection with the pandemic, our deliveries to
customers were affected by differing temporal and geo-
graphical effects. Following in some cases drastic losses at the
end of the first quarter and the start of the second quarter,
demand for Group models recovered as the reporting year
went on, with declines becoming weaker. We registered
declining demand year-on-year in nearly all regions. The sole
exception was the Middle East region, largely driven by the
positive trend in sales figures in Turkey. Bentley was the only
Volkswagen Group brand that did not fall short of its prior-
year figures.
Our e-mobility offensive had a positive impact on Group
sales: we delivered 231,624 fully electric vehicles to customers
globally – more than three times as many as in 2019. Our
plug-in hybrid models were also very popular with custom-
ers; sales amounted to 190,644 vehicles. The Group’s most
successful all-electric vehicles included the ID.3, the e-Golf
and the e-up! from Volkswagen Passenger Cars as well as the
Audi e-tron and Porsche Taycan. The Passat and the Golf from
Volkswagen Passenger Cars, the Audi Q5, the ŠKODA Superb
and the Porsche Cayenne were among the most popular plug-
in hybrid models.
In a significantly declining overall global market, our
passenger car market share increased slightly to 13.0 (12.9)%.
The table at the end of this section gives an overview of
passenger car deliveries to customers of the Volkswagen
Group in the regions and the key individual markets. The
trends in demand for Group models in these markets and
regions are described in the following sections.
Deliveries in Europe/Other Markets
In Western Europe, the Volkswagen Group delivered 2,848,861
passenger cars and light commercial vehicles to customers in
fiscal year 2020 in a substantially contracting overall mar-
ket. This was 21.5% fewer than in the previous year. The
increasing spread of the SARS-CoV-2 virus and the measures
taken to contain it sent demand for Group vehicles into a
tailspin during the first quarter and at the beginning of the
second quarter. All of the major individual markets demon-
strated very similar declines in demand for Group vehicles.
By the end of the first half of the year, the declines had
tapered off. In the second half of the year, demand for Group
vehicles in individual markets was once again up on a
monthly basis compared with the relevant prior-year figure.
The Group models with the highest volume of demand were
the Golf, Polo, T-Roc and Tiguan from the Volkswagen Pas-
senger Cars brand. In addition, the T-Cross from Volkswagen
Passenger Cars, the Q3 Sportback, Q7 and e-tron from Audi,
the Scala and Kamiq from ŠKODA, the Mii electric from SEAT,
and the Porsche Cayenne Coupé and Porsche Taycan, all of
which had been introduced as new or successor models over
the course of the previous year, were very popular with
customers. Some of the models successfully launched on the
market during the reporting year as new or successor models
were the up!, T-Roc Cabriolet, Golf, Tiguan and Arteon
Shooting Brake and the first all-electric production models,
the ID.3 and ID.4, from Volkswagen Passenger Cars, the A3
saloon, A3 Sportback, A5 and e-tron Sportback from Audi, the
Citigoe iV, Superb iV and Octavia from ŠKODA, the Leon,
Leon Sportstourer and Ateca from SEAT and the Caddy from
Volkswagen Commercial Vehicles. The Volkswagen Group’s
share of the passenger car market in Western Europe rose to
23.7 (22.8) %.
With a decline of 14.9%, the number of vehicles handed
over to customers in the reporting year in the Central and
Eastern Europe region fell less sharply than the global
average. This was largely attributable to the trend in
deliveries in Russia, which almost reached the prior-year
level. Demand developed encouragingly for the T-Cross from
Volkswagen Passenger Cars, for the Audi Q3 Sportback, for
ŠKODA’s Scala, Kamiq and Karoq models and for the Porsche
Cayenne Coupé. The Volkswagen Group’s share of the pas-
senger car market in the Central and Eastern Europe region
increased to 22.0 (21.5) %.
In Turkey, the Volkswagen Group continued to benefit
from the catch-up effects in the overall market, raising the
number of vehicles handed over to customers in 2020 by
54.8% compared with the previous year. The Passat saloon
was the most sought-after Group model from the Volkswagen
Passenger Cars brand. In the sharply contracting South
African market, the number of Group models sold fell by
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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
2020
2020
2019
2019
1,100
1,100
1,000
1,000
900
900
800
800
700
700
600
600
500
500
400
400
J
F
M
A
M
J
J
A
S
O
N
D
28.9%. The Polo from Volkswagen Passenger Cars continued
to be the most frequently sold Group model there.
Deliveries in Germany
In Germany, demand for vehicles from the Volkswagen Group
was down 19.6% year-on-year at 1,065,811 units in 2020 in an
overall market that was suffering a significant decline. As
with the overall market in Western Europe, the decrease was
attributable to the negative impact of the spread of the SARS-
CoV-2 virus. The Group models with the highest volume of
demand were the Golf and Passat Estate from the Volkswagen
Passenger Cars brand. Also in high demand from customers
were the T-Cross from Volkswagen Passenger Cars, the Q3
Sportback, Q7 and e-tron from Audi, the Scala and Kamiq
from ŠKODA, the Mii electric from SEAT, and the Porsche
Cayenne Coupé and Porsche Taycan, all of which had been
introduced as new or successor models over the course of the
previous year. Seven Group models led the Kraftfahrt-Bundes-
amt (KBA – German Federal Motor Transport Authority) regis-
tration statistics in their respective segments: the Golf, T-Roc,
Tiguan, Touran, Passat, Porsche 911 and Caddy. In addition,
the Golf continued to top the list of the most popular passen-
ger cars in Germany in terms of registrations.
Deliveries in North America
In North America, demand for Volkswagen Group models fell
by 17.3% year-on-year to 784,299 units in the reporting year,
a decrease largely mirroring the trend in the market as a
whole. The impact of the Covid-19 pandemic became appar-
ent in this region somewhat later, intensifying at the begin-
ning of the second quarter. The month-on-month declines
diminished again as the year went on. The Group’s market
share was 4.6 (4.7)%. The Tiguan Allspace and Jetta from
Volkswagen Passenger Cars were the most sought-after Group
models in North America.
In the considerably weaker US market, the Volkswagen
Group delivered 12.1% fewer vehicles to customers in fiscal
year 2020 than in the prior-year period. The Group models to
record the greatest increases included the Passat and Arteon
from Volkswagen Passenger Cars, the Audi Q3 and e-tron, and
the Porsche 911 Cabriolet. The Atlas and the Atlas Cross Sport
from the Volkswagen Passenger Cars brand, Audi’s A4, A5, Q7
and e-tron Sportback models, and the Porsche Taycan and
Cayenne Coupé were successfully launched on the market as
new or successor models during the reporting period.
In Canada, the number of deliveries to Volkswagen Group
customers fell by 25.6% year-on-year in 2020. The market as a
whole experienced a lesser decline during this period. The
Audi Q3 in particular recorded encouraging growth in
demand.
In the Mexican market, which was diminishing sharply
overall, the Volkswagen Group delivered 30.8% fewer vehicles
to customers in the reporting year than in the previous year.
The Group models with the highest volume of demand were
the Vento and Jetta from the Volkswagen Passenger Cars
brand.
Group Management Report
Business Development
105
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 2 0
Vehicles in thousands
Tiguan
Polo
Passat
Golf
Lavida
Jetta
Bora
T-Cross
591
488
485
481
450
439
350
296
Deliveries in South America
In the South American passenger car and light commercial
vehicles market, which recorded a strong contraction overall,
the number of Group models delivered to customers in fiscal
year 2020 was down by 20.2% year-on-year to 440,326 units.
The effects of the Covid-19 pandemic became apparent in this
region somewhat later, intensifying at the beginning of the
second quarter before weakening again on a monthly basis
over the rest of the year. The new T-Cross that was launched
in the previous year and the Gol from Volkswagen Passenger
Cars were the Group models in highest demand. The Nivus
SUV coupé was successfully launched on the market in the
reporting year. The Volkswagen Group’s share of the passen-
ger car market in South America rose to 14.1 (12.7)%.
The recovery of the Brazilian market was interrupted by
the outbreak of the Covid-19 pandemic. The Volkswagen
Group delivered 20.0% fewer vehicles to customers there than
in the previous year. Along with the Gol and the Polo, the new
T-Cross from Volkswagen Passenger Cars was in especially
high demand.
In Argentina, the number of vehicles delivered to Volks-
wagen Group customers in 2020 was 18.4% down on the
prior-year figure in a sharply declining overall market. The
Gol and T-Cross from Volkswagen Passenger Cars and the
Amarok from Volkswagen Commercial Vehicles saw the
highest demand of all Group models.
Deliveries in the Asia-Pacific region
In fiscal year 2020, the Volkswagen Group saw demand taper
off in the overall market of the Asia-Pacific region, which
witnessed a noticeable decline due primarily to the Covid-19
pandemic, and handed over 4,110,782 vehicles to customers,
9.1% fewer than in the year before. The Group’s market share
in the Asia-Pacific region amounted to 13.2 (13.1)%.
China, the world’s largest single market and the main
growth driver of the Asia-Pacific region for many years, was
distinctly weaker in the past fiscal year, mainly due to the
spread of the SARS-CoV-2 virus. The Volkswagen Group
delivered 9.1% fewer vehicles to customers there than in the
preceding year. Following very high declines in volumes in
the first quarter, we recorded a slight increase in most of the
following months compared with the respective prior-year
figure. The T-Cross and Teramont X from the Volkswagen
Passenger Cars brand, the VA3 and VS5 from the JETTA brand,
the Audi A6L and Audi Q8, the ŠKODA Kamiq GT and the
Porsche Cayenne Coupé, all of which had been introduced as
new or successor models over the course of the previous year,
were in especially high demand. In addition, the Tayron and
the Tharu from Volkswagen Passenger Cars, the Audi Q2L,
Q2L e-tron and Q5, and the Porsche Panamera saloon saw
encouraging growth in demand. The Tacqua, Golf, Tayron X,
Tiguan X, CC, Viloran and Phideon models from Volkswagen
Passenger Cars, the VS7 from the JETTA brand, the Audi Q7
and Audi e-tron and the ŠKODA Rapid were successfully
launched on the market as new or successor models in the
reporting year.
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Business Development
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In the Indian passenger car market, which registered a
significant decline, the Volkswagen Group saw 44.9% less
demand in the reporting year than in the preceding year. The
Polo from the Volkswagen Passenger Cars brand and the
Rapid from ŠKODA were the most sought-after Group models
there.
In a significantly weaker overall market in Japan, the number
of Group models handed over to customers in fiscal year
2020 decreased by 15.6% year-on-year. The Group model to
record the highest demand was the Volkswagen T-Cross.
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
France
United Kingdom
Italy
Spain
Central and Eastern Europe
of which: Czech Republic
Russia
Poland
Other Markets
of which: Turkey
South Africa
North America
of which: USA
Canada
Mexico
South America
of which: Brazil
Argentina
Asia-Pacific
of which: China
India
Japan
Worldwide
Volkswagen Passenger Cars
Audi
ŠKODA
SEAT
Bentley
Lamborghini
Porsche
Bugatti
D E L I V E R I E S ( U N I T S )
C H A N G E
2020
2019
(%)
3,779,778
2,848,861
1,065,811
4,712,746
3,628,314
1,324,942
222,522
409,064
239,167
213,700
652,813
112,589
221,811
126,883
278,104
121,129
64,693
784,299
574,822
83,531
125,946
440,326
336,773
57,555
307,847
544,117
310,944
305,494
766,810
136,377
223,454
165,530
317,622
78,251
90,968
948,275
654,118
112,247
181,910
551,734
420,880
70,496
4,110,782
3,844,679
28,423
66,935
4,520,322
4,228,841
51,541
79,268
9,115,185
10,733,077
5,328,029
1,692,773
1,004,816
427,035
11,206
7,430
272,162
77
6,279,007
1,845,573
1,242,767
574,078
11,006
8,205
280,800
82
– 19.8
– 21.5
– 19.6
– 27.7
– 24.8
– 23.1
– 30.0
– 14.9
– 17.4
– 0.7
– 23.3
– 12.4
+ 54.8
– 28.9
– 17.3
– 12.1
– 25.6
– 30.8
– 20.2
– 20.0
– 18.4
– 9.1
– 9.1
– 44.9
– 15.6
– 15.1
– 15.1
– 8.3
– 19.1
– 25.6
+ 1.8
– 9.4
– 3.1
– 6.1
Volkswagen Commercial Vehicles
371,657
491,559
– 24.4
1 Prior-year deliveries have been updated to reflect subsequent statistical trends. The figures include the Chinese joint ventures.
Group Management Report
Business Development
107
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
In the period from January to December 2020, the Volks-
wagen Group handed over 21.5% fewer commercial vehicles
to customers worldwide than in the previous year. We
delivered a total of 190,187 commercial vehicles to custom-
ers. Trucks accounted for 156,378 units (– 24.1%) and buses
for 16,174 units (– 24.8%). A total of 17,635 (14,788) vehicles
from the MAN TGE van series were delivered. The decline in
the truck and bus business was due to a slump in our core
markets, which was exacerbated by the ongoing uncertainty
generated by the Covid-19 pandemic.
In the 27 EU states excluding Malta, but plus the United
Kingdom, Norway and Switzerland (EU27+3), sales were down
by 26.0% on the same period of the previous year to a total of
105,131 units, of which 81,727 were trucks and 6,098 were
buses. Here, the MAN brand delivered 17,306 light commer-
cial vehicles.
In Russia, sales fell by 16.2% year-on-year to 8,486 units,
comprising 8,267 trucks and 219 buses.
Deliveries in Turkey increased to 2,681 (707) vehicles in fiscal
year 2020. Trucks accounted for 2,457 units and buses for
99 units, while 125 vehicles from the MAN TGE van series
were sold. In South Africa, deliveries of Volkswagen Group
commercial vehicles decreased by 30.2% year-on-year to a
total of 3,111 units; of this figure 2,789 were trucks and 322
were buses.
Sales in North America declined in fiscal year 2020 to
1,502 vehicles (– 53.3%), which were delivered almost exclu-
sively to customers in Mexico; of this figure 1,110 units were
trucks and 392 were buses.
Deliveries in South America fell to a total of 49,372 vehi-
cles (– 13.1%), of which 42,283 were trucks and 7,089 were
buses. Sales in Brazil decreased by 17.5% in fiscal year 2020.
Of the units delivered, 35,738 were trucks and 5,117 were
buses.
In the Asia-Pacific region, the Volkswagen Group sold
11,420 vehicles to customers in the reporting period; among
these, 10,331 were trucks and 1,075 were buses. Overall, this
was 14.4% less than in the previous year.
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
of which: EU27+3
of which: Germany
Russia
Turkey
South Africa
North America
of which: Mexico
South America
of which: Brazil
Asia-Pacific
Worldwide
Scania
MAN
1 Prior-year deliveries 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
2020
2019
(%)
127,893
105,131
31,859
8,486
2,681
3,111
1,502
1,498
49,372
40,855
11,420
190,187
72,085
118,102
168,831
142,058
39,059
10,123
707
4,455
3,219
3,218
56,826
49,551
13,344
242,220
99,457
142,763
– 24.2
– 26.0
– 18.4
– 16.2
x
– 30.2
– 53.3
– 53.4
– 13.1
– 17.5
– 14.4
– 21.5
– 27.5
– 17.3
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Business Development
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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 covers the Volkswagen
Group’s dealer and customer financing, leasing, banking and
insurance activities, fleet management and mobility offer-
ings. The division comprises Volkswagen Financial Services
and the financial services activities of Scania and Porsche
Holding Salzburg. It also includes the contracts concluded by
our international joint ventures in its figures.
The Financial Services Division’s products and services
were popular in fiscal year 2020, although the Covid-19
pandemic weighed on demand. At 8.6 (9.3) million, the num-
ber of new financing, leasing, service and insurance contracts
worldwide was below the previous year’s level. The ratio of
leased or financed vehicles to Group deliveries (penetration
rate) in the Financial Services Division’s markets increased to
35.5 (34.5)% as the Group’s deliveries fell at a higher rate than
the number of contracts signed. As of December 31, 2020, the
total number of contracts was 24.1 million, up 1.8% from
year-end 2019. The number of contracts in the customer
financing/leasing area climbed 1.2% to 11.9 million, while it
increased by 2.4% to 12.2 million in the service/insurance area.
In Europe/Other Markets, the financial services business
was impacted by the Covid-19 pandemic, particularly in the
second quarter. The number of new contracts signed here in
2020 fell by 9.4% to 6.3 million. The penetration rate was
50.1 (48.5)%. At 17.6 million, the total number of contracts at
the end of the reporting year slightly exceeded the 2019
figure of 17.5 million. The customer financing/leasing area
accounted for 7.6 million of these contracts (–1.3%), while
10.0 million (+2.3%) related to the service/insurance area.
At 936 thousand, the number of new contracts signed in
North America was 2.1% down on the previous year. The ratio
of leased or financed vehicles to Group deliveries in North
America was 67.0 (59.3)%. The number of contracts here on
December 31, 2020 was 3.1 million, an increase of 2.2% com-
pared with the previous year. The customer financing/leasing
area accounted for 1.9 million contracts (+4.7%) and 1.2 mil-
lion contracts (–1.7%) were owing to the service/insurance area.
The South America region was impacted by the Covid-19
pandemic in the second and third quarter in particular. The
number of new contracts signed here in the reporting year
fell to 318 (386) thousand. The penetration rate declined to
32.7 (38.4)%. The total number of contracts as of Decem-
ber 31, 2020 increased by 2.6% year-on-year to 721 thousand.
The contracts mainly related to the customer financing/
leasing area.
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.
Sales revenue in the Power Engineering segment was
largely driven by Engines & Marine Systems and Turbo-
machinery, which together generated more than two-thirds
of overall sales revenue. Until October 2020, this included the
business of Renk.
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
In the reporting year, orders received in Western Europe fell
by 17.8% compared with the previous year as a result of the
pandemic. All key markets fell short of the previous year’s
level. The scale of decline varied from country to country:
while Germany was markedly down on the previous year, the
United Kingdom, France, Italy and Spain were significantly or
sharply below the equivalent prior-year figure.
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 mid-sized and heavy trucks, for buses and
for commercial vehicles from the MAN TGE van series
decreased by 4.8% year-on-year to 216,251 vehicles in 2020.
The decline was attributable to both the truck and bus
markets. The overall market downturn expected for 2020 was
amplified by the uncertainty arising from the Covid-19
pandemic, especially in the second quarter of the year.
However, there was a noticeable recovery in the second half
of 2020.
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
2020 amounted to €3.4 (4.3) billion. Engines & Marine Systems
and Turbomachinery generated more than two-thirds of the
order volume in a persistently difficult market environment.
Until October 2020, this included the business of Renk.
In the marine business, for example, orders for 30 dual
fuel engines were placed in 2020 in a project for five ice-
breaking LNG tankers. In the power plant business, orders
were won for 35 engines of different types with an aggregate
output of 350 MW. For turbomachinery, we received several
orders for compressor trains and floating production and
storage units, as well as two engineering orders for carbon
capture and storage in the North Sea.
Group Management Report
Business Development
109
In Germany, production contracted by 22.7% to a total of
1,633,239 vehicles. The percentage of the Group’s total
production accounted for by Germany fell to 18.4 (19.5)%.
I N V E N T O R I E S
Global inventories at Group companies and in the dealer
organization were significantly lower at the end of the
reporting period than at year-end 2019.
E M P L OY E E S
Including the Chinese joint ventures, the Volkswagen Group
employed an average of 665,445 people in fiscal year 2020, a
decrease of – 0.3% year-on-year. In Germany, we employed
295,133 people on average; at 44.4 (44.1)%, their share of the
total headcount was slightly above the level of the previous
year.
The number of active employees in the Volkswagen
Group fell by 1.3% to 633,364 as of December 31, 2020. In
addition, 11,272 employees were in the passive phase of their
partial retirement and 17,939 young people were in voca-
tional traineeships. At the end of the reporting period, the
Volkswagen Group had a total of 662,575 employees world-
wide. Due to market conditions and employees leaving the
Group not being replaced, this was slightly below the year- end
2019 figure. A total of 294,510 people were employed in
Germany (– 1.0%) and 368,065 outside Germany (– 1.5%).
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, 2020
Passenger Cars
Passenger Cars
Commercial Vehicles
Commercial Vehicles
Power Engineering
Power Engineering
Financial Services
Financial Services
545,082
545,082
85,612
85,612
14,782
14,782
17,099
17,099
In Asia-Pacific, where the SARS-CoV-2 virus spread first, the
number of new contracts signed in the past fiscal year rose by
5.3% to 1.1 million. The ratio of leased or financed vehicles to
Group deliveries was 17.7 (15.5)%. The total number of
contracts amounted to 2.6 million at the end of the reporting
year, 9.1% more than at year-end 2019. The customer finan-
cing/leasing area grew by 9.6% to 1.9 million contracts, and
the service/insurance area by 7.8% to 0.7 million contracts.
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 unit sales to the dealer organization
decreased by 16.4% to 9,156,612 units (including the Chinese
joint ventures) in the reporting year. This decline was
essentially due to the negative effects of the Covid-19 pan-
demic. Ongoing uncertainty in connection with this and
national measures introduced to contain the pandemic, such
as mobility restrictions and store closures, were accompanied
by a fall in customer demand. Above-average decreases in
demand were recorded especially in Europe and in North and
South America. Overall, the unit sales volumes fell by 16.2%
outside Germany and unit sales decreased by 17.8% in
Germany. At 12.1 (12.3)%, the proportion of the Group’s total
unit sales accounted for by Germany was lower than in 2019.
The Tiguan, Polo, Passat, Golf, Jetta, T-Cross and T-Roc from
the Volkswagen Passenger Cars brand were our biggest sellers
last year. The largest increases in unit sales were recorded by
the e-up, T-Cross and Tharu from the Volkswagen Passenger
Cars brand, the e-tron, A6 saloon and Q3 Sportback from Audi,
the ŠKODA Rapid and the Bentley Flying Spur. The Porsche
Taycan and Boxster also achieved a strong growth rate.
P R O D U C T I O N
In fiscal year 2020, the Volkswagen Group’s global production
declined by 17.8% to a total of 8,900,154 vehicles due to the
measures taken to contain the spread of the SARS-CoV-2
virus. The impact of national measures to contain the pan-
demic led to a disruption of supply chains and consequently
to production stoppages within the Volkswagen Group. The
production figures for the locations in China have seen a
year-on-year recovery since the second quarter of 2020; in
total, our Chinese joint ventures manufactured 9.5% fewer
units than in the year before. By contrast, the delayed impact
of the Covid-19 pandemic at the other locations worldwide
caused declines in production in the first three quarters of
2020.
110
Shares and Bonds
Group Management Report
Shares and Bonds
Following the sharp fall in share prices triggered by the Covid-19 pandemic, trading in
Volkswagen AG’s ordinary and preferred shares recovered as the year went on, but
fell short of the year-end 2019 figure. To refinance projects connected with e-mobility,
green bonds were successfully placed on the market for the first time.
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
Following the sharp fall in share prices in the first quarter of
2020, which was triggered by the Covid-19 pandemic and its
severe negative economic implications, international stock
markets started to recover during the second quarter, with
some even reporting a strong upward trend. At the end of
2020, many equity markets even recorded closing levels
above the prior-year levels.
The DAX recorded an increase of 3.5% compared with the
end of 2019. After an initially good start to the new financial
year with a record high in February, share prices collapsed
with the increasing spread of the SARS-CoV-2 virus. Starting
from the low reached in March, the leading German stock
index then again gained in value and recouped its losses in
the fourth quarter. This development was fueled considerably
by economic stimulus measures from central banks and
governments throughout the world and the resulting hopes
of a more rapid global economic recovery. The upward trend
lost momentum in the second half of the year, with the
impact of the second wave of infections weighing on share
price performance, although hopes of a vaccine had a positive
effect.
After the losses incurred in the first quarter of 2020, the
prices of Volkswagen AG’s preferred and ordinary shares also
regained ground in the months that followed, but still fell
short of the year-end 2019 figures by 14% and 2% respec-
tively. Uncertainties surrounding the development of the
global demand for automobiles caused by the Covid-19
pandemic placed shares under pressure. In addition, negative
effects arose from the automotive industry’s current period
of transition that requires large-scale investment. Moreover,
the impending US punitive tariffs on European vehicles, the
uncertain outcome of the negotiations on the United King-
dom’s exit from the EU Single Market including the form the
future relationship takes, and the appreciation of the euro
against the US dollar since May 2020 all had a negative
impact. Positive momentum came from the incipient recov-
ery of the Chinese automotive market and investors’ hopes of
improved economic activity in the wake of eased restrictions
worldwide, government assistance measures, and hopes that
the Covid-19 pandemic would subside.
V O L K SWA G E N S H A R E K E Y 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 2 0
High
Low
Closing
Ordinary share
Price (€)
Date
Preferred share
Price (€)
DAX
Date
Price
Date
183.10
Jan. 10
185.52
Jan. 10
13,790
101.50
Mar. 18
87.20
Mar. 18
8,442
Dec. 28
Mar. 18
ESTX Auto & Parts
Price
509
255
170.10
Dec. 30
152.42
Dec. 30
13,719
Dec. 30
505
Date
Dec. 28
Mar. 18
Dec. 30
Group Management Report
Shares and Bonds
111
P R I C E 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 9 T O D E C E M B E R 2 0 2 0
Index based on month-end prices: December 31, 2019 = 100
Volkswagen ordinary share –1.8%
Volkswagen preferred share –13.5%
DAX +3.5%
EURO STOXX Automobiles & Parts +3.8%
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 that allows our shareholders to participate appropri-
ately in our business success. The proposed dividend there-
fore reflects our financial management objectives – in partic-
ular, ensuring a solid financial foundation as part of the
implementation of our strategy.
The current dividend proposal can be found in the
chapter entitled “Volkswagen AG (condensed, in accordance
with the German Commercial Code)” of this annual report.
The Board of Management and Supervisory Board of Volks-
wagen AG are proposing a dividend of €4.80 per ordinary
share and €4.86 per preferred share for fiscal year 2020. On
this basis, the total dividend amounts to €2.4 (2.4) billion.
The payout ratio is based on the Group’s earnings after tax
attributable to Volkswagen AG shareholders. This amounts to
29.0% for the reporting period and stood at 18.1% in the
previous year. In our Group strategy, we have set ourselves
the goal of achieving a payout ratio of at least 30%.
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 2.8 (2.8)%,
measured by the closing price on the last trading day in 2020.
The dividend yield on preferred shares is 3.2 (2.8)%.
E A R N I N G S P E R S H A R E
Basic earnings per ordinary share were €16.60 (26.60) in
fiscal year 2020. Basic earnings per preferred share were
€16.66 (26.66). 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 number of basic and diluted shares is identical, basic
earnings per share correspond to diluted earnings per share.
See also “Earnings per share” in the notes to the consoli-
dated financial statements for the calculation of earnings per
share.
112
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 2 0
as a percentage of subscribed capital
V O L K SWA G E N S H A R E D ATA
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
31.4
31.4
26.0
26.0
14.6
14.6
11.8
11.8
12.9
12.9
3.4
3.4
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
Primary market indices
Exchanges
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 2 0
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, 2020
is shown in the chart on this page.
The distribution of voting rights for the 295,089,818
ordinary shares was as follows at the reporting date: Porsche
Automobil Holding SE, Stuttgart, held 53.3% 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 9.7% of ordinary shares were attributable to other
shareholders.
Notifications of changes in voting rights in accordance
with the Wertpapierhandelsgesetz (WpHG – German Securities
Trading Act) are published on our website at www.volkswagen
ag.com/en/InvestorRelations/news-and-publications.html.
Group Management Report
Shares and Bonds
113
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
2020
2019
2018
2017
2016
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
206,205
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. 31
Price/earnings ratio5
Ordinary share
Preferred share
Dividend yield6
Ordinary share
Preferred share
Stock exchange turnover7
€
€
€ 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
4.80
4.86
2,419
1,416
1,002
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
2020
2019
2018
2017
2016
170.10
– 1.8
183.10
101.50
152.42
– 13.5
185.52
87.20
1.26
81.6
127.0
0.64
173.25
+ 24.6
182.50
135.60
176.24
+ 26.9
184.24
134.76
1.17
87.5
121.8
0.72
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
2020
2019
2018
2017
16.60
16.60
26.60
26.60
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
253.44
242.93
233.63
217.13
184.90
10.2
9.1
2.8
3.2
2020
3.1
21.6
49.8
361.2
4.7
6.5
6.6
2.8
2.8
2019
3.3
20.9
41.0
266.0
4.6
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
1 Figures for the years 2016 to 2019 relate to dividends paid in the following year. For
4 For the calculation see “Earnings per share” in the notes to the consolidated financial
2020, the figures relate to the proposed dividend.
statements. 2017 figure adjusted (IFRS 9).
2 Xetra prices.
3 For the calculation see chapter “Results of Operations, Financial Position and Net
Assets” of this annual report.
5 Ratio of year-end-closing price to earnings per share.
6 Dividend per share based on the year-end-closing price.
7 Order book turnover on the Xetra electronic trading platform (Deutsche Börse).
114
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, 2020
Commercial paper
Commercial paper
6%
6%
Bonds
Bonds
65%
65%
Asset-backed securities
Asset-backed securities
29%
29%
Money and capital
market instruments
Maturities
Currencies
≤ 1 year
≤ 1 year
30%
30%
> 1 to < 5 years
> 1 to < 5 years
52%
52%
EUR
EUR
62%
62%
USD
USD
15%
15%
≥ 5 years
≥ 5 years
18%
18%
Others
Others
23%
23%
0
10
20
30
40
50
60
70
80
90
100
R E F I N A N C I N G
The Volkswagen Group used a variety of instruments and
markets for its refinancing activities in 2020.
In September 2020, the Automotive Division of the Volks-
wagen Group successfully placed its first green bonds on the
market, with a principal amount of €2.0 billion and terms of
eight and twelve years. The green bonds are based on the
Green Finance Framework presented in March 2020 for sus-
tainability-oriented financial instruments. The resources will
be allocated specifically to refinancing the Modular Electric
Drive Toolkit (MEB) and the new completely battery-electric
vehicles, the ID.3 and ID.4.
We strengthened net liquidity through the placement of
unsecured subordinated hybrid notes with an aggregate
principal amount of €3.0 billion. The notes are perpetual. One
note with a principal amount of €1.5 billion can only be
canceled by the issuer after five years, while the other with a
principal amount of €1.5 billion cannot be canceled until
nine years have elapsed. The transactions will be partly used
to refinance the hybrid note with a principal amount of
€1.25 billion that was issued in 2014 and canceled as of
March 24, 2021.
In the US capital market, bonds with an aggregate princi-
pal amount of USD 4.0 billion each were placed with investors
in May and November 2020. Notes with a volume of CAD 1.0
billion were issued in the Canadian refinancing market. In
addition, private placements were placed under the auto-
motive issuance program for the first time since 2015.
Official euro benchmark bonds with an aggregate volume
of €2.15 billion were issued for the Financial Services Divi-
sion. In addition to this, private placements were issued in
various currencies and regions.
Alongside the placement of senior, unsecured bonds,
asset-backed securities (ABS) transactions were another ele-
ment of our refinancing activities. ABS transactions in the
amount of approximately €3.2 billion were publicly placed in
Europe. In addition, ABS transactions were issued in the USA,
China and Japan.
The Volkswagen Group was also actively involved in the
commercial paper market with several issuing companies.
The proportion of fixed-rate instruments in the past year
was more than twice as high as the proportion of floating-
rate instruments.
In our refinancing arrangements, we generally aim to
exclude interest rate and currency risk as far as possible with
the simultaneous use of derivatives.
The table below shows how our money and capital
market programs were utilized as of December 31, 2020 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, 2020
€ billion
43.8
164.3
92.0
8.2
94.7
15.5
41.1
Group Management Report
Shares and Bonds
115
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
2020
2019
2018
2020
2019
2018
2020
2019
2018
A – 2
BBB+
negative
P – 2
A3
negative
A – 2
BBB+
stable
P – 2
A3
stable
A – 2
BBB+
A – 2
BBB+
stable
negative
P – 2
A3
P – 2
A3
stable
negative
A – 2
BBB+
stable
P – 2
A3
stable
A – 2
BBB+
A – 2
A –
A – 2
A –
A – 2
A –
stable
negative
negative
negative
P – 2
A3
P – 1
A1
P – 1
A1
stable
negative
stable
P – 1
A1
stable
Volkswagen AG’s syndicated credit line of €10.0 billion agreed
in December 2019 was drawn down during 2020. Further-
more, the syndicated credit line was extended by one year by
making use of the first extension option. There is an option
to extend the term by a further year until 2026 at the latest,
subject to the banks’ approval. This credit facility was unused
as of the end of 2020.
In March, Moody’s Investors Service had announced that the
ratings would be reviewed due to possible effects of the
Covid-19 pandemic, but in June subsequently left the short-
term and long-term ratings for Volkswagen AG and Volks-
wagen Financial Services AG unchanged at P–2 and A3 and
those for Volkswagen Bank GmbH at P–1 and A1. The outlook
for each company was downgraded from “stable” to “negative”.
Of the syndicated credit lines with a total of €12.7 billion
at other Group companies, €1.3 billion has been drawn down.
In addition, Group companies had arranged bilateral, con-
firmed credit lines with national and international banks in
various other countries for a total of €4.8 billion, of which
€0.6 billion was drawn down.
R AT I N G S
In March 2020, rating agency Standard & Poor’s confirmed 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. Due to risks
associated with the duration of the Covid-19 pandemic and
their effects on the global automotive industry, the outlook
for Volkswagen AG and Volkswagen Financial Services AG was
downgraded from “stable” to “negative”. The outlook for
Volkswagen Bank GmbH was left at “negative”.
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 in relation to the Group strategy TOGETHER 2025+, and
they provide the basis for implementing internal measures.
After the diesel issue became public knowledge, the Volks-
wagen 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 Sustain-
ability Index and the FTSE4Good Index. In fiscal year 2020,
Volkswagen continued to have a score of A– in the CDP and a
rating of A in the Water Disclosure Project (WDP).
116
Results of Operations, Financial Position and Net Assets
Group Management Report
Results of Operations, Financial
Position and Net Assets
The Covid-19 pandemic had a strong negative impact on business at the Volkswagen Group
in the reporting year, and this led to lower sales revenue and operating profit. Despite
further charges and cash outflows in connection with the diesel issue,
net liquidity in the Automotive Division was above the prior-year figure.
The Volkswagen Group’s segment reporting comprises the four
reportable segments of Passenger Cars and Light Commercial
Vehicles, Commercial Vehicles, Power Engineering and Finan-
cial Services, in compliance with IFRS 8 and in line with the
Group’s internal management and reporting structures.
At Volkswagen, segment profit or loss is measured on the
basis of the operating result.
The reconciliation contains activities and other oper-
ations that do not, by definition, constitute segments. These
include the unallocated Group financing activities. Consoli-
dation adjustments between the segments (including the
holding company functions) are also contained in the recon-
ciliation. The purchase price allocations for Porsche Holding
Salzburg and Porsche, Scania and MAN are allocated to their
corresponding segments.
The Automotive Division comprises the Passenger Cars
and Light Commercial Vehicles segment, the Commercial
Vehicles segment and the Power Engineering segment, as well
as the figures from the reconciliation. The Passenger Cars and
Light Commercial Vehicles segment is combined with the
reconciliation to form the Passenger Cars Business Area,
while the Commercial Vehicles and Power Engineering seg-
ments are identical to the corresponding business areas. The
Financial Services Division corresponds to the Financial
Services segment.
S P E C I A L I T E M S
Special items consist of certain items in the financial
statements whose separate disclosure the Board of Manage-
ment believes can enable a better assessment of our eco-
nomic performance.
In fiscal year 2020, negative special items in connection
with the diesel issue amounting to €– 0.9 (– 2.3) billion
affected operating profit in the Passenger Cars Business Area.
These items resulted mainly from legal risks.
C O N T R I B U T I O N O F A U TO N O M O U S I N T E L L I G E N T D R I V I N G
On July 12, 2019, Volkswagen announced that, together with
Ford Motor Company (Ford), it would be investing in Argo AI,
a company that is working on the development of a system
for autonomous driving. The investment involves the pro-
vision of financial resources totaling USD 1.0 billion, spread
over several years, and the contribution by Volkswagen of its
consolidated subsidiary Autonomous Intelligent Driving (AID).
K E Y F I G U R E S F O R 2 0 2 0 B Y S E G M E N T
€ million
Sales revenue
Segment profit or loss
(operating result)
as a percentage of sales
revenue
Capex, including capitalized
development costs
Passenger Cars
and Light
Commercial
Vehicles
Commercial
Vehicles Power Engineering
Financial Services
Total segments
Reconciliation
Volkswagen
Group
175,984
22,156
8,381
4.8
– 79
– 0.4
15,677
1,309
3,640
– 482
– 13.2
147
40,778
242,557
– 19,673
222,884
3,012
10,832
– 1,157
9,675
7.4
208
4.3
17,340
405
17,745
Group Management Report
Results of Operations, Financial Position and Net Assets
117
Furthermore, Volkswagen acquired existing Argo AI shares
from Ford for a purchase price of USD 500 million, payable in
three equal annual installments.
The transaction, including the contribution of AID, was
executed as of June 1, 2020. After proportional profit elimi-
nation, the contribution of AID to Argo AI at fair value
resulted in noncash income of €0.8 billion, which was recog-
nized in the other operating result. Argo AI will be accounted
for as a joint venture and included in the consolidated finan-
cial statements using the equity method.
S Q U E E Z E - O U T U N D E R T H E G E R M A N ST O C K C O R P O R AT I O N A C T
A G R E E D AT A U D I A G
On July 31, 2020, the Annual General Meeting of AUDI AG
approved the squeeze-out under stock corporation law at
AUDI AG and thus the transfer of all outstanding Audi shares
to Volkswagen AG. This resolution took effect upon its entry
in the commercial register on November 16, 2020. The
resulting cash outflow of €0.2 billion is presented in the
“capital transactions with noncontrolling interests” item.
S A L E O F I N T E R E ST I N R E N K A G
On October 6, 2020, the Volkswagen Group completed the
sale of its 76% interest in Renk AG following the required
regulatory approvals. The sale price was €0.5 billion. The
transaction generated operating income of €0.1 billion,
which is reported in other operating income. It also resulted
in an increase in net liquidity of €0.4 billion.
A C Q U I S I T I O N O F A L L S H A R E S I N N AV I STA R
In November 2020, TRATON SE and Navistar International
Corporation (Navistar), a leading US truck manufacturer,
announced the signing of a binding merger agreement.
Under this agreement, TRATON will acquire all outstanding
shares in Navistar not already owned by TRATON in return for
cash payment at a price of USD 44.50 per share (total:
approximately USD 3.7 billion). As of December 31, 2020,
TRATON already held a 16.7% interest in Navistar. The
completion of the transaction, through which TRATON will
become Navistar’s sole owner, is intended for mid-2021. Since
the merger agreement contains conditions precedent, the
payment of the purchase price cannot be recorded as a
liability in the balance sheet at present and is instead
reported under other financial obligations.
C A P I TA L I N C R E A S E AT Q U A N T U M S C A P E C O R P O R AT I O N
In fiscal year 2020, the Volkswagen Group took part in a
capital increase at QuantumScape Corporation, a US-based
company that develops solid-state batteries, entering into
forward purchase agreements for new shares. The capital
contribution comprises two tranches of USD 100 million
each. The first tranche was already paid in December 2020.
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 profits and losses 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
2020
2019
2020
2019
2020
2019
222,884
– 183,937
38,947
– 18,407
252,632
– 203,490
49,142
– 20,978
– 9,399
– 1,466
9,675
4.3
2,756
– 765
1,991
11,667
– 2,843
8,824
– 43
533
– 9,767
– 1,437
16,960
6.7
3,349
– 1,953
1,396
18,356
– 4,326
14,029
143
540
182,106
– 150,507
31,599
– 17,267
– 7,147
– 522
6,664
3.7
2,697
– 469
2,227
8,891
– 2,228
6,663
– 98
533
212,473
– 170,477
41,996
– 19,712
– 7,522
– 1,014
13,748
6.5
3,278
– 1,889
1,389
15,137
– 3,491
11,646
79
540
40,778
– 33,430
7,348
– 1,140
– 2,252
– 944
3,012
7.4
60
– 296
– 236
2,776
– 615
2,161
55
–
40,160
– 33,014
7,146
– 1,266
– 2,245
– 423
3,212
8.0
71
– 64
7
3,219
– 836
2,383
64
–
8,334
13,346
6,227
11,027
2,106
2,319
1 Including allocation of consolidation adjustments between the Automotive and Financial Services divisions.
118
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 2 0
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 2 0
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
41 %
41 %
19 %
19 %
16 %
16 %
4 %
4 %
20 %
20 %
Passenger Cars
Passenger Cars
Commercial Vehicles
Commercial Vehicles
Power Engineering
Power Engineering
Financial Services
Financial Services
70 %
70 %
10 %
10 %
2 %
2 %
18 %
18 %
Payment of the second tranche is subject to a technical
milestone being reached. Since there has meanwhile been a
merger with a special purpose acquisition company (SPAC),
which resulted in a listing on the New York Stock Exchange,
the forward purchases are measured with reference to the
share price of QuantumScape Corporation until the con-
tribution has been made and the new shares have been
issued. This measurement and realization resulted in non-
cash income of €1.4 billion in fiscal year 2020, which are
reported in the other financial result.
R E S U LT S O F O P E R AT I O N S
Results of operations of the Group
In fiscal year 2020, the Volkswagen Group generated sales
revenue of €222.9 billion. The year-on-year decrease of 11.8%
was mainly attributable to falling volumes as a result of the
Covid-19 pandemic, as well as the negative effects of changes
in exchange rates. Improvements in the mix and in price
positioning had a positive impact. 80.8 (80.6)% of the Volks-
wagen Group’s sales revenue originated abroad.
Gross profit amounted to €38.9 billion, €10.2 billion
lower than in 2019. This figure also included risk provisions
for any non-compliance with legal emissions limits. Positive
special items amounting to €0.1 (0.3) billion recognized here
in both periods due to the reversal of provisions for technical
measures in connection with the diesel issue had an
offsetting effect. The gross margin stood at 17.5 (19.5)%;
excluding special items, it amounted to 17.4 (19.3)%.
The persistent negative impact of the spread of the SARS-
CoV-2 virus was the main factor driving the €8.7 billion
decline in the Volkswagen Group’s operating profit before
special items to €10.6 billion in the reporting year. The
operating return on sales before special items fell to
4.8 (7.6)%. In addition to lower unit sales due to the
pandemic-related decline in customer demand, turbulence in
the capital markets meant that the measurement of
receivables and liabilities denominated in foreign currencies
had a negative effect. One-off expenses for restructuring
measures of €0.5 billion also contributed to the reduction in
profit. Positive factors were lower costs. The contribution of
the consolidated subsidiary Autonomous Intelligent Driving
(AID) to Argo AI, a company that is working on the develop-
ment of a system for autonomous driving, led to income of
€0.8 billion. This figure also includes the income from the
sale of Renk. Special items in connection with the diesel issue
weighed on operating profit, reducing this item by €–0.9
(– 2.3) billion. The Volkswagen Group’s operating profit was
€9.7 (17.0) billion, while the operating return on sales fell to
4.3 (6.7)%.
The financial result increased by €0.6 billion year-on-year
to €2.0 billion. The interest expenses included in the financial
result were down, mainly for measurement-related reasons
caused by a change in discount rates applied in the measure-
ment of liabilities, while changes in share prices, also as a
response to the Covid-19 pandemic, weighed on net income
from securities and funds. The share of the result of equity-
accounted investments was lower than in the previous year.
The decline was primarily due to lower profit generated by
the Chinese joint ventures, which were affected by the spread
of the SARS-CoV-2 virus especially in the first quarter of 2020.
The other financial result includes the measurement and
realization of forward purchase agreements for new shares in
QuantumScape Corporation, which led to noncash income of
€1.4 billion in fiscal year 2020.
The Volkswagen Group’s profit before tax amounted to
€11.7 (18.4) billion. The return on sales before tax decreased
to 5.2 (7.3)%. Income taxes resulted in an expense of
Group Management Report
Results of Operations, Financial Position and Net Assets
119
€2.8 (4.3) billion in fiscal year 2020, which in turn led to a tax
rate of 24.4 (23.6)%. Profit after tax decreased by €5.2 billion
to €8.8 billion.
Results of operations in the Automotive Division
In the period from January to December 2020, the Auto-
motive Division recorded sales revenue of €182.1 billion,
down 14.3% on the prior-year period. Profit was weighed
down especially by the decline in volumes resulting from the
Covid-19 pandemic, while changes in exchange rates also had
a negative effect. In contrast, mix effects and improved price
positioning made a positive contribution. Since our Chinese
joint ventures are accounted for using the equity method, the
Group’s business performance in the Chinese passenger car
market is primarily reflected in the Group’s sales revenue
only through deliveries of vehicles and vehicle parts.
Lower volumes led to a decrease in cost of sales, although
its ratio to sales revenue rose year-on-year. Positive special
items recognized here in both periods due to the reversal of
provisions for technical measures in connection with the
diesel issue had a favorable effect. Higher depreciation and
amortization charges due to the large capex volume of
previous years and provisions for any non-compliance with
legal emissions limits were set against lower research and
development costs recognized in profit or loss. Despite the
reduction in their absolute amount, total research and
development costs as a percentage of the Automotive Divi-
sion’s sales revenue (research and development ratio or R&D
ratio) increased to 7.6 (6.7)% in fiscal year 2020 compared to
the prior-year period, due to the decline in sales revenue. 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 technologies.
Factors such as exchange rate effects led to a year-on-year
decline in both distribution and administrative expenses in
the reporting period, although their ratio to sales revenue
rose. The other operating result amounted to €– 0.5 (– 1.0) bil-
lion. The main items to be recognized here were negative
special items in connection with the diesel issue in an
amount of €– 1.0 (– 2.6) billion. Other adverse factors were the
negative effects of the measurement of receivables and
liabilities denominated in foreign currencies and one-off
expenses for restructuring measures. The income from the
contribution of AID to the Argo AI joint venture and from the
sale of the shares in Renk was also included in this item. In
the prior-year period, the reversal of impairment losses
following the remeasurement of development costs had a
positive effect.
The Automotive Division’s operating profit was
€6.7 (13.7) billion in 2020. Its operating return on sales fell to
3.7 (6.5)%. Compared with the previous year, lower unit sales
caused by the Covid-19 pandemic had a negative impact, as
did the measurement of receivables and liabilities denomi-
nated in foreign currencies. One-off expenses for restruc-
turing measures of €0.5 billion also contributed to the reduc-
tion in profit. Positive factors were lower costs as well as the
income from the contribution of AID and from the sale of
Renk; negative special items declined compared with the
previous year, in which the reversal of impairment losses
following the remeasurement of development costs had a
positive impact. The operating profit before special items
decreased by €8.5 billion to €7.6 billion, while the operating
return on sales before special items went down to 4.2 (7.6)%.
Our operating profit largely benefits from the business
performance of our Chinese joint ventures only through
deliveries of vehicles and vehicle parts and through license
income, as the joint ventures are accounted for using the
equity method and therefore included in the financial result.
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 revenue
Operating result
Operating return on sales (%)
2020
2019
156,311
7,224
4.6
182,031
12,188
6.7
The Passenger Cars Business Area reported sales revenue of
€156.3 billion in fiscal year 2020, 14.1% less than in the
previous year. The year-on-year decrease was mainly attri-
butable to falling volumes as a result of the Covid-19 pan-
demic. Moreover, changes in exchange rates had a negative
effect, while the contribution of mix effects and better price
positioning was positive. The Passenger Cars Business Area’s
operating profit was down €5.0 billion to €7.2 billion. The
spread of the SARS-CoV-2 virus led to a drop in vehicle sales
and caused the measurement of receivables and liabilities
denominated in foreign currencies to have a negative effect.
One-off expenses for restructuring measures also weighed on
operating profit. Lower costs and the income from the
contribution of AID led to higher profit. Special items
recognized in connection with the diesel issue in an amount
of €– 0.9 (– 2.3) billion were lower than in fiscal year 2019. The
prior-year figure had also included the reversal of impair-
ment losses following the remeasurement of development
costs. The operating return on sales decreased to 4.6 (6.7)%.
120
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 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 (%)
2020
2019
22,156
– 79
– 0.4
26,444
1,653
6.3
In the period from January to December 2020, the Com-
mercial Vehicles Business Area recorded sales revenue of
€22.2 billion; this was a significant year-on-year drop of
16.2%, due primarily to falling volumes as a result of the
Covid-19 pandemic. Again due mainly to the pandemic-
related decline in customer demand, as well as exchange rate-
related factors, the Commercial Vehicles Business Area’s
operating result decreased by €1.7 billion to €– 0.1 billion
year-on-year. Improvements in the mix, in price positioning
and in fixed costs had a beneficial impact. The operating
return on sales fell to – 0.4 (6.3)%.
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 (%)
2020
2019
3,640
– 482
– 13.2
3,997
– 93
– 2.3
Following the sale of Renk as of October 6, 2020, the Power
Engineering Business Area now comprises MAN Energy
Solutions and the purchase price allocation made to the
segment. The result of Renk’s operating activities for 2020 is
therefore included in the Power Engineering Business Area
only for the first nine months.
The Power Engineering Business Area generated sales
revenue of €3.6 (4.0) billion in the reporting year. The
operating loss amounted to €– 0.5 (– 0.1) billion. The main
reasons were falling volumes and in particular one-off
expenses for restructuring measures of €0.4 billion. Cost
reductions and improvements in the mix had a positive
effect. The operating return on sales was at – 13.2 (– 2.3)%.
Results of operations in the Financial Services Division
The Financial Services Division reported sales revenue of
€40.8 billion in fiscal year 2020, 1.5% more than in the
previous year. Due to the Financial Services Division’s busi-
ness model, the negative effect of the Covid-19 pandemic on
sales revenue is less severe here than in the Automotive
Division.
Cost of sales increased by 1.3% to €33.4 billion. When
taken together, distribution expenses, administrative expenses
and the other operating result were up; their ratio to sales
revenue also increased overall. The other operating result was
weighed down particularly by higher risk costs.
The Financial Services Division’s operating profit was
6.2% lower, at €3.0 billion, primarily for pandemic-related
reasons. The operating return on sales amounted to
7.4 (8.0)%. The return on equity before tax of 8.8 (10.8)% was
down on the prior-year figure.
Principles and goals of financial management
Financial management in the Volkswagen Group covers
liquidity management, the management of currency, interest
rate and commodity price risks, as well as credit and country
risk management. It is performed centrally for all Group
companies by Group Treasury, based on internal guidelines
and risk parameters. Some functions of the MAN Energy
Solutions, Porsche Holding Salzburg and TRATON subgroups
are integrated into the financial management. Additionally,
these subgroups have their own financial management struc-
tures.
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 this system, the balances, either positive or negative,
accumulating in the cash pooling accounts are swept daily to
a regional target account and thus pooled. The overriding
aim of currency, interest rate and commodity risk manage-
ment is to hedge, using derivative financial instruments and
commodity forwards, the prices on which investment,
production and sales plans are based when making planning
assumptions and to mitigate interest rate risks incurred in
financing transactions. In the management of credit and
country risk, diversification is used to limit the Volkswagen
Group’s exposure to the so-called counterparty risk. To
achieve this, counterparty risk management imposes internal
limits on the volume of business allowed per counterparty
when financial transactions are entered into. Various credit
rating criteria are applied 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 Manage-
ment. For additional information on the principles and goals
Group Management Report
Results of Operations, Financial Position and Net Assets
121
of financial management, please refer to the chapter on
“Financial risk management and financial instruments” in
the notes to the consolidated financial statements.
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 decreased to
€35.0 (39.9) billion in the reporting year, mainly due to the
pandemic-related decline in profit. The change in working
capital amounted to €– 10.1 (– 22.0) billion. The effects of the
Covid-19 pandemic included a reduction in receivables,
including in the financial services business, lower inventories
because of downscaled production, a decline in other pro-
visions and a smaller rise in liabilities. Cash outflows attri-
butable to the diesel issue were higher than in fiscal year
2019. Cash flows from operating activities improved signifi-
cantly year-on-year, to €24.9 (18.0) billion.
The Volkswagen Group’s investing activities attributable
to operating activities amounted to €18.4 (20.1) billion in
fiscal year 2020; this was down on the previous year, mainly
due to lower capex.
Financing activities accounted for total cash inflows of
€7.6 billion in the reporting year, primarily to boost gross
liquidity; a cash outflow of €– 0.9 billion had been recorded in
the previous year. Financing activities primarily include the
issuance and redemption of bonds and changes in other
financial liabilities. In June 2020, hybrid notes totaling
€3.0 billion were placed successfully. In September 2020,
Volkswagen issued green bonds in an amount of €2.0 billion.
The dividend payment to the shareholders of Volkswagen AG
led to a cash outflow in October 2020 in the same amount as
in the previous year. The figure for fiscal year 2019 had
included the acquisition of MAN shares tendered as a result
of the termination of the control and profit and loss transfer
agreement, and the cash inflow resulting from the IPO of
TRATON.
At the end of the reporting period, the Volkswagen
Group’s cash and cash equivalents reported in the cash flow
statement amounted to €33.4 (24.3) billion.
On December 31, 2020, the Volkswagen Group’s net
liquidity stood at €– 137.4 billion, compared with €– 148.0 bil-
lion at the end of 2019.
Financial position of the Automotive Division
In the period from January to December 2020, the Auto-
motive Division’s gross cash flow was €23.6 billion, down
€5.5 billion on the previous year due to earnings-related
factors. Working capital, which underwent very different
changes in the individual quarters, amounted to €1.1 (1.6) bil-
lion. The effects of the Covid-19 pandemic included lower
inventories because of downscaled production, a reduction in
receivables as well as lower liabilities and a decline in other
provisions. Cash outflows attributable to the diesel issue were
higher than a year earlier. Consequently, cash flows from
operating activities were down €6.0 billion to €24.7 billion.
Investing activities attributable to operating activities
decreased by €18.4 billion to €1.5 billion. Investments in
property, plant and equipment, investment property and in-
tangible assets, excluding capitalized development costs
(capex) included in this figure declined by €2.9 billion to
€11.1 billion. Despite a drop in sales revenue as a result of the
pandemic, the ratio of capex to sales revenue was 6.1 (6.6)%
down on the prior-year figure due to a significant fall in
122
Results of Operations, Financial Position and Net Assets
Group Management Report
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
2020
2019
2020
2019
2020
2019
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
Cash and cash equivalents at beginning of period
Earnings before tax
Income taxes paid
Depreciation and amortization expense2
Change in pension provisions
Share of the result of equity-accounted investments
Other noncash income/expense and reclassifications3
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 flow4
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 & cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents at Dec. 315
Securities, loans and time deposits
Gross liquidity
Total third-party borrowings
Net liquidity6
24,329
11,667
– 2,646
27,069
806
536
– 2,461
34,971
28,113
18,356
– 2,914
24,439
342
460
– 734
39,950
– 10,070
– 21,966
1,334
712
540
– 2
– 12,914
260
24,901
– 674
– 893
2,297
1,304
– 13,204
– 10,796
17,983
18,098
8,891
– 2,009
17,798
767
584
– 2,388
23,642
1,079
1,406
45
– 138
– 214
52
– 72
23,354
15,137
– 2,187
15,958
320
520
– 651
29,097
1,636
– 345
– 1,176
1,564
1,400
– 110
303
24,721
30,733
– 18,372
– 20,076
– 18,364
– 19,898
– 11,273
– 14,230
– 11,065
– 14,007
– 6,473
– 1,037
6,529
– 4,319
– 5,171
– 913
– 2,093
– 1,069
– 6,473
– 1,188
6,357
– 3,015
– 22,690
– 21,146
– 21,379
7,637
– 238
2,984
– 865
1,368
–
2,938
– 238
2,952
– 5,171
– 716
10,835
– 5,018
– 24,916
– 11,278
1,368
– 970
2
– 1,109
2
– 1,109
– 745
– 0
9,103
33,432
32,645
66,078
243
1
– 3,784
24,329
29,099
53,428
– 619
– 0
5,660
23,758
15,868
39,626
205
1
– 5,256
18,098
13,458
31,556
6,231
2,776
– 637
9,272
39
– 48
– 73
4,759
3,219
– 726
8,480
23
– 59
– 83
11,329
10,853
– 11,148
– 23,603
– 72
668
678
211
– 12,966
332
180
– 8
– 208
–
151
172
– 1,304
– 1,312
4,699
–
33
–
– 125
0
3,443
9,674
16,777
26,451
– 329
283
733
– 96
– 13,095
– 11,099
– 12,750
– 178
– 223
–
– 196
– 12,928
3,949
3,771
10,413
–
970
–
38
– 0
1,472
6,231
15,641
21,872
– 203,457
– 201,468
– 12,830
– 10,280
– 190,627
– 191,189
– 137,380
– 148,040
26,796
21,276
– 164,176
– 169,316
1 Including allocation of consolidation adjustments between the Automotive and Financial Services divisions.
2 Net of impairment reversals.
3 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.
4 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).
5 Cash and cash equivalents comprise cash at banks, checks, cash-in-hand and call deposits.
6 The total of cash, cash equivalents, securities, loans to affiliates and joint ventures as well as time deposits net of third-party borrowings (noncurrent and current financial liabilities).
Group Management Report
Results of Operations, Financial Position and Net Assets
123
The Automotive Division’s net cash flow fell by €4.5 bil-
Change in working capital
capex. Capex was primarily allocated to our production
facilities and to models that we launched in 2020 or are
planning to launch in 2021, or for which production is set to
start. These are primarily vehicles in the ID. family and in the
Golf, Audi Q4 e-tron, Audi Q6 e-tron, Audi e-tron GT, ŠKODA
Enyaq model series, the new generation of the ŠKODA Fabia,
the SEAT Leon family, as well as the CUPRA Formentor, the
Porsche Taycan, the Porsche Macan and Bentley’s Bentayga.
Other investment priorities included the ecological focus of
our model range, product electrification and digitalization,
and our modular toolkits. The increase in capitalized develop-
ment costs to €6.5 (5.2) billion is primarily due to product
impairment tests, which have had to be performed at brand
level since the end of 2019. The “acquisition and disposal of
equity investments” item went up by €0.5 billion to €1.2 bil-
lion as a result of strategic investments in a number of com-
panies, in particular the Argo AI joint venture; this was offset
by the cash provided by the sale of Renk.
lion to €6.4 billion in the reporting period.
Financing activities relate to the issuance and redemption
of bonds and changes in other financial liabilities; the total
cash inflow in this item was €2.9 billion in fiscal year 2020.
This helped boost gross liquidity and resulted in higher
liabilities to banks. The hybrid notes with a principal amount
of €3.0 billion, which were successfully issued via Volks-
wagen International Finance N.V. in June 2020, led to cash
inflows. The first one is a €1.5 billion note that has a coupon
of 3.5% and can first be called after five years, and the other is
a €1.5 billion note that has a coupon of 3.875% and can first
be called after nine years. Both notes have perpetual
maturities and increase equity, net of transaction and other
costs. An amount of €3.0 billion of the hybrid notes was
eligible to be classified as a capital contribution and led to a
rise in net liquidity. In addition, the green bonds of €2.0 bil-
lion issued in September 2020 are included in financing
activities. A dividend of €2.4 (2.4) billion was distributed to
the shareholders of Volkswagen AG in October 2020. The
“capital transactions with noncontrolling interests” item
includes the cash outflow of €0.2 billion for the transfer of all
outstanding Audi shares to Volkswagen AG. In the previous
year, financing activities accounted for cash outflows of
€11.3 billion. This figure also included the acquisition of
MAN shares tendered as a result of the termination of the
control and profit and loss transfer agreement with MAN SE,
which was set against the cash inflow resulting from the IPO
of TRATON.
At the end of the reporting year, the Automotive Divi-
sion’s net liquidity was up €5.5 billion, at €26.8 billion.
Driven by the increase in net liquidity and the decrease in
sales revenue, the Automotive Division’s net
liquidity
accounted for 12.0 (8.4)% of consolidated sales revenue in the
reporting period.
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
Gross cash flow
Cash flows from operating activities
Cash flows from investing activities
attributable to operating activities
Net cash flow
2020
2019
21,823
331
22,154
– 16,762
5,392
25,474
3,053
28,528
– 20,254
8,273
Due to the pandemic-related decline in profit, the gross cash
flow generated by the Passenger Cars Business Area was
€21.8 billion in fiscal year 2020, having experienced a decline
of €3.7 billion compared with the previous year. The change
in working capital amounted to €0.3 (3.1) billion. The effects
of the Covid-19 pandemic included lower inventories, a
reduction in receivables, lower liabilities and a decline in
other provisions. The cash outflows attributable to the diesel
issue were higher in the reporting period than a year earlier.
Cash
from operating activities were down by
€6.4 billion to €22.2 billion. Investing activities attributable
to operating activities in the Passenger Cars Business Area
decreased to €16.8 (20.3) billion. Capex was lower, while
capitalized development costs increased. The “acquisition
and disposal of equity investments” item went up due to
strategic investments in a number of companies, in particular
the joint venture Argo AI. The Passenger Cars Business Area’s
net cash flow declined by €2.9 billion to €5.4 billion.
flows
124
Results of Operations, Financial Position and Net Assets
Group Management Report
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
2020
2019
caused by the lower business volume in response to the
decline in demand following the spread of the SARS-CoV-2
virus,
to
€– 11.1 (– 23.6) billion. Cash flows from operating activities
improved by €12.9 billion to €0.2 billion.
in working capital amounted
the change
Gross cash flow
Change in working capital
Cash flows from operating activities
Cash flows from investing activities
attributable to operating activities
Net cash flow
1,845
159
2,004
– 1,328
676
At €0.0 (0.2) billion, investing activities attributable to
3,357
operating activities were below the prior-year figure.
– 1,249
2,108
603
2,711
The Financial Services Division’s financing activities
relate primarily to the issuance and redemption of bonds and
other financial liabilities; there was a total cash inflow of
€4.7 billion to refinance the business volume in the reporting
period, compared with €10.4 billion in the previous year.
In the period from January to December 2020, the Com-
mercial Vehicles Business Area’s gross cash flow went down
by €1.5 billion to €1.8 billion due to earnings-related factors
driven by the Covid-19 pandemic. The change in working
capital amounted to €0.2 (– 1.2) billion. Cash flows from
operating activities declined by €0.1 billion to €2.0 billion.
Investing activities attributable to operating activities were
up on the previous year, in which the intragroup sale of the
power engineering business had led to a cash inflow. Net cash
flow dropped to €0.7 (2.7) billion.
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
2020
– 25
588
562
– 274
289
2019
265
– 168
98
– 247
– 150
In the reporting year, gross cash flow in the Power
Engineering Business Area declined to €0.0 (0.3) billion year-
on-year, primarily as a result of a deterioration in profit. Due
to a reduction in receivables and restructuring expenses that
have not yet led to cash outflows, the change in working
capital amounted to €0.6 (– 0.2) billion. Cash flows from
operating activities rose by €0.5 billion year-on-year, to
€0.6 billion. Investing activities attributable to operating
activities increased by 10.6% to €0.3 billion. Net cash flow
improved by €0.4 billion to €0.3 billion.
Financial position in the Financial Services Division
In the period from January to December 2020, the Financial
Services Division generated gross cash flow of €11.3 (10.9) bil-
lion. Given a decrease in funds tied up in working capital
At the end of the reporting period, the Financial Services
Division’s negative net liquidity, which is common in the
industry, stood at €– 164.2 billion, compared with €– 169.3 bil-
lion on December 31, 2019.
N E T A S S E T S
Consolidated balance sheet structure
At the end of fiscal year 2020, the Volkswagen Group had total
assets of €497.1 billion, 1.9% more than at the end of the
prior year. The rise is mostly attributable to the boost in gross
liquidity and the successful issue of hybrid notes in the
second quarter of 2020. It was offset by exchange rate effects.
A chart showing the structure of the consolidated balance
sheet as of the reporting date can be found in this chapter.
The Volkswagen Group’s equity increased by €5.1 billion to
€128.8 billion. The equity ratio was 25.9 (25.3)%.
As of the end of fiscal year 2020, the Group had off-
balance-sheet commitments in the form of contingent
liabilities in the amount of €8.6 (8.5) billion and in the form
of financial guarantees in the amount of €0.4 (0.4) billion. In
addition, there were other financial obligations of €22.0 bil-
lion, which exceeded the prior-year figure of €20.0 billion.
The contingent liabilities relate primarily to legal risks in
connection with the diesel issue, as well as to potential
liabilities from tax risks in the Commercial Vehicles Business
Area in Brazil. Other financial obligations primarily result
from purchase commitments for property, plant and equip-
ment and irrevocable credit commitments to customers.
They also include commitments to invest in the infrastruc-
ture 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. The other financial
obligations include an amount of €0.9 billion for this pur-
pose. In addition, this item reflects the payment of the
purchase price for the acquisition of all of Navistar’s out-
standing shares totaling around USD 3.7 billion, as the merger
agreement between TRATON and Navistar contains condi-
tions precedent and the purchase price payment cannot be
recorded as a liability in the balance sheet at present.
Group Management Report
Results of Operations, Financial Position and Net Assets
125
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
Financial liabilities
Trade payables
Other liabilities
Liabilities associated with assets held for sale
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
2020
2019
2020
2019
2020
2019
302,170
300,608
156,861
153,736
145,309
146,873
67,968
63,884
50,686
82,565
37,067
194,944
43,823
58,006
38,044
21,162
33,909
–
66,214
66,152
48,938
86,973
32,331
187,463
46,742
58,615
38,620
16,769
25,923
795
67,781
62,807
1,512
– 377
25,137
97,236
39,055
– 557
17,012
17,503
24,222
–
66,010
65,043
2,084
– 390
20,989
93,081
41,898
– 640
17,803
13,546
19,679
795
187
1,077
49,174
82,942
11,930
97,708
4,768
58,562
21,033
3,658
9,687
–
204
1,110
46,853
87,363
11,342
94,382
4,844
59,255
20,817
3,223
6,243
–
497,114
488,071
254,097
246,816
243,017
241,255
128,783
123,651
96,733
92,774
32,050
30,877
111,336
109,117
79,913
78,872
31,423
30,246
15,713
12,663
15,713
12,663
–
–
127,049
1,734
202,921
114,809
45,081
43,031
165,410
88,648
22,677
54,085
–
121,781
1,870
196,497
113,556
41,389
41,551
167,924
87,912
22,745
56,896
370
95,626
1,107
93,523
15,637
44,207
33,680
63,840
– 2,806
19,539
47,107
–
91,535
1,239
90,822
17,592
40,631
32,600
63,220
– 7,312
19,603
50,559
370
31,423
627
109,398
99,173
874
9,352
101,569
91,454
3,137
6,978
–
30,246
631
105,675
95,965
759
8,951
104,703
95,224
3,142
6,337
–
Total equity and liabilities
497,114
488,071
254,097
246,816
243,017
241,255
1 Including allocation of consolidation adjustments between the Automotive and Financial Services divisions, primarily intragroup loans.
126
Results of Operations, Financial Position and Net Assets
Group Management Report
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 2 0
in percent
Noncurrent assets
Noncurrent assets
60.8 (61.6)
60.8 (61.6)
Current assets
Current assets
39.2 (38.4)
39.2 (38.4)
Equity
Equity
25.9 (25.3)
25.9 (25.3)
Noncurrent liabilities
Noncurrent liabilities
40.8 (40.3)
40.8 (40.3)
Current liabilites
Current liabilites
33.3 (34.4)
33.3 (34.4)
Total assets
Total equity
and liabilities
0
10
20
30
40
50
60
70
80
90
100
Automotive Division balance sheet structure
As of December 31, 2020, the Automotive Division’s intan-
gible assets increased slightly compared with fiscal year 2019,
driven among other factors by a rise in capitalized develop-
ment costs. Property, plant and equipment declined due to
exchange rate factors and depreciation in excess of additions.
Equity-accounted investments were up as the year-on-year
decline in the business results of the Chinese joint ventures
was offset by resolutions to pay lower dividends and by
additions to the interests held in entities such as Argo AI,
QuantumScape, Anhui Jianghuai Automobile Group Holdings
and Northvolt. Noncurrent other receivables and financial
assets increased. Total noncurrent assets were up €3.1 billion
to €156.9 billion.
Current assets were higher than at the end of 2019,
amounting to €97.2 (93.1) billion. As a result of downscaled
production in response to the pandemic and due to exchange
rate effects, the inventories included in this item were lower.
The Automotive Division’s securities and cash and cash
equivalents rose by €8.5 billion to €41.7 billion.
In the previous year, the “Assets held for sale” item
included the carrying amounts of assets to be derecognized
as a result of the contribution of AID to the Argo AI joint
venture and those relating to the sale of Renk.
At the end of the reporting year, the Automotive Divi-
sion’s equity amounted to €96.7 billion, 4.3% more than a
year earlier. The increase was mainly attributable to the profit
generated, the hybrid notes issued in June 2020, and the
positive effects from the measurement of derivatives recog-
nized directly in equity. Currency translation, the dividend
payment to the shareholders of Volkswagen AG resolved by
the Annual General Meeting, and higher actuarial losses from
the remeasurement of pension plans reduced equity. Non-
controlling interests are primarily held by the noncontrolling
interest shareholders of TRATON. The equity ratio was
38.1 (37.6)%.
Noncurrent liabilities increased by €2.7 billion to €93.5 bil-
lion. The decrease in noncurrent financial liabilities included
in this item was driven primarily by reclassifications from
noncurrent to current liabilities to reflect shorter remaining
maturities and by exchange rate effects; the issuance of green
bonds in September 2020 had an offsetting impact on this
item. Pension provisions were significantly higher than the
comparative 2019 figure, due mainly to the actuarial remea-
surement following a change in the discount rate.
At €63.8 (63.2) billion, current liabilities were on a level
with the previous year. Current financial liabilities amounted
to €– 2.8 (– 7.3) billion due primarily to reclassifications from
noncurrent to current liabilities. 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 liabilities were down, primarily
due to the effects of the measurement of derivatives and to
lower liabilities from buyback transactions. Other provisions
decreased, due mainly to utilizations in connection with the
diesel issue.
At the end of fiscal year 2020, the Automotive Division’s
total assets amounted to €254.1 billion, up 2.9% compared
with the figure on December 31, 2019.
Group Management Report
Results of Operations, Financial Position and Net Assets
127
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
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
B A L A N C E S H E E T ST R U C T U R E
€ million
Dec. 31, 2020
Dec. 31, 2019
€ million
Dec. 31, 2020
Dec. 31, 2019
Noncurrent assets
Current assets
Total assets
Equity
Noncurrent liabilities
Current liabilities
130,237
83,180
213,417
81,423
82,263
49,731
126,387
Noncurrent assets
75,459
Current assets
201,846
Total assets
75,773
Equity
78,679
Noncurrent liabilities
47,394
Current liabilities
24,777
11,256
36,033
13,389
10,592
12,052
25,143
13,420
38,563
14,115
11,367
13,081
At the end of the reporting period, property, plant and
equipment in the Commercial Vehicles Business Area was up
slightly, while lease assets were down. In total, noncurrent
assets were slightly lower than at the last balance sheet date
in 2019, amounting to €24.8 (25.1) billion. Current assets
declined by 16.1%. The inventories included in this item were
lower as a result of downscaled production in response to the
pandemic. Total securities and cash and cash equivalents
decreased in the reporting year. At €36.0 billion, total assets
were again €2.5 billion lower than in the previous year.
The Commercial Vehicles Business Area’s equity was
down on the previous year, amounting to €13.4 (14.1) billion.
Noncurrent liabilities were 6.8% lower overall than on
December 31, 2019. There was a decline in other noncurrent
liabilities. Current liabilities dropped by a total of 7.9%. The
current other liabilities included in this item were lower than
on the previous year’s balance sheet date.
At the end of 2020, intangible assets in the Passenger Cars
Business Area were higher than at the 2019 balance sheet
date. This was attributable among other factors to an increase
in capitalized development costs. Exchange rate factors and
depreciation in excess of additions led to a decrease in prop-
erty, plant and equipment. Equity-accounted investments
rose compared with December 31, 2019: the year-on-year
decline in the business results of the Chinese joint ventures
was set against resolutions to pay lower dividends in the
Chinese joint ventures, as well as additions to the interests
held in entities such as Argo AI, QuantumScape, Anhui
Jianghuai Automobile Group Holdings and Northvolt.
Overall, noncurrent assets increased by 3.0% compared with
the end of 2019. Current assets rose by 10.2%. The inventories
included in this item were lower as a result of downscaled
production in response to the pandemic and due to exchange
rate effects. Total securities and cash and cash equivalents in
the Passenger Cars Business Area significantly exceeded the
figure recorded at the end of 2019. On December 31, 2020, the
Passenger Cars Business Area had total assets amounting to
€213.4 (201.8) billion.
At €81.4 (75.8) billion, the Passenger Cars Business Area’s
equity was up on the figure for December 31, 2019, mainly for
earnings-related reasons. Total noncurrent liabilities were
4.6% higher than at the end of 2019. The noncurrent financial
liabilities included in this item increased, and pension
provisions rose, mainly due to the actuarial remeasurement
following a change in the discount rate. A rise in current
financial liabilities was the main factor driving the 4.9%
increase in current liabilities compared with the end of 2019.
This was offset in particular by lower other provisions, whose
decline was driven by factors such as utilizations in connec-
tion with the diesel issue.
128
Results of Operations, Financial Position and Net Assets
Group Management Report
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
€ million
Dec. 31, 2020
Dec. 31, 2019
Noncurrent assets
Current assets
Total assets
Equity
Noncurrent liabilities
Current liabilities
1,847
2,800
4,647
1,922
668
2,057
2,206
4,202
6,408
2,885
777
2,746
The Power Engineering Business Area’s intangible assets and
property, plant and equipment were lower on December 31,
2020 than on the prior-year balance sheet date. Noncurrent
assets dropped by a total of 16.3%. Current assets decreased
by 33.4%, with a significant reduction in the cash and cash
equivalents included in this item. In the previous year, the
“Assets held for sale” item had included the carrying
amounts of assets derecognized as a result of the sale of Renk
completed in October 2020. As a result, total assets in the
Power Engineering Business Area went down
to
€4.6 (6.4) billion at the end of fiscal year 2020.
At the end of 2020, the Power Engineering Business Area’s
equity amounted to €1.9 (2.9) billion. Overall, noncurrent
liabilities were lower than a year earlier. Current liabilities
also declined compared with the end of 2019. The financial
liabilities included here fell significantly, while other pro-
visions went up because of provisions recognized for restruc-
turing measures. Current liabilities as of the end of 2019 had
also included the carrying amounts of the liabilities of Renk,
which were derecognized as a result of the sale of Renk in
2020.
Financial Services Division balance sheet structure
On December 31, 2020, the Financial Services Division had
total assets of €243.0 (241.3) billion, slightly more than at the
balance sheet date in 2019.
Noncurrent assets declined by 1.1% to €145.3 billion com-
pared with the end of the prior year; the property, plant and
equipment included in this item was virtually unchanged.
Lease assets increased, while non-current financial services
receivables were down because volumes and exchange rates
were affected by the Covid-19 pandemic.
Current assets expanded to €97.7 (94.4) billion. Current
financial services receivables were lower than at the end of
2019, primarily for pandemic-related reasons. At €13.3 bil-
lion, total securities and cash and cash equivalents in the
Financial Services Division exceeded the figure recorded at
the end of 2019 by €3.9 billion.
On December 31, 2020, the Financial Services Division
accounted for around 48.9 (49.4)% of the Volkswagen Group’s
assets.
At the end of the reporting year, the Financial Services
Division’s equity stood at €32.0 billion, 3.8% more than a year
earlier. Negative exchange rate effects were offset by positive
earnings. The equity ratio was 13.2 (12.8)%.
Noncurrent liabilities increased by 3.5% overall, mainly
due to a rise in noncurrent financial liabilities and higher
other provisions. A reduction in current financial liabilities,
offset by higher other current liabilities, led to a net decrease
in total current liabilities.
Deposits from the direct banking business amounted to
€28.9 (32.5) billion, and were therefore below the figure
recorded at the end of 2019.
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 indi-
cator linked to the cost of capital, as an absolute performance
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 contribution1 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.
Based on our companies’ income tax rates, which vary from
country to country, we assume an overall average tax rate of
30% when calculating the operating result after tax.
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
129
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 7.5% reflects the general risk
of a capital investment in the equity market.
The specific business risk – price fluctuations in Volks-
wagen preferred shares – is 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 weekly
basis followed by the subsequent calculation of the average. A
beta factor of 1.26 (1.17) was determined for 2020.
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 6.5 (6.3)% for 2020.
C O ST O F C A P I TA L A F T E R TA X I N T H E A U TO M OT I V E D I V I S I O N
%
2020
2019
Risk-free rate
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
– 0.2
7.5
2.0
(1.26)
9.3
1.4
– 0.4
1.0
66.7
33.3
6.5
0.0
7.5
1.3
(1.17)
8.8
1.9
– 0.6
1.3
66.7
33.3
6.3
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
At €7,450 (13,019) million, the Automotive Division’s operating
profit after tax, including the proportionate operating profit
of the Chinese joint ventures, was down on the prior-year
figure in fiscal year 2020, mainly due to the persistently
negative impact of the spread of the SARS-CoV-2 virus. In
addition particularly to the decline in revenue resulting from
the pandemic-related fall in customer demand, turbulence in
the capital markets led to negative effects from the mea-
surement of receivables and liabilities denominated in
foreign currencies. One-off expenses for restructuring mea-
sures also reduced earnings. A positive impact was made by
lower costs. In addition, income was generated from the
contribution of AID to the Argo AI joint venture and from the
sale of Renk. Negative special items weighed on the operating
profit, but to a lesser extent than in the previous year. The
effect of purchase price allocation on earnings and assets is
not taken into account as this cannot be influenced by
management in the course of business operations.
In the reporting year, the invested capital fell to
€114,907 (116,016) million, partly due to exchange rates. The
decrease was due primarily to lower inventory levels and
lower property, plant and equipment, offset by higher capi-
talized development costs.
130
Results of Operations, Financial Position and Net Assets
Group Management Report
The return on investment (ROI) is the return on invested
capital for a particular period based on the operating result
after tax. Due to earnings-related factors as a result of the
Covid-19 pandemic, ROI declined year-on-year; at 6.5 (11.2)%
it was below our defined minimum required rate of return on
invested capital of 9%.
At €7,504 (7,328) million, the opportunity cost of capital
(invested capital multiplied by cost of capital) slightly
exceeded the prior-year figure. After deduction of the oppor-
tunity cost of invested capital, the operating result after tax
– which was negatively impacted by the pandemic – led to a
negative value contribution of €– 54 (5,691) million.
More information on value-based management is contained
in our publication entitled “Financial Control System of the
Volkswagen Group”, which can be downloaded from our In-
vestor Relations website: www.volkswagenag.com/en/Investor
Relations/news-and-publications/More_Publications.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 %
Opportunity cost of invested capital
Value contribution
2020
2019
7,450
114,907
6.5
6.5
7,504
– 54
13,019
116,016
11.2
6.3
7,328
5,691
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.
Group Management Report
Results of Operations, Financial Position and Net Assets
131
S U M M A RY 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 given the context created by the extensively
and persistently negative impact of the spread of the SARS-
CoV-2 virus.
Throughout the entire reporting period, the Covid-19
pandemic had a strong impact on business at the Volkswagen
Group and led to lower figures in terms of deliveries, sales
revenue and profit, as well as to deviations from the original
forecast. In this environment, which was also dominated by
fierce competition, technological change in our industry and
growing environmental awareness, we delivered 9.3 million
vehicles to customers. The Group’s sales revenue also fell sig-
nificantly by 11.8% as a result of lower volumes and exchange
rate effects. This reduced operating profit before special items
to €10.6 billion. At 4.8%, the operating return on sales before
special items fell short of the originally forecast range of
6.5 to 7.5%. The operating return on sales, including special
items related to the diesel issue, amounted to 4.3%.
The research and development costs reflect our activities to
safeguard the Company’s future viability; despite the coun-
termeasures taken, the R&D ratio in the Automotive Division
came to 7.6% and, as ultimately expected, was therefore
higher than in the previous year owing to the decline in sales
revenue caused by the pandemic.
Due to a significant fall in capex, the Automotive Divi-
sion’s ratio of capex to sales revenue declined to 6.1% and
was within the originally expected range. At €6.4 billion, the
net cash flow came in clearly positive despite the Covid-19
pandemic, the year-on-year decline was driven particularly by
the lower profits and by higher cash outflows attributable to
the diesel issue. Net liquidity improved beyond the forecast to
€26.8 billion, partly due to the successful placement of hybrid
notes.
The return on investment (ROI) in the Automotive Division
decreased to 6.5% as a consequence of the pandemic and fell
short of the minimum required rate of return on invested
capital.
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
Deliveries to customers (units)
Volkswagen Group
Sales revenue
Operating return on sales before special items
Operating return on sales
Operating result before special items
Operating result
Passenger Cars Business Area
Sales revenue
Operating return on sales before special items
Operating return on sales
Operating result before special items
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
Actual 2019
Original forecast
for 2020
Adjusted forecast
for 2020
Actual 2020
11.0 million
around the prior-year level
considerable decline
9.3 million
€252.6 billion
7.6%
6.7%
€19.3 billion
€17.0 billion
€182.0 billion
8.0%
6.7%
€14.5 billion
€12.2 billion
€26.4 billion
6.3%
€1.7 billion
increase of up to 4%
6.5–7.5 %
6.5–7.5 %
in forecast range
in forecast range
considerable decline
positive, <6.5%
positive, <6.5%
severe decline, positive
severe decline, positive
moderate increase
6.5–7.5 %
6.5–7.5 %
in forecast range
in forecast range
considerable decline
in forecast range, <6.5%
in forecast range, <6.5%
severe decline
severe decline
moderate decline
4.0–5.0%
in forecast range
considerable decline
in forecast range, <4.0%
severe decline
€222.9 billion
4.8%
4.3%
€10.6 billion
€9.7 billion
€156.3 billion
5.2%
4.6%
€8.2 billion
€7.2 billion
€22.2 billion
–0.4%
€– 79 million
€4.0 billion
€– 93 million
at prior-year level
smaller loss
considerable decline
considerably higher loss
€3.6 billion
€– 482 million
€40.2 billion
€3.2 billion
6.7%
6.6%
€10.8 billion
€21.3 billion
around the prior-year level
around the prior-year level
6.0–6.5%
6.0–6.5%
noticeable decline,
clearly positive
at prior-year level
considerable decline
increase, >6.5%
at prior-year level
considerable decline,
positive
distinct increase around the prior-year level
11.2%
slight increase, >9%
decline, positive, <9%
€40.8 billion
€3.0 billion
7.6%
6.1%
€6.4 billion
€26.8 billion
6.5%
132
Volkswagen AG
Group Management Report
Volkswagen AG
(Condensed, in accordance with the German Commercial Code)
Unit sales of Volkswagen AG in 2020 were down on the previous year due to
the negative impact of the Covid-19 pandemic, while profit increased.
A N N U A L R E S U LT
Additional special items in connection with the diesel issue
amounting to €0.8 billion were recognized in fiscal year 2020.
This was mainly due to further provisions for legal risks.
Special items had an impact of €–0.8 (–1.8) billion on net
other operating result.
At €67.5 billion, sales in the reporting period were down
16.2% year-on-year largely due to the pandemic and the
measures taken to contain the spread of the SARS-CoV-2
virus. Sales generated abroad accounted for a share of €40.7
billion or 60.3%. Cost of sales decreased by 15.1% to €63.4 bil-
lion.
Gross profit on sales fell accordingly to €4.1 (5.9) billion.
At €7.3 billion, distribution, general and administrative
expenses were down €0.7 billion on the prior-year figure.
The net other operating result was €1.3 billion higher, at
€0.4 billion. The rise was due particularly to lower expenses
for legal and litigation risks.
The €0.7 billion increase in the financial result to
€9.8 billion resulted mainly from lower write-downs of long-
term financial assets.
Taxes on income declined to €–0.7 (–1.2) billion, particu-
larly due to lower current tax expense and tax refunds for
prior years, taking net income for fiscal year 2020 to
€6.3 (5.0) billion.
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.
2020
2019
€ million
2020
2019
67,535
– 63,418
4,117
– 7,269
398
9,787
– 693
6,338
6,338
855
– 3,165
4,028
80,621
Fixed assets
– 74,700
Inventories
5,921
Receivables1
– 7,948
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.
– 914
9,115
– 1,215
4,958
4,958
0
– 1,685
3,273
130,377
120,823
6,542
38,766
8,803
184,488
39,549
18
43,086
36,348
65,487
5,554
35,856
5,639
167,872
35,629
18
39,206
35,983
57,036
Group Management Report
Volkswagen AG
133
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 that allows our shareholders to benefit appropriately
from our business success. The proposed dividend therefore
reflects our financial management objectives – in particular,
ensuring a solid financial foundation as part of the imple-
mentation of our strategy.
In our Group strategy, we have set ourselves the goal of
achieving a payout ratio of at least 30%. The payout ratio is
based on the Group’s earnings after tax attributable to Volks-
wagen AG shareholders. This amounts to 29.0% for the
reporting period and stood at 18.1% in the previous year.
D I V I D E N D P R O P O S A L
In fiscal year 2020, net retained profits amounted to
€4.0 billion. 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.
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
€
Dividend payout on subscribed capital
(€1,283 million)
of which on: ordinary shares
preferred shares
Balance (carried forward to new account)
Net retained profits
2020
2,418,589,589.10
1,416,431,126.40
1,002,158,462.70
1,609,493,827.80
4,028,083,416.90
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 €184.5 billion on December 31,
2020, up €16.6 billion on the prior-year figure. Property, plant
and equipment was up by €0.6 billion, with capital expendi-
ture exceeding depreciation charges. The rise in financial
assets to €121.6 (112.8) billion was mainly the result of an
increase in shares held in affiliated companies.
Fixed assets accounted for a share of 70.7 (72.0)% of total
assets.
Current assets (including prepaid expenses) amounted to
€54.1 (47.0) billion on December 31, 2020. Inventories went
up due primarily to the addition of precious metals. Receiv-
ables were higher, mainly because of financing provided to
subsidiaries. Cash instruments increased, driven mostly by
raising restricted short-term time deposits.
At the end of the reporting period, equity was at €39.5 bil-
lion; the increase was due particularly to the positive net
income for the year. The equity ratio was 21.4 (21.2)%.
Other provisions decreased by €1.5 billion to €19.9
(21.4) billion due mainly to the utilization of provisions in
connection with the diesel issue. Provisions for pensions and
similar obligations rose by €1.2 billion to €19.0 billion, pri-
marily as a result of a change in measurement inputs, while
provisions for taxes increased by €0.5 billion to €4.3 billion.
The €12.5 billion increase in total liabilities (including
deferred income) to €101.7 billion is attributable primarily to
higher liabilities to affiliated companies.
Volkswagen AG’s cash funds, comprising cash instru-
ments with a maturity of less than three months, less bank
liabilities repayable on demand and cash pooling liabilities,
improved year-on-year from €–7.6 billion to €–5.1 billion.
The interest-bearing portion of debt amounted to €89.8 (78.2)
billion. In our assessment, given the context created by the
extensive and persistent negative impact of the spread of the
SARS-CoV-2 virus, the economic position of Volkswagen AG is
just as positive overall as that of the Volkswagen Group.
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
€ million
Direct pay including cash benefits
Social security contributions
Compensated absence
Retirement benefits
Total expense
2020
7,477
1,379
1,099
634
%
70.6
13.0
10.4
6.0
2019
8,421
1,502
1,310
682
%
70.7
12.6
11.0
5.7
10,588
100.0
11,916
100.0
134
Volkswagen AG
Group Management Report
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 pro-
cess. In contrast to additive environmental protection mea-
sures, integrated measures already reduce the environmental
impact during the production process. In 2020 we invested
primarily in climate protection and in soil and water pol-
lution 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 environ-
ment, as well as expenditures for measures not relating to
such equipment. As in previous years, the emphasis in 2020
was on sewage and waste management.
V E H I C L E S A L E S
Volkswagen AG sold a total of 1,941,821 (2,580,553) vehicles
in fiscal year 2020. This decrease is essentially due to the
negative impact of the Covid-19 pandemic. Vehicles sold
abroad accounted for a share of 64.9 (67.6)%.
P R O D U C T I O N
Volkswagen AG produced a total of 792,393 vehicles at its
vehicle production plants in Wolfsburg, Hanover and Emden
in the reporting period (–25.9%).
E M P L OY E E S
As of December 31, 2020, a total of 118,673 (119,204) people
were employed at the sites of Volkswagen AG, excluding staff
employed at subsidiaries. Of this figure, 4,848 (5,029) were
vocational trainees. 6,210 (5,254) employees were in the
passive phase of their partial retirement.
Female employees accounted for 17.8 (17.6)% of the
workforce. Volkswagen AG employed 7,002 (6,551) part-time
workers. The percentage of foreign employees was 6.4 (6.4)%.
In the reporting period, 83.1 (83.2)% of the employees in
Volkswagen AG’s production area were in possession of
vocational or additional training. The proportion of gradu-
ates was 20.7 (20.1)% in the same period. The average age of
employees in fiscal year 2020 was 44.5 (44.2) 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 amounted to €5.9 (6.1) bil-
lion in the reporting period. 13,547 (13,378) 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
2020
4
225
2019
9
233
2018
13
230
2017
17
227
2016
11
223
Group Management Report
Volkswagen AG
135
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 2 0
Share of environmental protection areas in percent
Sewage management
Waste management
Air pollution control
Soil and water
pollution control
Climate protection
Species and
landscape conservation
Protection against
noise and vibration
29.8
28.5
15.2
13.7
7.8
2.6
2.4
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 O F V O L K S WA G E N A G
As the parent of the Volkswagen Group, Volkswagen AG is
fundamentally subject to the same expected developments
and risks and opportunities. The forecast is explained in
the chapter entitled “Report on Expected Developments”
and the risks and opportunities in the chapter entitled
“Report on Risks and Opportunities” 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 generally the same as those to which the
Volkswagen Group is exposed. An explanation of these risks
can be found in the chapter “Report on Risks and Oppor-
tunities” 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 Aktiengesetz (AktG – German Stock Corporation Act)
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.
136
Sustainable Value Enhancement
Group Management Report
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. With our vision
“Shaping mobility – for generations to come”, part of our TOGETHER 2025+ Group strategy,
we aim to make mobility sustainable for present and future generations.
The main financial key performance indicators for the
Volkswagen Group are described in the “Results of Oper-
ations, Financial Position and Net Assets” chapter. Nonfinan-
cial key performance indicators also provide information on
the efficiency of our Company’s value drivers. These include
the processes in the areas of research and development,
procurement, production, 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 examples of how we want to increase the value of
our Company in a sustainable way.
S U STA I N A B I L I T Y
Sustainability means maintaining intact environmental,
social and economic systems with long-term viability at a
global, regional and local level. The Volkswagen Group can
influence these systems in various ways and actively takes
responsibility to make a contribution to their sustainability.
We have thus developed a sustainable style of company man-
agement and put in place the necessary management struc-
tures.
We have anchored our goal to sustainably shape mobility
for present and future generations in our Group strategy
TOGETHER 2025+. In addition, we want to be an excellent
employer and a role model for the environment, safety and
integrity. Sustainability is thus at the center of our corporate
actions.
A particular challenge when implementing our strategic
goals on all levels of the value chain is the complexity of our
Company, with its twelve brands, more than 660 thousand
employees and 118 production sites. At the same time, we are
guiding our Group through the furthest-reaching process of
change in its history. The transformation sweeping our entire
industry is dominated especially by the transition to e-mobil-
ity, digitalization and new mobility services. We want to
master these challenges and become a leading company for
individual mobility in this electric and connected age.
Protecting the climate is currently the greatest global
challenge affecting all three sustainability dimensions. We
want to provide our own highly unique answer to this and
have decided on an ambitious decarbonization program.
With the implementation of this program, we want to be a
net-carbon-neutral company by 2050. We are assuming a pio-
neering role by making this voluntary commitment based on
the Paris Climate Agreement. We are guided in this by the
specifications of the Task Force on Climate-Related Financial
Disclosures (TCFD) For more information, please see our
Sustainability Report for fiscal year 2020.
In the field of digitalization, we also want to help shape
the transformation and are pressing ahead with develop-
ments in our vehicles and mobility services on the one hand
and in our operating processes and management on the
other. The digital transformation requires us not just to
develop new technologies and be able to harness them, but
also to devise a forward-looking human resources strategy
that takes our employees along this path of change, trains
them accordingly, and ensures that their jobs are secure.
Parameters and guiding principles
Our actions are determined by the Volkswagen Group Essen-
tials as the foundation of values and the basis for our shared
corporate culture. The Volkswagen Group Essentials support
managers and employees in overcoming legal and ethical
challenges that arise in their daily work. At the same time, we
are guided in our activities by a large number of internal
guidelines on sustainability.
On this basis, our objective is to attain that the Volks-
wagen Group’s actions are in line with international agree-
ments and frameworks such as the Sustainable Development
Goals (SDGs) of the United Nations (UN), the declarations of
the International Labour Organization (ILO), the principles
Group Management Report
Sustainable Value Enhancement
137
and conventions of the Organization for Economic Co-oper-
ation and Development (OECD) and the UN covenants on
basic rights and freedoms.
Management and coordination
The structure and workflows of Group-wide sustainability
management were expanded in the reporting period. The
related structures, processes and responsibilities are codified
in a separate Group policy. We view sustainability manage-
ment as a continuous improvement process. The core ele-
ments include assumption of overall responsibility for
sustainability by the Chairman of the Board of Management
of Volkswagen AG, specification of the competence of the
responsible Board members for specific sustainability man-
agement concepts and implementation of the Group Sustain-
ability Steering Committee as a top management committee.
The members of this steering committee include managers
from central Board of Management positions and repre-
sentatives of the brands and the Group Works Council. The
steering committee defines concrete strategic goals and
programs, establishes measures for uniform further develop-
ment of sustainability management across divisions, brands
and regions and decides on fundamental sustainability
issues. It also handles the enhancement of Group-wide sus-
tainability management. The offices of the Group Sustain-
ability Steering Committee are the responsibility of the
Group’s Sustainability function.
Strategic stakeholder management
Our stakeholders are individuals, groups, or organizations
who have an influence on or are influenced by the course or
the result of corporate decisions. Our customers and employ-
ees are at the center of our stakeholder network. Based on our
annual stakeholder assessment, we have identified eight
more stakeholder groups of equal value around this core. The
Group’s supervisory and advisory bodies such as the
Supervisory Board, the Works Council and the Sustainability
Council act as a special interface between internal and
external stakeholders. The Monitor appointed by the US
Department of Justice until the termination of his duties in
September 2020 was a stakeholder of the Volkswagen Group
as well.
We understand stakeholder management as systematic,
continuous interaction with key stakeholder groups in line
with our TOGETHER 2025+ Group strategy. Stakeholder
management aims to systematically record expectations and
use feedback from our stakeholders to critically reflect on
strategic planning processes.
To be able to systematically incorporate our stakeholders’
suggestions and recommendations, we have given our stake-
holder management an organizational structure in the form
of external committees. At Group level, these are the Sus-
tainability Council and the Stakeholder Panel. The latter took
a break in 2020 due to the pandemic. In addition, we offer our
stakeholders a broad range of opportunities for interaction
and feedback channels including regular discussion panels
with stakeholders, stakeholder surveys and international
cooperative projects.
Sustainability Council
The Sustainability Council set up in 2016 provides assistance
to the Volkswagen Group with important, strategic sustain-
ability issues and is made up of internationally renowned
experts from the academic world, politics and society. The
Council establishes its own working methods and areas of
focus independently, has far-reaching 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 the
reporting year, the Volkswagen Group extended its collab-
oration with the Sustainability Council by two more years.
In 2020, the agenda for the intensified dialogue between
Volkswagen and the Sustainability Council included the CEO
Alliance for Europe’s Recovery, Reform and Resilience, jointly
initiated by the Chairman of the Board of Management of
Volkswagen AG and the Council in support of the EU Green
Deal, aspects of corporate governance and integrity, decar-
bonization, employment in times of advancing digitalization
and e-mobility, and sustainable action in international
markets.
138
Sustainable Value Enhancement
Group Management Report
The Council also launched two new projects: a research
project on the distribution effects of climate-related fiscal
and transport policies with the Mercator Research Institute
on Global Commons and Climate Change, building on the
preceding project on climate-conscious transport policies,
and a study with the Fraunhofer Institut für Arbeitswirtschaft
und Organisation (IAO – Fraunhofer Institute for Industrial
Engineering) to examine the effects of digitalization and
e-mobility on employment. The Open Source Lab on Sustain-
able Mobility concluded its work in 2020 with the publication
of the project results.
Materiality analysis
In 2020, we forged ahead with the overhaul of our materiality
analysis begun in the previous year and established a new
binding sustainability strategy with the development of a
sustainability narrative for the Volkswagen Group. Some 60
stakeholders were
including
decision-makers from various business areas and brands as
well as representatives of the Sustainability Council.
in this process,
involved
The materiality process is used to identify and evaluate
the most important sustainability issues for the Group. The
decisive factors here are the impact on the environment and
society, stakeholder expectations, the business model of
Volkswagen AG and adherence to legal provisions and inter-
nationally established reporting standards.
The sustainability strategy developed based on the
materiality analysis focuses on the key sustainability issues
within the Group strategy TOGETHER 2025+, which is
supported by the vision “Shaping Mobility – for generations
to come” and the seven Group principles. The sustainability
narrative clearly illustrates how the Volkswagen Group
intends to achieve its overarching strategic objective of sus-
tainable growth. Not only will it lay the foundation for per-
formance management and improvement in environmental,
social and governance performance, but it will also boost
confidence among stakeholders and in the financial markets.
To implement the transformation with a holistic approach
and run our business responsibly along the value chain, we
prioritized four focus areas that are essential for our core
business.
> Decarbonization
> Circular economy
> Responsibility in supply chains and in business
> Workforce transformation
The focus areas are each underpinned by forward-looking
ambition and are developed and implemented within the
framework of programs and initiatives.
Corporate citizenship
As a good corporate citizen, we aim to be a constant source of
economic impetus for local structural development and
equal opportunities. We have always believed in the impor-
tance of recognizing our social responsibilities toward our
stakeholders. The main focus of our corporate social engage-
ment activities is on supporting future, educational and
community projects at many of our sites across the world. In
2020, the brands and companies launched or continued
around 700 projects and initiatives worldwide.
C S R - P R O J E C T S
https://www.volkswagenag.com/en/sustainability/reporting/cc-projects.html
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139
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
H O L I ST I C I N T E G R I T Y A N D C O M P L I A N C E M A N A G E M E N T SY ST E M
Integrity and compliance are major priorities in the Volks-
wagen Group. Marking the end of the Monitorship, the Chair-
man of the Volkswagen AG Board of Management Herbert
Diess said: “The end of the Monitorship is not the end of our
journey. I am committed to the continuous improvement of
our organization and its culture, and so are all my Board of
Management colleagues. This mindset is essential to our
ambition of making safer and more intelligent zero-emission
vehicles for today’s customers and for generations to come.”
We firmly believe that acting with integrity and in com-
pliance with the rules is vitally important for our Company’s
future success. It is for this reason that we have embedded
integrity and compliance in our Group strategy TOGETHER
2025+. Our objective is to act as a role model for integrity and
compliance and thus deepen the trust of our employees,
customers, shareholders and partners – both existing and
future – in our Company.
To achieve this aim, we have been building a compre-
hensive and holistic integrity and compliance management
system (ICMS) since 2018. This is being rolled out as part of
the Together4Integrity (T4I) program and is based on the five
principles of the internationally recognized ECI, which relate
to strategy, risk management, a culture of integrity, a speak-
up environment and resolute accountability. In this context
we are also implementing the measures that we defined
based on the recommendations made by the Independent
Compliance Monitor Larry D. Thompson.
T4I aims to establish robust, consistent process standards
that are anchored in the Group’s corporate policies or organi-
zational guidelines. The purpose is to give integrity and
compliance an equally important strategic and operational
priority in our Company as, for example, sales revenue, profit,
product quality or employer attractiveness. T4I is thus one of
the most extensive change programs in the history of the
Group. In 2020, the Group Board of Management resolved to
form the Group Board of Management Integrity and Com-
pliance Committee (K-VAC), which, among other things, takes
over the tasks of the Group Compliance Committee estab-
lished during the Monitorship. The main tasks of the
K-VAC include continuing to develop the ICMS and the cor-
porate culture as well as managing the uniform implemen-
tation of the initiatives combined in T4I across all divisions
and brands.
Through T4I we aim to implement the ICMS by 2025 in
around 850 Group companies in which we hold a majority
stake. By the end of 2020, 639 companies had already begun
the implementation. This will strengthen Group-wide cor-
porate governance and reduce the corresponding risks. The
ICMS is therefore also a substantial contribution to the sus-
tainability of the Volkswagen Group. We also want to live up
to our responsibilities in terms of our influence on com-
panies not controlled by Volkswagen.
Integrity encourages ethical decision-making
An essential role of the ICMS is to introduce integrity as a
strategic key to success in all the Group’s brands and com-
panies. This includes integrating integrity into decision-
making processes. For example, every resolution proposal
submitted to the Board of Management must highlight the
extent to which the intended decision is in line with the
Group’s integrity and compliance, what risks arise from it
and how the risks can be reduced. Similar requirements apply
to Group brands and companies and to Group bodies to
which the Board of Management has delegated decision-
making powers.
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Compliance means adherence to rules
We firmly believe that long-term commercial success can
only be achieved if each and every individual complies with
laws, regulations and commitments. Compliant behavior
must be a matter of course for all Group employees. The
compliance organization provides worldwide support in the
form of programs, guidelines, processes and practical advice.
The compliance Infopoint is a core element of this. This is
available to all employees.
Our compliance organization focuses on preventing
corruption, fraudulent breaches of trust and money laun-
dering. Compliance in mergers & acquisitions, noncontrolled
shareholdings and safeguarding business and human rights
are other key areas. In addition, we expedited the integration
of the topic of business and human rights into the ICMS and
accorded the topic vital strategic importance. Here, we follow
the UN’s requirements and principles on business and
human rights due diligence. An investigation of all com-
panies in the Group within the scope of compliance was
conducted in 2020 with the aim of identifying risks in respect
of human rights. Based on the findings, these companies
were given a set of binding measures that they must imple-
ment by December 31, 2021.
T4I brings together activities from eleven key initiatives
The ICMS defines standards for integrity and compliance. T4I
is rolling out and implementing these standards uniformly
throughout the Group in the form of more than 100 packages
of measures. The packages of measures are divided into
eleven key initiatives:
1. HR Compliance Policies and Procedures
The focus is on standard HR processes such as recruitment,
training, promotion and remuneration (bonus payments).
For example, integrity and compliance matters have been
included as criteria for the recruitment process and staff
development measures for managers since 2019. Employ-
ment contracts contain integrity and compliance clauses.
Integrity and compliance have also been covered by annual
employee appraisals since 2020. Performance-related remu-
neration from senior executive positions is now also partly
determined by integrity and compliance standards.
2. Code of Conduct
The Volkswagen Group’s Code of Conduct is the key instru-
ment for strengthening employees’ awareness of responsible
action and decisions, giving employees support and guid-
ance, and finding the right contact persons in cases of doubt.
The framework is available online to employees and also to
external third parties.
Every employment contract refers to the Code of Conduct
and commits the employee to comply with it. Regular
training is intended to increase its efficacy. The Code of
Conduct is also taken into account when calculating their
variable, performance-related remuneration, which is set as
part of the employee appraisals. Members of the higher levels
of management are annually certified on the Code of
Conduct. They confirm that they will comply with the Code of
Conduct and undertake to report any serious regulatory
violations.
3. Integrity Program
The integrity program is designed to reinforce the culture of
integrity. The most important instruments in this program
include dialogue-oriented communication measures and
event formats. These communicate to employees the
importance of integrity and motivate employees to behave
with
in the face of external pressure.
Associated actions include encouraging a culture of handling
mistakes constructively, more
taking
decisions and a greater willingness to discuss mistakes and
risks openly.
integrity even
transparency
in
4. Risk Management and Internal Controls
This initiative involves operating an effective risk manage-
ment system. Uniform, defined structures should ensure
transparent handling of risks from our business activities
and enable them to be managed. This refers to the annual
regular governance, risk and compliance (GRC) process
focused on systemic risks, the quarterly risk process (QRP)
focused on acute risks, the standard ICS (internal control
system) aimed at safeguarding processes, and root cause
analysis. The initiative to support the QRP also includes the
introduction of the “Riskradar” IT system and training of risk
managers.
5. ICRA and Compliance Organization
This key initiative describes the organization and processes
of the Compliance department at Group level and in the
individual Group companies. It shapes the Company’s com-
pliance strategy, sets Group-wide standards for the internal
compliance risk assessment (ICRA) and contains measures for
managing and mitigating the compliance risks. The ICRA has
been carried out since 2018, with the Group companies being
assigned to different risk categories on the basis of a compre-
hensive questionnaire. To reduce potential risks, we rolled
out standardized compliance measures in the relevant busi-
ness units, the scope of which varies depending on the
business units’ individual risk exposure. The degree to which
measures have been implemented is reported on a regular
basis, but at least once per year. Business units with a high
risk are regularly monitored by the Divisional Compliance
Officer or Regional Compliance Officer and starting in 2021,
audited by an external auditor.
Group Management Report
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141
6. Whistleblower system and incident response
This initiative brings together all measures for the estab-
lishment and operation of the whistleblower system. The
whistleblower system is the central point of contact for
reporting cases of serious rule-breaking in the Volkswagen
Group. The aim is to avert damage to the Company and its
employees through the use of binding principles and a clearly
governed process. An investigation is only initiated after the
information received has undergone a thorough exami-
nation and the latter has identified concrete indications of
rule-breaking. The affected parties are treated fairly: the
presumption of innocence applies as long as rule-breaking
has not been proven. They are listened to at an early stage
and vindicated if wrongly suspected. Strict confidentiality
and secrecy apply throughout the investigation. Appropriate
sanctions are applied where misconduct is proven. Whistle-
blowers are protected and their statements are treated
confidentially. A wide range of channels is available for
reporting information on misconduct, including anony-
mously if preferred.
7. M & A and NCS Compliance
In the event of planned mergers and acquisitions, the rele-
vant companies are audited according to integrity and
compliance standards. This prevents a Group company from
being confronted with unidentified integrity or compliance
risks when acquiring another company. This key initiative
also promotes compliance in non-controlled shareholdings
(NCS), i.e. companies that are not controlled by a Volkswagen
Group company as a majority shareholder (excluding Chinese
joint ventures). During mergers and acquisitions (M&A) and
the supervision of NCSs, strategic, economic and ethical con-
siderations are key to the sustainability of investment
decisions.
8. Business partner due diligence
Business partner due diligence entails reviewing the integrity
and compliance systems of suppliers, service providers and
sales partners. This review of existing and potentially new
business partners is carried out as part of a risk-based, trans-
parent, documented process that is implemented worldwide
using an IT-based tool. This initiative also includes the offer
to assist business partners in meeting the required standards.
Companies that do not meet the standards defined in the
Volkswagen Code of Conduct for Business Partners should
not receive new business.
9. Product compliance
The product compliance management system (PCMS) shall
ensure that our products comply with the legal and regu-
latory requirements of the exporting and importing country,
external standards and contractually agreed customer require-
ments, as well as internal standards and externally com-
municated voluntary commitments throughout their life
cycle. We have defined clear roles and responsibilities for
our PCMS with regard to design, implementation and
monitoring.
10. Environmental compliance
Statutory environmental regulations and voluntary commit-
ments are binding at all locations and in all business fields.
The Group’s environmental policy and the environmental
compliance management system stipulate the corresponding
requirements and responsibilities for all strategy, planning
and decision-making processes in the Group brands and
companies. This also includes a system of metrics to deter-
mine progress in meeting environmental targets: in the fields
of renewable energy, CO2 emissions and resource efficiency.
We make allowance for the actual and potential environ-
mental risks and opportunities in our products’ entire life
cycle.
11. Anti-corruption
We advocate fairness in business dealings and have a clear
zero-tolerance policy on active or passive corruption. We have
therefore produced Group policies on dealing with gifts and
invitations, donations and sponsorship. This initiative also
includes the development and implementation of trainings
for employees in divisions or companies with a high risk
exposure.
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Emphatically developing a culture of integrity
The holistic integrity and compliance management system
being established Group-wide through T4I provides the
regulatory framework for acting with integrity and in com-
pliance with the rules and results in uniform corporate gover-
nance throughout the Group in relation to integrity and
compliance. It is also advancing the culture of integrity. The
aim is to inspire and motivate employees and strengthen
their own drive to act with integrity in all situations. Both,
uniform corporate governance and a mature culture of inte-
grity contribute to the effectiveness of the ICMS as a major
factor in the sustainability of the Volkswagen Group.
Volkswagen’s corporate culture is founded on the seven
Group Essentials. They define how we at Volkswagen want to
work together and thus supplement the Code of Conduct. The
Group Essentials also form the frame of reference for the Role
Model Program, which encourages dialogue-oriented and
distance-reducing collaboration.
T4I inspires and motivates employees, especially with
launch events and perception workshops. Both events are
held in each Group or brand company at the start of the
implementation of T4I and involve both employees and
managers across hierarchies as players in the change process.
The perception workshops are primarily about the actual
practice of integrity and compliance – measured by the
perception of employees. Here, representatively selected
employees and managers give their assessment of this
practice and discuss opportunities for improvement. The
perception workshops will be repeated annually until the key
initiatives have been fully implemented. They measure the
progress of the relevant company with regard to integrity and
compliance and show where further action is needed.
Monitoring of implementation and effectiveness
Methods of impact monitoring and progress measurement
are an integral part of our ICMS. The planning and reporting
system of the T4I program provides information on the
implementation status of all packages of measures at any
time. It is used for reporting to the Board of Management and
the boards of the Group and brand companies as well as for
monitoring potential delays and initiating countermeasures.
In addition to the recurring perception workshops, our
annual employee opinion survey shows the progress in our
culture of integrity. This Group-wide survey asks whether it is
possible for each individual to act with integrity. If the answer
is no, the relevant manager must identify and clear the
possible obstacles together with the team. The question was
asked in the opinion survey for the first time in 2017 and
since then, including in the reporting period, has been one of
the three questions with the highest level of agreement, with
a significant improvement in the value. The level of agree-
ment among employees each achieved an average value in
the highest category of the underlying five-level range.
Contributing to the Group’s strategic indicators
To measure the level of target achievement in the area of
Integrity & Legal Affairs, 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 the opportunity to act with integrity. In the case
of negative deviations, the affected departments develop
and implement measures. The indicator continuously
improved on the previous good figure until 2020. On
average, the level of agreement among employees was in
the highest category of the underlying five-level range.
As an additional measuring tool, we use the Integrity Index
developed by independent business ethicists from the
Technical University of Munich. Based on more than 100
criteria in the categories of: the compliance & infrastructure,
working atmosphere & integrity culture, products & custom-
ers, society, and partners & markets; it gives a comprehensive
picture of an organization’s integrity. The integrity index was
started in 2019 as a pilot project for Volkswagen Passenger
Cars Germany and Audi (German sites). The scientists found
that both of the brands examined exhibited a “good”
integrity level overall.
The findings were used in the reporting year in a struc-
tured follow-up process to derive and implement improve-
ment measures together with the respected departments.
Further information on the topics of integrity and com-
pliance can be found in the Group Sustainability Report 2020.
Group Management Report
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143
Independent Compliance Monitorship successfully completed
In September 2020, the Independent Compliance Monitor,
Larry D. Thompson, certified that Volkswagen has fulfilled its
obligations under its Plea Agreement with the US Depart-
ment of Justice (DOJ) to maintain a compliance program that
will prevent, detect and punish violations of anti-fraud and
environmental laws. Certification applies to Volkswagen AG
and its subsidiaries and affiliates with the exception of
Porsche AG and Porsche Cars North America, which were not
part of the Monitorship. Over the course of the Monitorship,
which began in 2017 and is now concluded, Volkswagen
enhanced and improved its structures, processes and systems
in many divisions of the company including technical
development, governance, risk management, compliance and
legal functions. Volkswagen expanded the whistleblower
system, strengthened processes to prevent corruption and
antitrust violations, and created a due diligence process for
business partners. The Group also flattened hierarchies,
decentralized decision-making and gave more responsibility
to its brands and regional companies.
The completion of the Monitorship is not the end of the
process; the Group remains committed to continuous further
improvement of compliance and its corporate culture.
Thompson also served as Independent Compliance Auditor
and issued his third and final audit report in June 2020. That
report established that there had been no new violations of
the relevant settlements with the Environment and Natural
Resources Division of the DOJ, the California Attorney
General, the US Environmental Protection Agency (EPA) and
the California Air Resources Board.
On September 2, 2019, Volkswagen also announced that the
Company had concluded a settlement agreement with the
EPA, which had been the reason for commissioning a second
auditor for the Volkswagen Group. This agreement was
concluded to prevent it from being excluded from public
contracts in the United States. This second auditorship is
scheduled to last three years and will run until August 2022.
W H I ST L E B LOW E R SY ST E M
https://www.volkswagenag.com/en/group/compliance-and-risk-management/
whistleblowersystem.html
Phone: +49 5361 9 46300
E-mail: io@volkswagen.de
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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 7 + 3 ) N E W P A S S E N G E R C A R F L E E T
in grams per kilometer (NEDC)
2020
2019
2018
2017
2016
¹
100
¹
124
¹
123
122
¹
120
0
20
40
60
80
100
120
140
160
1 Subject to confirmation of CO2 data within the scope of official publication by the European Commission.
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 inno-
vation. This makes our research and development work
essential for sustainably increasing the value of the Company.
Together with our Group brands, we have launched mea-
sures based on our future program TOGETHER 2025+ to link
development activities across the Group. At the heart of this
is an efficient, cross-brand development alliance charac-
terized by a close network of our experts, collaboration on an
equal footing, an innovative working environment and the
pooling of development activities. The aim is to make use of
synergy effects across the Group and act as a role model for
the environment, safety and integrity. The development
alliance plays a major part in driving the Volkswagen Group’s
transformation and helping to make it fit for the future.
In view of 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 prod-
ucts and services and improving the functionality, quality,
safety and environmental compatibility of our products and
services.
We use a strategic indicator in Europe and the United
States to evaluate the effectiveness of our measures to reduce
CO2 emissions when driving:
> CO2 fleet emissions. The Volkswagen Group’s new passen-
ger car fleet in the EU (excluding Lamborghini and Bentley)
emitted an average of 99.9 g CO2/km1 (NEDC) in the reporting
period in accordance with the statutory measurement
bases, thus down 20% on the prior-year figure. The CO2
pool established together with other manufacturers fell
just 0.8 g CO2/km short of its target. Owing to delays in
product launches and contrary to the original planning, it
was not possible to achieve the target despite substantial
improvements compared with 2019. As small volume
manufacturers, the Lamborghini and Bentley brands each
have an independent fleet for the purposes of European
CO2 legislation and were both above their individual
targets. In the United States, the regulation of fleet
emissions is different to that in Europe, for example in
terms of the underlying test process, the period of evalu-
ation, which corresponds to the model year of the vehicles
rather than the calendar year, and the period for compen-
sating for any breaches of CO2 limits, which comprises
three model years. In fiscal year 2020, we complied with the
regulations that apply to our greenhouse gas account in
the United States, subject to any alternative notification by
the authorities.
Fuel and drivetrain strategy
With a view to the legal regulations on emissions, we are
currently developing a forward-looking vehicle and drivetrain
portfolio: we have set ourselves the objective of increasing
drive system efficiency with each new model generation
– irrespective of whether it is a combustion engine, a hybrid or
a purely electric drive system. The Volkswagen Group closely
coordinates technology and product planning with its brands
so as to avoid breaches of fleet fuel consumption limits, since
these would entail substantial excess emissions premiums.
Around one in five new Volkswagen Group vehicles world-
wide is to have a purely electric drive by the year 2025;
depending on market development, this could be over two
million electric vehicles a year. As part of our electrification
Group Management Report
Sustainable Value Enhancement
145
campaign, we aim to offer our customers worldwide around
70 completely battery-electric vehicles by 2030, of which
production of approximately 20 models has already started.
In addition, a total of around 60 hybrid models are planned
by the end of the decade, just over half of which are already in
production. By 2030, the Volkswagen Group aims to have
electrified its entire model portfolio – from high-volume
models to premium vehicles. This will mean offering at least
one electric version – battery electric or hybrid vehicles – of
each of our passenger car models across all Group brands. To
this end, in addition to the Modular Electric Drive Toolkit
(MEB), we are also developing an all-electric platform for our
premium and sports brands – the Premium Platform Electric
(PPE).
The Volkswagen Group is committed to achieving the
goals of the Paris Agreement on climate change and intends
to become a net-carbon-neutral company by 2050.
To offer sustainable, affordable mobility in the future for
as many people around the world as possible, we offer a range
of drivetrains with a focus on electrification. From today’s
perspective, conventional combustion engines look set to
continue to make up the lion’s share of drive technology in
the coming years. In the interest of using resources respon-
sibly, it is therefore essential to further enhance this engine
segment and systematically consolidate it for specific mar-
kets. Powertrain measures such as significantly more sophis-
ticated exhaust gas purification or mild hybridization of our
vehicles, as well as vehicle measures such as optimized aero-
dynamics or reduced rolling resistance will be necessary to
fulfill future emissions standards. With the new Golf 8 we
offer more efficient and more sustainable mobility in the
volume segment: The Golf’s new petrol mild hybrid drive-
train significantly reduces fuel consumption compared to its
predecessor.
It is more important to us than ever to rigorously pursue
our modular approach. We are reducing the number of indi-
vidual modules so that we can make a large product portfolio
economically viable. For example, we aim to reduce the
number of versions of conventional combustion engines in
the Group by more than a third in the long term. This will
create capacity for the development and production of new
hybrid and electric drives.
Life cycle engineering and recycling
Technological innovation for reducing fuel consumption is
not enough on its own to minimize the effect of vehicles on
the environment. We consider the environmental impact we
cause throughout the entire life cycle and at all stages of the
value chain. This includes the manufacturing process with
the associated extraction of raw materials, the production of
materials, the processes at our suppliers and our own
production operations at our sites, the use phase with the
resulting vehicle emissions and the necessary supply of fuel,
and ultimately the recycling of the vehicle at the end of its life
cycle. 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. We there-
fore already take the recyclability of the required materials
into consideration when developing new vehicles, use high-
quality recycled material and avoid pollutants. Under the
European Directive on end-of-life vehicles, passenger cars and
light commercial vehicles must be 85% recyclable and 95%
recoverable. Our vehicles registered in Europe comply with
these standards.
Leveraging synergies increases efficiency
When developing vehicles, we cooperate closely with our
brands to leverage synergies. The joint strategy of our devel-
opment alliance involves, for example, making 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 therefore not only work with each other, but also for
each other on key technologies, forming cross-brand net-
works of expertise to address topics of importance for the
future. Against this background, responsibilities in Technical
Development were reorganized in 2020 in order to coordinate
module development even more efficiently and leverage
synergies in module variance, components, parts and pro-
cesses. We consolidated the Group’s activities in and respon-
sibility for the development, procurement and quality assur-
ance of all battery cells in a central Center of Excellence under
the umbrella of the Volkswagen Passenger Cars brand. In the
Center, a pilot line for cell production was put into operation
in 2019 to build up expertise for the Group in the area of cell
design but also throughout the entire value chain.
We also manage our modules centrally to reduce costs,
capital expenditure and complexity. We are seeking to reduce
expenditure in the modular toolkits, while at the same time
facilitating widespread electrification and a focus on autono-
mous systems. We want to achieve this through a consider-
able reduction in complexity using streamlined platforms
that synergize but do not overlap. To this end, the individual
Group brands draw on the modular toolkits, thus creating
synergies between the various models of a product line, as
well as across the product lines. By streamlining the toolkits,
we are giving ourselves the financial leeway needed for
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Group Management Report
developments in the future trends of digitalization and
autonomous driving. The high-volume passenger car brands
have introduced the model-line organization, thus strength-
ening their responsibility for the success of vehicle projects,
improving project work across different cross-departmental
areas, accelerating decision-making and intensifying the
focus on project results.
together all of our interests and subsidiaries that develop
software for vehicles and digital ecosystems in the Car.Soft-
ware Organisation, an independent entity with Group respon-
sibility. This first step involved more than 3,500 employees.
Since mid-2020, experts who used to work in the various
Group brands and regions have been working together under
the umbrella of the Car.Software Organisation.
We are also leveraging synergies by constantly sharing
best practices, for instance in virtual development and
testing. Last but not least, the centralized development and
consolidation of our IT systems is also helping to strengthen
cooperation across the brands, make development activities
more comparable and reduce the Group’s IT costs.
Sustainable mobility, connectivity and automated driving
Mobility of people and goods is a basic prerequisite for eco-
nomic growth and social development, especially in times of
the Covid-19 pandemic. At the same time, natural resources
are dwindling and climate change is advancing. This calls for
comprehensive mobility concepts to minimize the environ-
mental impact. Such solutions need to be efficient, sustain-
able, crisis-proof, customer-oriented and accessible anytime
and anywhere.
We are researching and developing such concepts and
solutions in our Group-wide alliance: when shaping the
future of mobility, we are looking not only at the automobile,
its components and related services, but at all modes of
transport and transport infrastructures, at people’s mobility
habits and at other relevant factors. Innovations such as
digital connectivity and automated driving allow for new
approaches to solving problems. We strive to utilize these and
thus to play our part in a comprehensive mobility system for
the future and to help shape our industry’s transformation.
In its pursuit of autonomous driving, the Volkswagen
Group further improved its assistance systems and auto-
mated driving functions and introduced these in vehicles in
2020. The 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 presented its vision of an
autonomous mobility system by unveiling 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. These vehicles will enable new
forms of mobility in both cities and rural areas, particularly
for user groups that have so far been excluded from access to
mobility.
As part of the TOGETHER 2025+ strategy, we are working
with the Software-enabled Car Company module to make soft-
ware development one of the core competencies of the Volks-
wagen Group. Starting on January 1, 2020, we have brought
The Car.Software Organisation is developing software for
five applications within the Group:
> a uniform vehicle operating system “vw.os” for all Group
vehicles as well as their connectivity with the Volkswagen
Automotive Cloud;
> a standardized infotainment platform;
> all assistance systems including highly automated driving
and parking;
> functions for connecting the drivetrain, chassis and
charging technology; and
> ecosystems for all the brands’ mobility services and digital
business models.
From the middle of this decade onwards, all new vehicle
models throughout the Group are to be based on a uniform,
cross-brand software platform, including the “vw.os” oper-
ating system and Volkswagen Automotive Cloud, as well as a
uniform architecture. At the end of 2024, this architecture
will be used for the first time in an Audi model as part of the
Artemis project. It is then to be deployed in high-volume
vehicles to generate economies of scale and thus reduce the
cost of in-vehicle software for all brands.
Pooling strengths with strategic alliances
The aim of our future program TOGETHER 2025+ is to trans-
form our core business and to establish a mobility solutions
business area at the same time. It is decisive to the success of
this plan that we place our innovative strength on even
broader foundations.
Within the Volkswagen Group, we combine technological
innovation activities in the Volkswagen Group Innovation
unit. At seven locations worldwide in the USA, Europe and
Asia, employees are working on sustainable solutions for
urban and interurban mobility systems in line with our stra-
tegic vision “Shaping mobility – for generations to come”.
Technologies and activities from Volkswagen Group Innova-
tion that are ready for pre-development are regularly trans-
ferred to our Group brands. This means that the areas of
digitalization, sustainability and e-mobility receive contin-
uous support through innovative projects. In this way, we are
creating an agile innovation structure that allows us to
initiate new milestone projects with innovative international
partners, even at short notice.
Growth in the mobility sector is strongly defined through
regional innovation activities. Volkswagen therefore concen-
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147
trates its strategic venture-capital activities and partnerships
in the Group’s international innovation ecosystem. This
helps us to identify the regional needs of customers more
precisely, to adjust our product range correspondingly and to
establish competitive cost structures. In doing so, we rely to a
greater extent than in the past on partnerships, acquisitions
and venture-capital investments and manage investment
selection centrally so as to generate maximum value for the
Group and its brands. It is against this backdrop that we have
formed an alliance with Ford Motor Company with the
intention of working together on the development of vans
and mid-sized pickups. At the beginning of June 2020, Ford
Motor Company and Volkswagen AG signed additional
contracts within their existing global alliance for light
commercial vehicles, electrification and autonomous driving.
The contracts serve as the foundation for a total of three
vehicle projects. In addition to the existing collaboration on
the mid-sized pickup, projects are underway for a city van
and a one-tonne cargo van. In total, the three alliance projects
amount to a volume of approximately 8 million vehicles over
the entire model cycle. In addition, we are investing with Ford
in Argo AI, a company that is working on the development of
a system for autonomous driving. This alliance allows both
car companies to integrate Argo AI’s self-driving system into
their own models independently of each other. The system is
to make fully automated driving possible, and thus to open
up new opportunities, particularly for ride-sharing providers
and delivery services in urban areas through the use of fully
automated vehicles. At the start of June 2020, a transaction
was completed with Argo AI and Ford on cooperation to
develop autonomous driving. Subsequently, the Volkswagen
Group company AID was incorporated into Argo AI. In
addition, Ford intends to use the Modular Electric Drive
Toolkit (MEB) developed by Volkswagen for a zero-emissions
volume model that should be offered in Europe from 2023.
The aim of the cooperation is to place both Volkswagen and
Ford in a position that enables them to improve their com-
petitiveness, tailor their products to better meet the needs of
customers worldwide and at the same time to leverage
synergies related to cost and investment.
The strategic partnership with Microsoft enables us to
accelerate our transformation into a mobility service pro-
vider with a fully connected vehicle fleet and our Volkswagen
We digital ecosystem. Together, we will press ahead with
software development for the automobile of tomorrow and
new services for our customers, thus comprehensively
strengthening and expanding our IT expertise and solutions.
Battery technology is to become a core competency 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 when differentiating
between products. We have already pooled our in-house
expertise in battery cells in a Center of Excellence and at the
same time intend to accelerate technological change and the
development of expertise through intelligent partnerships.
We anticipate that we will need a battery capacity of more
than 150 GWh a year in the period to 2025 just to equip our
own electric fleet with lithium-ion batteries. 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. A 16 GWh battery
cell factory is to be built in Salzgitter. Looking ahead, we are
already preparing for the next generation: we intend to bring
solid-state batteries to market readiness in collaboration with
our partner QuantumScape.
Our Group brands Volkswagen Passenger Cars, Audi and
Porsche are involved in the pan-European High-Power
Charging (HPC) joint venture IONITY, under which a compre-
hensive charging infrastructure is being built to safeguard
long-distance mobility: by the end of the reporting year, 325
charging stations were already in operation. By the end of
2021, we plan to have 400 charging stations in place.
We support the design of the framework conditions for
the approval and introduction of our own self-driving system
by our active involvement in public projects. The experience
we are gathering here will benefit the Group brands and thus
also our customers.
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Key R&D figures
In fiscal year 2020, we filed 6,795 (7,614) patent applications
worldwide for employee inventions, the majority 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, automation and connectivity as well as
alternative drive systems.
ratio – came to 7.6 (6.7)% due to the fall in sales revenue as a
result of the Covid-19 pandemic. Along with new models, the
focus was primarily on the electrification of our vehicle
portfolio, a more efficient range of engines, digitalization and
new technologies. The capitalization ratio was 46.6 (36.1)%.
Research and development expenditure recognized in profit
IFRSs decreased to €12.1
or
loss
(13.2) billion.
in accordance with
The Automotive Division’s total research and development
costs in the reporting period amounted to €13.9 (14.3) billion
and were 2.9% lower than in the previous year; their per-
centage of the Automotive Division’s sales revenue – the R&D
As of December 31, 2020, our Research and Development
departments – including the equity-accounted Chinese joint
ventures – employed 53,268 people (–3.1%) Group-wide,
corresponding to 8.0% of the total workforce.
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
2020
13,885
6,473
46.6
4,644
12,056
182,106
13,885
7.6
2019
14,306
5,171
36.1
4,064
13,199
212,473
14,306
6.7
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P R O C U R E M E N T
In fiscal year 2020, the main task for Procurement was once
again to safeguard supplies, and to help create competitive,
innovative products and optimize cost structures. In addi-
tion, we continued to drive digitalized procurement pro-
cesses forward.
Procurement strategy
The Group strategy TOGETHER 2025+ stands for more speed,
focus and stringency, within the Procurement division as
well, accelerating change even more. The focus in 2020 was
on implementing the concepts developed in the procurement
strategy. Procurement’s key performance indicators were
defined as part of a combined system of targets for Group
Components and Procurement. This system of targets now
gives greater weight to sustainability aspects in the supply
chain, alongside the targets for material and investment costs
and the timely award of contracts.
Target-costing strategies are becoming
increasingly
important in Procurement. They allow costs to be made
transparent and concepts to be influenced in the early stage
of product development by focusing on calculatory poten-
tials. They also provide approaches for worldwide bench-
marking and the exchange of best practices.
A cross-divisional strategic value chain management has
been implemented to support profitable growth and safe-
guard the availability of hardware and software that is strate-
gically relevant and/or crucial for ensuring supplies. The Stra-
tegic Value Chain Management committee that has been set
up takes strategically important “make, buy or partner”
decisions on a regular basis.
The growing volume of software and the new partners
and suppliers this entails necessitate adjustments to the
process chain and Procurement’s award criteria. The Corpo-
rate Sourcing Committee Digital Car is in charge of awarding
contracts for vehicle and vehicle-related software optimally
and on a weekly basis.
Volkswagen FAST – Supplier network as the basis for success
The FAST (Future Automotive Supply Tracks) initiative from
Group Procurement is instrumental in advancing the Volks-
wagen Group and its supply network in terms of partnerships
and future viability.
FAST facilitates the regular exchange of information so
that both sides are strongly positioned to cope with the
future challenges facing the automotive industry. Based on a
set of established criteria, a comprehensive assessment of the
previous year is disclosed to the suppliers so that improve-
ments can be made together. Strategic agreements on
globalization and innovation continue to be core issues of
this exchange, in addition to existing supply relationships.
FAST partners are prioritized in the cross-divisional inno-
vation process in that they are given the opportunity to
present innovations to representatives from the Procurement
and Technical development divisions at upper management
level in strategy meetings. FAST partners are invited to attend
relevant innovation events at which they can contribute their
expertise. Where possible, digital communication media were
used for the annual meeting in the reporting year due to the
spread of the SARS-CoV-2 virus. The program is updated and
refined on an ongoing basis in order to take full advantage of
the potential from the FAST initiative in the future as well.
E-mobility
A key task for Procurement is to safeguard supplies for the
continually growing requirements of the e-mobility offensive
over the next five to ten years in a sustainable way, and while
optimizing cost structures.
Group Procurement puts a particular focus on high-
voltage batteries and e-resources. By means of benchmarking
and requirements-based training, we are increasing our
purchasing expertise in this context.
When awarding contracts to our electric mobility part-
ners, we have laid down requirements as regards sustainable
supplier sources, transparent, traceable supply streams, and
energy- and carbon-optimized supply chains. We pool global
demand from the European, American and Asian markets
and award Group contracts with the aim of achieving cost
leadership for electric mobility solutions. To this end, we
consider diversification in conjunction with dual-supplier
strategies as well as localization of the supplier portfolio for
all core components of the electric vehicle fleet in an effort to
reduce economic and geopolitical risks.
Digitalization of supply
We are working systematically to implement a completely
digitalized supply chain. This is intended to help us to
safeguard supply and leverage synergies throughout the
Group in order to take a leading position 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 objective of our functional area strategy for
Procurement
is to standardize transactions with our
suppliers in the future and automate them where possible.
This will not only reduce transaction costs but will also
accelerate business processes. Potential supply risks can be
reported in an automated way in order to identify measures
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and alternatives faster together. The cornerstone for the
future of Procurement was laid in 2018 in the form of Group
Procurement’s digitalization strategy. This strategy aims not
only to eliminate the weaknesses of Procurement’s IT system
environment but also to increase the organization’s effective-
ness, efficiency and future viability.
Structure of key procurement markets
Our procurement process is organized at a global level, with a
presence in the key markets around the world. This enables
us to procure production materials, investments in property,
plant and equipment, and services worldwide at the quality
required and on the best possible terms. Networking among
the brands’ procurement organizations enables us to leverage
synergies across the Group in the various procurement mar-
kets.
In addition to the brands’ procurement units, the Volks-
wagen Group operates eight regional offices. In growth mar-
kets, we identify and train local suppliers to generate cost
advantages for all Group production sites. In this context, we
are also focusing on start-ups and software suppliers. In
familiar and established markets, the regional offices support
access to the latest technologies and innovations.
Management of purchased parts and suppliers
Today’s supplier portfolio is characterized by global distri-
bution, segmentation and diversification. We address the
challenges this presents by supporting and monitoring the
industrialization of suppliers with our procurement supplier
management. This starts with auditing and assessing sup-
pliers in preparation for the nomination process and
continues with monitoring the maturity of the industriali-
zation of purchased parts, to the complete acceptance and
confirmation of the required production capacity at the indi-
vidual supplier locations. The complexity of the components
requires regular monitoring of production processes in order
to identify any disruptive factors at an early stage and take
action to remedy these. Close cooperation with the quality
assurance units at the production sites is crucial for a stable
supply of purchased parts for our start-up and series pro-
duction vehicle projects. The global supplier management
network worked reliably, particulary in the face of the
challenges posed by the Covid-19 pandemic, and supplies to
vehicle and component plants were largely safeguarded
throughout the reporting year. Bottlenecks and supply disrup-
tion occurred globally due to the restrictions on mobility and
border closures, resulting from the pandemic.
Sustainability in supplier relationships
Successful relationships with our business partners are based
on respecting human rights, compliance with occupational
health and safety standards, active environmental protection
and combating corruption. These sustainability standards are
defined in the contractually binding Volkswagen Group
requirements for sustainability in relations with business
partners (Code of Conduct for Business Partners). These
signed documents also contain the expectation that any
subsuppliers will be subject to the same standards. We review
compliance with the requirements, which has been an
explicit condition for award of contract since 2019.
In our sustainability rating – introduced in 2019 and
expanded in 2020 – we determine suppliers’ sustainability
performance by means of self-disclosures and on-site audits.
By the end of the reporting year, we had obtained 13,041
ratings for suppliers, covering 76% of the total order volume.
Both the validation of the self-assessment questionnaire and
the on-site audits are carried out by selected service pro-
viders. As a rule, contracts are not awarded to suppliers who
fail to comply with regulations or do not implement these
adequately. Tying award decisions to sustainability criteria is
one of the strongest levers for enforcing these. We address
existing sustainability risks and violations of sustainability
principles by systematically implementing measures; this
also includes the upstream supply chain. Depending on the
severity, these may entail the inclusion of stipulations and
measures in performance specifications for suppliers. Despite
the adversities caused by the Covid-19 pandemic, we once
again stepped up our focus on advanced and continuing
training for suppliers; in fiscal year 2020, more than 12
thousand suppliers took advantage of the training programs.
The focus of our activities in 2020 was on decarboni-
zation, respecting human rights and responsible raw material
sourcing.
With regard to decarbonization, the Volkswagen Group is
striving to continuously reduce greenhouse gas emissions or
avoid them altogether over the entire life cycle of a vehicle.
The Group’s transformation into a provider of sustainable
mobility solutions and in particular the trend towards
electric mobility are shifting the action required from the
service life of the vehicle to supply chains and the manu-
facture of vehicles and components. We are aware of our
social responsibility and are committed to the 2°C target of
the Paris Climate Agreement. We have therefore incorporated
the use of renewable energy into the specifications for battery
suppliers.
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151
In respecting human rights in our supply chains, we are
guided by international agreements and frameworks as
required by the UN Guiding Principles on Business and
Human Rights and the principles and conventions of the
OECD. To comply with these requirements, we launched a
human rights due diligence management system in 2020 to
make human rights risks in our supply chain transparent and
to mitigate these risks. An additional management system
has been set up to effectively manage the sometimes
extensive risks in the raw material supply chains. This sets
out in detail the prioritization and processing of the raw
material supply chains that we classify as particularly high
risk. Our current focus is on 16 raw materials. The inclusion
of additional transparency requirements for our battery
suppliers in 2020 represented a milestone for responsible raw
material procurement. These requirements
include the
disclosure of the entire upstream supply chain by our battery
suppliers and is effective for new contracts awarded from
fiscal year 2020 onwards.
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 on as part of the Group strategy TOGETHER 2025+
and implemented as of January 1, 2019. The aim is the further
improvement of future viability and competitiveness by
means of cross-brand management of component activities
and an added-value strategy coordinated throughout the
Group. Synergies are to be leveraged across both traditional
technologies and topics of the future to advance the
transition to electric mobility.
The components business manages around 75 thousand
employees worldwide. The focus of their expertise is the
development 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
components activities around the world into an independent
corporate entity, Volkswagen Group Components, under the
umbrella of Volkswagen AG.
The entity has been organized into business areas: Engine
and Foundry, Transmissions and Electric Drive, Chassis and
Battery System, Battery Cell and Seats. In each of the busi-
ness areas, innovative power and competitiveness is to be
increased by means of an economical product portfolio that
is viable for the future, a continuously optimized product
range and economies of scale exploited across all business
areas. Group Components in the Volkswagen Group is to be
responsible for the development and production of battery
systems and electric drives for new electric vehicles as well as
for the development and pilot production of battery cells and
the management of production partners. There are also plans
to reuse the battery cells in innovative reutilization concepts
such as the flexible fast charging station and then to recycle
them in a climate-friendly manner.
P R O D U C T I O N
The international, cross-brand production network enables
the process 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. To be able
to meet the challenges of the future, we rely on holistic
optimizations, forward-looking innovations, flexible supply
streams and structures, and an agile team. In fiscal year 2020,
the global vehicle production volume was 17.8% below the
previous year’s level, reaching 8.9 million units. This was
primarily attributable to the global spread of the SARS-CoV-2
virus and the measures taken to contain the pandemic, such
as temporary closures of factories or reduced factory output,
particularly in the first half of 2020, due to interruption to
supply chains and logistics and closures of dealerships.
Despite the continuing difficult conditions in many markets,
production in the second half of 2020 stabilized at close to
the previous year’s level. To maintain production processes
amid the pandemic conditions and protect our employees,
we developed and agreed behaviors and measures as part of
our Safe Production Initiative to prevent possible chains of
infection between the people working in the network. These
mainly include the obligation to wear face masks, adherence
to behavioural rules, particularly regarding social distancing,
hygiene requirements and ensuring regular ventilation, and
the reorganization of shift models and breaks. We constantly
review the measures taken to contain the Covid-19 pandemic
and adjust them if necessary.
Productivity increased by 0.8% year-on-year.
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“Intelligently networked” production strategy
Production is supporting the Group strategy TOGETHER 2025+
with its functional area strategy, “Intelligently Networked”. 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 cross-brand initiatives we have created content clusters
in which expert teams work on the strategic topics relevant
for production in the Group. Examples include the com-
petitive design of our global production network, the reduc-
tion and offsetting of environmental impact throughout the
production process, and digitalization with its implications
for production and working processes and for collaboration.
A scenario-based strategy process has been developed in the
course of the transformation phase in production and is
geared to an observation period running until 2040. The
overarching aim is to increase productivity and profitability.
We want to ensure that our locations remain competitive by
having our factories work at optimal capacity, enabling us to
manufacture high-quality products that give customers
maximum benefits at competitive prices.
Global production network
The Group’s production network encompasses twelve brands
and 118 production locations, including our Chinese joint
ventures. Standardizing production with uniform product
concepts, plants, operating equipment and production pro-
cesses is a key factor in our forward-looking production. We
are constantly enhancing our production concepts and
aligning them with new technologies to achieve ambitious
targets in the individual projects.
The flexible production capacity provided by our plat-
forms allows us to leverage synergies, respond to market
challenges, make requirements-based use of the production
network and realize multibrand locations. Currently, almost
half of the 47 passenger car locations are already multibrand
locations. The Bratislava site continues to serve as a prime
example in the Group, producing vehicles for the Volkswagen
Passenger Cars, Audi, Porsche, SEAT and ŠKODA brands.
The Volkswagen Group has set itself the goal of becoming
a world-leading provider of battery electric vehicles by 2025.
The basis for this is the introduction of the Modular Electric
Drive Toolkit (MEB), which we are using to complement our
range with additional battery-electric vehicles. We have been
manufacturing battery-electric vehicles based on the MEB in
Zwickau, the Volkswagen Group’s first electric car factory,
since 2019. One example is the ID.3 from the Volkswagen
Passenger Cars brand. In 2020, the portfolio of the MEB
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153
platform was expanded in Zwickau to include the ID.4 from
Volkswagen Passenger Cars as well as at the Mlada Boleslav
location with the addition of the Enyaq iV from ŠKODA.
In order to design multibrand projects and electric mobil-
ity to be cost-effective in conjunction with existing concepts,
it is necessary to make production 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 identical production
processes enables reduced capital expenditure and provides
the opportunity to better utilize existing capacities. The
future will also see electric vehicle projects at multibrand
locations such as Hanover.
Production locations
Following the sale of Renk, the Volkswagen Group’s pro-
duction network, including our Chinese joint ventures, is
now comprised of 118 locations in which passenger cars,
commercial vehicles and motorcycles, as well as powertrains
and components are manufactured.
With 66 locations, Europe remains our most important
production region for vehicles and components. There are 24
sites in Germany alone. The Group has 34 locations in the
Asia-Pacific region, five in North America, nine in South
America and four in Africa.
Despite difficult conditions due to the effects of the
Covid-19 pandemic, we carried out 81 production start-ups in
the reporting year: 33 for new products and successor prod-
ucts and 48 for product upgrades and derivatives.
The Group’s production system
The Group’s production system provides methods and tools
designed to bring about continuous, sustainable workflow
improvements at all Group brand and regional sites in
production and production-related environments. When
refining the methods, we incorporate new topics and ongoing
trends, focusing, for example, on digitalization and the
switch to electric mobility. Digitalization in particular is
opening up new areas of application, for instance through the
use of digital data and models. Furthermore, digitalization
also provides the opportunity to transpose existing methods
into digital formats and create new, IT-based tools. In this
way, we are taking advantage of the opportunities presented
by digitalization and are making increased use of digital
formats and digital tools in training courses and workshops.
The people in the Group play a pivotal role in anchoring
the production system. We promote a culture of appreciative
cooperation, in which leadership and individual responsi-
bility are indispensable.
New technologies and digitalization
3D printing is still one of the key technologies for Industry
4.0 and digitalizing the automotive value chain. These tech-
nologies, also dubbed additive manufacturing, are being used
successfully at nearly all Volkswagen Group sites in the
manufacture of components and also operating equipment.
They open up wholly new opportunities in the areas of
development, design, production and after sales. Due to the
digital nature of 3D printing, which requires no tools what-
soever, components and operating equipment can be flexibly
implemented directly from digital drawings, and completely
new designs and component geometries can be created.
Developments for large-scale automotive production appli-
cations point to considerable potential for the future. To this
end, Volkswagen leverages the diversity of the Group,
achieved through close collaboration between its brands, and
cooperates with leading technology providers and research
institutions.
Augmented reality links the virtual world with the
physical one and, as a mature technology, likewise plays a key
part in the digitalization of the value chain – not least in view
of ongoing restrictions on contact and travel caused by the
Covid-19 pandemic. In this regard, there is potential to
increase efficiency and innovative capability in areas such as
remote support, employee training, quality assurance and
the development process. Along with the implementation of
new solutions that use data glasses, tablets or projectors as an
output medium, existing augmented reality applications are
continuously being rolled out to other Group sites.
The basis for the digitalization of the production system
is often the harnessing of production data. One focus is the
use of artificial intelligence on image data, the so-called
“industrial computer vision”. Here, the Volkswagen Group
developed its own platform for the implementation of
specific projects and is rolling out applications across its
brands and locations. Examples include checking that vehicle
license plates are correct or detecting cracks in the press shop.
Alongside new technologies, moving the IT architecture
over to a cloud-based platform solution will be the main task
in the coming years on the road to digitalized manufacturing.
For this, the Volkswagen Group is developing, among other
things, the Industrial Cloud in collaboration with Amazon
Web Services and the integration partner Siemens. The cloud-
based platform with its simplified data exchange is a vital
prerequisite for making innovations available rapidly across
all sites. Examples include intelligent robotics, related inline
measuring systems, continuous quality control loops, predic-
tive maintenance applications or data analysis functions for
analyzing and comparing cross-plant processes. The cloud-
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based platform can be used to scale new applications directly
to all sites and operate them centrally. The entire project will
take several years to be implemented. Moreover, Volkswagen
is creating its Industrial Cloud as an open platform with the
goal of incorporating companies from the entire value chain
in addition to its own locations. In the long term, the Volks-
wagen Group aims to integrate its global supply chain with
over 30,000 sites of suppliers and partner companies into the
cloud, creating a constantly growing, worldwide ecosystem.
In order to identify future innovations and new business
models along the entire value chain, our open innovation
approach enables an influx of innovative ideas and technol-
ogies from external start-ups, thus driving forward-looking
innovations for our products, services and processes within
the Volkswagen Group.
GoTOzero Impact Factory
We are planning the production of tomorrow with our func-
tional area strategy, “Intelligently Networked”. Emissions
levels and the use of resources at Volkswagen Group locations
require particular attention. The goTOzero Impact Factory
program is developing specific steps for more sustainable
production, with a vision toward creating a factory that has
no adverse environmental impact.
We have developed a checklist to help the sites determine
their status on the way to becoming a “Zero-Impact Factory”.
This currently comprises 140 environmental criteria and thus
provides the basis for continuous reduction of energy con-
sumption and CO2 emissions, for example.
To implement such programs, a new management system
will be introduced at all production sites worldwide, linking
the main compliance issues with environmental manage-
ment. This environmental compliance management system
provides a solid foundation for compliance with all external
and internal rules relating to the environment for instance in
the course of production processes.
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 provide our employees with training on the
topic of environmental protection.
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 1,520 imple-
mented measures in the area of environment and energy
were documented in this system. They serve to improve
infrastructure and production processes for passenger cars
and light commercial vehicles and are incorporated into the
decarbonization index (DCI), for example. These activities are
beneficial from an environmental and often also from an
economic perspective
as well as having a positive effect on the Group’s environ-
mental indicators.
GoTOzero Impact Logistics
In the joint “goTOzero Impact Logistics” initiative, Group and
brand logistics departments work together to help achieve
the goals of the goTOzero environmental mission statement.
Continuous optimization of the transport network and
logistics processes reduces emissions – this includes the use
of digitalization tools. The use of new low-emission tech-
nologies for transporting production materials and vehicles
will also be continuously analyzed and accelerated.
The measures the Volkswagen Group is taking to achieve
future carbon-neutral logistics include, for example, moving
shipments from road to rail and almost complete avoidance
of CO2 through the use of green electricity in rail transport in
Germany in collaboration with Deutsche Bahn AG.
Other examples of the use of the railways as a low-emis-
sion mode of transport are the delivery of battery modules to
Braunschweig from the supplier in Wrocław, Poland, and the
transport of battery systems from the component site in
Braunschweig to the Zwickau plant in order to produce com-
pletely battery-electric vehicles.
In addition, Group Logistics is using the world’s first two
roll-on/roll-off (RoRo) charter ships powered by low-pollution
liquefied natural gas (LNG) for transporting vehicles across
the North Atlantic.
S A L E S A N D M A R K E T I N G
We regard ourselves as an innovative and sustainable mobil-
ity provider for all commercial and private customers world-
wide – with a unique product portfolio encompassing twelve
successful brands and innovative financial services.
Together with their sales partners and importers, our
passenger car brands agreed on a procedure for integrating
state-of-the-art products and services into the sales network.
The priority thereby is the 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 customer data have been
tightened in many countries. At the same time, new Group
vehicles that are permanently connected to the internet are
about to be launched. We are increasingly investing in distri-
bution systems and processes with the goal of further
digitalizing and improving the individual customer experi-
ence in all distribution channels.
The Volkswagen Group’s financial strength and profitabil-
ity is attributable to an extensive portfolio of strong brands.
The objective of our strategic Best Brand Equity module is to
continuously sharpen the brand profiles, demarcate the
respective vehicle segments that are served by the brands as
Group Management Report
Sustainable Value Enhancement
155
clearly as possible and add to them in a targeted way as
required. Our aim is to achieve high market saturation with
great efficiency and a low level of brand cannibalization.
Market positioning is an important element for increasing
brand values. To this end, we have established automobile-
specific customer segmentation to steer the positioning of
our brands which we consistently apply throughout the
strategy and product process.
reason why we have measured both external and internal
customer satisfaction in our markets in recent years.
> Customer loyalty. Trust in and loyalty to our services rely
on customer satisfaction with our product range and
service. For this reason we ascertained the re-entering con-
tract rates in our markets in past years based on product
sales to customers, for financing and lease agreements for
repurchases of new Volkswagen Group vehicles.
Customer satisfaction and customer loyalty
The Volkswagen Group aims its sales activities at exciting its
customers. This is our top priority, as satisfied 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 connec-
tion to our brands. It is important for us to retain customers
and win new ones. To measure our success in this area, we
compile and analyze two strategic indicators for the passen-
ger car-producing brands:
> Loyalty rate. Proportion of customers of our passenger car
brands who have bought another Group model. Thanks to
their faithful customers, the Volkswagen Passenger Cars,
Audi, ŠKODA and Porsche brands have remained in the
upper loyalty rankings of the core European markets in
comparison with their competitors for a number of years.
Following a decrease in the loyalty rates between 2016 and
2018, these figures stabilized for the Volkswagen Passenger
Cars, Audi and Porsche brands and have since risen for
ŠKODA and SEAT. Compared to other manufacturer groups,
the Volkswagen Group continues to hold a top spot in the
core European markets in terms of loyalty.
> 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 figures of the Volkswagen
Passenger Cars brand relating to brand image and confidence
in the brand stabilized in 2020 above the level for the market
as a whole. Porsche remains in top position in the image
ranking.
In the financial services business, we use two strategic
indicators. The two indicators are currently being revised in
light of changes in customer needs and in the product range,
the short- and long-term impact of the Covid-19 pandemic
and the strategic alignment of financial services in the Volks-
wagen Group:
> Customer satisfaction. A high level of customer satisfaction
is one of the key objectives of our financial services activi-
ties. Our goal is to satisfy customers completely. This is the
E-mobility and digitalization in Group Sales
As part of our electrification campaign, we aim to offer our
customers worldwide around 70 completely battery-electric
vehicles and approximately 60 hybrid models by 2030. This
campaign will be complemented by vehicle-related, customer-
focused offerings, such as customized charging infrastructure
solutions and mobile online services. The Volkswagen Group
is thus transforming from an automotive manufacturer into a
mobility service provider. This poses 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 a seamless
communication process,
in
from
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.
interest
initial
the
We also align our internal processes and structures to the
methods and new forms of working created by digital inno-
vation. This results to 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 – and 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 sales of well-equipped, profit-
able vehicle models than the private customer segment.
The Volkswagen Group has an established base of busi-
ness fleet customers, especially in Germany and the rest of
Europe. Our extensive product range enables us to satisfy
their individual mobility needs from a single source.
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In an overall passenger car market in Germany that declined
by 19.1% in the reporting year, business fleet customers
accounted for 16.2 (14.8)% of total registrations. The Volks-
wagen Group’s share of this customer segment slipped to
42.1 (44.1)%. Outside Germany, the Group’s share of regis-
trations by fleet customers in Europe was up slightly at 26.5
(25.7)%. This trend shows that fleet customers’ confidence in
the Group remains at a high level. We were able to consolidate
our strong market position in the fleet customer business in
Europe.
After Sales and Service
In addition to individual service, the timely provision of
genuine parts is essential to assure passenger car customer
satisfaction in After Sales. The genuine parts supplied by our
passenger car brands and the expertise of the service centers
stand for 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 are
creating the prerequisites to supply almost all our authorized
service facilities around the world 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, our mission is to ensure the worldwide
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
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 quality and on customer focus.
Our range of trucks, buses and engines is complemented by
services that aim to guarantee fuel efficiency, reliability and
wide vehicle availability. Workshop service and service con-
tracts are intended to 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 cus-
tomers to secure the availability of machinery with MAN
PrimeServ. The global network of more than 100 PrimeServ
locations stands for excellent customer focus and offers,
among other things, replacement parts of genuine-part
quality, qualified technical service and long-term main-
tenance contracts.
Q U A L I T Y
The quality of our products and services plays a key role in
maintaining customer satisfaction. Customers are particu-
larly satisfied and loyal when their expectations of a product
or service are met or even exceeded. Appeal, reliability and
service determine quality as it is perceived by the customer
throughout the entire product experience. Our objective is to
positively surprise our customers and inspire enthusiasm in
all areas, and thus to win them over with our quality.
Digitalization was once again the beating heart of our
work in the reporting year: we are sharpening our focus on
software-based system development, which is a critical factor
for success in respect of customer satisfaction. Consistent
application of the “Automotive SPICE” process assessment
model that we use to improve our processes is particularly
important in our activities. It is a key building block for
meeting the requirements of our customers, as well as those
of the regulatory and legislative bodies.
Volkswagen has been implementing cybersecurity mea-
sures in the Group for some time now. For example, we have
an independent cybersecurity network in place across all
regions and Group brands and monitor potential cyber risks.
This enables us to act fast when potential threats arise. The
UNECE (United Nations Economic Commission for Europe) has
provided for corresponding certification and homologation
in the future to ensure that companies can guarantee that
these aspects are dealt with properly so as to protect the users
of our vehicles from potential attacks. Our Group pursues the
goal of implementing standards in the areas of both accident
prevention and security. We are refining the established
processes within the framework of an Automotive Cyber
Security Management System in keeping with the require-
ments of the UNECE regulation. In this context, Volkswagen is
implementing comprehensive measures across departments
in the Group. One of these is a Group-wide communications
campaign launched for the Volkswagen Passenger Cars brand
to underline the importance of this issue.
Strategy of Group Quality
We review our functional area strategy periodically and
coordinate it with the brands. We align our activities with our
goal expressed in the motto: “We embody outstanding
quality and ensure reliable mobility for our customers
Group Management Report
Sustainable Value Enhancement
157
worldwide.” Group Quality 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 ex gratia repair costs.
launches, high customer satisfaction and
The strategy of Group Quality developed in this context
comprises the following four goals:
> We excite our customers with our outstanding quality by
understanding what exactly they perceive as quality and
implementing this in our products.
> We contribute to competitive products with optimal quality
costs by ensuring robust processes, thereby reducing the
expense involved in testing each vehicle.
> We make our contribution to sustainability, security and
integrity by embodying and designing high standards of
quality in products and processes.
> We are becoming an excellent employer by promoting the
personal development of every single employee even more
intensively.
To achieve our goals, we have defined a variety of work
packages. All are focused on the topics that are decisive to the
success of the quality organizations in the Volkswagen
Group.
Contributing to the Group’s strategic indicators
We use a strategic indicator to measure the contribution of
Group Quality at the top level of consideration for the major
passenger car-producing brands.
> Warranty and ex gratia repair payments per vehicle after 12
months in service. This indicator shows all warranty and ex
gratia repair payments for the vehicles produced worldwide
in each production year, expressed in euros per vehicle. All
vehicles from the Volkswagen Passenger Cars, Audi, Porsche,
ŠKODA, SEAT and Volkswagen Commercial Vehicles brands
are included in this figure. Extraordinary items resulting
from initiatives such as recalls or in connection with the
diesel issue are not taken into account. While the figures
for the 2017 and 2018 production years remained at a
constant level, it was possible to reduce the allowances for
vehicles manufactured in 2019 which are within the
targeted corridor. Particularly noteworthy is the Volks-
wagen Commercial Vehicles brand, the figures for which
improved by more than 10% year-on-year in the 2019
production year.
In 2020, the Board of Management decided to replace the
“Tow-in 12 MIS” strategic indicator with this new indicator, as
evaluation of global warranty and ex gratia repair payments
is a more comprehensive instrument for the economic man-
agement of customer perceptions of product quality.
Legal and regulatory compliance
The legal and regulatory compliance of our products is para-
mount in our work. In our processes we employ the principle
of multiple-party verification, which involves mutual support
and control between the business units. Among other things,
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 that the conformity
checks on our products are carried out and assessed with the
participation of all business units involved. This applies
particularly to checks related to emissions and fuel consump-
tion.
We are also dedicating increased attention to our quality
management system, reinforcing the interdisciplinary, pro-
cess-driven approach throughout the Group. The quality
management system in the Volkswagen Group is based on
the ISO 9001 standard. This standard must be complied with
for us to obtain type approval for the manufacture and sale of
our vehicles. We conducted numerous system audits in the
reporting period to verify that our sites and brands comply
with the requirements of the standard. Particular focus was
placed on assessing the risk of non-compliance with defined
processes. Our quality management consultants pay atten-
tion 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 a central office
in Group Quality.
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 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 estab-
lished vehicle models – together with other important crite-
ria such as the quality of locally available fuel, road condi-
tions, traffic density, country-specific usage patterns and, last
but not least, local legislation. We mainly use market studies
and customer surveys to determine region-specific customer
requirements.
In order to be able to ensure that the perceived quality of
our vehicles is at a level commensurate with that of our
competitors, we take the needs of our regional customers
into account in our vehicle audits. Every brand works
together with the individual regions to decide how its
product is to be positioned there. In this way, we strengthen
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Sustainable Value Enhancement
Group Management Report
the brands’ responsibility. So that the vehicle audit returns
comparable results, consistent quality benchmarks apply
across all brands 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.
E M P L OY E E S
The Volkswagen Group is one of the world’s largest employers
in the private sector. On December 31, 2020, we employed a
total of 662,575 people, which includes the Chinese joint
ventures. This figure represents a 1.3% decrease compared
with the end of 2019. The ratio of Group employees in Ger-
many to those abroad remained largely stable over the past
year; at the end of 2020, 44.4 (44.3)% of the workforce worked
in Germany.
Human resources strategy and principles of the human resources policy
With the functional area strategy for Human Resources –
“Empower to transform” – the Group is continuing with key
and successful approaches in its human resources policy.
These include the pronounced stakeholder focus in corporate
governance, comprehensive participation rights for employ-
ees, outstanding training opportunities, the principle of long-
term service through systematic employee retention and
remuneration that is fair and transparent. At the same time,
the new human resources strategy is setting innovative
trends. Hierarchies are being dismantled, and modern forms
of working such as agile working – an approach whereby
most of the responsibility for the work organization is
transferred to the teams – are set to be expanded.
In the Human Resources division, we are guided within
the framework of our strategy by five overarching objectives:
> The Volkswagen Group, including all of its brands and com-
panies, aims to be an excellent employer worldwide.
> Highly competent and dedicated employees strive for
excellence in terms of innovation, added value and cus-
tomer focus.
> A forward-looking work organization ensures optimal
working conditions in factories and offices.
> An exemplary corporate culture creates an open work
environment that is characterized by mutual trust and
collaboration.
> The Company’s human resources work is highly employee-
oriented, strives for operational excellence, and yields
strategic value-added contributions.
the
implementation of our
During
future program
TOGETHER 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:
E M P L O Y E E S B Y M A R K E T
in percent, as of December 31, 2020
Europe (excluding Germany)/
Europe (excluding Germany)/
Other markets
Other markets
Germany
Germany
North America
North America
South America
South America
Asia-Pacific
Asia-Pacific
31 %
31 %
44 %
44 %
4 %
4 %
4 %
4 %
16 %
16 %
> Internal employer attractiveness. This indicator is deter-
mined by asking respondents, as part of the opinion
survey, whether they perceive the respective company as an
attractive employer. The target for 2025 is 89.1 out of a
possible total of 100 index points. A score of 88.2 index
points was achieved in the reporting period, contrasting
with 85.6 points in the previous year. The scope of this
survey extends beyond the brands that manufacture
passenger cars.
> External employer attractiveness. The ability to recruit top
talent is of decisive importance, particularly in view of the
Company’s transformation into one of the world's leading
providers of sustainable mobility solutions and the
associated development of new business fields. We use this
strategic indicator once a year to check the positioning of
the major passenger car-producing brands on the labor
markets for graduates. Rankings in surveys conducted by
renowned institutions, in which we aim to achieve top
scores for the Group brands featured, serve as the basis for
this. The Porsche and ŠKODA brands fully met and partly
exceeded their targets in fiscal year 2020, while Volkswagen
Passenger Cars, Volkswagen Commercial Vehicles, SEAT and
Audi missed or only partially achieved them.
> Diversity index. Given the cultural diversity in our global
markets and the growing economic momentum, success in
a highly competitive marketplace requires an ever-wider
range of experience, world views, solutions to problems
and product ideas. The diversity of our workforce provides
potential for innovation in this area, which we aim to make
even better use of in future. As we establish diversity
management across the Group, this strategic indicator
expresses the development of the proportion of women in
management and the internationalization of top manage-
ment as a percentage of the active workforce worldwide.
In particular, it underpins the objective of the human
resources strategy, which is aimed at contributing to an
Group Management Report
Sustainable Value Enhancement
159
exemplary leadership and corporate culture. The pro-
portion of women in management amounted to 15.3% in
2020 and was one percentage point up on the prior-year
level. We aim to raise this figure to 20.2% by 2025. Our goal
is to increase the level of internationalization in top man-
agement, the uppermost of our three management tiers, to
25.0% in 2025; in the past fiscal year this was 18.7 (18.4)%.
One strategic indicator has been defined for the financial
services business:
> External employer ranking. This involves taking part in
external benchmarking, in general once every two years.
The aim is to position ourselves as an attractive employer
and derive appropriate measures to achieve a ranking
among the top-20 employers by 2025, not just in Europe,
but globally. Volkswagen Financial Services AG was
represented in various national and international best-
employer rankings the last time it participated in 2019.
Coming in 11th place, it was among the top European
employers in the “Great Place to Work” employer com-
petition.
The implementation of our Group strategy TOGETHER 2025+
has been accompanied by a work package that we defined
with the Excellent Leadership module under the slogan
“Accelerate the transformation” to drive the change towards
an open, cooperative, diverse management culture that
places emphasis on acting with integrity. Communication
and collaboration will be improved across the brands and
regions, open, partnership-based and value-based leadership
will be intensified, management development and training
will undergo fundamental change, and an even more
systematic approach to succession planning will be taken so
that the Group has the right people available for the right
positions. In 2020, we overhauled our staff development
system
line with our business requirements and
introduced scouting day management, a new selection
procedure that will enable us to identify suitable talent for
selected functions in specialist or executive management
objectively, accurately and promptly. Individual responsi-
bility, transparency and greater practical relevance already
characterize the career paths leading to management; the
evaluation of talented candidates addresses employees from
different levels of the hierarchy.
in
To master the challenges of the transformation, the
Group and the employee representatives have signed
agreements for the future that will position the Group’s
individual brands more efficiently and also structure
employee career prospects. The Volkswagen Passenger Cars
brand’s roadmap for digital transformation is one example,
as is the Audi brand’s Audi.Zukunft agreement, both of which
were refined in fiscal year 2020.
We are also driving large-scale cultural change to achieve
greater openness and transparency in line with our corporate
strategy. The seven Volkswagen Group Essentials define the
shared underlying values and the foundation for cultural
change across all of the 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 and the role model
program encourage employees to analyze the Group Essen-
tials and incorporate them into all work processes. In the role
model program, managers from all brands improve the cor-
porate culture together with their staff.
Training and professional development
At Volkswagen, our capacity for innovation and our com-
petitive position largely depends on the commitment and
knowledge of our employees, particularly during the trans-
formation.
Staff training at Volkswagen is organized according to
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 specialist 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,
Volkswagen 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
experienced colleagues, who pass on their knowledge as
experts in the vocational group academies. Training mea-
sures are based on the dual training principle, which
combines theoretical content with practical experience on
the job by means of specific tasks.
The range of learning opportunities is being expanded
continuously. Since 2019, the Volkswagen Group Academy
has forged partnerships with renowned external training
portals to expand online learning, for example on IT topics.
The Company has set aside additional funds for the trans-
formation of personnel skills made necessary by digitali-
zation. These resources are used for special training for the
groups of employees and departments affected by the trans-
formation. In addition, Volkswagen is striking out in new
directions with the Faculty 73 program and is providing in-
house training for the software developers who are needed
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Sustainable Value Enhancement
Group Management Report
for the digital transformation. The academic year started in
2020 with 100 participants. The program is designed for
employees and also external applicants with IT affinity and
an interest in software development.
P R O P O R T I O N O F W O M E N
as of December 31
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
university studies with on-the-job training). As of the end of
2020, the Volkswagen Group trained 17,939 young people. We
have introduced the principle of dual vocational training at
many of the Group’s international locations over the past few
years and are continuously working on improvements. 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. At
Volkswagen AG, for example, we developed the AGEBI+
program, which promotes fully qualified vocational trainees
who are eligible for university and wish to combine a degree
program in subjects that are relevant to Volkswagen’s future –
such as electrical engineering, chemistry or computer science
– with closely 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 also take part in supplementary
training measures. University graduates
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 profes-
sionals become familiarized with several
in
Germany and other countries by working in various depart-
ments. Both programs also include several weeks’ experience
working in production. In 2020, Volkswagen AG hired a total
of 151 graduate trainees as part of these programs, 32.5% of
whom were women.
interested
locations
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 development programs
%
Employees
Vocational trainees1
Graduate recruits2
Total management
Management
Senior management
Top management
1 Excluding Scania.
2 Volkswagen AG
2020
17.0
20.5
32.5
15.1
17.3
11.6
7.0
2019
16.8
21.4
31.7
14.2
16.2
10.8
6.8
equality. We are working continuously to develop family-
friendly working time models and to increase the number of
women in management positions. In line with the Gesetz für
die gleichberechtigte Teilhabe von Frauen und Männern in
Führungspositionen in der Privatwirtschaft und im öffent-
lichen Dienst (German Act on the Equal Participation of
Women and Men in Leadership Positions in 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, 2020, the proportion of women in the active
workforce at the first level of management was 10.9 (11.4)%
and at the second level of management it was 16.7 (16.4)%.
In order to encourage women with great potential to
advance within the Company, we have set targets relating to
the development of the proportion of women in manage-
ment for every Board of Management business area at
Volkswagen AG. This approach is supported by many different
measures ranging from cross-brand mentoring programs to a
quota system for the management selection procedure and
targets for the share of women among external hires.
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 family members, the possi-
bility to convert salary components into paid leave, childcare
services that are associated with the company or are
company-owned, and remote working.
for specific target groups
A human resources policy that promotes a work-life balance
is a major component of Volkswagen’s attractiveness as an
employer; in particular, it contributes to greater gender
At Volkswagen AG, which first entered into its works
agreement for remote working back in 2016, around 40
thousand employees were making use of a more flexible
working arrangement as of the end of the 2020 fiscal year.
Group Management Report
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161
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, 2020; in percent
< 20
20–29
30–39
40–49
50–59
60 +
< 20
20–29
30–39
40–49
50–59
60 +
2 %
18 %
30 %
25 %
20 %
5 %
The Covid-19 pandemic brought fundamental changes to the
way we work and collaborate with one another. As in other
companies, at Volkswagen the pandemic acted primarily as a
catalyst for the breakthrough of digitalization in knowledge
work: virtual communication and collaboration, and new
formats of knowledge transfer and training, for example
through podcasts or online tutorials, were set up and
expanded at short notice. In addition, digital tools enabled us
to remain operational throughout the measures introduced
to contain the pandemic, such as business closures.
Preventive healthcare and occupational safety
Preventive healthcare and occupational safety are key ele-
ments of human resources policy in the Volkswagen Group.
In fiscal year 2019, we underpinned this by drawing up a
corresponding Group Policy. This defines basic requirements
and objectives relating to occupational health and safety,
laying down rules for the organization thereof as well as the
responsibilities of the Group, brands and companies.
In addition to fulfilling statutory requirements, Volks-
wagen’s Health department places strong emphasis on pre-
ventive approaches with regard to health, fitness and perfor-
mance. Employees are given the opportunity to have regular
check-ups followed by a talk in which they receive offers that
draw on recent scientific findings for improving their indi-
vidual health. In fiscal year 2020, our Health department
faced unique challenges due to the spread of the Covid-19
pandemic and the measures that needed to be put in place.
Our top priority was to safeguard production in the Group
without putting the protection and health of our employees
in jeopardy. To this end, we developed and implemented a
variety of actions such as hygiene measures, setting up
dedicated test centers at Volkswagen locations and providing
input and guidance from the Health department on the Safe
Production Initiative, which supports safe and healthy
manufacturing under pandemic conditions.
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
criticism being heard.
We brief our employees extensively on upcoming
changes so as to involve them in strategic decision-making as
early as possible. When shaping labor relations to embody
cooperation and social peace, we are guided by universal
human rights and the standards of the International Labour
Organization (ILO). Building on these principles, we have
agreed various charters and declarations with the European
and the Global Works Councils which set out the principles of
labor policy in the Volkswagen Group as well as employee
rights.
By means of the opinion survey, an employee poll con-
ducted at 172 companies belonging to the Group, the Com-
pany not only regularly gathers information regarding
employee satisfaction, but also inquires about the manifes-
tation 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
measures are developed and executed. Over 540 thousand
employees in 38 countries were invited to take part in the
2020 survey. The participation rate was 81%. The average
result from all of the answers provided for the questions in
the opinion survey – the sentiment rating – is an important
parameter of the survey; in 2020 it stood at 82.2 out of a
possible total of 100 index points. The score achieved in 2020
was thus higher than the previous year’s figure, which
amounted to 80.0 points.
In addition, we also encourage employee involvement by
means of Idea Management. Employees have the opportunity
to put their creativity and knowledge to use in the form of
ideas for improvements, thus contributing to streamlining
workflows, further enhancing ergonomics in the workplace,
reducing costs and continuously increasing efficiency. The
system also provides monetary incentives by offering set
rewards.
Employee participation in the Company’s success through
the issuance of treasury shares in the form of an employee
share program is not currently offered.
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 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 Company and standardizing these as far
162
Sustainable Value Enhancement
Group Management Report
as possible. We are also concentrating on building up our
expertise 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.
To safeguard the development of core competencies in
our Company in the fields of technology, digitalization and
autonomous driving, we are building up IT resources that will
help shape and push the Company’s digital transformation.
Due to the global spread of the Covid-19 pandemic, we
have taken measures to protect the workforce, such as an
increased use of remote working. In this context, safe-
guarding access to the IT infrastructure in all brands and
companies was a major priority in fiscal year 2020. Usage
figures for VPN (virtual private network) access and digital
collaboration applications soared compared with the pre-
vious year. IT system availability improved once again year-
on-year.
The Group IT Steering Committee was formed in 2019 to
leverage synergies, to manage the Group’s IT project portfolio
and promote communication with departments on IT
projects. Planning and managing the IT project portfolio at
Group level make sure that budgets and resources are
employed in a coordinated fashion in the development,
implementation and use of IT solutions. In fiscal year 2020,
the Group IT Steering Committee prioritized the IT project
portfolio with all brands so as to take account of the Group’s
situation during the Covid-19 pandemic.
Volkswagen embraces digitalization in the Company; its
in-house IT labs are just one example of this. The labs act as
centers of innovation and expertise that conduct research,
experiment with new technologies and make these available
for productive use in applications for the organization. Here,
Group IT, research institutes, technology partners and policy-
makers work closely together on future trends in information
technology. At the same time, the labs function as liaison
offices for start-ups. 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 Munich, and increasingly
also in Wolfsburg, are working, for example, on exploiting
the potential of quantum computers for areas that have a
commercial application. The focus here is on the optimi-
zation of traffic flows and the simulation of materials and
alloys. Initial experimental projects are also investigating
opportunities for combining the potential of quantum com-
puters with self-learning systems (quantum machine learning).
In addition, the IT labs are used to transfer knowledge
throughout the entire Company on topics such as data
analytics (process for the systematic analysis of data in
electronic form) and decentralized databases, that allow
network participants to jointly process and store data (distri-
buted ledger technologies), and to make new technologies
usable for the Company. For instance, numerous bot projects
are being implemented to automate business processes
(robotic process automation), and self-learning systems will
be used to intelligently analyze data to assist staff in
recurring administrative work by preparing such activities
independently and passing them on to staff for decision-
making.
The further convergence of different business areas with
IT is also opening up potential. In production, for example,
big data processes help us to analyze faulty machinery and
take action at an early stage. Big data refers to data volumes
that are too vast and too complex to be analyzed and evalu-
ated using manual or conventional methods. Production
processes are also safeguarded by artificial intelligence and
camera systems
(computer vision). The systems and
equipment in the factories are linked together in an
integrated overall system, enabling efficiency to be increased
and digital pilot projects to be integrated into the existing
architecture much more easily than before. In conjunction
with the different departments, Group IT is also contributing
its expertise to the field of research and development. For
instance, digitalized work tools such as the “virtual concept
vehicle” make the product development process faster and
more efficient. Value creation in sales is being increased with
the help of advanced analytics (a process for systematic
analysis of future events and behavior), for example in
optimizing the use of parking lots and vehicle collection
processes.
The IT department engages in extensive activities to give
Volkswagen’s employees access to digital media and work
tools. The provision of state-of-the-art IT applications for
digital collaboration and the expansion of options for
conducting business on mobile devices are designed to
improve productivity in the long term. The Company’s
internal network, Group Connect, promotes knowledge
transfer and networking among all employees. The platform
puts experts in touch with one another across the brands and
the world.
In software development centers we develop cross-brand
software for digital ecosystems and for new business
Group Management Report
Sustainable Value Enhancement
163
processes in the Group. We thereby maintain in-house exper-
tise in the rapid, demand-oriented development of software
and IT solutions. This capability will become increasingly
important as the Company’s digital transformation evolves.
Cutting-edge technologies for the industrial Internet of
Things are being developed at the software development
center in Dresden. In collaboration with a leading cloud pro-
vider, Amazon Web Services, we are working on a digital pro-
duction platform that will enable Volkswagen to significantly
reduce its production costs in the future.
Safeguarding data and
information throughout the
Volkswagen Group worldwide is one of the main tasks of IT
and is being continued with the Group Information Security
Program launched in fiscal year 2020. The objective of the
program is to create uniform processes and solutions across
the Group to further enhance information security in the
areas of cloud security and secure software development. The
main focus is on topics that could one day pose information
security risks for the Group. The program’s content and
orientation will be reviewed annually and updated
if
necessary.
CAR2X technology offers our customers protection by
warning them, for example, about traffic hazards. CAR2X
technology enables direct wireless communication among
the vehicles themselves and with the transport infrastruc-
ture. This TÜV IT-certified technology, implemented in
accordance with European standards, represents a technical
milestone in our CAR2X program.
We are one of the first vehicle manufacturers to require
our suppliers to have passed TISAX (Trusted Information
Security Assessment Exchange) certification. This sends out a
strong signal about cross-company information and data
security. TISAX certification
is an assessment method
developed by the German Association of the Automotive
Industry and is based on the new international industry
standard and the requirements of the automotive world. The
aim is for sensitive data and information to be dealt with
securely by our suppliers.
The tasks of automotive cybersecurity are to avert cyber
attacks on our vehicles throughout the entire product life
cycle and in the supply chains and to protect our customers’
personal data in our vehicles. The first Group policies in the
Volkswagen Group based on the legal requirements of the
UNECE regulation have been implemented. Cross-brand
organizational guidelines are being specified and imple-
mented on this basis, taking the organizational circum-
stances into account.
Our “Protected Customer” program addresses the require-
ments of the UNECE regulation. To enable us to protect our
customers against cyber attacks, and to implement our
solutions in conformity with national and international
legislation, we are establishing integrated, cross-brand, cross-
regional security management systems for information and
cybersecurity. One of the aims of this program, which is set to
run until 2021, is to safeguard the complete life cycle of our
vehicles and the digital mobility services.
Key central information security processes have been
audited within the international ISO 27001 framework and
were recertified in 2020. This is the most important standard
for information security and extends beyond IT to also cover
issues such as human resource security, compliance, physical
security and legal requirements.
In fiscal year 2020, we continued the activities of our
implementation of the
Group program for systematic
European General Data Protection Regulation (GDPR) and
developed Group-wide standards for GDPR compliance. This
gave rise to uniform processes, procedures and systemic
solutions, as well as a Group-wide GDPR dialogue. In addition,
knowledge relating to data protection was continuously built
up through extensive training and qualification measures.
Whenever new IT solutions are developed, requirements
based on the Privacy by Design principle are taken into
account from the outset. The basic requirements of the GDPR,
transparency in processing and the minimization of personal
data, remain essential goals in all existing and future
processes. To facilitate long-term compliance with the GDPR,
the development of the data protection management organi-
zation that began in 2019 was steadily continued and imple-
mented in regular operations.
E N V I R O N M E N TA L ST R AT E G Y
As one of the largest automobile manufacturers, Volkswagen
takes responsibility for the environmental impact of its
activities. Based on the TOGETHER 2025+ Group strategy, we
have set ourselves ambitious environmental targets. With the
environmental mission statement goTOzero, we aspire to
minimize environmental impact along the entire life cycle
– from raw material extraction until end-of-life – for all our
products and mobility solutions in order to keep ecosystems
intact and to exert a positive influence on society. Com-
pliance with environmental regulations, standards and
voluntary commitments is a basic prerequisite of our actions.
Our focus is on four prioritized action areas:
> Climate change. We are committed to the 2°C target of the
Paris Climate Agreement. By 2025, we plan to reduce the
greenhouse gas emissions of our passenger cars and light
commercial vehicles by 30% over the total life cycle
compared with 2015. We use the decarbonization index to
document our progress. We intend to become a net-carbon-
neutral company by 2050.
164
Sustainable Value Enhancement
Group Management Report
> Resources. We intend to reduce production-related environ-
mental impact, maximize our resource efficiency and pro-
mote circular economy approaches in the areas of materials,
energy and water.
> Air quality. We are driving e-mobility forward with the
intention of improving the local air quality. Our target is a
share of battery electric vehicles in our model portfolio of
around 20% by 2025.
> Environmental compliance. Where integrity is concerned,
we aim to become a role model for a modern, transparent
and successful enterprise by covering the environmental
impact of our mobility solutions over all life cycle stages.
To this end, we use effective management systems, the
effectiveness of which is monitored regularly.
With our future program TOGETHER 2025+, we have defined a
strategic indicator:
> Decarbonization index (DKI). The DKI measures the emis-
sions of CO2 and CO2 equivalents (jointly referred to as
CO2e) by the major passenger car- and light commercial
vehicle-producing brands in the regions of Europe (EU27,
United Kingdom, Norway and Iceland), China and the USA
over the entire life cycle. In this index, the use phase is
calculated over 200,000 km and with reference to region-
specific fleet values without statutory flexibilities. The CO2e
intensity of the charging current of the electric vehicles is
also calculated based on region-specific electricity mixes.
Our vehicle life cycle assessments, which are used as the
data basis for calculating supply chain and recycling
emissions, have been verified externally and independently
in accordance with ISO 14040. In the DKI, we have a
that makes our
meaningful measuring
progress and interim results public and verifiable. The DKI
calculation methodology is adapted according to internal
and external requirements such as new test cycles for fleet
emissions. Published DKI values can therefore also be
adjusted to the new methodology and thus changed to
facilitate the presentation of a time series that is method-
ologically consistent. By 2025, the DKI is to be reduced by
30% compared with the base year 2015. In the reporting
year, the DKI value averaged 43.0 t CO2e/vehicle. Compared
with the value calculated for 2019, this represents an
increase of 0.2 t CO2e/vehicle.
instrument
We once again markedly enhanced and expanded our climate
protection targets in the reporting year. The Volkswagen
Group aims to reduce the CO2 emissions of its vehicles by
30% in the production and use phase between 2018 and 2030.
The independent Science Based Targets Initiative confirmed
to the Volkswagen Group that due to its climate targets, the
Company fulfills the conditions for limiting global warming
to “significantly below 2 degrees Celsius.”
Organization of environmental protection
Volkswagen has created an environmental policy that sets out
guidelines for environmental decision-making, for the man-
agement of projects and for the Group’s environmental
stewardship. Thus, parameters are set for the conduct and
working methods of management and staff in five areas:
management behavior, compliance, environmental protec-
tion, collaboration with stakeholders and continuous improve-
ment.
The Board of Management of Volkswagen AG is the
highest internal decision-making body for environmental
issues. Both it and the brands’ boards of management take
business, social and environmental criteria into account
when making key company decisions. The Group-wide man-
agement of environmental protection is the responsibility of
the Group Steering Committee for the Environment and
Energy. Other bodies take responsibility for steering key indi-
vidual aspects. They include the Group CO2 Steering Com-
mittee, the Group Steering Committee for Fleet Compliance
and Exhaust Gas, and the Group Sustainability Steering
Committee.
The Volkswagen Group coordinates the activities of the
brands, which in turn steer the measures in the regions. The
brands and companies are responsible for their own
environmental organization. They base their own environ-
mental protection activities on the targets, guidelines and
principles that apply throughout the Group.
Our declared aim is to comply with legal and regulatory
requirements. Furthermore, we are guided by company stan-
dards and targets. The intention of our environmental com-
pliance management systems is to ensure that environ-
mental aspects and obligations are taken into account in our
business operations. Disregard for the rules is treated as a
severe compliance violation, as are fraud and misconduct.
Compliance with our Environmental Policy Statement and
with other Group environmental requirements is evaluated
annually and reported to the Board of Management of
Volkswagen AG, the respective boards of management of the
brands or the managing directors of the companies.
Group Management Report
Sustainable Value Enhancement
165
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 2020 will be available on the website
https://www.volkswagenag.com/presence/nachhaltigkeit/doc
uments/sustainability-report/2020/Nichtfinanzieller_ Bericht_
2020_d.pdf in German and at https://www.volkswagenag.com/
presence/nachhaltigkeit/documents/sustainability-report/
2020/Nonfinancial_Report_2020_e.pdf in English by no later
than April 30, 2021.
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
For more information on the agreement covering the key
points of a comprehensive realignment of MAN Truck &
Bus SE, please refer to the details provided in “Events after the
balance sheet date” of the notes to the consolidated financial
statements.
qq
166
Report on Expected Developments
Group Management Report
Report on Expected Developments
Growth in the global economy is expected to recover overall in 2021. Global demand for passenger
cars will probably vary from region to region and increase noticeably year-on-year. With our brand
diversity, broad product range, technologies and services, we believe we are well prepared for the
future challenges in the mobility business.
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 repre-
sent 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 planning is based on the assumption that global eco-
nomic output will recover overall in 2021, provided lasting
containment of the Covid-19 pandemic is achieved. This
growth will most likely be sufficient for the economy to
recover to approximately its pre-pandemic level. We continue
to believe that risks will arise from protectionist tendencies,
turbulence in the financial markets and structural deficits in
individual countries. In addition, growth prospects will be
negatively impacted by ongoing geopolitical tensions and
conflicts. We anticipate that both the advanced economies
and the emerging markets will experience positive momen-
tum.
Furthermore, we anticipate that the global economy will
also continue to grow in the period from 2022 to 2025.
Europe/Other Markets
In Western Europe, we expect moderate economic growth in
2021 after the downturn in the last fiscal year. The impact of
the Covid-19 pandemic and the uncertain consequences of
the United Kingdom’s withdrawal from the EU will funda-
mentally pose major challenges.
We also anticipate moderate growth rates in Central
Europe in 2021. The economic situation in Eastern Europe is
expected to recover as well, albeit at a somewhat slower pace
given that only slight growth is anticipated for the Russian
economy.
For Turkey, we expect an increasing economic growth rate
combined with high inflation and a weak domestic currency.
The South African economy will probably be dominated by
political uncertainty and social tensions again in 2021
resulting from high unemployment, among other factors.
Despite the sharp slump in the past fiscal year, we therefore
expect only moderate growth.
Germany
We expect gross domestic product (GDP) in Germany to grow
at a relatively robust pace in 2021 but to remain short of its
pre-pandemic level. The labor market situation is likely to
deteriorate somewhat depending, among other things, on a
delayed increase in corporate insolvencies following the
suspension of the obligation to file for insolvency during the
pandemic.
North America
We anticipate a distinct improvement in the economic
situation in the USA in 2021, despite a declining but still
relatively high unemployment rate. The US Federal Reserve
will probably leave key interest rates close to zero. Economic
growth is also likely to increase distinctly in neighboring
Canada and Mexico, although growth in Mexico is not
expected to match the pace of the relatively sharp decline in
the reporting year.
South America
In all probability, the Brazilian economy will recover in 2021
and record a moderate rate of growth. After three years of
negative GDP growth rates, we anticipate only little improve-
Group Management Report
Report on Expected Developments
167
ment in the economic situation in Argentina. Inflation is
likely to remain very high and the local currency to depre-
ciate.
the United Kingdom in 2021. In Italy, Spain and France, the
markets are likely to significantly exceed the level seen in the
reporting year.
Asia-Pacific
The Chinese economy will probably continue growing at a
relatively high level in 2021 after being one of the few
economies not to experience a recession in 2020. After a
sharp contraction in the reporting year, we also expect a
relatively high rate of expansion for the Indian economy in
2021, outpacing the average growth seen in the years before
the Covid-19 pandemic. In Japan, we anticipate a solid rise in
GDP growth.
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 predict that trends in the markets for passenger cars in
the individual regions will be mixed in 2021. Overall, the
volume of demand worldwide for new vehicles is expected to
be noticeably up on the reporting year, but will not reach the
pre-pandemic level, provided successful containment of the
Covid-19 pandemic is achieved. We are forecasting growing
demand for passenger cars worldwide in the period from
2022 to 2025.
Trends in the markets for light commercial vehicles in the
individual regions will also be mixed in 2021; on the whole,
we anticipate a moderate rise in demand for 2021, assuming a
successful containment of the Covid-19 pandemic. For the
years 2022 to 2025, we expect demand for light commercial
vehicles to increase globally.
We believe we are well prepared overall for the future
challenges pertaining to automobility business activities and
for the mixed development of the regional automotive mar-
kets. Our brand diversity, our presence in all major world
markets, our broad and selectively expanded product range,
and our technologies and services put us in a good com-
petitive position worldwide. With electric drives, digital con-
nectivity and autonomous driving, we want to make the
automobile cleaner, quieter, more intelligent and safer. With
an appealing product portfolio of impressive vehicles and
forward-looking, tailor-made mobility solutions we have set
ourselves the goal of continuing to excite our customers and
to meet their diverse needs.
Europe/Other Markets
For 2021, we anticipate that the volume of new passenger car
registrations in Western Europe will be significantly above
that recorded in the reporting year. At the same time,
however, possible consequences of the pandemic and the
uncertain impact of the United Kingdom’s exit from the EU
may result in ongoing uncertainty among consumers and
dampen demand. Despite this, we expect a strong increase in
For light commercial vehicles, we anticipate demand in
Western Europe in 2021 to be noticeably up on the previous
year’s level despite the possible consequences of the pan-
demic and the uncertain impact of the United Kingdom’s exit
from the EU. We predict a moderate to large increase in Italy,
France, Spain and the United Kingdom.
Sales of passenger cars in 2021 are expected to distinctly
exceed the prior-year figures in markets in Central and
Eastern Europe. In Russia, we anticipate a moderate year-on-
year increase in market volume. In the region’s other mar-
kets, a slight to strong rise in the number of new registrations
is expected.
Registrations of light commercial vehicles in the Central
and Eastern European markets in 2021 will probably be dis-
tinctly higher than in the previous year. We predict a moder-
ate increase in market volume for Russia.
The volume of the passenger car market in Turkey in 2021
is expected to remain at the previous year’s level. The volume
of new registrations in South Africa in 2021 is likely to be
substantially higher year-on-year.
Germany
In the German passenger car market, we expect a moderate
year-on-year increase in demand in 2021.
We also anticipate that registrations of light commercial
vehicles will be noticeably up on the previous year.
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 USA in 2021 is likely to be
distinctly higher than the previous year’s level. Demand will
probably remain highest for models in the SUV and pickup
segments. In Canada, the number of new registrations is also
projected to be significantly higher than the previous year’s
level. For Mexico, we expect demand to rise slightly compared
with the reporting 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 anticipate an overall
large increase in new registrations in the South American
markets in 2021 compared with the previous year. In Brazil,
the volume of demand is expected to increase substantially
compared with 2020. We anticipate that demand in Argentina
will be significantly higher year-on-year.
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Asia-Pacific
The passenger car markets in the Asia-Pacific region are
expected to be noticeably up on the prior-year level in 2021.
We predict demand in China to also be noticeably higher than
the comparative figure for 2020. Attractively priced entry-
level models in the SUV segment in particular should still see
strong demand. As long as there is no resolution in sight, the
trade dispute between China and the United States is likely to
continue to weigh on business and consumer confidence. We
anticipate an appreciable increase in the Indian market com-
pared with the previous year. Japan should see slight growth
in market volume in 2021.
The market volume for light commercial vehicles in 2021
will probably be slightly higher than the previous year’s
figure. We are expecting demand in the Chinese market to be
distinctly lower than in the previous year. For India, we are
forecasting a substantially higher volume in 2021 than in the
reporting year. In the Japanese market, we expect demand to
be comparable with the previous year.
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
For 2021, we expect a significantly positive development in
new registrations for mid-sized and heavy trucks with a gross
weight of more than six tonnes compared with the previous
year, with variations from region to region, in the markets
that are relevant for the Volkswagen Group.
Significant market growth is expected for the 27 EU states
excluding Malta, but plus the United Kingdom, Norway and
Switzerland (EU27+3). Russia will probably witness a notice-
able rebound in demand. We are forecasting a slight increase
in Turkey and a significant increase in demand in South
Africa. We estimate that demand in Brazil will be considerably
higher than in the previous year.
On average, we anticipate moderate growth rates in the
relevant truck markets for the years 2022 to 2025.
A moderate increase in overall demand with regional vari-
ations for 2021 is likely in the bus markets relevant for the
Volkswagen Group. We anticipate a slight year-on-year
decline in the market in the EU27+3 countries. In Mexico, we
expect to see very strong market growth. New registrations in
Brazil will probably be distinctly higher than the prior-year
figure.
Overall, we expect a noticeable increase in the demand for
buses on the relevant markets for the period from 2022 to
2025.
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
In the Power Engineering segment, we expect the market
environment to remain difficult in 2021. The further course
of the Covid-19 pandemic and its consequences bring addi-
tional uncertainty.
In 2021, the market volume for two-stroke engines used
in merchant shipping is likely to reach a higher level than in
the reporting period. An expected higher volume of sea trade,
combined with calls for high energy efficiency and low pol-
lutant emissions, will continue to have a significant influence
on drive systems in the future. The market for four-stroke
engines for cruise ships is likely to remain at a very low level
due to the continuing very difficult liquidity situation.
Demand in the passenger ferry segment – similarly affected
by a loss of revenue – is also expected at a low level. We also
expect demand to remain stable for government vessels and
dredgers. In the offshore sector, new order volumes of special
applications look set to be on the low side due to continued
overcapacity. Overall, we expect the marine market to be at a
slightly higher level than that seen in the reporting year with
competitive pressure continuing unabated.
The Covid-19 pandemic has led to great uncertainty con-
cerning likely energy demand in 2021. Initial signs point to a
further slight decline in market volume. The global spread of
the SARS-CoV-2 virus and the measures taken to contain it
have reduced demand for energy and made it harder to raise
capital for investment in energy generation plants. Despite
this impact on the markets, we expect the trend towards
decentralized power stations and gas-based applications to
further intensify. In addition, demand for new and carbon-
neutral technologies should continue to increase in future.
Potential projects
in turbomachinery suggest that
demand will stabilize in 2021 at the previous year’s level.
However, the course of the Covid-19 pandemic brings sub-
stantial uncertainty to the decision-making process for
capital expenditure. Favorable conditions in the capital mar-
kets and targeted state support facilitate such capital-
intensive decisions. Lower capacity utilization of production
facilities by market participants is expected. With the pan-
demic’s increasing duration, this may lead to more intense
competition. In energy generation, we expect increasing
growth in renewable energy sources, bolstered by state
support. Fluctuations in the amount of electricity generated
by these will necessitate an increase in storage capacity. We
are therefore pushing the construction of pilot plants for
thermal storage. This could lead to an expansion of the
market for turbocompressors and turboexpanders.
Group Management Report
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We anticipate a slight recovery in 2021 both in the marine
and power plant after-sales business for diesel engines and in
the after-sales market for turbomachinery. There may be a
temporary catch-up effect in order intake following the post-
ponement of projects over the past year.
For the period 2022 to 2025, we expect to see growing
demand in the power engineering markets. However, the
extent and timing of this growth will vary in the individual
business fields. It remains to be seen for how long the
pandemic will continue to affect the market.
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 anticipate that automotive financial services will prove
highly important to global vehicle sales in 2021, particularly
in the context of the ongoing challenges posed by the Covid-
19 pandemic. We expect demand to rise in emerging markets
where market penetration has so far been low. Regions with
already established automotive financial services markets
will see a continuation of the trend towards enabling mobil-
ity at the lowest possible total cost. Integrated end-to-end
solutions, which include mobility-related service modules
such as insurance and innovative packages of services, will
become increasingly important for this. Additionally, we
expect that demand will increase for new forms of mobility,
such as rental services, and for integrated mobility services,
for example parking, refueling and charging, and that the
initiated with
shift
individual customers from financing to lease contracts will
continue. We estimate that this trend will continue in the
years 2022 to 2025.
in the European
leasing business
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 2021.
This trend is also expected to persist in the period 2022 to
2025.
E XC H A N G E R AT E T R E N D S
In 2020, the euro appreciated slightly against the US dollar on
an annual average. It also rose against sterling. The euro/
in 2020 was affected by high
sterling exchange rate
uncertainty about the outcome of the negotiations on the
United Kingdom’s exit from the EU and the shape of future
relationships. Against the currencies of some emerging
markets, the euro appreciated considerably in some cases. In
particular, the Argentinian peso, Brazilian real, South African
rand, Russian ruble and Mexican peso lost value against the
European single currency. The currencies of Asian emerging
markets also weakened overall against the euro on an annual
average. For 2021, we are forecasting that the euro will
strengthen against the US dollar, sterling and the Chinese
renminbi. The Argentinian peso, Brazilian real, Mexican peso,
South African rand and Russian ruble will most likely con-
tinue to depreciate. For 2022 to 2025, we expect that the euro
will be stable against the key currencies, but that the com-
parative weakness of the currencies in the aforementioned
emerging markets will probably continue. However, there is
still a general event risk – defined as the risk arising from
unforeseen market developments.
I N T E R E ST R AT E T R E N D S
The challenging macroeconomic conditions, including as a
result of the Covid-19 pandemic, resulted in globally falling
interest rates in fiscal year 2020. National central banks both
in the major Western industrialized nations and in emerging
markets cut key interest rates, in some cases on multiple
occasions, and also introduced additional expansionary
monetary policy measures to support their economies. In
March 2020, the US Federal Reserve cut the key interest rate
to almost 0% in the space of just a few days, while the
European Central Bank also left its key interest rate at zero.
We expect these policies to generally continue in 2021 and
therefore consider it currently unlikely that interest rates will
rise in the USA or Europe. In the period from 2022 to 2025, we
expect no more than a slight increase in interest rates.
C O M M O D I T Y P R I C E T R E N D S
The global spread of the coronavirus (SARS-CoV-2) has also
affected commodity markets. The associated restrictions and
the resulting downturn in demand and supply, reduced the
prices of many raw and input materials in the first half of
2020. However, the prices recovered markedly in some cases
over the course of the year. Compared with the previous year,
there was a fall in the average prices for raw materials such as
crude oil, coking coal, lead, aluminum and natural rubber,
while prices for iron ore, rare earths and the precious metals
rhodium and palladium rose and copper and platinum prices
were more or less unchanged. Prices for the raw materials
that are relevant for e-mobility also developed unevenly:
average prices over the year for lithium and cobalt fell, while
nickel prices were more or less on the prior-year level. Based
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on analyses of factors of influence and trends in the com-
modity markets, we expect the prices of most commodities
to rise in 2021. For the years 2022 to 2025, we continue to
expect volatility in the commodity markets with prices
trending both upwards and downwards.
Ducati will introduce its new Monster, among other motor-
cycles, in 2021. The fourth generation of the Multistrada V4
will be available and the XDiavel and Scrambler families will
be upgraded. The SuperSport 950, new Panigale V4 SP and
updated Panigale 4 sports bikes are also waiting in the wings.
N E W M O D E L S I N 2 0 2 1
The Volkswagen Passenger Cars brand will expand the ID.
family in 2021 with the all-electric ID.5, a new crossover
derivative based on the MEB. The Tiguan will be electrified as
a plug-in hybrid. The brand will also launch a compact SUV
coupé and the updated Polo. New entry-level SUVs in the
compact category will also be debuted in the respective
markets, with the Tarek being launched in Russia and the
Taos in North and South America. In China, several all-electric
vehicles will be introduced to the market, including the
ID.4 Crozz and ID.4 X. In India, the locally produced Taigun
compact SUV will be available.
Audi will also continue its electric car offensive in 2021,
expanding the e-tron family with the new e-tron GT. The all-
electric Q4 e-tron will also be available. In the Q5 series, Audi
will offer a dynamic Sportback model and a version with
plug-in hybrid drive.
The ŠKODA brand will power ahead with the electrifi-
cation of its portfolio by introducing the new Enyaq iV. The
new generation of the Fabia and the facelifted Kodiaq will
also become available in the course of the year. In India, the
Kushaq, a new small SUV, tailored to local needs, will arrive
on the market.
SEAT will expand its range in 2021 with a plug-in hybrid
Tarraco, among other models. The popular, compact Ibiza will
receive an update. CUPRA will bring its Formentor e-Hybrid
with powerful plug-in hybrid drive to the market. The el-Born
will mark the brand’s debut in the world of pure electric cars.
Porsche will expand its Taycan model range in 2021 with
an all-electric Cross Turismo version. Sporty all-round models
will be added to the 911 model range. The Macan will receive
a product upgrade.
The Bentley brand will offer a plug-in hybrid version of
the new Bentayga in 2021. The introduction of a further
model with plug-in hybrid drive is also planned.
Lamborghini will launch its Huracán STO high-perfor-
mance super sports car.
A new derivative of the Chiron will be available from
Bugatti.
Volkswagen Commercial Vehicles will completely revamp
the Multivan/Transporter in 2021, and in doing so pen a new
chapter in this model’s success story.
Scania and MAN will present innovative new models in
2021, including a truck and a bus with all-electric drives and
other solutions for urban transport.
(Navistar), a
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
In November 2020, TRATON SE and Navistar International Cor-
poration
leading US truck manufacturer,
announced the signing of a binding merger agreement.
Under this agreement, TRATON will acquire all outstanding
shares in Navistar not already owned by TRATON in return for
cash payment at a price of USD 44.50 per share (total:
approximately USD 3.7 billion). As of December 31, 2020,
TRATON already holds a 16.7% stake in Navistar. The aim of
the transaction is to enhance the ability to meet challenges
from new regulations and fast-developing technologies in
connectivity, propulsion and autonomous driving and to
benefit from Navistar’s presence on the North American
market. The completion of the transaction, through which
TRATON will become Navistar’s sole owner, is intended for
mid-2021 and is subject to the approval of Navistar’s share-
holders, to the usual closing conditions and regulatory
approvals. The main shareholders Icahn Capital LP and MHR
Fund Management LC have already agreed to vote their stake
in favor of the transaction.
Our plans are based on the Volkswagen Group’s current
structures. They do not include the conclusion of the merger
agreement. The effects of this transaction on the financial
performance, cash flows and financial position are not taken
into account in the forecast of the Volkswagen Group.
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 meet people’s needs for individual, sustainable, fully con-
nected mobility and thus increase the Volkswagen Group’s
future viability, we will continue to mobilize our pronounced
strengths in innovation and technology and push the Volks-
wagen Group’s transformation into a digital mobility group
while leveraging our economies of scale and maximizing
synergies.
In our current planning for 2021, most of the 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.
Forthis, we will invest in the electrification and hybridization
of our model portfolio and continue to advance the devel-
opment of the Modular Electric Drive Toolkit (MEB) and the
Premium Platform Electric (PPE), the all-electric platform for
our premium and sports brands. We will also focus on the
growing digitalization of our vehicles and locations and
Group Management Report
Report on Expected Developments
171
increase our capital expenditure on these. 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 is expected to fluctuate around
a level of 6.0% to 6.5%.
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
the direct banking business, and through the use of inter-
national credit lines.
Besides capex, investing activities will also cover addi-
tions to capitalized development costs. Among other things,
these reflect upfront expenditures in connection with the
electrification, digitalization and updating of our model range.
Also included are the services of the Car.Software Organi-
sation, which is developing a standardized operating system
for Group brand vehicles, along with other projects.
With the investments in our facilities and models, as well
as in the development of electric drives and modular toolkits
and in digitalization, we are laying the foundations for
profitable, sustainable growth at Volkswagen. These invest-
ments 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. For 2021, we estimate
cash outflows resulting from the diesel issue to remain more
or less the same and effects from mergers & acquisitions to
be significantly higher. Consequently, we anticipate that the
net cash flow will be in line with the previous year.
Net liquidity in the Automotive Division will probably see
a moderate increase in 2021.
These plans are based on the Volkswagen Group’s current
structures. They do not include the intended acquisition of all
outstanding ordinary shares of Navistar International Cor-
poration and the related cash outflows.
Our joint ventures in China are accounted for using the
equity method and are therefore not included in the figures
above. For 2021, the joint ventures plan to invest in e-mo-
bility, further enhancement of the model portfolio, the
development of new mobility solutions and smart city
concepts. Their capex will probably exceed the 2020 level and
be financed from the companies’ own funds.
In the Financial Services Division, we are planning higher
investments in 2021 than in the previous year. We expect the
development of lease assets and of 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
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%.
Business at the Volkswagen Group was affected by the
consequences of the Covid-19 pandemic throughout the whole
of 2020. As a result, ROI decreased in the reporting period due
to earnings-related factors and, at 6.5% (11.2%), was below
both the prior-year figure and our minimum required rate of
return (for further information, please see the headline
“Return on investment (ROI) and value contribution in the
reporting period” in the chapter entitled “Results of Oper-
ations, Financial Position and Net Assets”). In the Automotive
Division, we expect the return on investment (ROI) to be
noticeably above our minimum required rate of return on
the invested capital.
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
Our planning is based on the assumption that global eco-
nomic output will recover overall in 2021, provided lasting
containment of the Covid-19 pandemic is achieved. This
growth will most likely be sufficient for the economy to
recover to approximately its pre-pandemic level. We continue
to believe that risks will arise from protectionist tendencies,
turbulence in the financial markets and structural deficits in
individual countries. In addition, growth prospects will be
negatively impacted by ongoing geopolitical tensions and
conflicts. We anticipate that both the advanced economies
and the emerging markets will experience positive momen-
tum.
The trend in the automotive industry closely follows
global economic developments. We assume that competition
in the international automotive markets will intensify
further.
We predict that trends in the markets for passenger cars
in the individual regions will be mixed in 2021. Overall, the
volume of demand worldwide for new vehicles is expected to
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Report on Expected Developments
Group Management Report
be noticeably up on the reporting year, provided successful
containment of the Covid-19 pandemic is achieved; however,
it will not recover to its pre-pandemic level. For 2021, we
anticipate that the volume of new passenger car registrations
in Western Europe will be significantly above that recorded in
the reporting year. In the German passenger car market, we
expect a moderate year-on-year increase in demand in 2021.
Sales of passenger cars in 2021 are expected to distinctly
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 as a whole in 2021 is also likely to
be distinctly higher than the previous year’s level. We expect
to see a large increase overall in new registrations in the
South American markets in 2021 compared with the previous
year. The passenger car markets in the Asia-Pacific region are
expected to be noticeably up on the prior-year level in 2021.
Trends in the markets for light commercial vehicles in the
individual regions will also be mixed in 2021; on the whole,
we anticipate a moderate rise in demand for 2021, assuming
that containment of the Covid-19 pandemic is successful.
For 2021, we expect a significantly positive development
in new registrations for mid-sized and heavy trucks with a
gross weight of more than six tonnes compared with the
previous year in the markets that are relevant for the Volks-
wagen Group. A moderate increase in overall demand for
2021 is likely in the bus markets relevant for the Volkswagen
Group.
We anticipate that automotive financial services will be of
great significance to global vehicle sales in 2021, particularly
in the context of the ongoing challenges posed by the Covid-
19 pandemic.
We believe we are well prepared overall for the future
challenges pertaining to automotive business activities and
for the mixed development of the regional automotive
markets. Our brand diversity, our presence in all major world
markets, our broad and selectively expanded product range,
and our technologies and services put us in a good com-
petitive position worldwide. As part of the transformation of
our core business, we are positioning our Group brands with
an even stronger focus on their individual characteristics, and
are optimizing our vehicle and drive portfolio. The focus 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 leverage the advantages of our
multibrand Group even more effectively with the ongoing
development of new technologies and the enhancement of
our toolkits. With electric drives, digital connectivity and
autonomous driving, we want to make the automobile
cleaner, quieter, more intelligent and safer. We have set
ourselves the goal of continuing to excite our customers in
the future and meeting their diverse needs with an appealing
product portfolio of impressive vehicles and forward-looking,
tailor-made mobility solutions.
We anticipate that deliveries to Volkswagen Group cus-
tomers will be significantly up on the previous year in 2021
– assuming successful containment of the Covid-19 pan-
demic – amid continued challenging market conditions.
Challenges will arise particularly from the economic situ-
ation, the increasing intensity of competition, volatile com-
modity and foreign exchange markets, securing supply
chains, and more stringent emissions-related requirements.
We expect the sales revenues of the Volkswagen Group
and Passenger Cars Business Area in 2021 to be significantly
higher than the prior-year figure. In terms of operating profit
for the Group and the Passenger Cars Business Area, we fore-
cast an operating return on sales in the range of 5.0% to 6.5%
in 2021. For the Commercial Vehicles Business Area, we antic-
ipate an operating return on sales of 4.0% to 5.5% before
restructuring measures amid a significant year-on-year
increase in sales revenue. We expect the Power Engineering
Business Area to reach the break-even point amid a notice-
able decline in sales revenue compared with the previous year.
For the Financial Services Division, we forecast that sales reve-
nue will be noticeably higher than the prior-year figure and
that the operating result will be in line with the previous year.
In the Automotive Division, we expect the R&D ratio to
come in at around 7% and the ratio of capex to sales revenue
at around 6% in 2021. For 2021, we expect cash outflows
resulting from the diesel issue to remain more or less the
same and effects from mergers & acquisitions to be signifi-
cantly higher. Consequently, we anticipate that the net cash
flow will be in line with the previous year. Net liquidity in the
Automotive Division will probably see a moderate increase in
2021. We expect the return on investment (ROI) to be
noticeably above our minimum required rate of return. Our
unchanged stated goal is to continue our solid liquidity
policy.
To achieve sustainable success, we need skilled and
dedicated employees. We aim to increase their satisfaction
and motivation by means of equal opportunities, an attrac-
tive and modern working environment, and a forward-
looking approach to organizing work. Every day, we at the
Volkswagen Group assume and exercise responsibility in
issues relating to the environment, safety and society. In
terms of integrity, Volkswagen aspires to become a role model
for a modern, transparent and successful enterprise. We also
aim for operational excellence in all business processes.
Group Management Report
Report on Risks and Opportunities
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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 an 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
activities.
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 effec-
tively and efficiently managing the risks and opportunities
arising from our business activities can we ensure the Volks-
wagen Group’s long-term 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 con-
tinued existence can be ruled out.
Assessing the likelihood of occurrence 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-
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 man-
ner. Opportunities are not recorded.
Another key element of the RMS/ICS at Volkswagen is the
Three Lines Model, a basic element required by, among other
bodies, the European Confederation of Institutes of Internal
Auditing (ECIIA). In line with this model, the Volkswagen
Group’s RMS/ICS has three lines designed to protect the Com-
pany from significant risks occurring.
The minimum requirements for the RMS/ICS, including
the Three Lines Model, are set out in guidelines for the entire
Group.
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The RMS/ICS was further developed in the past fiscal year.
The IT risk management system called “Riskradar” was
introduced at all brands and significant Group companies in
2020. In this way, we have increased process and data security
and reduced our manual workload through automated
workflows and end-to-end system support for the analysis of
data. At the same time, risk awareness at the Company is
further intensified, risk transparency is improved and risks
can be analyzed with end-to-end system support. The ICS has
been standardized for high-risk business processes at
significant companies. We will continue to develop our RMS/
ICS in the future.
First line: Operational risk management
The first line comprises the operational risk management
and internal control systems at the individual Group com-
panies and business units. The RMS/ICS is an integral part of
the Volkswagen Group’s structure and workflows. Events that
may give rise to risk are identified and assessed locally in the
divisions and at the investees. Countermeasures are intro-
duced immediately, the remaining potential impact is
assessed, and the information incorporated into the planning
in a timely manner. Material risks are reported to the relevant
committees on an ad hoc basis. 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 are promptly incor-
porated into the monthly forecasts regarding further busi-
ness development. This means that the Board of Manage-
ment also has access to an overall picture of the current risk
situation via the documented reporting channels during the
year.
The operational risk management and internal control
system also includes compliance with the so called Golden
Rules in the areas of control unit software development,
emission classification and escalation management. These
rules are the minimum requirements in the organization,
processes and tools & systems categories.
Second line: Identifying and reporting systemic and acute risks
using Group-wide processes
In addition to the ongoing operational risk management, the
Group Risk Management department sends standardized
surveys regarding the risk situation and the effectiveness of
the RMS/ICS to the significant Group companies and units
worldwide (regular Governance, Risk & Compliance (GRC)
process) each year.
recorded and assessed in our RICORS IT system. The risk
assessment is made by multiplying the criterion of likelihood
of occurrence (Prob) by the potential extent of the damage.
The extent of the damage is calculated from the criteria of
financial loss (Mat) and reputational damage (Rep) and crimi-
nal relevance (Penal). A score between 0 and 10 is assigned to
each of these criteria. The measures taken to manage and
control risk are taken into account in the risk assessment (net
perspective). The result is a risk score that expresses the risk.
The score for a likelihood of occurrence of more than 50%
in the analysis period is classified as high; for a medium
classification, the likelihood of occurrence is at least 25%. For
the criterion of financial loss, the score rises in line with the
loss; the highest score of 10 is reached when the potential
loss is upwards of €1 billion. The criterion of reputational
damage can have characteristics ranging from local erosion
of confidence and loss of trust at local level to loss of repu-
tation at regional or international level. Criminal relevance is
classified based on the influence on the local company, the
brand or the Group.
In addition to strategic, operational and reporting risks,
risks arising from potential compliance violations are also
integrated 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 recti-
fied.
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 2020.
As part of this process, each systemic risk inherent to the
process or inherent to the business that is reported is
Quarterly risk reports are produced in addition to the
annual risk assessment. These depict the Volkswagen Group’s
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175
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
acute – short to medium-term – risk situation. The assessment
of risks from this quarterly risk process (QRP) is conducted in
the “Riskradar” IT system similarly to that of the annual
regular GRC process. All Group brands as well as Porsche
Holding Salzburg, Volkswagen Financial Services AG and
Volkswagen Bank GmbH are included in the QRP.
In addition, significant changes to the risk situation that
can arise in the short term, for instance from unexpected
external events, are reported to the Board of Management as
required. This is necessary if, among other things, the risk
may lead to potential financial loss of over €1 billion.
Based on the feedback from the annual regular GRC pro-
cess and quarterly risk surveys, the overall picture of the
potential risk situation is updated and the system’s effec-
tiveness assessed.
A separate Group Board of Management Committee for
Risk Management examines the key aspects of the RMS/ICS
every quarter. Its tasks are as follows:
> to further increase transparency in relation to significant
risks to the Group and their management,
> to explain specific issues where these constitute a signifi-
cant 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.
Risk reporting to the committees of Volkswagen AG depends
on materiality thresholds. Systemic risks from a risk score of
20 and acute risks from a risk score of 40 or potential finan-
cial loss of €1 billion or more are regularly presented to the
Board of Management and the Audit Committee of the
Supervisory Board of Volkswagen AG.
Third line: Review 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 line). Independently of this, the
external auditors check both the processes and procedures
implemented in this respect and the adequacy of the docu-
mentation on an annual basis. The plausibility and adequacy
of the risk reports are examined via spot checks in detailed
interviews with the divisions and companies concerned
together with the external auditors. The auditor examines
the risk early warning system integrated in the risk manage-
ment system with respect to its fundamental suitability of
being able to identify risks that might jeopardize the con-
tinued existence and assesses the functionality of the risk
early warning and monitoring systems in accordance with
section 317(4) of the HGB.
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 insti-
tution, 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 operates a risk early
warning and management system. Its aim is to ensure that
the locally applicable regulatory requirements are adhered to
and at the same time to enable 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.
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Monitoring the effectiveness of the risk management system and the
internal control system
To ensure the effectiveness of the RMS/ICS, we regularly opti-
mize it as part of our continuous monitoring and improve-
ment processes. In the process, we give equal consideration
to both internal and external requirements. External experts
assist in the continuous enhancement of our RMS/ICS on a
case-by-case basis. The results culminate in both regular and
event-driven reporting to the Board of Management 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
Volkswagen Group as well as its subsidiaries comprises mea-
sures 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 external
reporting.
Main features of the risk management and integrated internal control
system in the context of 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 in line with external expert opinions in certain
cases, is intended to ensure the application and assessment
of uniform accounting 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 that are required to be prepared by the Group
companies are also set out in detail there, and requirements
have been established for the presentation and settlement of
intragroup transactions and the balance reconciliation pro-
cess that is based on these.
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
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
plausibility of the single-entity financial statements and
specific significant issues at the subsidiaries. Alongside plau-
sibility checks, 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 "four eyes"
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 Ger-
many 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 the required 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 main risks and opportunities
arising in our business activities. In order to provide a better
overview, we have grouped the risks and opportunities into
categories. At the beginning of each risk category, we state the
most significant risks in order of their importance as
identified using the risk score from the regular GRC process
and the quarterly risk process (QRP). We then describe the
individual risks in no particular order. Unless explicitly
mentioned, there were no material changes to the specific
risks and opportunities compared with the previous year
even though the weighting of individual risks has changed.
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177
The risks from the regular GRC process and the QRP reported
to the Board of Management and the Audit Committee are
incorporated into the assessment of the Volkswagen Group’s
risk categories. The risk categories are plotted based on the
average scores.
We use analyses of the competition and the competitive
environment in addition to market studies to identify not
only risks but also opportunities that have a positive impact
on the design of our products, the efficiency with which they
are produced, their success in the market and our cost stru-
cture. 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, based on existing information, may result
in a negative or positive deviation from our forecast or
targets.
Risks and opportunities from the macroeconomy, the sector, markets
and sales
For this risk category, the likelihood of occurrence is classified
as high (previous year: medium) and the potential extent of
damage is classified as medium (previous year: medium).
The most significant risks from the regular GRC process
and the QRP lie in restrictions on trade and increasingly pro-
tectionist tendencies resulting in a negative trend in markets
and unit sales.
Macroeconomic risks and opportunities
We believe that risks to positive growth in global economic
output will arise primarily if efforts to contain the Covid-19
pandemic are not successful in the long term, as well as from
turbulence in the financial and commodity markets, increas-
ingly protectionist tendencies and structural deficits, which
pose a threat to the performance of individual advanced
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economies and emerging markets. In addition, there are
increasing environmental challenges that affect individual
countries and regions to varying degrees. The possible world-
wide transition from an expansionary monetary policy to a
more restrictive one also presents risks for the macroeco-
nomic environment. High private- and public-sector debt in
many places is clouding the outlook for growth and 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. There are also risks from the uncertain con-
sequences of the United Kingdom’s exit from the EU.
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 can also pose risks.
Geopolitical tensions and conflicts, along with signs of
fragmentation in the global economy, are a further major risk
factor to the performance of individual countries and regions.
In light of the existing, strong global interdependence, local
developments could also have adverse effects on the world
economy. 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 also put a strain on the global economy. The same
applies to violent conflicts, terrorist activities, cyber attacks
and the spread of infectious diseases, which may quickly
result in unexpected market reactions.
Overall, we anticipate a recovery in the global economy in
2021. However, due to the risk factors mentioned, as well as
cyclical and structural aspects, a further negative trend in the
global economy 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 from expected developments in a positive way.
Sector-specific risks and market opportunities/potential
Western Europe, especially Germany, and China are our main
sales markets. A drop in demand in these regions due to the
economic climate would have a particularly strong impact on
the Company’s earnings including financial services. We
counter this risk with a clear, customer-oriented and inno-
vative 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 in order to cater to local requirements.
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. Examples of these are customs regulations or mini-
mum local content requirements for production. At the same
time, wherever the economic and regulatory situation per-
mits, there are opportunities above and beyond current pro-
jections. These arise from faster growth in the emerging
markets where vehicle densities are currently still low.
Price pressure in established automotive markets for new
and used vehicles as a result of high market saturation is a
further risk 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.
There is a risk that excess capacity in global automotive
production may lead to a rise in inventories and therefore an
increase in tied-up capital. With a decline in demand for
vehicles and genuine parts, automotive manufacturers may
adjust their capacities or intensify measures to promote
sales. This would lead to additional costs and greater price
pressure.
The demand that built up in individual established mar-
kets in times of crisis could result in a marked recovery if the
economic environment eases more quickly than expected.
In Europe, there is a risk that further municipalities and
cities will impose a driving ban on vehicles with combustion
engines in order to comply with emission limits. China
imposed a so-called “new energy vehicle quota” in 2019,
which means that battery-electric vehicles, plug-in hybrids
and fuel cell vehicles will have to account for a certain pro-
portion of a manufacturer’s new passenger car fleet. To ensure
compliance 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.
Economic performance varied in individual regions in
fiscal year 2020. The resulting risks for our trading and sales
companies, such as in relation to efficient inventory manage-
ment and a profitable dealer network, are substantial and are
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179
being responded to with 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 oper-
ational risk. We have installed a comprehensive liquidity risk
management system so that we can promptly counteract any
liquidity bottlenecks at the dealership end that could hinder
smooth business operations.
We continue to approve loans for vehicle financing on the
basis of the same cautious principles applied in the past, for
example by 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 regulatory reasons. This is due to the pro-
visions of the block exemption regulations, which have
applied to after-sales services since June 2010, and also to the
amendments included in EU Regulation 566/2011 dated
June 8, 2011 and EU Regulation 858/2018 applicable from
September 1, 2020, regarding independent market partici-
pants' access to technical information.
In Germany, legislation entered into force on December 2,
2020 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
business.
The automotive industry is facing 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 at a faster pace of innovation and adjustments to
business models. There is uncertainty regarding the wide-
spread use of electric vehicles and the availability of the
necessary charging infrastructure.
There is also a risk 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 regions and markets with the
greatest growth potential for the Volkswagen Group.
> China
Demand for vehicles is expected to increase in the coming
years due to the need for individual mobility. It is also
expected that demand will shift from the coastal metro-
polises to the country's interior. In order to leverage the
considerable opportunities offered by this 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.
> India
The Volkswagen Group has consolidated its activities
in this strategically important future market and has
launched a model initiative with the new ŠKODA Kushaq
tailored to the needs of customers.
> USA
In the USA, Volkswagen Group of America is steadfast in its
pursuit to become a full-fledged volume supplier. The
expansion of local production capacity – including pro-
duction for electric vehicles in the future – will allow the
Group to better serve the market in the North America
region. We are also working intensively on offering addi-
tional products specifically tailored to the US market.
> Brazil
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 com-
petitive position here, we offer vehicles tailored specially
for this market that are locally produced, such as the Gol
and the Nivus.
> Russia
The heavy reliance on oil and gas income, currency vola-
tility and the resulting volatility of vehicle prices, the politi-
cal crisis and the related sanctions imposed by the EU and
the USA continue to negatively impact the development of
demand. The market remains strategically important to the
Volkswagen Group, which is why we have a strong focus on
market cultivation there.
> Middle East
Political and economic uncertainty in the region weigh on
the passenger car markets. In spite of this instability, the
Middle East region offers short-term and long-term growth
potential. We aim to leverage the potential for growth with
a range of vehicles that has been specifically tailored to this
market, without having our own production facilities there.
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Power Engineering
Global economic trends are likely to continue, such as digi-
talization and the increasing interest in emissions-reducing
technologies associated with decarbonization. Growing
global energy needs call for innovation in the industry and a
growing willingness on the part of governments to invest in
line with the global climate policy.
The situation for the marine market has deteriorated due
to the global pandemic. There is a risk that investments will
be postponed and there will be a distinct slowdown in project
business. Some market segments have been disproportion-
ately affected. These include the cruise industry, which has
been hit by the collapse in demand for tourist travel, or the
offshore market, which is suffering from the sustained reduc-
tion in oil prices.
In turbomachinery, there is the risk that planned projects
and orders will be scaled back or postponed due to negative
developments in sales markets or individual applications.
We address these risks by constantly monitoring the
markets, focusing on less strongly affected market segments,
working closely with all business partners such as customers
and licensees, and introducing new and improved technol-
ogies.
We are working systematically to leverage market oppor-
tunities at a global level, for example by positioning ourselves
as a solution provider for reduced-carbon drive and energy-
generation technologies as well as for storage technology.
Moreover, significant potential can be leveraged in the
medium term by enhancing our after-sales business through
the introduction of new digital products and the expansion
of our service network. The requirements for occupational
safety, which will continue to increase in the future, the
availability of the plants that are already in operation, the
increase in environmental compatibility, and efficient oper-
ation, together with the large number of engines and plants,
will provide the basis for growth. Digital service solutions, for
instance for remote surveillance of plants, offer growth
potential despite the pandemic.
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,
carry the risk of significant changes in demand or the cancel-
lation of already existing orders.
The measures we use to counter the substantial economic
and extraordinary risks include flexible production concepts
and cost flexibility by means of temporary external person-
nel, working time accounts and short-time working (Kurz-
arbeit), and the necessary structural adjustments.
Sales risks
There is a risk that the Volkswagen Group could experience
decreases in demand, possibly exacerbated by media reports
or insufficient communication, for example as a result of the
diesel issue. 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 Volkswagen
Group has recognized provisions arising from the diesel
issue, in particular for the service measures, recalls and cus-
tomer-related measures. Further substantial financial liabili-
ties may emerge due to existing estimation risks particularly
from technical solutions, repurchase obligations, customer-
related measures and possible official or statutory require-
ments for diesel vehicles.
The Volkswagen Group’s multibrand strategy may weaken
individual Group brands if there are overlaps in customer
segments or the product portfolio. This effect may be rein-
forced by the Volkswagen Group’s common-parts strategy, as
this strategy means that, in some cases, the differences in
product substance between the brands are small. As a result,
there could be a risk of internal cannibalization between the
Group brands, higher marketing costs, or repositioning
expenses. By sharpening the brand identities as part of our
Best Brand Equity strategic module, we are working to
minimize these risks.
The fleet customer business continues to be characterized
by increasing concentration and internationalization, accom-
panied by the risk that the loss of individual fleet customers
may result in relatively high volume losses. Viewed over an
extended period, the fleet customer business is more stable
than the business with retail customers. The Volkswagen
Group is well positioned with its broad portfolio of products
and drive systems, as well as its target-group-focused cus-
tomer care, and counteracts a concentration of default risks
at individual fleet customers or markets. The consistently
high market share in Europe shows that fleet customers still
have confidence in the Group.
Consumer demand is shaped not only by real factors such
as disposable income, but also by psychological factors that
cannot be planned for. A current example is that of the
Covid-19 pandemic. Households’ worries about the future
economic situation, for example, may lead to unexpected
buyer reluctance. 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 existing
Group Management Report
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181
vehicles for longer. We are countering the risk of buyer
reluctance with our attractive range of models and our strict
policy of customer orientation.
A combination of buyer reluctance in some markets as a
result of the crisis, and increases in some vehicle taxes based
on CO2 emissions – which have already been observed 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 finan-
cial situation by constantly developing new, fuel-efficient
vehicles and alternative drive technologies, 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, and from restrictions on
trade and protectionist tendencies. Sales incentives may lead
to shifts in the timing of demand.
Commercial vehicles are capital goods: even minor
changes in growth rates or growth forecasts may significantly
affect transport requirements and thus demand. The
resulting risk of production fluctuations calls for a high
degree of flexibility from the manufacturers. Although pro-
duction volumes are significantly lower, the complexity of
the trucks and buses range does in fact significantly exceed
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. Further-
more, customers are increasingly interested in additional
services such as freight optimization and fleet utilization,
which we offer in the commercial vehicle segment through
the digital brand RIO, for example.
Power Engineering’s two-stroke engines are produced
exclusively by licensees, particularly in South Korea, China
and Japan. On account of volatile demand in new ship con-
struction, there is excess capacity in the market for marine
engines, which poses a risk of declining license revenues. Due
to changes in the competitive environment, especially in
China, there is also the risk of losing market share.
Other factors
In addition to the risks outlined in the individual risk
categories, 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 partic-
ular, such occurrences include natural disasters, pandemics –
such as the current spread of the SARS-CoV-2 virus –, violent
conflicts and terrorist attacks.
There is a risk that the Covid-19 pandemic could intensify,
due to reasons such as changes in the virus. All areas of the
Volkswagen Group are affected by the pandemic, especially
sales due to a fall in customer demand, production and
supply chains. There are risks arising in particular from a
sustained fall in demand and an increasing intensity of
competition. These risks could be mitigated by government
economic programs. Furthermore, we envisage challenges,
especially in production with regard to stable supply chains
and protecting the health of our staff. We have put in place
increased hygiene and protective measures to ensure plants
can operate.
Research and development risks
For this risk category, the likelihood of occurrence is classified
as high (previous year: high) and the potential extent of
damage is classified as medium (previous year: medium).
The most significant risks from the regular GRC process
and QRP result from the inability to develop products in line
with demand and requirements, especially with regard to
e-mobility and digitalization.
Risks arising from research and development
The automotive industry is undergoing a fundamental trans-
formation process. For multinational corporations like Volks-
wagen, this means risks in the areas of customer/market,
technological advances and legislation. One risk is posed by
the implementation of increasingly stringent emission and
fuel consumption regulations, taking new test procedures
and test cycles (e.g. Worldwide Harmonized Light-Duty Vehi-
cles Test Procedure, 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 restrictions concerning
chemicals, heavy metals, biocides, persistent organic pollut-
ants). There is therefore a risk of non-conformity in the manu-
facture, procurement and introduction of products such as
automobiles or replacement parts.
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 changing
conditions. Given the intensity of competition and speed of
technological development, for example in the fields of
digitalization and automated driving, there is a risk of failing
to identify relevant trends early enough to respond accor-
dingly.
The latest from the world of physics and other scientific
findings are used to plot our course. In addition, we conduct
trend analyses and customer surveys and examine the
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relevance of the results for our customers. We counter the
risk that it may not be possible to develop modules, vehicles,
or services – especially in relation to e-mobility and digitali-
zation – within the specified time frame, to the required
quality standards, or in line with cost specifications, by con-
tinuously and systematically monitoring the progress of all
projects; at present also amidst the Covid-19 pandemic.
To reduce the risk of patent infringements, we intensively
analyze third-party industrial property rights, increasingly in
relation to communication technologies.
We regularly compare the results of all the analyses with
the respective project’s targets; in the event of variances, we
introduce appropriate countermeasures in good time. Our
end-to-end project organization supports cooperation among
all departments involved in the process, ensuring that speci-
fic requirements are incorporated 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 require-
ments and infrastructural requirements.
As volumes rise, however, so does the risk that disruption
in the supply chain – for example, as a consequence of the
pandemic – or quality problems will affect an increasing
number of vehicles.
The Modular Transverse Toolkit (MQB) is an extremely
flexible vehicle architecture that was created to allow con-
ceptual dimensions – such as the wheelbase, track width,
wheel size and seat position – to be harmonized throughout
the Group and utilized flexibly. Other dimensions, 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. Thanks to the resulting synergy
effects, we are able to cut both development costs and the
necessary one-time expenses as well as manufacturing times.
The toolkits also allow us to produce different models from
different brands in varying quantities, using the same equip-
ment in a single plant. This means that our capacities can be
used with greater flexibility throughout the entire Group,
enabling us to achieve efficiency gains.
We have also transferred this principle of standardization
with maximum flexibility to the Modular Electric Drive
Toolkit (MEB) and Premium Platform Electric (PPE), concepts
developed for all-electric drives. The synergy effects and
efficiency gains offered by the modular toolkit strategy will
give us the opportunity to bring e-mobility into mass pro-
duction worldwide with the introduction of the first MEB-
and PPE-based vehicles.
Operational risks and opportunities
For this risk category, the likelihood of occurrence is classified
as high (previous year: high) and the potential extent of
damage is classified as medium (previous year: medium).
The most significant risks from the regular GRC process
and QRP lie particularly in cyber security and new regulatory
requirements for IT, in quality problems, and in volatile pro-
curement markets.
Risks from particular events in the Volkswagen Group’s procurement
and production network
Particular events beyond our control such as natural disas-
ters, pandemics – currently the spread of the SARS-CoV-2
virus – or other events such as fires, explosions, or the
leakage of substances hazardous to health and/or the environ-
ment, may result in supply risks in procurement and signifi-
cantly impair production. As a consequence, bottlenecks or
even outages in production may occur, thus preventing the
planned volume of production from being achieved.
Supply risks are identified in Procurement through early
warning systems and mitigated by applying corresponding
measures to safeguard supply and avert future assembly line
stoppages caused by suspensions of deliveries. Further
methods of counteracting such risks include hygiene con-
cepts, fire protection measures and hazardous goods man-
agement, and, where financially viable, ensuring that they are
covered by insurance policies.
Due to the uncertainty arising from the further develop-
ment of the Covid-19 pandemic, there is a risk that looming
supply breakdowns may not be recognized early enough and
that countermeasures may not be initiated in time to main-
tain production. Countermeasures to stabilize global produc-
tion include, for example, observing the spread of infection
and the measures taken to contain the pandemic, analyzing
the impact on suppliers and supply and transport chains,
finding alternatives where suppliers are unavailable and
organizing special processes. Vehicle programs and produc-
tion processes can be adjusted dynamically. As part of the
Safe Production Initiative, we have defined hygiene measures
to prevent possible chains of infection at essential points of
contact between the people working in the network. These
measures will be adjusted if necessary and include physical
distancing, wearing of protective masks, cleaning and dis-
infecting, and reorganizing shift models and staggering break
times.
Risks and opportunities from Procurement and Components
Concentrating on only a few financially strong suppliers gives
rise to the risk of insufficient competition. Current trends in
the automotive industry such as e-mobility and automated
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183
driving are resulting in an increased need for financing
among suppliers, presenting them with considerable chal-
lenges. The Volkswagen Group’s procurement risk manage-
ment system assesses suppliers before they are commis-
sioned to carry out projects and takes risk management into
account when awarding contracts.
There is a risk of bottlenecks or disruption in supply, as is
currently being seen in the case of semiconductor com-
ponents. Here, the rapid recovery in demand starting in the
fourth quarter of 2020, following the pandemic-induced drop
in production and sales volumes in the first half of 2020, and
the insufficient market capacity of the semiconductor indus-
try combined with high demand from the consumer, IT and
telecommunications industries have led to bottlenecks in
supply. We intend to safeguard supplies for our production
plants by implementing short-term measures and intensi-
fying relationship management and monitoring across the
entire supply chain.
A global economic slowdown exacerbated by trade
disputes and especially the consequences of the Covid-19
pandemic is impacting the financial situation of many sup-
pliers. This is also giving rise to risks of bottlenecks or dis-
ruption in supply.
Government support measures have stabilized the posi-
tion of suppliers experiencing financial difficulties as a result
of the pandemic. In Germany, for example, new rules on
short-time working (Kurzarbeit) and loan support schemes,
but also the suspension of the obligation to file for insol-
vency, have prevented companies from becoming insolvent.
Despite the government support measures, the number of
suppliers around the world experiencing crises and insol-
vencies rose significantly in 2020. Specialists in Procurement
for restructuring and supply reliability monitor the financial
situation of our suppliers continuously and globally, taking
targeted measures to counter the risk of possible supply
disruptions.
Risks in battery cell production arise particularly from the
rising demand for battery cells and the resulting reliance on
suppliers, from technological change and from the service life
of battery cells. To counter these risks, the Group maintains
multiple strategic supplier relationships in order to ensure its
supply of batteries in every region.
Demand for resources, possible speculations on the
market and current trends in the automotive industry, such
as the growing share of electrified vehicles, may affect the
availability and prices of certain raw materials. Trends in raw
materials and demand are continuously analyzed and
assessed on an interdisciplinary basis to enable steps to be
taken at an early stage in the event of potential bottlenecks.
Quality problems may necessitate technical intervention
involving a substantial financial outlay where costs cannot be
passed on to the supplier or can only be passed on to a
limited extent. Assuring quality is of fundamental impor-
tance especially in the US, Brazilian, Russian, Indian and
Chinese markets, for which we develop vehicles specific to the
countries and where local manufacturers 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 to their individual needs. We
counter the local risks we identify by continuously devel-
oping measures and implementing them locally, thereby
preventing quality defects in the supply chain from arising.
It is not possible at present to rule out the possibility of a
further increase in recalls of various models produced by a
variety of manufacturers in which certain airbags manufac-
tured by Takata were installed. This could also affect Volks-
wagen Group models.
Specialists in Procurement systematically investigate
risks resulting from antitrust violations by suppliers and file
claims for any losses that may arise.
Production risks
Volatile developments in the global automotive markets,
accidents at suppliers and disruptions in the supply chain
may cause fluctuations in production volumes affecting both
vehicle models and plants. In specific markets we are seeing a
trend away from orders for conventional vehicles with
combustion engines and towards increased orders for electric
vehicles. We use established tools, such as flexible working
time models, to address possible risks in terms of fluctu-
ations in the mix of vehicle types. The international pro-
duction network enables us to respond flexibly at the sites.
“Turntable concepts” adjust capacity utilization between
production facilities. At multibrand sites, volatility can also
be balanced across brands.
Quick changes in customer demand for specific equip-
ment features in our products, and the decreasing predict-
ability of demand, may lead to supply bottlenecks. We mini-
mize this risk, for example, by continuously comparing our
available resources against future demand scenarios. If
bottlenecks in the supply of materials are indicated, we can
introduce countermeasures far enough in advance.
Production capacity is planned several years in advance
based on long-term sales planning for all vehicle projects.
This involves a degree of risk as it is subject to market momen-
tum and changes in demand. 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. In the event of short-notice fluctuations in demand
beyond the technical capacity that has been installed, Volks-
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wagen or its suppliers may be unable to meet demand that
goes beyond the available technical flexibility. We counter
such risks by matching demand and capacity at rapid
intervals and issuing program scheduling guidelines where
necessary.
The diversity of our models is growing, particularly with
the current electrification campaign. The growing model
diversity and reduction in product life cycles are leading to an
increasing number of new vehicle start-ups at our sites
worldwide. These involve the use of complex processes and
technical systems, meaning there is a risk that a vehicle start-
up 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 – to the highest degree possible –
that production volumes and quality standards are met
during our new vehicle start-ups throughout the Group.
In order to generally prevent risks such as disruption to
plant operation, downtime, lost output, rejects and reworking,
we use the TPM (Total Productive Maintenance) method at
our production facilities. TPM is a continuous 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.
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.
Risks arising from long-term production
In the case of large projects within the Power Engineering
Business Area, risks may arise that are often only identified
over the course of the project. They may result in particular
from contract drafting errors, inaccurate or incomplete infor-
mation used in costing, post-contract changes in economic
and technical conditions, weaknesses in project manage-
ment, quality defects and unnoticed product malfunctions in
product creation, or poor performance by subcontractors.
Most notably, omissions at the start of a project, overshooting
of the development budget or timeframe, and legislative
changes are usually difficult to correct or compensate for and
often entail substantial additional expenses.
We endeavor to identify these risks at an early stage and to
take appropriate measures to eliminate or minimize them 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 reduce risk, particularly
during the bidding and planning phase, for large upcoming
projects.
Quality risks
Right from the product development stage, we aim to identify
and rectify quality problems at the earliest 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 quickly and
eliminate the faults. Nonconformity of internally or exter-
nally sourced parts or components may necessitate time-
consuming and cost-intensive measures and lead to recalls
and therefore to damage to the Volkswagen Group’s image. In
addition, the resulting financial impacts may exceed pro-
visions. To meet our customers’ expectations and minimize
warranty and ex gratia repair costs, we continuously opti-
mize the processes at our brands with which we can prevent
these defects. If quality management is ineffective, there is a
risk of losing ISO 9001 and KBA certification. This would lead
directly to a loss of type approval from one or more authori-
ties. We counter this risk by continuously training the
Group’s system auditors and subjecting our quality manage-
ment system and process quality to internal audits.
We also check the conformity of series products (con-
formity of production – CoP) in vehicle production plants as
part of system audits with a CoP component. Further risks are
associated with discrepancies identified in conformity of
production (CoP) measurements and in-service-conformity
(ISC) measurements. We have established an effective system
for monitoring the conformity of CoP and ISC measurements
for manufactured vehicles. To ensure that the results of the
CoP and ISC measurements are analyzed systematically, we
have defined an IT system throughout the Group as the basis
for reporting and implemented it across the organization.
This is used for status reporting and documenting the results
of the series of measurements.
Vehicle registration and operation criteria are defined and
monitored by national and, in some cases, international
authorities. Furthermore, several countries have special – and
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185
in some cases new – rules aimed at protecting customers in
their dealings with vehicle manufacturers. We have estab-
lished quality processes so that the Volkswagen Group brands
and their products fulfill all respective applicable require-
ments and local authorities receive timely notification of all
issues requiring reporting. By doing so, we reduce the risk of
customer complaints or other negative consequences.
With increasing technical complexity and the use of the
toolkit system in the Group, the demand for high-grade,
impeccable-quality supplier components and software is
growing. This is lending increasing importance to cyber
security. To better monitor and manage the risk of cyber
attacks on our vehicles in the future, we are establishing an
Automotive Cyber Security Management System in all Group
brands and integrating it into the existing quality manage-
ment system. This will allow us to fulfill the legal require-
ments of the UNECE regulation that apply from 2021.
The Ausschuss für Produktsicherheit (APS – Product
Safety Committee) has been established to mitigate product
safety risks. In the event of safety defects, doubts about
compliance with legal requirements, or issues relating to the
brand or corporate image, the APS examines the matter
concerned and decides on how to respond. In this context,
the APS is also responsible for managing related inquiries
from authorities. The cross-divisional Car Security Board
(CSB) provides support in relation to cyber security issues. We
also created central units responsible for recording and
managing incoming information on APS- and CSB-related
topics. These now have an established position within the
organization. All incoming reports on APS-related issues are
also transferred from the APS mailbox to a central database.
Risks may arise in this context from a lack of timely, complete
and correct preliminary analysis, reporting and follow-up or
from a lack of timely, complete and correct decisions and
measures by the APS or CSB.
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
confidentiality, integrity and availability, and comprise in
particular 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 is a key
factor for the correctness and soundness of data , and for the
functionality of error-free systems.
There is a risk of cyber attacks, particularly on our digital
technology used for our mobility services. 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. Legal regulations including the UNECE (United Nations
Economic Commission for Europe) cyber security regulation
(R155) are creating requirements for our vehicle and software
development. These also have a large impact on our IT sys-
tems. We therefore work on an interdisciplinary basis to
protect our connected vehicles and mobility services. Our
guiding principles are data security, transparency and infor-
mational self-determination.
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 such as firewall and
intrusion prevention systems and a multiple-authentication
procedure. Additionally, we increase protection by restricting
the allocation of access rights to systems and information
and by keeping backup copies of critical data resources.
Redundant IT infrastructures allow us to mitigate risks that
occur in the event of a systems failure or of a disaster.
We use 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 proces-
sing.
The further development and Group-wide use of IT gover-
nance processes, particularly the further standardization of
the IT risk management process, also help to identify
weaknesses at an early stage and to reduce or avoid risks
effectively.
Another focus is the continuous enhancement of Group-
wide security measures with modern technologies and tools,
such as the further expansion of the IT security command
center for the early detection of and defense against cyber
attacks.
Volkswagen complements these technical measures by
systematically raising awareness and providing training for
employees.
Risks from media impact
The image 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 and strategic orientation on
issues such as integrity, ethics and sustainability are in the
public focus. One of the basic principles of running our
business is therefore to pay particular attention to com-
pliance with legal requirements and ethical principles.
However, we are aware that misconduct or criminal acts by
individuals and the resulting reputational damage can never
be fully prevented. In addition, media reactions can have a
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negative effect on the image of the Volkswagen Group and its
brands. This impact could be amplified through insufficient
communication at times of crisis.
Environmental and social risks
For this risk category, the likelihood of occurrence is classified
as medium (previous year: medium) and the potential extent
of damage is classified as medium (previous year: medium).
The most significant risks from the regular GRC process
and QRP arise from non-fulfillment of CO2-related require-
ments.
Personnel risks
We counter economic risks as well as changes in the market
and the competitive situation with a range of instruments
that help the Volkswagen Group to remain flexible in terms of
staff deployment when faced with a fluctuating order
situation – whether orders are in decline, or there is an
increase in demand for our products. These instruments
include time accounts to which hours are added when
overtime is necessary and from which hours are deducted in
quiet periods, enabling our factories to adjust their capacity
to production volume with measures such as extra shifts,
closure days and flexible shift models. The use of temporary
workers also allows us to be more flexible in our planning. 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. We counter the risk of not being able
to develop sufficient expertise in the Company’s different
vocational groups with our strategically oriented and holistic
human resource development, which gives all employees
attractive training and development opportunities. By
boosting our training programs, particularly at our inter-
national locations, we are able to adequately address the
challenges of technological change.
To counter the potential risk of a shortage of skilled
specialists – especially in the areas of digitalization and IT –
we continuously expand our recruitment tools. Our system-
atic 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 and our
Faculty 73 ensure a pipeline of highly qualified and moti-
vated employees. By systematically increasing our attractive-
ness as an employer, we are able to gain talented people in
areas that are crucial for the future, such as electrical
engineering, chemistry or information technology. With
tools such as these, we want to ensure that our demand for
qualified new staff is covered, even amid a shortage of skilled
labor.
We counter the risks associated with employee fluctu-
ation and loss of knowledge as a result of retirement with
intensive, department-specific succession planning and
training. We have also established a base of senior experts in
the Group. With this instrument, we use the valuable know-
ledge of our experienced specialists who have retired from
Volkswagen.
The advancing digitalization of our human resources
processes entails risks arising from the processing of per-
sonal 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.
A challenge lies in the conflict between requests for infor-
mation in the context of various US agreements entered into
in connection with the diesel issue on the one hand and both
German and international data protection requirements on
the other. This is true particularly in view of the fact that
these data protection requirements are open to a certain
degree of interpretation and assessment. In the interest of
precluding infringements of the law as far as possible, despite
a partially unclear legal situation, Volkswagen is advised by
external law firms on these issues.
The spread of the SARS-CoV-2 virus had a negative impact
on business development in fiscal year 2020. Any infectious
diseases occurring in the future may also pose a risk of high
infection rates among the workforce, resulting in process
disruptions in production and non-production areas, for
example production stoppages. In the event of the future
spread of such diseases, emergency plans to tackle this risk
for the purpose of business continuity management will be
developed for critical processes, based on the experience of
2020, and incorporated into the risk management systems.
Environmental protection regulations
The specific emission targets for all new passenger car and
light commercial vehicle fleets for brands and groups in the
EU for 2020 and subsequent years are set out in Regulation
(EU) No 2019/631. This regulation is a material component of
the European climate protection policy and therefore forms
the key regulatory framework for product design and mar-
keting by all vehicle manufacturers selling in the European
market.
Adopted by the EU on April 17, 2019 and published on
April 25, 2019, the regulation states that, from 2021 onward,
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187
the average emissions of European passenger car fleets must
be no higher than 95 g CO2/km; in 2020, this emissions limit
already applied to 95% of the fleet. Up to and including 2020,
European fleet legislation was complied with on the basis of
the New European Driving Cycle (NEDC). From 2021, the
NEDC target value will be replaced by a WLTP target value
through a process defined by lawmakers; this change will not
lead to additional tightening of the target value. A similar
approach will apply to light commercial vehicles, where a
target of 147 g CO2/km applied to the entire fleet in 2020.
The targets will be tightened as from 2025: for new
European passenger car fleets, a reduction of 15% will there-
fore be required from 2025 and a reduction of 37.5% from
2030. For new light commercial vehicle fleets, the required
reductions will be 15% from 2025 and 31% from 2030. In each
case, the starting point is the fleet value in 2021. These
targets can only be achieved through a high proportion of
electric vehicles within the fleet.
Non-fulfillment of the respective fleet-wide target will
result in an excess emissions premium, amounting to €95
per excess gram of CO2 per newly registered vehicle.
At the same time, regulations governing fleet fuel con-
sumption are also being developed or introduced outside the
EU27 (plus Norway, Iceland), for example in Brazil, Canada,
China, India, Japan, Mexico, Saudi Arabia, South Korea,
Switzerland, Taiwan, the United Kingdom and the USA. Brazil
has introduced a fleet efficiency target as part of a voluntary
program which grants tax advantages. To receive a 30% tax
advantage, manufacturers must, among other things, achieve
a specified fleet efficiency. The fuel consumption regulations
in China, which set an average fleet target of 5.0 liters/100 km
(NEDC) for the period 2016 to 2020, were continued into the
period 2021 to 2025 with a target of 4.6 liters/100 km (WLTP).
In addition to this legislation on fleet fuel consumption, a
new energy vehicle quota applies in China. This requires
every manufacturer to increase the share of electric vehicles –
which are included with different weightings – in its total
sales. The quota for 2020 was 12%, to be fulfilled through
battery-electric vehicles, plug-in hybrids, or fuel cell vehicles.
The minimum quota will increase by two percentage points
annually until 2023. Targets for the period after 2023 have
not yet been defined. In the USA, greenhouse gas legislation
has defined the annual CO2 fleet targets since 2012. A
decision was reached in fiscal year 2020 to relax fleet targets
significantly starting in 2022. The Volkswagen Group decided
to participate in the framework of the California Air
Resources Board (CARB). This involves a voluntary com-
mitment to the alternative fleet targets set by the CARB which
are more ambitious than the national standards. The form
the fleet targets will take under the new administration is not
known.
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 coordi-
nates technology and product planning with its brands so as
to avoid breaches of fleet values, since these would entail
severe payment obligations. Whether the Group meets its
fleet targets depends crucially on its technological and finan-
cial capabilities, which are reflected in, for example, our drive-
train and fuel strategy. Volkswagen continues to regard diesel
technology as an important element in the fulfillment of CO2
emissions targets.
Alongside technical and portfolio electrification measures,
it is also possible to use local statutory mechanisms such as
the creation of emission pools in Europe or the trading of
emission credits in the United States and China. Legislation
provides further flexibility to aid target achievement,
depending on the region, for example:
> Relief opportunities may be provided for additional inno-
vative technologies in the vehicle that apply outside the
test cycle (eco-innovations and off-cycle credits),
> Particularly efficient vehicles qualify for super-credits,
> Special rules are in place for small-series producers and
niche manufacturers.
In the EU, a more time-consuming test procedure has applied
to all new vehicles with WLTP since September 2018. Other
challenges arise in connection with stricter processes and
requirements regarding WLTP, such as from test criteria and
homologation (achievement of vehicle type approvals).
The Real Driving Emissions (RDE) Regulation for passen-
ger cars and light commercial vehicles is another 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, leading to stricter
requirements for exhaust gas aftertreatment in passenger
cars and light commercial vehicles. Stricter RDE processes
and requirements have resulted in certain challenges, for
example relating to test criteria and homologation.
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The other main EU regulations affecting the automotive
industry include:
> 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,
> The 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.
Commercial vehicles are increasingly subject to ever stricter
environmental regulations all around the world, particularly
to regulations relating to climate change and vehicle emis-
sions. With Regulation (EU) 2019/1242 of June 20, 2019,
which specifies CO2 emission standards for new heavy trucks
with a permitted gross weight of over 16 tonnes, the EU has
set heavy commercial vehicle manufacturers very ambitious
targets for reducing CO2 emissions within the next decade.
The CO2 emissions from such vehicles must be reduced by
15% by 2025 and 30% by 2030 compared to a reference value
for a monitoring period from July 2019 to June 2020. If they
fail to meet these targets, vehicle manufacturers will be liable
to substantial excess emissions premiums, amounting to
€4,250 per excess gram of CO2/tonne-kilometer (tkm) per
vehicle for the period from 2025 to 2029 and €6,800 per
excess gram of CO2/tkm per vehicle for the period from 2030
onward.
Compliance with regulations relating to climate change
and vehicle emissions requires substantial investment in new
technologies, including alternative drive systems and vehicles
powered by alternative fuels. Increasing connectivity within
transport networks can help to reduce inefficiencies such as
unused transport capacity, empty runs and inefficient routes
in existing transport networks. In conjunction with con-
nected traffic management systems, this can result in
optimized goods transport and therefore a reduction in CO2
emissions.
As part of the European Green Deal, the European Com-
mission has presented its 2030 Climate Target Plan, which
sets out to reduce CO2 emissions in the EU by at least 55%
(previously 40%) compared to 1990 levels by 2030. This may
lead to even more stringent requirements for CO2 emissions
for the automotive industry.
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
air pollutant limits for nitrogen dioxide (NO2) immissions. In
some cases, these issues have been, and continue to be, the
subject of legal proceedings. Individual cities throughout
Germany have already imposed zonal traffic bans for older
vehicles such as Euro 4/IV diesel. It is argued 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 declining further and
financial liabilities arising from customer-related measures
and potential official or statutory requirements.
Local traffic bans are already also in place in a number of
other countries, though these mainly affect older vehicles.
Regulations in Belgium that successively ban older vehicles
from larger cities are one example. In addition to major cities
such as Paris and London, countries like the United Kingdom
are now discussing future bans on vehicles with internal
combustion engines.
In the Power Engineering segment, the International
Maritime Organization (IMO) has introduced the Interna-
tional 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 was imple-
mented globally with effect from January 1, 2020. In addition,
the IMO has decided on a number of emission control areas
in Europe and the USA/Canada that will be subject to partic-
ularly stringent 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. Moreover,
emission limits are in force under Regulation (EU) 2016/1628
and in accordance with the regulations of the US Environ-
mental Protection Agency (EPA), for example. We are pushing
for a maritime energy transition in specialist bodies and also
promote this to the general public. In a first step, we are
supporting the switch to liquefied natural gas (LNG) as a fuel
for maritime applications, and offer dual fuel and gas-
powered engines for new and retrofitted vessels. For the long-
term and 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 in countries that have adopted no
national requirements of their own, or requirements that are
less strict than those of the World Bank Group. These guide-
lines are currently being revised. In addition, the United
Nations adopted the Convention on Long-range Trans-
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189
boundary 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 equipment and systems.
The allocation method for emissions certificates changed
fundamentally when the third emissions trading period
(2013 to 2020) began. As a general rule, all emission allow-
ances for power generators have been sold at auction since
2013. For the manufacturing industry and certain power
generation installations (e.g. combined heat and power
installations), a portion of the certificates is allocated free of
charge on the basis of benchmarks applicable throughout the
EU. This portion of free certificates will gradually decrease as
the trading period progresses; the remaining quantities
required will have to be bought at auction. In certain
(sub)sectors of industry, there was a risk that production will
be transferred to countries outside Europe due to the
amended provisions governing emissions trading, a phe-
nomenon referred to as carbon leakage. A consistent quantity
of certificates was allocated to these sectors free of charge for
the period from 2013 to 2020 on the basis of the pan-EU
benchmarks. The automotive industry was included in the
carbon leakage list that came into effect in 2015. As a result,
individual facilities at Volkswagen Group locations in Europe
received additional certificates free of charge up to the end of
the third trading period. Back in 2013, the European
Commission decided to initially withhold a portion of the
certificates to be auctioned. The certificates were directed
into a market stability reserve that was established in 2018.
This reserve will serve to offset any imbalance between the
supply of and demand for certificates in emissions trading in
the fourth trading period (from 2021). Moreover, there are
further modifications in emissions trading as from the
beginning of the fourth trading period, which may lead in
total 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, eight corresponding pilot projects are
underway. These do not yet affect the Volkswagen Group. The
implemented a national
Chinese government officially
emissions trading system at the end of 2017. Initially, this
affects only the power generation sector; a gradual expansion
is being planned.
L E G A L R I S K S
For this risk category, the likelihood of occurrence is classified
as medium (previous year: medium) and the potential extent
of damage is classified as medium (previous year: high).
The most significant risks from the regular GRC process and
QRP are associated with the diesel issue.
Litigation
Volkswagen AG and the companies in which it is directly or
indirectly invested are involved in a substantial number of
legal disputes and governmental proceedings in Germany
and abroad. Such legal disputes and other proceedings occur,
among other things, in connection with products and ser-
vices or in relation to employees, public authorities, dealers,
investors, customers, suppliers, or other contracting parties.
For the companies in question, these disputes and proceed-
ings may result in payments such as fines or in other obliga-
tions or consequences. In particular, substantial compen-
satory or punitive damages may have to be paid and cost-
intensive measures may have to be implemented. In this
context, specific estimation of the objectively likely conse-
quences is often possible only to a very limited extent, if at
all.
Various legal proceedings are pending worldwide, partic-
ularly in the USA, in which customers are asserting purported
product-related 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. Compliance with legal or regulatory
requirements (such as the GDPR) is another area in which
risks may arise. This is particularly true in gray areas where
Volkswagen and the relevant public authorities may interpret
the law differently.
In connection with their business activities, Volkswagen
Group companies engage in constant dialogue with regu-
latory agencies including the Kraftfahrt-Bundesamt (KBA –
German Federal Motor Transport Authority). It is not possible
to predict with assurance how government regulators will
assess certain issues of fact and law in a particular situation.
For this reason, the possibility that certain vehicle charac-
teristics and/or type approval aspects may in particular
ultimately be deemed deficient or impermissible cannot be
ruled out. This is fundamentally a question of the regulatory
agency's specific evaluation in a concrete situation.
Risks may also result from actions for infringement of
intellectual property, including infringement of patents,
trademarks, or other third-party rights, particularly in Ger-
many and the USA. If Volkswagen is alleged or determined to
have violated third-party intellectual property rights, it may
have to pay damages, modify manufacturing processes, or
redesign products, and may be barred from selling certain
products; this may result in delivery and production restric-
tions or interruptions.
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Criminal acts by individuals, which even the best compliance
management system can never completely prevent, are
another potential source of legal risks.
Appropriate insurance has been taken out to cover these
risks where they were sufficiently definite and such coverage
was economically sensible. Where necessary based on the
information currently available, identified and correspon-
dingly measurable risks have been reflected by recognizing
provisions in amounts considered appropriate or disclosing
contingent liabilities, as the case may be. As some risks
cannot be assessed or can only be assessed to a limited
extent, the possibility of material loss or damage not covered
by the insured amounts or by provisions cannot be ruled out.
This is, for instance, the case with regard to the legal risks
assessed in connection with the diesel issue.
Diesel issue
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
Volkswagen Group vehicles with 2.0 l diesel engines in the
USA. In this context, Volkswagen AG announced that notice-
able discrepancies between the figures recorded in testing
and those measured 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.
The so-called diesel issue is rooted in a modification of
parts of the software of the relevant engine 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. No member 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.
There are furthermore no findings that, following the
publication in May 2014 of the study by the International
Council on Clean Transportation, an unlawful “defeat device”
under US law was disclosed either to the Ausschuss für
Produktsicherheit (Product Safety Committee) or to the per-
sons responsible for preparing the 2014 annual and
consolidated financial statements as the cause of the high
NOx emissions in certain US vehicles with 2.0 l type EA 189
diesel engines. Rather, at the time the 2014 annual and
consolidated financial statements were being prepared, the
persons responsible for preparing these financial statements
remained under the impression that the issue could be
resolved with comparatively little expense.
In the course of the summer of 2015, however, it became
progressively 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 that was later identified as
an unlawful “defeat device” as defined by US law. This
culminated in Volkswagen's disclosure of a “defeat device” to
the EPA and the California Air Resources Board, a department
of the Environmental Protection Agency of the State of
California, on September 3, 2015. According to the assess-
ment at the time by the responsible persons dealing with the
matter, the magnitude of the costs expected to result for the
Volkswagen Group (recall costs, retrofitting costs, and finan-
cial penalties) was not fundamentally dissimilar to that in
previous cases involving other vehicle manufacturers. It
therefore appeared to be manageable overall considering the
business activities of the Volkswagen Group. This assessment
by Volkswagen AG was based, among other things, on the
advice of a law firm engaged in the USA for regulatory
approval issues, according to which similar cases had in the
past been amicably resolved with the US authorities. The
EPA's publication of the “Notice of Violation” on Septem-
ber 18, 2015, which the Board of Management had not
expected, especially at that time, then presented the situation
in an entirely different light.
The AUDI AG Board of Management members in office at
the time in question have likewise stated that they had no
knowledge of the use of “defeat device” software that was
prohibited by US law in the type V6 3.0 l TDI engines until the
EPA issued its November 2015 “Notice of Violation”.
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 4.2 l diesel engines.
As a consequence of the diesel issue, numerous judicial
and regulatory proceedings were initiated in various coun-
tries. Volkswagen has in the interim succeeded in making
substantial progress and ending many of these proceedings.
In the USA, Volkswagen AG and certain affiliates reached
settlement agreements with various government authorities
and private plaintiffs, the latter represented by a Plaintiffs'
Steering Committee in a multidistrict litigation in the US
state of California. The agreements in question include
various partial consent decrees as well as a plea agreement
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191
that resolved certain civil claims as well as criminal charges
under US federal law and the laws of certain US states in
connection with the diesel issue. Although Volkswagen is
firmly committed to fulfilling the obligations arising from
these agreements, a breach of these obligations cannot be
completely ruled out. In the event of a violation, significant
penalties could be imposed as stipulated in the agreements,
in addition to the possibility of further monetary fines,
criminal sanctions and injunctive relief. The last remaining
vehicle class settlement program for customers in the United
States, which pertained to second Generation 3.0 l TDI
vehicles, ended in May 2020.
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. For all clusters (groups of vehicles) within its
(KBA – German
jurisdiction, the Kraftfahrt-Bundesamt
Federal Motor Transport Authority) determined that imple-
mentation of the technical measures would not result in any
adverse changes in fuel consumption, CO2 emissions, engine
output, maximum torque, and noise emissions.
Following the studies carried out by AUDI AG to check all
relevant diesel concepts for possible irregularities and retrofit
potential, measures proposed by AUDI AG have been adopted
and mandated by the KBA in various recall orders pertaining
to vehicle models with V6 and V8 TDI engines. AUDI AG cur-
including recall
rently anticipates that the total cost,
expenses, of the ongoing largely software-based retrofit
program that began in July 2017 will be manageable and has
recognized corresponding balance-sheet risk provisions.
AUDI AG has in the meantime developed software updates for
many of the affected powertrains and, after approval by the
KBA, already installed these in the vehicles of a large number
of affected customers. The software updates still being
developed are expected to be submitted to the KBA in 2021
for approval.
In connection with the diesel issue, potential conse-
quences for Volkswagen’s results of operations, financial
position and net assets could emerge primarily in the
following legal areas:
manipulation relating to capital market disclosure obli-
gations in connection with the diesel issue were definitively
terminated by the Braunschweig Regional Court against
payment in each case of a court-imposed sum of €4.5 million,
thereby also terminating to the same extent the proceedings
against Volkswagen AG as collateral participant. After permit-
ting the charges against a former Chairman of the Board of
Management of Volkswagen AG and the related action
against Volkswagen AG to go forward in September 2020, the
Braunschweig Regional Court in January 2021 terminated
these proceedings – provisionally as regards the indictment
which is for the time being still pending against the former
Chairman of the Board of Management, but definitively as
regards Volkswagen AG.
In September 2020, the Braunschweig Regional Court
accepted the indictment of the same former Chairman of the
Board of Management of Volkswagen AG and others on
charges that include fraud in connection with the diesel issue
involving type EA 189 engines and opened the main trial
proceedings.
In June 2020, the Munich II Regional Court accepted the
substantially unchanged indictment of the Munich II Office
of the Public Prosecutor, which also names the former Chair-
man of the Board of Management of AUDI AG, and opened
the main trial proceedings on charges of, among other things,
fraud in connection with the diesel issue involving 3.0 l TDI
engines. Trial proceedings commenced in September 2020.
In August 2020, the Munich II Office of the Public Pros-
ecutor issued a further indictment charging three former
members of the Board of Management of AUDI AG and
others with, among other things, fraud in connection with
the diesel issue involving 3.0 l and 4.2 l TDI engines.
In connection with the diesel issue, the Stuttgart Office of
the Public Prosecutor is conducting a criminal investigation
on suspicion of fraud and illegal advertising; this investi-
gation also involves a member of the Board of Management
of Dr. Ing. h.c. F. Porsche AG.
The respective Group companies have appointed renowned
law firms to clarify the matters underlying the public pros-
ecutor’s accusations. The Board of Management and Super-
visory Board receive regular updates on the current status.
1. Criminal and administrative proceedings worldwide
(excluding the USA/Canada)
investigations, regulatory offense proceedings,
Criminal
and/or administrative proceedings have been commenced in
some countries. Criminal investigations into the core factual
issues are being conducted by the Offices of the Public
Prosecutor in Braunschweig and Munich.
As the type approval authority of proper jurisdiction, the
KBA is moreover continuously testing Audi, Volkswagen, and
Porsche brand vehicles for problematic functions. If certain
functions are deemed impermissible by the KBA, the affected
vehicles are recalled pursuant to a recall order or they are
brought back into compliance by means of a voluntary ser-
vice measure.
In May 2020, the criminal proceedings against the current
Chairman of the Board of Management of Volkswagen AG
and a former member of its Board of Management (currently
Chairman of the Supervisory Board) regarding alleged market
Moreover, additional administrative proceedings relating
to the diesel issue are ongoing in other jurisdictions.
The companies of the Volkswagen Group are cooperating
with the government authorities.
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Risks may furthermore result from possible decisions by the
European Court of Justice construing EU type approval pro-
visions.
Whether the criminal and administrative proceedings will
ultimately result in fines or other consequences for the
Company, and if so what amounts these may entail, is cur-
rently subject to estimation risks. According to Volkswagen’s
estimates, the likelihood that a sanction will be imposed is
50% or less in the majority of these proceedings. 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 less than 10%.
Provisions were recognized to a small extent.
2. Product-related lawsuits worldwide (excluding the USA/
Canada)
A general possibility exists 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 environ-
mental 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 organizations are pending
against Volkswagen AG and other Volkswagen Group com-
panies in a number of countries including Australia, Belgium,
Brazil, England and Wales, France, Germany, Italy, the Nether-
lands, Portugal, and South Africa. Alleged rights to damages
and other relief are asserted in these actions. The pending
actions include in particular the following: In Australia,
various class action lawsuits had been pending against
Volkswagen AG and other Volkswagen Group companies,
including the Australian subsidiaries. In December 2019,
Volkswagen AG reached tentative agreements with the
Australian class action plaintiffs terminating the litigation;
the court approved these agreements in April 2020. Volks-
wagen AG anticipates that the total cost of settling these
actions will be approximately AUD 180 million. Two civil
suits filed against Volkswagen AG and other Group com-
panies by the Australian Competition and Consumer Com-
mission (ACCC) were settled in the second half of 2019. The
settlement is not yet legally final, however, as an appellate
court has yet to rule on the amount of the fine. Depending on
the appellate court decision, Volkswagen AG continues to
anticipate payment of a fine of up to AUD 125 million.
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. Given the opt-out rule,
the class action potentially covers all vehicles with type
EA 189 engines purchased by consumers on the Belgian
market after September 1, 2014, unless the right to opt out is
actively exercised. The asserted claims are based on pur-
ported violations of unfair competition and consumer pro-
tection law as well as on alleged breach of contract.
In Brazil, two consumer protection class actions are
pending. The first of these class actions pertains to some
17 thousand Amarok vehicles and the second to roughly
67 thousand later generation Amaroks. In the first class
action, an appeals judgment was rendered in May 2019 that
only partially upheld the lower court's decision. This judg-
ment initially reduced the damage liability of Volkswagen do
Brasil considerably to around BRL 172 million plus interest.
This amount can increase as a result of the adjudicated
inflation rate and the assertion of individual claims alleging
declines in the value of affected Amarok vehicles. The appeals
judgment remains non-final since Volkswagen do Brasil has
appealed it to a higher court. So far no judgment has been
rendered in the second class action proceeding.
In Germany, Volkswagen AG and Verbraucherzentrale
Bundesverband e.V. (Federation of Consumer Organizations)
entered into an out of court settlement on February 28, 2020
terminating the consumer action for model declaratory judg-
ment. The terms of the settlement require Volkswagen AG to
offer individual settlements to consumers who registered
claims under the action for model declaratory judgment and
meet the settlement criteria. As a result, Volkswagen AG
entered into individual settlements in the reporting year with
some 245 thousand customers in an aggregate amount of
roughly €770 million. The process of settling the consumer
action for model declaratory judgment is thus almost com-
plete. Verbraucherzentrale Bundesverband e.V. withdrew the
action for model declaratory judgment on April 30, 2020.
In addition, various actions have been brought against
companies of the Volkswagen Group in several German
regional courts by financialright GmbH, which is asserting
rights assigned to it by a total of approximately 45 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). 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. To date, some 90 thousand plaintiffs have
registered claims under the group litigation, for which the
opt-in period has expired. In these proceedings, the High
Court in England and Wales ruled in April 2020 that the
switch logic in the EA 189 engine constituted an unlawful
defeat device; the court believed that it was also bound by the
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Report on Risks and Opportunities
193
findings of the KBA (German Federal Motor Transport
Authority) in this respect. In August 2020, the Court of Appeal
rejected Volkswagen's appeal against the High Court's ruling
on these preliminary questions; this decision is final. The
question of liability on the part of Volkswagen was not a
matter addressed by the High Court's ruling and will be dealt
with at a later stage of the proceedings. The main trial pro-
ceedings are to begin in January 2023.
In France, the French consumer organization Confédér-
ation de la Consommation, du Logement et du Cadre de Vie
(CLCV) filed a class action in September 2020 against Volks-
wagen Group Automotive Retail France and Volkswagen AG
for up to 950 thousand French owners and lessees of vehicles
with type EA 189 engines. This is an opt-in class action in
which the affected consumers are not required to opt into the
class action until a legally final judgment is rendered.
In Italy, a class action lawsuit filed by the consumer
association Altroconsumo on behalf of Italian customers is
pending before the Venice Regional Court. This litigation
involves damage claims based on alleged breaches of contract
as well as claims based on purported violations of Italian
consumer protection law. Some 82 thousand customers have
registered for the class action, whereby the validity of the
majority of the registrations is still unclear.
In the Netherlands, Stichting Volkswagen Car Claim has
brought an opt-out class action seeking declaratory rulings.
Any individual claims would then have to be established
afterwards in separate proceedings. In November 2019 the
Regional Court in Amsterdam held the requests for relief to
be inadmissible in part. Proceedings in the matter are
presently suspended. Furthermore, in April 2020 an opt-out
class action lawsuit seeking monetary damages on behalf of
Dutch consumers was served on Volkswagen by the Diesel
Emissions Justice Foundation. It is currently unclear whether
other consumers in addition to those in the Netherlands may
join this class action. The class action relates to vehicles with
type EA 189 engines, among others.
In Portugal, a Portuguese consumer organization has
filed an opt-out class action. Potentially, up to approximately
139 thousand vehicles with type EA 189 engines are affected
in the Portuguese market. The complaint seeks vehicle return
and alleges damages as well.
In South Africa, an opt-out class action seeking damages
is pending that pertains to some 8 thousand vehicles with V6
and V8 TDI engines in addition to approximately 72 thou-
sand vehicles with type EA 189 engines.
Furthermore, individual lawsuits and similar proceedings
are pending against Volkswagen AG and other Volkswagen
Group companies in various countries; most of these law-
suits are seeking damages or rescission of the purchase con-
tract.
individual
In Germany, over 55 thousand
lawsuits are
currently pending. In May 2020, the Bundesgerichtshof (BGH
– Federal Court of Justice) handed down its first decision ever
in an individual product-related lawsuit in connection with
the diesel issue. The BGH held that the buyer, who had
purchased a vehicle with a type EA 189 engine prior to public
disclosure of the diesel issue, had a claim for damages against
Volkswagen AG. While the buyer can require reimbursement
of the vehicle's purchase price, he must accept a deduction for
the benefit derived from using the vehicle and must return it
to Volkswagen AG. The judgment clarified the BGH's stance
on the fundamental issues underlying a large number of the
individual diesel lawsuits then still pending in Germany. On
this basis, it has since been possible to conclude settlements
and thus significantly reduce the number of individual law-
suits pending. In a series of fundamental judgments rendered
in July 2020, the BGH decided further legal issues of major
importance for the litigation still pending with regard to
vehicles with type EA 189 engines. The BGH held that plain-
tiffs who purchased their vehicle after the ad hoc announce-
ment of September 22, 2015 have no claim for damages. The
court furthermore ruled that purchasers of affected vehicles
are not entitled to tort interest under section 849 of the
German Civil Code. The court also made it clear that a
plaintiff's potential damage claim may be completely offset
by the benefit derived from using the vehicle.
Volkswagen estimates the likelihood that the plaintiffs
will prevail to be 50% or less in the great majority of cases:
customer class actions, complaints filed by consumer and/or
environmental organizations, and individual lawsuits. Con-
tingent 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 remote.
Since most of these actions are still in an early procedural
stage, it is in many cases not yet possible to quantify the
realistic risk exposure. Furthermore, provisions were recog-
nized to the extent necessary based on the current assess-
ment.
At this time, it cannot be estimated how many customers
will choose to file lawsuits in the future in addition to those
already pending and what prospect of success such lawsuits
might have.
3. 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.
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The vast majority of these investor lawsuits are currently
pending before the Braunschweig Regional Court. In August
2016, the Braunschweig Regional Court issued an order
referring common questions of law and fact relevant to the
investor lawsuits pending before it to the Higher Regional
Court in Braunschweig for binding declaratory rulings pursu-
ant to the Kapitalanleger-Musterverfahrensgesetz (KapMuG
– German Capital Investor Model Declaratory Judgment Act). In
this proceeding, common questions of law and fact relevant
to these actions are to be adjudicated by the Braunschweig
Higher Regional Court in a single consolidated proceeding
(model case proceedings). The lawsuits filed with the Braun-
schweig Regional Court are 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 the pending cases that have been
stayed as described. The model case plaintiff is Deka Invest-
ment GmbH. Oral argument in the model case proceedings
before the Braunschweig Higher Regional Court began in Sep-
tember 2018 and will be continued at subsequent hearings.
Further investor lawsuits have been filed with the Stutt-
gart Regional Court against Volkswagen AG, in some cases
along with Porsche SE as joint and several debtor. A further
investor action for model declaratory judgment is pending
before the Stuttgart Higher Regional Court against Porsche SE;
Volkswagen AG is involved in this action as a third party
intervening in support of a party to the dispute. The Wolver-
hampton City Council, Administrating Authority for the West
Midlands Metropolitan Authorities Pension Fund, has been
appointed model case plaintiff. The first hearing for oral
argument in these proceedings has yet to take place.
Additional investor lawsuits have been filed with various
courts in Germany and the Netherlands.
Excluding the United States and Canada, claims in
connection with the diesel issue totaling roughly €9.7 billion
are currently pending worldwide against Volkswagen AG in
the form of investor lawsuits, judicial applications for
dunning and conciliation procedures, and claims under the
KapMuG. Volkswagen AG remains of the opinion that it duly
complied with its capital market obligations. Therefore, no
provisions have been recognized for these investor lawsuits.
Contingent liabilities have been disclosed where the chance
of success was estimated to be not less than 10%.
4. Proceedings in the USA/Canada
In the USA and Canada, the matters described in the EPA’s
“Notices of Violation” are the subject of various types of
lawsuits and requests for information that have been filed
against Volkswagen AG and other Volkswagen Group com-
panies, in particular by customers, investors, salespersons,
and various government agencies in Canada and the United
States, including the attorneys general of several US states.
The attorneys general of five US states (Illinois, Montana,
New Hampshire, Ohio, and Texas) and some municipalities
have suits pending in state and federal courts against Volks-
wagen AG, Volkswagen Group of America, Inc., and certain
affiliates, alleging violations of environmental laws. The
claims asserted by Illinois have been dismissed in full, but
Illinois has appealed the dismissal of a subset of its claims.
Certain claims asserted by Montana, Ohio, Texas, two Texas
counties, Hillsborough County (Florida), and Salt Lake County
(Utah) have also been dismissed, but these suits are currently
proceeding as to other claims. Volkswagen has asked the US
Supreme Court to review a decision by the US Court of
Appeals for the Ninth Circuit that declined to dismiss certain
claims brought by Hillsborough and Salt Lake Counties. A
Texas appellate court dismissed claims asserted by Texas
against Volkswagen AG and AUDI AG for lack of personal
jurisdiction. Texas has indicated that it will seek discretionary
review by the Texas Supreme Court of that decision.
In March 2019, the US Securities and Exchange Commis-
sion (SEC) filed a lawsuit against, among others, Volks-
wagen AG, Volkswagen Group of America Finance, LLC, and
VW Credit, Inc., asserting claims under US federal securities
law based, among other things, on alleged misstatements and
omissions in connection with the offer and sale of certain
bonds and asset-backed securities. In August 2020, the US
District Court for the Northern District of California granted
in part and denied in part Volkswagen’s motion to dismiss.
The claims dismissed by the court included all claims against
VW Credit, Inc. related to asset-backed securities. In Septem-
ber 2020, the SEC filed an amended complaint that, among
other things, removed the dismissed claims.
Furthermore, in December 2019, the Canadian federal
environmental regulator filed charges against Volkswagen AG
in respect of 2.0 l and 3.0 l Volkswagen and Audi diesel
vehicles at the conclusion of its criminal enforcement-related
investigation into the diesel emissions issue. Volkswagen AG
cooperated with the investigation and agreed to a plea
resolution addressing all of the charges. In January 2020,
Volkswagen AG pleaded guilty to the charges and agreed to
pay a penalty of CAD 196.5 million, which was approved by
the court. Following this approval, the Ontario provincial
environmental regulator withdrew its action against Volks-
wagen AG charging a quasi-criminal enforcement-related
offense with respect to certain Volkswagen and Audi 2.0 l
diesel vehicles. As to private civil law matters, in an environ-
mental class action lawsuit seeking punitive damages on
Group Management Report
Report on Risks and Opportunities
195
behalf of the residents of the Province of Quebec, after
authorizing the case to proceed as a class, a Quebec court
ruled in October 2020 that issues raised as to the viability of
plaintiffs’ damages theory should be deferred until trial. On
that basis, the court denied a motion to dismiss by Volks-
wagen. The case remains in the early stages.
In line with IAS 37.92, no statements have been made
concerning estimates of financial impact or regarding
uncertainty as to the amount or maturity of provisions and
contingent liabilities in relation to proceedings in the USA/
Canada. This is so as to not compromise the results of the
proceedings or the interests of the Company.
5. Special audit
In a November 2017 ruling, 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 the members of the
Board of Management and Supervisory Board of Volks-
wagen AG breached their duties in connection with the diesel
issue from June 22, 2006 onwards 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 constitutional complaint
with the German Federal Constitutional Court alleging
infringement of its constitutional rights. 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. In April 2020, the Celle Higher Regional Court
issued a ruling appointing a different special auditor. Volks-
wagen AG has filed a constitutional complaint with the
Federal Constitutional Court contesting this formally unap-
pealable decision as well on grounds of infringement of its
constitutional rights and has suggested joinder of this matter
with its initial constitutional complaint against the decision
to appoint the special auditor. It is currently unclear when the
Federal Constitutional Court will rule on the two consti-
tutional complaints. The constitutional complaints have no
suspensory effect.
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 stayed pending a
decision by the Federal Constitutional Court in the initial
special auditor litigation.
6. Risk assessment regarding the diesel issue
An amount of around €1.9 (2.9) billion has been included in
the provisions for litigation and legal risks as of December 31,
2020 to account for the currently known legal risks related to
the diesel issue based on the presently available information
and the current assessments. Where adequately measurable
at this stage, contingent liabilities relating to the diesel issue
have been disclosed in the notes in an aggregate amount of
€4.2 (3.7) billion, whereby roughly €3.5 (3.4) billion of this
amount results from lawsuits filed by investors in Germany.
The provisions recognized, the contingent liabilities dis-
closed, and the other latent legal risks in the context of the
diesel issue are in part subject to substantial estimation risks
given the complexity of the individual relevant factors, the
ongoing coordination with the authorities, and the fact that
the fact-finding efforts have not yet been concluded. Should
these legal or estimation risks materialize, this could result in
further substantial financial charges. In particular, adjust-
ment of the provisions recognized in light of knowledge
acquired or events occurring in the future cannot be ruled out.
In line with IAS 37.92, no further statements have been
made concerning estimates of financial impact or regarding
uncertainty as to 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) filed a
claim for damages against Volkswagen AG and Porsche SE 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
being sought based on allegedly assigned rights currently
amount to approximately €2.26 billion plus interest. In April
2016, the Hanover Regional Court formulated numerous
objects of declaratory judgment that the antitrust panel of
the Higher Regional Court in Celle will decide on in model
case proceedings under the KapMuG. At the first hearing in
October 2017, the court already indicated that it currently
sees no justification for claims against Volkswagen AG, both
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because the pleadings are not sufficiently specific and for
substantive legal reasons. Volkswagen AG sees the court's
statements as confirmation that the claims against the
Company are absolutely baseless. The Higher Regional Court
has yet to render a decision as many hearings have been
canceled, among other things due to motions for recusal filed
by the plaintiff side (so far in all cases without success) and,
more recently, as a result of the Covid-19 pandemic.
In Brazil, the Brazilian tax authorities commenced tax pro-
ceedings against MAN Latin America; at issue in these pro-
ceedings are the tax consequences of the acquisition struc-
ture chosen for MAN Latin America in 2009. In December
2017, an adverse administrative appeal ruling was rendered
against MAN Latin America. MAN Latin America challenged
this ruling before the regular court in 2018. Estimation of the
risk in the event the tax authorities prevail on all points is
subject to uncertainty because of differences in the amount
of penalties and interest that might then apply under
Brazilian law. However, a positive outcome for MAN Latin
America remains the expectation. Should this not occur, a
risk of about BRL 3.1 billion could result for the contested
period from 2009 onwards; this amount has been included in
contingent liabilities in the notes.
In 2011, the European Commission conducted searches at
European truck manufacturers for suspected unlawful
exchange of information during the period from 1997 to
2011; in November 2014, the Commission issued a statement
of objections to MAN, Scania, and the other truck manufac-
turers concerned. In its settlement decision of July 2016, the
European Commission assessed fines against 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 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 seeking damages have
been received from customers. As is the case in any antitrust
proceedings, this may result in further lawsuits for damages.
No provisions have been recognized or contingent liabilities
disclosed for these cases as most of them are still in an early
stage and currently cannot be assessed for this reason. In
other cases, the chance of a decision by a court of last resort
that awards damages against MAN or Scania currently
appears remote.
In April 2019, the European Commission issued a state-
ment of objections to Volkswagen AG, AUDI AG, and Dr. Ing.
h.c. F. Porsche AG in connection with the Commission's
antitrust investigation of the automobile industry. These
objections state the European Commission's preliminary
evaluation of the matter and afford the opportunity to
comment. The subject matter of the proceedings is limited to
the cooperation of German automobile manufacturers on
technical questions in connection with the development and
introduction of SCR systems and gasoline particulate filters
for passenger cars that were sold in the European Economic
Area. The manufacturers are not charged with any other
misconduct such as price fixing or allocating markets and
customers. After receiving access to the investigation files
starting in July 2019, Volkswagen in December 2019 filed its
reply to the European Commission's statement of objections.
The Chinese, South Korean, and Turkish competition author-
ities have also instituted proceedings in this matter.
In October 2020, the US District Court for the Northern
District of California dismissed two antitrust class action
complaints. The plaintiffs in these actions alleged that several
automobile manufacturers including Volkswagen AG and
other Group companies had conspired to unlawfully increase
vehicle prices in violation of US antitrust and consumer
protection law. The court held that the plaintiffs have not
stated a claim for relief because the allegations in the com-
plaints do not plausibly support that the alleged agreements
unreasonably restrained competition in violation of US law.
Plaintiffs have appealed this ruling. Plaintiffs in Canada filed
claims with similar allegations on behalf of putative classes
of purchasers against several automobile manufacturers,
including Volkswagen Group Canada Inc., Audi Canada Inc.,
and other Volkswagen Group companies. Neither provisions
nor contingent liabilities are stated because the early stage of
the proceedings makes an assessment of the realistic risk
exposure 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.
A settlement between Volkswagen and the Plaintiffs’ Steering
Committee resolving civil claims relating to approximately
98 thousand gasoline-powered Volkswagen, Audi, Porsche,
Group Management Report
Report on Risks and Opportunities
197
and Bentley vehicles with automatic transmissions received
final approval from the US District Court for the Northern
District of California in February 2020.
tainty as to the amount or maturity of provisions and contin-
gent 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.
Porsche AG has discovered potential regulatory
issues
relating to vehicles for various markets worldwide. There are
questions as to the permissibility of specific hardware and
software components used in type approval measurements.
Differences compared with production versions may also
have occurred in certain cases. Based on the information
presently available, current production is not affected, how-
ever. The issues are unrelated to the defeat devices that were
at the root of the diesel issue. Porsche AG is cooperating with
the relevant authorities including the Stuttgart Office of the
Public Prosecutor, which is investigating the matter in Ger-
many. Based on the available information, no formal criminal
investigation has been opened against the company, however.
Porsche's own internal investigations are still in progress.
Five complaints related to these matters were filed with
the US District Court for the Northern District of California.
The complaints alleged that the affected vehicles used certain
software and/or hardware that resulted in increased emis-
sions and/or overstated fuel economy estimates as compared
to the results of certification testing. The suits named Volks-
wagen AG, Dr. Ing. h.c. F. Porsche AG, AUDI AG, and Porsche
Cars North America, Inc. as defendants; however, each
defendant was not named in all the complaints. A consoli-
dated complaint merging the five putative class actions into a
single lawsuit was filed in January 2021. AUDI AG is no longer
named as a defendant in the consolidated complaint.
Tax risks
Volkswagen AG and its subsidiaries have operations world-
wide and are audited by local tax authorities on an ongoing
basis. Amendments to tax laws and changes in legal prece-
dent and their interpretation by the tax authorities in the
respective countries may lead to tax payments that differ
from the estimates made in the financial statements.
Risks arise particularly from tax assessment of the cross-
border supply of intragroup goods and services. Through
organizational measures, such as the implementation of an
advance pricing agreement, as well as the monitoring of
transfer prices, Volkswagen constantly monitors the develop-
ment of tax risks, as well as the impact thereof on the con-
solidated financial statements.
Tax provisions were recognized for potential future tax
payments for former years, while other provisions were
recognized for ancillary tax payments arising in this connec-
tion.
Financial risks
For this risk category, the likelihood of occurrence is classified
as high (previous year: high) and the potential extent of
damage is classified as medium (previous year: medium).
The most significant risks from the regular GRC process
and QRP result from volatile foreign exchange markets.
Provisions were recognized by Volkswagen Bank GmbH and
Volkswagen Leasing GmbH for possible claims in connection
with financial services provided to consumers. These relate to
actions involving certain features of customer loan and
leasing agreements that may toll the running of the statutory
cancellation time periods.
In February 2020, Volkswagen AG and another defendant were
served with a lawsuit filed by GT Gettaxi Ltd. The lawsuit in
particular alleges large damage claims. Volkswagen is asses-
sing the alleged claims and defending itself against them.
In line with IAS 37.92, no further statements have been made
concerning estimates of financial impact or regarding uncer-
S trategies 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 – but also from
unforeseeable events such as the Covid-19 pandemic. Man-
agement of these financial risks and of liquidity risks is the
central responsibility of the Group Treasury department,
which reduces these risks using nonderivative and derivative
financial instruments. The Board of Management is informed
of the current risk situation at regular intervals.
Interest rate risk refers to potential losses that could arise
as a result of changes in market interest rates. It occurs
because of interest rate mismatches between asset and
liability items in a portfolio or on the balance sheet. We
198
Report on Risks and Opportunities
Group Management Report
hedge interest rate risk – where appropriate in combination
with currency risk – and risks arising from fluctuations 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 matu-
rities. The principle of matching amounts and maturities
applies to financing arrangements within the Volkswagen
Group in the Automotive Division. In the Financial Services
Division, the risk of changes in the interest rate is managed
on the basis of limits using interest rate derivatives as part of
the defined risk strategy.
intragroup financing and
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 mainly comprise currency forwards and
currency options. We use these transactions to limit the
currency risk associated with forecasted cash flows from
operating activities,
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 ten years. We use these to hedge our
principal foreign currency risks, mostly against the euro and
primarily in Australian dollars, Brazilian real, British pound
sterling, Canadian dollars, Chinese renminbi, Czech koruna,
Hong Kong dollars, Hungarian forints,
Indian rupees,
Japanese yen, Mexican pesos, Norwegian kroner, Polish zloty,
Russian rubles, Singapore dollars, South African rand, South
Korean won, Swedish kronor, Swiss francs, Taiwan dollars and
US dollars.
The hedging of commodity prices 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 particularly 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 and copper over a period of up to six years, in the case of
nickel for up to nine years. The precious metals platinum,
palladium and rhodium have shorter hedging periods,
generally amounting to a maximum of up to three years. For
selected commodities, this may also involve increases in
physical inventories. We have also entered into transactions
in order to supplement and improve allocations of CO2 emis-
sion certificates as part of the European Union Emissions
Trading System (EU ETS).
Special funds in which we invest surplus liquidity may entail
equity price risks and fund price risks. We reduce these risks
through the diversified investment of funds and through
minimum values set out in the respective investment guide-
lines. In addition, exchange rates are hedged when market
conditions are appropriate.
In the notes to the consolidated financial statements we
explain our hedging policy, the hedging rules and the default
and liquidity risks, and quantify the hedging transactions
mentioned. We also disclose information on market risk
within the meaning of IFRS 7 in the same section.
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 chapter entitled “Principles and Goals of Finan-
cial Management” in the “Results of Operations, Financial
Position and Net Assets” chapter. The financial instruments
held for hedging purposes give rise to both counterparty risks
and balance sheet risks, which we limit using hedge account-
ing.
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.
Liquidity risk
Volkswagen is reliant on its ability to adequately cover its
financing needs. A liquidity risk consists of potentially being
unable to cover existing capital requirements by raising
funds or being unable to finance the Group on reasonable
terms, which in turn can have a substantially negative impact
on Volkswagen’s business position, assets, financial position
and earnings.
In principle, the Automotive Division and Financial Ser-
vices Division refinance themselves independently of one
another. However, they are subject to very similar refinancing
risks. In the Automotive Division, the Company’s solvency is
ensured at all times mostly through retained, non-distributed
earnings, by drawing down on credit lines and by issuing
financial instruments on the money and capital markets. The
capital requirements of the financial services business are
Group Management Report
Report on Risks and Opportunities
199
covered mainly by raising funds in the national and inter-
national financial markets, as well as through customer
deposits from the direct banking business.
One of the ways in which Volkswagen finances its projects
is with loans provided by national development banks such
as Kreditanstalt für Wiederaufbau (KfW) or Banco Nacional de
Desenvolvimento Econômico e Social (BNDES), or by supra-
national development banks.
In addition to confirmed credit lines, unconfirmed lines
of credit from commercial banks supplement our broadly
diversified refinancing structure.
Financing opportunities can be hindered by worsening
financial and general market conditions – including as a
result of the Covid-19 pandemic – a worsening credit profile
and outlook or a downgrade or withdrawal of the credit rating.
In such cases, there is a risk of a fall in demand from market
participants for securities issued by Volkswagen, which may
additionally have a detrimental effect on the interest rates
payable and restrict access to the capital market.
Risks and opportunities in the financial services business
While carrying out our financial services activities, we are
primarily exposed to residual value risks and credit risks.
A residual value risk arises when the expected fair value
for the disposal of the lease or finance asset may be lower
than the residual value set at contract conclusion. However,
there is also a possibility that disposal of the asset will
generate more income than calculated for the residual value.
Referring to the bearer of residual value risk, a distinction
is made between direct and indirect residual value risks. A
direct residual value risk means that our financial services
companies directly bear this risk (as outlined in the contract).
An indirect residual value risk occurs when, based on a
residual value guarantee, the residual value risk has passed to
a third party, such as a dealer. In such cases, there is an initial
counterparty default risk associated with this third party (the
residual value guarantor). If the guarantor defaults, the resid-
ual value risk passes to our financial services companies.
Management of the residual value risk is based on a
defined control cycle, which ensures that risks are fully
assessed, monitored, responded to and communicated. This
process structure enables us to manage residual risks pro-
fessionally and also to systematically improve and enhance
the way we handle residual value risks.
As part of our risk management efforts, the appropri-
ateness of the risk provision is assessed regularly, as is the
residual value risk potential. In the process, we compare the
contractually agreed residual values with the obtainable fair
values. These are determined utilizing data from external
service providers and our own marketing data. We do not
take possible gains on residual market values into account
when recognizing risk provisions.
Based on the resulting potential residual value risk, a
variety of measures are initiated in order to limit this risk.
With respect to new business, current market circumstances
and future influencing factors must be considered in the
residual value recommendation.
Credit checks on borrowers are the primary basis for
lending decisions. Rating and scoring systems are used to
provide an objective decision-making basis for granting loans
and leases and for recognizing risk provisions.
Credit risk describes the risk of losses due to defaults in
customer transactions, specifically by the borrower or lessee.
Default occurs when the borrower or lessee is unable or
unwilling to make the payments due. This includes late or
partial payment of interest and principal on the part of the
contracting party.
An opportunity may arise if the losses from the lending
and leasing business are less than the expected losses
previously calculated and the risk provision recognized on
this basis. In some countries in particular, where we take a
conservative approach to risk due to the uncertain economic
situation, a stabilization of the economy, accompanied by an
improvement in borrowers’ credit rating, provides an oppor-
tunity for realized losses to be less than expected losses.
Risks are managed and monitored within the framework
of corresponding processes relating to economic circum-
stances and collateral, adherence to limits, contractual obli-
gations, and conditions stipulated both by outside parties
and the company itself. As such, commitments are managed
according to the degree of risk involved (standard, intensified
and problem loan management).
More information on risks in the financial services busi-
ness can be found in the 2020 annual reports of Volkswagen
Financial Services AG and Volkswagen Bank GmbH.
Opportunities and risks from mergers & acquisitions and/or other
strategic partnerships/investments
For this risk category, the likelihood of occurrence is classified
as medium (previous year: high) and the potential extent of
damage is classified as high (previous year: high).
The most significant risks from the regular GRC process
and QRP are linked to cooperation with other partners.
Opportunities and risks from partnerships
As part of our future program TOGETHER 2025+, we are
stepping up our efforts to forge partnerships, both for the
transformation of our core business and for the establish-
ment of the new mobility solutions business.
200
Report on Risks and Opportunities
Group Management Report
In the field of battery cells, possible risks could arise from
potential disagreement with our partners, possible delays in
battery cell development or delayed battery cell production.
Strong interaction with partners in the field of e-mobility,
such as the development of a comprehensive charging infra-
structure, in the form of partnerships and joint ventures, sup-
ports technological change. This cooperation involves risks
such as an increased coordination workload, more complex
decision-making processes and the loss of expertise. At the
same time, opportunities are presented by the pooling of
specialist knowledge, by horizontal and vertical integration
and by better use of resources. Volkswagen has therefore
created various teams in Group Components to closely sup-
port all such partnerships.
With the marketing of the Modular Electric Drive Toolkit
to third parties, as is conceivable as part of the strategic
alliance with Ford, for example, damage claims could arise in
the event of problems with procurement, production and
quality.
By entering into partnerships at a local level, we aim to
identify regional customer needs more precisely, establish
competitive cost structures and thus develop and offer
market-driven products. We are concentrating to a greater
extent on partnerships, acquisitions and venture capital invest-
ments. This will enable us to generate maximum value for the
Group and its brands and to expand our expertise, particu-
larly in new areas of business. Our innovative presence in the
markets supports this process. At the same time, there is a
risk that the interests of business partners differ from our
own.
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.
Risks arising from the recoverability of goodwill or brand names
For the goodwill recognized in the consolidated financial
statements and for brand names, there is a risk that the
carrying amount of goodwill may be higher than the
recoverable amount and that an extraordinary impairment
loss must therefore be recognized. Volkswagen tests at least
once a year on the basis of underlying cash-generating units,
whether the value of the goodwill or the brand names could
have been impaired. If there are objective indications that the
recoverable amount of the asset concerned is lower than the
carrying amount, then Volkswagen recognizes this as a non-
cash impairment. An impairment can be caused by an
increase in interest rates or deteriorating business prospects.
Risks from the disposal of equity investments
An unexpected need for funding, for example in connection
with the diesel issue, may lead to a situation in which assets
have to be sold for a lower amount not equivalent to their
value.
Group Management Report
Report on Risks and Opportunities
201
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 Volkswagen Group across all
risk categories arise from a negative trend in markets and
unit sales, with regard to quality and cyber security, and from
an inability to develop products in line with demand and
requirements, especially in view of e-mobility and digitali-
zation. Non-fulfillment of CO2-related requirements also con-
stitutes a risk. The Volkswagen Group continues to be
exposed to risks from the diesel issue. Negative effects, for
example resulting from supply bottlenecks, may arise for
2021 if efforts to contain the Covid-19 pandemic are not
successful in the long term. 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
commodities relevant to the Volkswagen Group or deviations in the actual effects of the
the Volkswagen Group. These statements are based on assumptions relating to the
Covid-19 pandemic from the scenario presented in this report will have a corresponding
development of the economic, political and legal environment in individual countries,
effect on the development of our business. In addition, there may be departures from our
economic regions and markets, and in particular for the automotive industry, which we
expected business development if the assessments of the factors influencing sustainable
have made on the basis of the information available to us and which we consider to be
value enhancement and of risks and opportunities presented in this annual report develop
realistic at the time of going to press. The estimates given entail a degree of risk, and
in a way other than we are currently expecting, or if additional risks and opportunities or
actual developments may differ from those forecast. Any changes
in significant
other factors emerge that affect the development of our business.
parameters relating to our key sales markets, or any significant shifts in exchange rates or
202
Prospects for 2021
Group Management Report
Prospects for 2021
Our planning is based on the assumption that global eco-
nomic output will recover overall in 2021, provided lasting
containment of the Covid-19 pandemic is achieved. This
growth will most likely be sufficient for the economy to
recover to approximately its pre-pandemic level. We continue
to believe that risks will arise from protectionist tendencies,
turbulence in the financial markets and structural deficits in
individual countries. In addition, growth prospects will be
negatively impacted by ongoing geopolitical tensions and
conflicts. We anticipate that both the advanced economies and
the emerging markets will experience positive momentum.
We predict that trends in the markets for passenger cars
in the individual regions will be mixed in 2021. Overall, the
volume of demand worldwide for new vehicles is expected to
be noticeably up on the reporting year, provided successful
containment of the Covid-19 pandemic is achieved; however,
it will not recover to its pre-pandemic level. For 2021, we
anticipate that the volume of new passenger car registrations
in Western Europe will be significantly above that recorded in
the reporting year. In the German passenger car market, we
expect a moderate year-on-year increase in demand in 2021.
Sales of passenger cars in 2021 are expected to distinctly
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 as a whole in 2021 is also likely to
be distinctly higher than the previous year’s level. We expect
to see a large increase overall in new registrations in the
South American markets in 2021 compared with the previous
year. The passenger car markets in the Asia-Pacific region are
expected to be noticeably up on the prior-year level in 2021.
Trends in the markets for light commercial vehicles in the
individual regions will also be mixed in 2021; on the whole,
we anticipate a moderate rise in demand for 2021, assuming
that containment of the Covid-19 pandemic is successful .
For 2021, we expect a significantly positive development
in new registrations for mid-sized and heavy trucks with a
gross weight of more than six tonnes compared with the
previous year in the markets that are relevant for the Volks-
wagen Group. A moderate increase in overall demand for
2021 is likely in the bus markets relevant for the Volkswagen
Group.
We anticipate that automotive financial services will be of great
significance to global vehicle sales in 2021, particularly in
the context of the ongoing challenges posed by the Covid-19
pandemic.
We believe we are well prepared overall for the future
challenges pertaining to automotive business activities and
for the mixed development of the regional automotive mar-
kets. Our brand diversity, our presence in all major world
markets, our broad and selectively expanded product range,
and our technologies and services put us in a good com-
petitive position worldwide. As part of the transformation of
our core business, we are positioning our Group brands with
an even stronger focus on their individual characteristics, and
are optimizing our vehicle and drive portfolio. The focus 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 leverage the advantages of our
multibrand Group even more effectively with the ongoing
development of new technologies and the enhancement of
our toolkits.
We anticipate that deliveries to Volkswagen Group cus-
tomers will be significantly up on the previous year in 2021
– assuming successful containment of the Covid-19 pan-
demic – amid continued challenging market conditions.
Challenges will arise particularly from the economic
situation, the increasing intensity of competition, volatile
commodity and foreign exchange markets, securing supply
chains and more stringent emissions-related requirements.
We expect the sales revenues of the Volkswagen Group
and Passenger Cars Business Area in 2021 to be significantly
higher than the prior-year figure. In terms of operating profit
for the Group and the Passenger Cars Business Area, we fore-
cast an operating return on sales in the range of 5.0% to 6.5%
in 2021. For the Commercial Vehicles Business Area, we antic-
ipate an operating return on sales of 4.0% to 5.5% before
restructuring measures amid a significant year-on-year
increase in sales revenue. We expect the Power Engineering
Business Area to reach the break-even point amid a notice-
able decline in sales revenue compared with the previous year.
For the Financial Services Division, we forecast that sales reve-
nue will be noticeably higher than the prior-year figure and
that the operating result will be in line with the previous year.
Wolfsburg, February 16, 2021
The Board of Management
5
Consolidated Financial
Statements
CONSOLIDATED FINANCIAL STATEMENTS
207
208
Income Statement
Statement of Comprehensive Income
210 Balance Sheet
212
Statement of Changes in Equity
214 Cash Flow Statement
215 Notes
351 Responsibility Statement
352 Auditor’s Report
CONSOLIDATED FINANCIAL STATEMENTS
207 Income Statement
208 Statement of Comprehensive Income
210 Balance Sheet
212 Statement of Changes in Equity
214 Cash flow Statement
215 NOTES
215 Basis of presentation
215 Effects of new and amended IFRSs
216 New and amended IFRSs not applied
217 Key events
220 Basis of consolidation
230 Consolidation methods
231 Currency translation
232 Accounting policies
245 Segment reporting
248 Income statement disclosures
248 1. Sales revenue
249 2. Cost of sales
249 3. Distribution expenses
249 4. Administrative expenses
250 5. Other operating income
250 6. Other operating expenses
251 7. Share of the result of
equity-accounted investments
251 8. Interest result
252 9. Other financial result
269 20. Inventories
270 21. Trade receivables
270 22. Marketable securities
270 23. Cash, cash equivalents and time deposits
271 24. Equity
273 25. Noncurrent and current financial liabilities
273 26. Noncurrent and current other financial liabilities
274 27. Noncurrent and current other liabilities
275 28. Tax liabilities
276 29. Provisions for pensions and other
post-employment benefits
284 30. Noncurrent and current other provisions
285 31. Trade payables
286 Other disclosures
286 32. IAS 23 (Borrowing Costs)
286 33. IFRS 16 (Leases)
291 34. IFRS 7 (Financial Instruments)
304 35. Cash flow statement
306 36. Financial risk management and
financial instruments
327 37. Capital management
329 38. Contingent liabilities
330 39. Litigation
340 40. Other financial obligations
341 41. Total fee of the Group auditor
341 42. Personnel expenses
342 43. Average number of employees during the year
252 10. Income tax income/expense
342 44. Events after the balance sheet date
256 11. Earnings per share
257 Balance Sheet disclosures
257 12. Intangible assets
343
45. Remuneration based on performance shares and
phantom shares (share-based payment)
345 46. Related party disclosures in accordance with IAS 24
260 13. Property, plant and equipment
349 47. German Corporate Governance Code
262 14. Lease assets and investment property
349 48. Remuneration of the Board of Management
264 15. Equity-accounted investments and other
and the Supervisory Board
equity investments
351 Responsibility Statement
266 16. Noncurrent and current financial services receivables
352 Independent Auditor’s Report
267 17. Noncurrent and current other financial assets
268 18. Noncurrent and current other receivables
269 19. Tax assets
Consolidated Financial Statements
Income Statement
207
Income Statement
of the Volkswagen Group for the period January 1 to December 31, 2020
€ 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/diluted earnings per ordinary share in €
Basic/diluted earnings per preferred share in €
Note
2020
2019
1
2
3
4
5
6
7
8
8
9
10
11
11
222,884
–183,937
38,947
–18,407
–9,399
12,438
–13,904
9,675
2,756
793
–2,291
733
1,991
11,667
–2,843
–3,150
307
8,824
–43
533
8,334
16.60
16.66
252,632
–203,490
49,142
–20,978
–9,767
11,453
–12,890
16,960
3,349
910
–2,524
–339
1,396
18,356
–4,326
–4,147
–180
14,029
143
540
13,346
26.60
26.66
208
Statement of Comprehensive Income
Consolidated Financial Statements
Statement of Comprehensive Income
Changes in comprehensive income for the period January 1 to December 31, 2019
€ 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 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 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 debt instruments that may be reclassified to profit or loss, before tax
Deferred taxes relating to fair value valuation of debt instruments recognized in other
comprehensive income
Fair value valuation of 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
14,029
13,346
540
–8,011
–7,993
2,429
–5,582
2,423
–5,570
–27
–26
–3
–5,612
–1
–5,597
572
2
574
12
586
–1,622
–782
–2,404
708
–1,697
–1,490
997
–493
146
–347
23
1
24
–7
17
78
–1,363
–10,263
3,288
–6,974
7,055
565
2
567
12
579
–1,618
–784
–2,402
707
–1,695
–1,490
996
–494
146
–348
23
1
24
–7
17
77
–1,370
–10,248
3,282
–6,967
6,379
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
540
143
–18
6
–11
–1
–2
–15
7
0
7
–
7
–4
2
–2
1
–1
0
1
1
0
1
–
–
–
–
–
1
7
–14
7
–8
136
Consolidated Financial Statements
Statement of Comprehensive Income
209
Changes in comprehensive income for the period January 1 to December 31, 2020
€ 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 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 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 debt instruments that may be reclassified to profit or loss, before tax
Deferred taxes relating to fair value valuation of debt instruments recognized in other
comprehensive income
Fair value valuation of 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
8,824
8,334
533
–43
–2,871
–2,861
930
–1,940
928
–1,933
–6
–6
61
–1,885
–2,883
16
–2,868
–6
–2,874
2,866
–1,122
1,744
–553
1,191
–799
1,178
378
–110
268
38
1
39
–12
27
–304
–1,690
–3,825
250
–3,575
5,249
55
–1,885
–2,846
16
–2,830
–6
–2,836
2,872
–1,126
1,746
–553
1,192
–799
1,178
379
–110
269
38
1
39
–12
27
–297
–1,645
–3,777
247
–3,530
4,804
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
533
–9
2
–7
1
6
0
–37
0
–37
–
–37
–6
4
–2
1
–1
0
0
0
0
0
–
–
–
–
–
–6
–45
–48
3
–45
–88
210
Balance Sheet
Consolidated Financial Statements
Balance Sheet
of the Volkswagen Group as of December 31, 2020
€ 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, 2020
Dec. 31, 2019
12
13, 33
14, 33
14
15
15
16
17
18
19
19
20
21
16
17
18
19
22
23
67,968
63,884
50,686
558
10,080
1,865
82,565
7,834
2,867
376
13,486
302,170
43,823
16,243
58,006
13,234
7,381
1,186
21,162
33,909
–
194,944
497,114
66,214
66,152
48,938
538
8,169
1,902
86,973
5,553
2,722
341
13,106
300,608
46,742
17,941
58,615
12,216
7,272
1,190
16,769
25,923
795
187,463
488,071
Consolidated Financial Statements
Balance Sheet
211
€ million
Equity and liabilities
Equity
Subscribed capital
Capital reserve
Retained earnings
Other reserves
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
Financial liabilities
Trade payables
Tax payables
Other financial liabilities
Other liabilities
Provisions for taxes
Other provisions
Liabilities associated with assets held for sale
Total equity and liabilities
Note
Dec. 31, 2020
Dec. 31, 2019
24
25
26
27
28
29
28
30
25
31
28
26
27
28
30
1,283
14,551
100,772
–5,270
15,713
127,049
1,734
128,783
1,283
14,551
96,929
–3,646
12,663
121,781
1,870
123,651
114,809
113,556
4,257
7,905
4,890
45,081
3,292
22,688
4,499
7,271
5,007
41,389
2,991
21,783
202,921
196,497
88,648
22,677
340
10,590
17,979
2,213
22,964
–
165,410
497,114
87,912
22,745
408
10,858
19,320
1,876
24,434
370
167,924
488,071
212
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, 2020
O T H E R R E S E R V E S
Retained
earnings
91,105
13,346
–5,570
7,776
–4
–
–2,419
390
81
Currency
translation
reserve
–3,576
–
579
579
–
–
–
173
–
Subscribed
capital
Capital reserve
1,283
14,551
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,283
14,551
96,929
–2,824
1,283
14,551
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
96,929
8,334
–1,933
6,400
5
–
–2,419
–166
22
–2,824
–
–2,836
–2,836
–
–
–
–
1
1,283
14,551
100,772
–5,659
€ million
Balance at Jan. 1, 2019
Earnings after tax
Other comprehensive income, net of tax
Total comprehensive income
Disposal of equity instruments
Capital increases/Capital decreases
Dividends payment
Capital transactions involving a change in ownership interest
Other changes
Balance at Dec. 31, 2019
Balance at Jan. 1, 2020
Earnings after tax
Other comprehensive income, net of tax
Total comprehensive income
Disposal of equity instruments
Capital increases/Capital decreases¹
Dividends payment
Capital transactions involving a change in ownership interest²
Other changes
Balance at Dec. 31, 2020
1 Issuance of new hybrid notes in June 2020.
2 For the change in capital transactions involving a change in ownership interest see the “Key events” section.
Explanatory notes on equity are presented in the note relating to equity.
Consolidated Financial Statements
Statement of Changes in Equity
213
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
–230
228
12,596
117,117
1,790
–
–1,695
–1,695
–
–
–
1
–
95
95
–
1,192
1,192
–
–
–
–
–
–629
–
–348
–348
–
–
–
0
–
–977
–977
–
269
269
–
–
–
–
–
–
–9
–9
4
–
–
–1
–
–235
–235
–
21
21
–5
–
–
–
–
–
76
76
–
–
–
–10
1
295
295
–
–242
–242
–
–
–
–
–23
30
1,287
–708
–219
Noncontrolling
interests
Total equity
225
143
–8
136
–
–
–9
1,519
–1
1,870
117,342
14,029
–6,974
7,055
–
–
–2,899
2,071
81
123,651
540
–
540
–
–
13,886
–6,967
6,920
–
–
–472
–2,891
–
–
553
82
12,663
121,781
12,663
121,781
1,870
123,651
533
–
533
–
2,989
–472
–
–
8,867
–3,530
5,337
–
2,989
–2,891
–166
–1
–43
–45
–88
–
–
–61
–72
85
8,824
–3,575
5,249
–
2,989
–2,952
–238
84
15,713
127,049
1,734
128,783
214
Cash flow statement
Consolidated Financial Statements
Cash flow statement
of the Volkswagen Group for the period January 1 to December 31, 2020
€ million
2020
2019
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 property¹
Amortization of and impairment losses on capitalized development costs¹
Impairment losses on equity investments¹
Depreciation of and impairment losses on lease assets¹
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
Repayments of lease liabilities
Cash flows from financing activities
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 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 Net of impairment reversals.
24,329
11,667
–2,646
12,765
4,637
454
9,214
–889
536
–1,572
1,334
712
540
803
–12,914
260
24,901
–11,273
–6,473
26
–1,660
402
195
411
–4,462
143
–22,690
2,984
–2,952
–238
25,181
–19,815
3,577
–1,100
7,637
–745
0
9,103
33,432
28,113
18,356
–2,914
12,046
3,665
300
8,428
–4
460
–730
–674
–893
2,297
1,646
–13,204
–10,796
17,983
–14,230
–5,171
–673
–420
3
177
237
387
–1,456
–21,146
–
–2,899
1,368
25,916
–19,784
–4,509
–957
–865
243
1
–3,784
24,329
33,432
32,645
66,078
–203,457
–137,380
24,329
29,099
53,428
–201,468
–148,040
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
215
Notes to the Consolidated
Financial Statements
of the Volkswagen Group as of December 31, 2020
Basis of presentation
Volkswagen AG is domiciled in Wolfsburg, Germany, and entered in the commercial register at the Braunschweig
Local Court under No. HRB 100484. The fiscal year corresponds to the calendar year.
In accordance with Regulation No. 1606/2002 of the European Parliament and of the Council,
Volkswagen AG prepared its consolidated financial statements for 2020 in compliance with the International
Financial Reporting Standards (IFRSs), as adopted by the European Union. All the IFRSs adopted by the EU and
required to be applied have been complied with.
The accounting policies applied in the previous year were generally retained. The only changes required
resulted from new or amended standards.
Moreover, all the provisions of German commercial law that Volkswagen is additionally required to apply,
as well as the German Corporate Governance Code, have been complied with in the preparation of the consolidated
financial statements. For information on notices and disclosures of changes regarding the ownership of voting
rights in Volkswagen AG in accordance with the Wertpapierhandelsgesetz (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 aforementioned 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 16,
2021. On that date, the period ended in which adjusting events after the reporting period are recognized.
Effects of new and amended IFRSs
Volkswagen AG has applied all accounting pronouncements adopted by the EU and effective for periods beginning
in fiscal year 2020.
On January 1, 2020, an amended definition of a business in IFRS 3 (Business Combinations) entered into force.
According to the new definition, a set of activities and assets is a business only if it includes, as a minimum, an input
and a substantive process that together significantly contribute to the ability to create outputs. At the same time,
the definition of an output has been narrowed by focusing on goods and services provided to customers and on
generating investment income. The reference to an ability to reduce costs as a single criterion has been removed. In
addition, an optional concentration test has been introduced that permits an assessment of whether an acquired set
of activities and assets is not a business.
216
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Furthermore, amendments to IFRS 16 entered into force on June 1, 2020. These amendments exempt lessees
from having to consider whether a rent concession in connection with the Covid-19 pandemic in relation to lease
payments that, according to the original agreement, would have been due on or before June 30, 2021 is a lease
modification and allows lessees to account for such rent concessions as if they were not lease modifications. The
Volkswagen Group is electing not to apply this option.
In addition, as from January 1, 2020, the application of amendments to IFRS 9, IAS 39 and IFRS 7 (Benchmark
Interest Rate Reform – Phase 1) became mandatory. In the previous year, the Volkswagen Group had voluntarily
opted for early application of these amendments. This affects hedges that existed at the beginning of the
reporting period or have subsequently been designated as such. In application of the associated practical
expedient, the Volkswagen Group regards the effectiveness of designated hedges as given and not negatively
impacted by the IBOR reform so that it will consequently not be necessary to terminate any hedges.
Also as of January 1, 2020, amendments to IAS 1 and IAS 8 entered into force, which clarify and standardize
the definition of “material”.
The amendments referred to above do not materially affect the Volkswagen Group’s net assets, financial
position and results of operations.
New and amended IFRSs not applied
In its 2020 consolidated financial statements, Volkswagen AG did not apply the following accounting pronounce-
ments that have been adopted by the IASB until December 31, 2020, 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
Updating a Reference to the
Conceptual Framework
May 14, 2020
Jan. 1, 2022
No
No material impact
Extension of the Temporary
Exemption from Applying IFRS 9
June 25, 2020
Jan. 1, 2021
Yes
None
IFRS 4
IFRS 4;
IFRS 7;
IFRS 9;
IFRS 16
and IAS 39
IAS 1
IAS 16
IAS 37
Interest Rate Benchmark Reform
(Phase 2)
IFRS 17
Insurance Contracts
IFRS 17
Insurance Contracts – several
amendments
Classification of liabilities as current
or non-current
Property, Plant and Equipment:
Proceeds before intended use
Aug. 27, 2020
Jan. 1, 2021
May 18, 2017
Jan. 1, 20232
Yes
No
No material impact
No material impact
June 25, 2020
Jan. 1, 2023
No
No material impact
Jan. 23, 2020
Jan. 1, 2023
No
No material impact
May 14, 2020
Jan. 1, 2022
No
No material impact
Onerous contracts – cost of fulfilling
a contract
Annual Improvements 2018 – 20203 May 14, 2020
May 14, 2020
Jan. 1, 2022
Jan. 1, 2022
No
No
No material impact
No material impact
1 Effective date from Volkswagen AG’s perspective.
2 On June 25, 2020, the IASB published amendments to IFRS 17, that led, among other things, to the effective date being deferred to January 1, 2023.
3 Minor amendments to a number of IFRSs (IFRS 1, IFRS 9 and IAS 41).
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
217
Key events
Diesel issue
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 Volkswagen Group vehicles with 2.0 l diesel engines in the USA. In this context, Volkswagen AG
announced that noticeable discrepancies between the figures recorded in testing and those measured 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.
The so-called diesel issue is rooted in a modification of parts of the software of the relevant engine 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. No member 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.
There are furthermore no findings that, following the publication in May 2014 of the study by the International
Council on Clean Transportation, an unlawful “defeat device” under US law was disclosed either to the
Ausschuss für Produktsicherheit (Product Safety Committee) or to the persons responsible for preparing the
2014 annual and consolidated financial statements as the cause of the high NOx emissions in certain US vehicles
with 2.0 l type EA 189 diesel engines. Rather, at the time the 2014 annual and consolidated financial statements
were being prepared, the persons responsible for preparing these financial statements remained under the
impression that the issue could be resolved with comparatively little expense.
In the course of the summer of 2015, however, it became progressively 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 that was later identified as an unlawful “defeat device” as defined
by US law. This culminated in Volkswagen's disclosure of a “defeat device” to the EPA and the California Air
Resources Board, a department of the Environmental Protection Agency of the State of California, on September 3,
2015. According to the assessment at the time by the responsible persons dealing with the matter, the
magnitude of the costs expected to result for the Volkswagen Group (recall costs, retrofitting costs, and financial
penalties) was not fundamentally dissimilar to that in previous cases involving other vehicle manufacturers. It
therefore appeared to be manageable overall considering the business activities of the Volkswagen Group. This
assessment by Volkswagen AG was based, among other things, on the advice of a law firm engaged in the USA
for regulatory approval issues, according to which similar cases had in the past been amicably resolved with the
US authorities. The EPA's publication of the “Notice of Violation” on September 18, 2015, which the Board of
Management had not expected, especially at that time, then presented the situation in an entirely different
light.
In fiscal year 2020, additional expenses of €0.9 billion had to be recognized in this context, primarily related
to legal risks.
Further information on the litigation in connection with the diesel issue can be found in the “Litigation”
section.
218
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Effects of the Covid-19 Pandemic
By causing a global decline in demand – driven among other factors by measures taken by governments in the form
of restrictions on trade in motor vehicles – as well as temporary production stoppages, the Covid-19 pandemic had a
negative impact on the Volkswagen Group’s net assets, financial position and results of operations in fiscal year
2020. Since the Covid-19 pandemic still persists at the beginning of 2021, effects on the net assets, financial position
and results of operations are again expected for 2021. Please also refer to our comments in the 2020 group
management report, specifically in the chapters entitled Business Development, Results of Operations, Financial
Position and Net Assets, Report on Expected Developments and Report on Risks and Opportunities.
During the preparation of the consolidated financial statements as of December 31, 2020, the effects of the
Covid-19 pandemic had to be analyzed, in particular in the following areas:
The impairment testing of nonfinancial assets, especially goodwill, acquired brand names, as well as some
capitalized development costs and property, plant and equipment, took the planning influenced by the
Covid-19 pandemic into consideration. No need to recognize significant impairment losses was identified.
The impairment tests on lease assets identified no material impact of the Covid-19 pandemic on forecast
residual values for the vehicles for the entire Group.
Impairment tests conducted on financial assets, taking adjusted default expectations into account, did
not identify any need for material additional impairment losses.
The review of the impact of changes in the timings and amounts of hedged items caused by the Covid-19
pandemic on the effectiveness and accounting treatment of hedges did not identify any material factors
with an impact on profits.
The turbulence in the commodity and capital markets had an impact particularly on the treatment of
derivatives to which hedge accounting is not applied and the measurement of receivables and liabilities
denominated in foreign currencies, sometimes with offsetting consequences.
For more information on these areas, please also refer to our additional comments in the “Accounting policies”
section and in the notes to the relevant income statement items.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
219
Material Transactions
On July 12, 2019, Volkswagen announced that, together with Ford Motor Company (Ford), it would be investing
in Argo AI, a company that is working on the development of a system for autonomous driving. The investment
involves the provision of financial resources totaling USD 1.0 billion, spread over several years, and the
contribution by Volkswagen of its consolidated subsidiary Autonomous Intelligent Driving (AID). Furthermore,
Volkswagen acquired existing Argo AI shares from Ford for a purchase price of USD 500 million, payable in
three equal annual installments. The transaction, including the contribution of AID, was executed as of
June 1, 2020. After proportional profit elimination, the contribution of AID to Argo AI at fair value resulted
in a non-cash gain of €0.8 billion, which was recognized in the other operating result. Argo AI is accounted
for as a joint venture and included in the consolidated financial statements using the equity method.
As part of the planned squeeze-out at AUDI AG under the German Stock Corporation Act, Volkswagen AG announced
on June 16, 2020 that the cash compensation for the transfer of the shares held by minority shareholders had
been set at €1,551.53 per share. On July 31, 2020, the Annual General Meeting of AUDI AG approved the squeeze-
out under stock corporation law at AUDI AG and thus the transfer of all outstanding Audi shares to
Volkswagen AG. Following the resolution, the present value of the put options granted, amounting to approxi-
mately €0.2 billion, had to be recognized as a current liability not affecting net income. The noncontrolling interests
in the Volkswagen Group’s equity and the retained earnings attributable to the shareholders of Volkswagen AG
declined accordingly. This resolution took effect upon its entry in the commercial register on November 16, 2020.
In December 2020, a former shareholder of AUDI AG initiated award proceedings against Volkswagen AG at the
Munich I Regional Court, asking the court to review the amount of the cash settlement offered by
Volkswagen AG.
On October 6, 2020, the Volkswagen Group completed the sale of its 76% interest in Renk AG following the
required regulatory approvals. The sale price was €0.5 billion. The transaction generated an operating profit of
€0.1 billion, which is reported in other operating result. It also resulted in an increase in net liquidity of
€0.4 billion.
In fiscal year 2020, the Volkswagen Group took part in a capital increase at QuantumScape Corporation, a US-
based company that develops solid-state batteries, entering into forward purchase agreements for new shares.
The capital contribution comprises two tranches of USD 100 million each. The first tranche was already executed
in December 2020. Execution of the second tranche is subject to a technical milestone being reached. Since
there has meanwhile been a merger with a special purpose acquisition company (SPAC), which resulted in a
listing on the New York Stock Exchange, the forward purchases are measured with reference to the share price
of QuantumScape Corporation until the contribution has been made and the new shares have been issued. The
measurement and realization resulted in a non-cash gain of €1.4 billion in fiscal year 2020, which is reported
in the other financial result under gains and losses from changes in the fair value of hedges/derivatives to
which hedge accounting is not applied.
220
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
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 involvement 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.
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 financial
and operating policy decisions (associates), or that are directly or indirectly jointly controlled (joint ventures), 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 agreements 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 investments
Germany
Abroad
2020
2019
145
736
78
284
80
119
1,442
151
714
78
290
76
107
1,416
The list of all shareholdings that forms part of the annual financial statements of Volkswagen AG can be
from
downloaded
www.volkswagenag.com/ir.
the electronic companies register at www.unternehmensregister.de and
from
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
221
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)
and have as far as possible exercised the option not to publish annual financial statements:
> AUDI AG, Ingolstadt
> Audi Berlin GmbH, Berlin
> Audi Frankfurt GmbH, Frankfurt am Main
> Audi Hamburg GmbH, Hamburg
> Audi Hannover GmbH, Hanover
> AUDI Immobilien GmbH & Co. KG, Ingolstadt
> Audi Leipzig GmbH, Leipzig
> Audi München GmbH, Munich
> Audi Sport GmbH, Neckarsulm
> Audi Stuttgart GmbH, Stuttgart
> Auto & Service PIA GmbH, Munich
> Autostadt GmbH, Wolfsburg
> Bugatti Engineering GmbH, Wolfsburg
> 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
> MAHAG Automobilhandel und Service GmbH & Co. oHG, Munich
> MAHAG GmbH, Munich
> MAHAG Sportwagen Zentrum Albrechtstraße GmbH, Munich
> MAN Energy Solutions SE, Augsburg
> MOIA GmbH, Berlin
> MOIA Operations Germany GmbH, Hanover
> Porsche Consulting GmbH, Bietigheim-Bissingen
> Porsche Deutschland GmbH, Bietigheim-Bissingen
> Porsche Dienstleistungs GmbH, Stuttgart
> Porsche Digital 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 Immobilien GmbH & Co. KG, Stuttgart
> Porsche Investments 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
> Schwaba GmbH, Augsburg
> SEAT Deutschland Niederlassung GmbH, Frankfurt am Main
> SKODA AUTO Deutschland GmbH, Weiterstadt
222
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
> SZM Sportwagen Zentrum München GmbH, Munich
> VfL Wolfsburg-Fußball GmbH, Wolfsburg
> VGRD GmbH, Wolfsburg
> VGRHH GmbH, Hamburg
> 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 car.SW Org Wolfsburg AG, 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
> Volkswagen Group Services GmbH, Wolfsburg
> Volkswagen Immobilien GmbH, Wolfsburg
> Volkswagen Konzernlogistik GmbH & Co. OHG, Wolfsburg
> Volkswagen Original Teile Logistik GmbH & Co. KG, Baunatal
> Volkswagen Osnabrück GmbH, Osnabrück
> Volkswagen Sachsen GmbH, Zwickau
> Volkswagen Sechste Leasingobjekt GmbH, Braunschweig
> Volkswagen Siebte Leasingobjekt GmbH, Braunschweig
> Volkswagen Software Asset Management GmbH, Wolfsburg
> Volkswagen Vermögensverwaltungs-GmbH, Wolfsburg
> Volkswagen Vertriebsbetreuungsgesellschaft mbH, Chemnitz
> Volkswagen Vierte Leasingobjekt GmbH, Braunschweig
> Volkswagen Zubehör GmbH, Dreieich
> Volkswagen Zweite Leasingobjekt GmbH, Braunschweig
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
223
C O N S O L I D AT E D S U B S I D I A R I E S
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
0
0
4
3
4
3
10
27
3
13
43
3
2
16
21
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.
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, Germany (Bertrandt), There Holding B.V., Rijswijk, the Netherlands (There Holding), and Navistar
International Corporation, Lisle, Illinois/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, 2020, the quoted market price of the shares in Sinotruk amounted to €1,436 million
(previous year: €1,312 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, Germany.
As of December 31, 2020, the quoted market price of the shares in Bertrandt amounted to €116 million
(previous year: €165 million).
224
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
There Holding
Together with the BMW Group, Daimler AG and other companies, Volkswagen holds an equity investment
in There Holding B.V., Rijswijk (the Netherlands), an investment company. In turn, There Holding B.V. held
around 60% of the shares of HERE International B.V., Eindhoven (the Netherlands), as of the end of fiscal
year 2020. HERE International B.V. is one of the world’s largest producers of digital road maps for navigation
systems. Since the interest held does not grant control in accordance with IFRS 10, HERE International B.V. is
included in the financial statements of There Holding B.V. as an associate using the equity method.
Capital increases were implemented at There Holding B.V. in January 2020, in which Volkswagen participated.
As a result, the shares in There Holding B.V., which are accounted for using the equity method, increased by
€19 million.
As early as in December 2019, it was announced that additional investors would acquire shares in
HERE International B.V. Following the signing in December 2019 and after all antitrust approvals had been
obtained, Mitsubishi Corporation (MC), Tokyo (Japan), and Nippon Telegraph and Telephone Corporation of
Japan (NTT), Tokyo (Japan), jointly acquired 30% of the shares of HERE International B.V. as of May 29, 2020. As a
result, the interest held by There Holding B.V. in HERE International B.V. declined from around 85% to around
60%. In June 2020 and September 2020, capital reductions were implemented at the level of There Holding B.V.
in connection with the sale of shares. In this process, an amount of €197 million was attributable to the interest
held by Volkswagen.
Volkswagen’s ownership interest in There Holding B.V. continues to amount to 29.7%.
Navistar
Navistar International Corporation (Navistar) is a US manufacturer of commercial vehicles; it is based in Lisle,
Illinois/USA. Navistar and TRATON GROUP companies have entered into master agreements for strategic technology
and supply cooperation, as well as a procurement joint venture.
Since, on the basis of contractual arrangements with Navistar, TRATON SE is entitled to two out of ten seats on
the Board of Directors and in view of existing cooperation agreements, the investment in Navistar is reported
under equity-accounted investments in the consolidated financial statements.
On November 7, 2020, TRATON SE and Navistar announced that they had entered into a binding merger
agreement under which TRATON SE would acquire all outstanding ordinary shares of Navistar not already
owned by TRATON SE at a cash price of USD 44.50 per ordinary share. At the time of the agreement, TRATON SE
held 16.7% of Navistar’s outstanding shares. Expected to be completed in mid-2021, the transaction is subject to
approval by Navistar shareholders, customary closing conditions and regulatory approvals.
As of December 31, 2020, the quoted market price of the shares in Navistar amounted to €596 million
(previous year: €429 million).
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
225
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
2020
Equity interest in %
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
2019
Equity interest in %
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
Sinotruk1
Bertrandt2
There Holding
Navistar3
25
2,578
8,755
185
7,180
3,969
9,072
538
–
–1
537
30
25
2,351
6,127
50
4,669
3,758
8,047
627
–
0
627
47
29
666
481
408
197
541
915
–19
–
–1
–20
5
29
575
468
313
153
578
1,058
16
–
–1
15
6
30
1,190
24
–
0
17
1,765
3,921
6,072
2,888
1,214
–3,274
–
206
–
10
216
–
30
1,131
467
–
0
6,664
–292
–
212
–80
–
17
1,762
4,441
6,336
3,206
1,597
–3,339
–
–390
–
1
–389
–
10,004
216
–
7
223
–
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 reporting date and income statement amounts refer to the period from November 1 to October 31.
4 Proportionate dividends are shown net of withholding tax.
226
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
R E CO 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 CA R RY I N G A M O U N T O F T H E E Q U I T Y - ACCOU N TE D I N V E STM E N T S
Sinotruk
Bertrandt
There Holding
Navistar
€ million
2020
Net assets at January 1
Profit or loss
Other comprehensive income
Changes in reserves
Foreign exchange differences
Dividends¹
Net assets at December 31
Proportionate equity
Consolidation/Goodwill/Others
Carrying amount of equity-accounted investments
2019
Net assets at January 1
Profit or loss
Other comprehensive income
Changes in reserves
Foreign exchange differences
Dividends¹
Net assets at December 31
Proportionate equity
Consolidation/Goodwill/Others
Carrying amount of equity-accounted investments
1 Dividends are shown before withholding tax.
3,758
538
–1
–124
–56
–146
3,969
992
–384
608
3,395
627
0
1
–46
–218
3,758
940
–388
552
578
–19
–1
–
–
–16
541
157
–36
120
583
16
–1
–
–
–20
578
167
80
247
1,597
206
10
–599
–
–
1,214
361
–
361
1,764
–390
1
222
–
–
1,597
475
–
475
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
Earnings after tax from continuing operations
Earnings after tax from discontinued operations
Other comprehensive income
Total comprehensive income
Carrying amount of equity-accounted investments
2020
–25
–
0
–26
1,663
There were unrecognized losses of €7 million (previous year: €54 million) relating to investments in associates.
Furthermore, there were no contingent liabilities or financial guarantees relating to associates.
–3,339
–292
212
7
153
–15
–3,274
–547
923
376
–3,461
216
7
–21
–60
–20
–3,339
–560
1,007
447
2019
27
–
12
39
597
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
227
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.
228
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 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
2020
Equity interest in %
Noncurrent assets
Current assets
of which cash and cash equivalents
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
2019
Equity interest in %
Noncurrent assets
Current assets
of which cash and cash equivalents
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
FAW-Volkswagen
Automotive
Company
SAIC-Volkswagen
Automotive
Company1
SAIC-Volkswagen
Sales Company
40
50
11,504
9,844
3,525
1,062
–
12,759
–
7,528
46,282
1,785
126
6
4,937
1,272
3,665
–
24
3,689
1,308
40
12,069
11,876
5,423
1,221
–
15,321
29
7,403
44,181
1,825
125
4
4,775
1,251
3,524
–
–49
3,475
1,332
8,871
6,509
2,711
843
–
10,601
–
3,936
20,350
1,776
62
38
2,187
444
1,743
–
–9
1,734
1,230
50
9,355
8,251
6,513
1,130
–
11,674
1
4,802
26,922
2,190
53
2
3,594
845
2,749
–
3
2,752
1,732
30
932
3,889
123
130
–
4,291
–
399
23,446
25
5
–
465
118
347
–
–
347
149
30
896
4,477
210
160
–
4,665
–
548
32,115
21
5
–
659
166
493
–
–
493
153
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.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
229
R E CO 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 CA R RY I N G A M O U N T O F T H E E Q U I T Y - ACCOU N TE D I N V E STM E N T S
FAW-Volkswagen
Automotive
Company
SAIC-Volkswagen
Automotive
Company
SAIC-Volkswagen
Sales Company
€ million
2020
Net assets at January 1
Profit or loss
Other comprehensive income
Changes in share capital
Changes in reserves
Foreign exchange differences
Dividends¹
Net assets at December 31
Proportionate equity
Consolidation/Goodwill/Others
Carrying amount of equity-accounted investments
2019
Net assets at January 1
Profit or loss
Other comprehensive income
Changes in share capital
Changes in reserves
Foreign exchange differences
Dividends¹
Net assets at December 31
Proportionate equity
Consolidation/Goodwill/Others
Carrying amount of equity-accounted investments
1 Dividends are shown before withholding tax.
7,403
3,665
24
–
–
–149
–3,416
7,528
3,011
–792
2,219
7,358
3,524
–49
–
–
54
4,802
1,743
–9
–
–
–33
–2,567
3,936
1,968
–803
1,165
5,538
2,749
3
–
–
37
–3,483
–3,524
7,403
2,961
–760
2,201
4,802
2,401
–803
1,599
548
347
–
–
–
0
–497
399
120
–
120
549
493
–
–
–
16
–509
548
164
–
164
2019
434
–
3
436
1,887
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
2020
166
–
–186
–20
3,447
There were unrecognized losses of €26 million (previous year: €29 million) relating to investments in joint
ventures. Contingent liabilities to joint ventures amounted to €248 million (previous year: €224 million), while
financial guarantees stood at €70 million (previous year: €134 million). Cash funds of joint ventures amounting
to €197 million (previous year: €276 million) are deposited as collateral for asset-backed securities transactions
and are therefore not freely available.
230
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
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, 2019, the RENK AG subgroup and the consolidated subsidiary Autonomous Intelligent
Driving (AID) were classified as disposal groups held for sale in accordance with IFRS 5 and measured at their
carrying amounts. Assets of €795 million and liabilities of €370 million attributable to the disposal groups were
reported in a separate balance sheet item as of December 31, 2019.
The sale of RENK was completed on October 6, 2020 following the required regulatory approvals. The sale
price was €0.5 billion.
The contribution of AID was effected as of June 1, 2020. After proportional profit elimination, the contribution
of AID to Argo AI at fair value resulted in a non-cash gain of €0.8 billion, which was recognized in the other
operating result.
Consolidation methods
The assets and liabilities of the German and foreign companies included in the consolidated financial statements
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 always 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 generally measured at their
fair value 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 at least 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 is 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 subsidiaries.
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 noncontrolling
interests is determined at the acquisition date as the share of the fair value of the assets (excluding goodwill)
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 adjustment of
the acquisition-date measurement. Acquisition-related costs that are not equity transaction costs are not added
to the purchase price; they are 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.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
231
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 equity,
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
2020
2019
2020
2019
103.28799
67.23626
100.39080
53.78083
1.58605
6.37555
1.56275
26.23900
89.69000
1.60080
4.51350
1.46205
25.40650
80.15450
1.61589
6.27218
1.55979
26.30420
89.57211
1.61071
4.41485
1.48595
25.66983
78.86396
126.51000
121.89500
126.26457
122.08649
24.41145
21.24340
24.29728
21.56326
8.02895
4.55615
7.81470
4.25970
7.95821
4.47717
7.73444
4.29784
1,336.21000
1,296.35000
1,332.54652
1,304.89265
91.77540
18.01515
10.02470
0.89925
1.22760
69.84685
15.76470
10.44505
0.84995
1.12275
90.25599
18.11555
10.17259
0.90553
1.21663
72.46709
16.17716
10.58593
0.87744
1.11974
€1 =
ARS
AUD
BRL
CAD
CZK
INR
JPY
MXN
CNY
PLN
KRW
RUB
ZAR
SEK
GBP
USD
232
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
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 – if they have finite useful lives – amortized over their
useful lives 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.
Since the fourth quarter of 2019, development costs for future series products and other internally generated
intangible assets have been capitalized at cost, provided the cash-generating unit to which the respective
intangible asset is attributable is not impaired and the other criteria for recognition as assets are met. If at
least one of the criteria for recognition as assets is 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
development process. The costs are amortized using the straight-line method from the start of production over
the expected life cycle of the models, powertrains or software developed – generally between three and nine
years.
Amortization charges on intangible assets are allocated to the relevant functional areas in the income
statement.
Brand names from business combinations usually have an indefinite useful life and are therefore not
amortized. 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 to determine the recoverable amount of goodwill and intangible assets with indefinite
and finite useful lives. Normally, the respective brand is the cash-generating unit that is used as the testing
level. Jointly used (corporate) assets are allocated to the cash-generating units using allocation formulas.
Measurement of value in use is based on management’s current medium-term planning (referred to as
budget planning round). The planning period generally covers five years. 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, expected trends in the Volkswagen Group’s market shares, the
volume and timing of the development of vehicle models and investments in production facilities, as well
as changes in price and cost structures, taking particular account of the transformation to e-mobility and
an increase in regulatory requirements. The planning for the Financial Services segment is likewise prepared
on the basis of these expectations, and also reflects the relevant market penetration rates of expected vehicle
sales with finance or lease agreements and other services, as well as regulatory requirements. The planning
for the Power Engineering 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 is based on the assumption that
global economic output and, consequently, trends in the automotive market will recover overall in 2021,
provided successful, lasting containment of the Covid-19 pandemic is achieved. However, this growth will
most likely be sufficient for the economy to recover to approximately its pre-pandemic level. We continue
to believe that risks will arise from protectionist tendencies, turbulence in the financial markets and structural
deficits in individual countries. In addition, growth prospects will be negatively impacted by ongoing geo-
political tensions and conflicts. We anticipate that both the advanced economies and the emerging markets
will experience positive momentum. Furthermore, we anticipate that the global economy will also continue
to grow in the period from 2022 to 2025. The Volkswagen Group’s automotive market and volume planning
reflects the above regional differentiation and takes account of the impact of the Covid-19 pandemic on the
initial years of the planning period. The negative impact on earnings expected to arise from 2021 onward
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
233
from more stringent emission and fuel consumption legislation and the sustained effects of the Covid-19
pandemic is to be offset by corresponding programs to increase efficiency. The change in the operating
return on sales assumed for fiscal year 2021 for the purpose of the impairment test is within the range
forecast by Volkswagen.
The 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.
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
2020
6.8%
8.7%
9.3%
2019
5.7%
7.7%
7.9%
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 is taken into account. The composition
of the peer groups used to determine beta factors and leverage is continuously reviewed and adjusted if necessary.
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.
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 operational equipment is 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.
234
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
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
recoverable amount of the asset concerned has fallen below the carrying amount. The 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 other investments are the same
as the discount rates for capitalized development costs given above for each segment. If the reasons for impair-
ments recognized 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.
L E A S E S
The Volkswagen Group accounts for leases in accordance with IFRS 16, which defines a lease as a contract or part
of a contract in which a lessor transfers to a lessee the right to use an asset for an agreed period of time in
exchange for consideration.
If the Volkswagen Group is the lessee, it generally recognizes in its balance sheet a right-of-use asset and a lease
liability for each lease. In the Volkswagen Group the lease liability is measured on the basis of the present value of
outstanding lease payments, while the right-of-use asset is generally measured at the amount of the lease liability
plus any direct costs.
During the lease term, the right-of-use asset is always depreciated on a straight-line basis over the term of
the lease. The lease liability is adjusted using the effective interest method and taking the lease payments
into account.
The right-of-use assets are reported in the balance sheet under those items in which the assets underlying the
lease would have been recognized if the Volkswagen Group had been their beneficial owner. For this reason, the
right-of-use assets are presented under noncurrent assets, mostly in property, plant and equipment, as of the
balance sheet date and included in impairment tests of property, plant and equipment conducted in accordance
with IAS 36.
Practical expedients are allowed for short-term and low-value leases; the Volkswagen Group makes use of
this option and therefore does not recognize right-of-use assets or liabilities for these types of leases. In this
respect, the lease payments will continue to be recognized in the income statement. Leases are accounted for
being as of low value if the value of the leased asset when new is no higher than €5,000. Furthermore, the
accounting rules of IFRS 16 are not applied to leases of intangible assets.
A large number of leases contain extension and termination options. The determination of the lease terms
considers all relevant facts and circumstances that create an economic incentive to exercise or not to exercise the
option. Optional periods are taken into account in determining the lease term, if it is reasonably certain that the
option will or will not be exercised.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
235
L E A S E A S S E T S
The accounting treatment of lease assets is based on the classification into operating leases and finance leases.
The classification is made on the basis of the distribution of risks and rewards incidental to ownership of the
lease asset.
If the lease is an operating lease, the Volkswagen Group is exposed to the material risks and rewards. The
lease asset is recognized at amortized cost in the Volkswagen Group’s noncurrent assets and the lease installments
collected in the period are recognized as income in the income statement.
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. The forecast residual values are adjusted to include
constantly updated internal and external information on residual 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 published by external experts. Qualified estimates are based on external
data – if available – that reflects additional information that is available from within the company, such as historical
experience and current sales data.
Under a finance lease, the material risks and rewards are transferred to the lessee. The lease asset is derecognized
from the Volkswagen Group’s noncurrent assets, and instead a receivable is recognized in the amount of the net
investment in the lease.
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 equipment
used by the Company itself. The fair value of investment property is disclosed in the notes if it is carried at
amortized cost. Fair value is generally estimated using an investment method based on internal calculations.
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 attributable to the Volkswagen Group
of increases or reductions in equity at the associates and joint ventures after their acquisition, 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.
236
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 contractual
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 amortized
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).
To encourage lending to private households and companies affected by the Covid-19 pandemic, the ECB
provided additional liquidity on favorable terms under the TLTRO III program. The Volkswagen Group is of the
view that this support constitutes a government grant. The income from these government grants within the
meaning of IAS 20 is recognized in the interest result.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
237
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.
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 always through other comprehensive income, i.e. gains and losses
from the measurement of equity investments are never recycled to the income statement but instead reclassified
to revenue reserves on disposal (no reclassification).
Any financial assets not measured at either amortized cost or through other comprehensive income are
allocated 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 principal
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.
238
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 instruments.
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. In the Volkswagen Group, IAS 39 is applied alongside IFRS 9 to account for
portfolio hedges of interest rate risk in the Financial Services Division.
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
(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
consolidated financial statements are also assigned to this category as a general rule. Assets and liabilities
measured at fair value through profit or loss consist of derivatives or components of derivatives that are not
included 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 rewards
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 period of more than 90 days, 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
239
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
other comprehensive income (debt instruments), as well as for contract assets in accordance with IFRS 15 and
lease receivables within the scope of IFRS 16. 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
carryforwards 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 appropriation
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 authority
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 measurement
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 continuing
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 discontinued
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 statement
are adjusted accordingly.
240
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 separate
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
Share-based payment comprises 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. These cash-settled
share-based payments are measured at fair value, which is determined using a recognized option pricing model,
until maturity. The total compensation cost to be recognized corresponds to the actual payment and 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 result
of a past event, where a future outflow of resources with economic benefits is probable and where a reliable
estimate of that outflow 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 –0.23% (previous year: –0.10%) 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 reim-
bursement.
Insurance contracts that form part of the insurance business are recognized in accordance with IFRS 4.
Reinsurance 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 assump-
tions 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 resources with economic benefits 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 resources with economic benefits has become probable and their amount can be reliably
estimated.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
241
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.
Lease liabilities are carried at the present value of the lease payments.
Current liabilities are recognized at their repayment or settlement value.
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 recognized
only when the relevant services have been rendered or the goods have been delivered, i.e. when the customer
has obtained control of the goods or services. 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 method.
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.
242
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
If services are sold to the customer at the same time as the vehicle, and the customer pays for them in advance,
the Group recognizes a corresponding contract liability until the services have been transferred. Examples 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 related 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
ratably as income 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 probable
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.
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 as
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 resources
free of charge) are disclosed as a memo item.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
243
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 operational equipment) and equity-accounted investments, or investments accounted at cost,
and the measurement 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 information on impairment tests and the measurement parameters used for those tests can be found
in the explanations 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 business
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 sections entitled “IFRS 7 (Financial Instruments)” and
“Financial risk management and 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 external
opinions. The assumptions applied in the measurement of pension provisions are described in the “Provisions
for pensions and other post-employment benefits” section. Actuarial gains or losses arising from changes in
measurement inputs 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 invariably means that unused provisions are reversed or additional amounts have to be recognized for
provisions. Similarly to expenses for the recognition of provisions, income from the reversal of provisions is
allocated to the respective functions. Warranty claims from sales transactions are calculated on the basis of
losses to date, estimated future losses and the policy on ex gratia arrangements. In addition, assumptions must
be made about the nature and extent of future warranty and ex gratia claims.
For the provisions recognized in connection with the diesel issue, assumptions were made in particular
about working hours, material costs and hourly wage rates, depending on the series, model year and country
concerned. 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 derived from experience. Further information on the legal
proceedings and on the legal risks associated with the diesel issue can be found in the “Litigation” section.
Tax provisions were recognized for potential future retrospective tax payments, while other provisions were
recognized for ancillary tax payments arising in this connection.
Volkswagen AG and its subsidiaries have operations worldwide and are audited by local tax authorities on
an ongoing basis. Amendments to tax laws and changes in legal precedent and their interpretation by the tax
authorities in the respective countries may lead to tax payments that differ from the estimates made in the
financial statements.
244
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
The measurement of the tax provision is based on the most likely exposure resulting from this risk materializing.
Volkswagen decides whether to account for multiple tax uncertainties separately or in groups on the merits of
each individual case considered, depending on which type of presentation is better suited to predicting the
extent to which the tax risk will materialize. The pricing of individual products and services is complex, especially
in relation to contracts for the cross-border supply of intragroup goods and services, because it is in many cases
not possible to observe market prices for internally generated products, or the use of market prices for similar
products is subject to uncertainty because they are not comparable. In these cases, prices – including for tax
purposes – are determined on the basis of standardized, generally accepted valuation techniques.
If actual developments differ from the assumptions made for recognizing the provisions, the figures actually
recorded may differ compared to the estimates expected originally.
An overview of other provisions can be found in the “Noncurrent and current other provisions” section.
Government grants are recognized based on an assessment as to whether there is reasonable assurance that
the Group companies will fulfill the conditions for awarding the grants and that the grants will in fact 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.
Estimates of lease terms under IFRS 16 are based on the non-cancelable period of a lease and an assessment
of whether existing extension and termination options will be exercised. The determination of the lease term
and the discount rates used impacts on the amounts to be recognized for right-of-use assets and lease liabilities.
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 available
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. 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.
The global spread of the SARS-COV-2 virus, the associated restrictions, and the resulting downturn in demand
and supply meant that negative growth of 4.0% was recorded for the world economy in 2020 (previous year:
positive growth of 2.6%).
The Volkswagen Group’s planning is based on the assumption that global economic output will recover
overall in 2021, provided successful, lasting containment of the Covid-19 pandemic is achieved.
Estimates and assumptions by management were based in particular on assumptions relating to the develop-
ment 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.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
245
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 and Light
Commercial Vehicles, Commercial Vehicles, Power Engineering and Financial Services.
The activities of the Passenger Cars and Light Commercial Vehicles segment cover the development of vehicles,
engines and vehicle software, the production and sale of passenger cars and light commercial vehicles, and the
corresponding genuine parts business. In the Passenger Cars and Light Commercial Vehicles reporting segment,
the individual brands are being combined into a single reportable segment, in particular as a response to the
high degree of technological and economic interlinking in the production network. 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 trucks and
buses, the corresponding genuine parts business and related services. As in the case of the passenger car
brands, there is collaboration within the areas procurement, development and sales. The aim is to create closer
cooperation within the business areas.
The Power Engineering segment combines the large-bore diesel engines, turbomachinery, special gear units,
and propulsion components businesses. Until October 2020, it also included the Renk business; for further
information see the “Key events” section.
The activities of the Financial Services segment comprise dealership and customer financing, leasing, banking
and insurance activities, fleet management and mobility services. In this segment, activities are combined for
reporting purposes taking into particular account the comparability of the type of services and of the regulatory
environment.
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 segment reporting, the share of the result of joint ventures is contained in 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 in right-of-use assets from 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.
246
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Segment result (operating result)
15,610
1,653
R E P O R T I N G S E G M E N T S 2 0 1 9
€ million
Sales revenue from
external customers
Intersegment sales revenue
Total sales revenue
Depreciation and amortization
Impairment losses
Reversal of impairment losses
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
R E P O R T I N G S E G M E N T S 2 0 2 0
€ million
Sales revenue from
external customers
Intersegment sales revenue
Total sales revenue
Depreciation and amortization
Impairment losses
Reversal of impairment losses
Segment result (operating result)
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
Passenger Cars
and Light
Commercial
Vehicles
Commercial
Vehicles
Power
Engineering
Financial
Services
Total
segments
Reconciliation
Volkswagen
Group
186,511
15,762
202,273
14,622
201
886
25,401
1,043
26,444
2,280
1
71
3,053
225
–1,582
6,232
–70
1,118
3,995
2
3,997
420
–
2
–93
–1
1
34
36,446
3,714
40,160
8,080
538
181
3,212
71
–64
784
252,353
20,522
272,875
25,402
740
1,140
20,381
3,349
–1,715
8,169
280
252,632
–20,522
–20,242
–996
209
–15
–3,422
–
252,632
24,406
949
1,124
16,960
–
3,349
–238
–
–1,953
8,169
17,098
1,460
197
223
18,977
423
19,401
Passenger Cars
and Light
Commercial
Vehicles
160,674
15,310
175,984
15,428
370
32
8,381
2,615
–3
8,129
Commercial
Vehicles
Power
Engineering
Financial
Services
Total
segments
Reconciliation
Volkswagen
Group
21,114
1,042
22,156
2,309
179
1
–79
85
–170
1,135
3,638
2
3,640
379
64
–
–482
–3
–2
29
37,223
3,555
40,778
8,647
742
204
3,012
222,649
19,908
242,557
26,763
1,355
237
10,832
235
222,884
–19,908
–19,673
–1,014
–49
–8
–1,157
–
222,884
25,749
1,306
229
9,675
60
2,756
–
2,756
–296
786
–471
10,080
–294
–
–765
10,080
15,677
1,309
147
208
17,340
405
17,745
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
247
R E C O N C I L I AT I O N
€ million
Segment sales revenue
Unallocated activities
Group financing
Consolidation/Holding company function
Group sales revenue
Segment result (operating result)
Unallocated activities
Group financing
Consolidation/Holding company function
Operating result
Financial result
Consolidated result before tax
B Y R E G I O N 2 0 1 9
2020
2019
242,557
272,875
997
27
–20,698
222,884
969
28
–21,239
252,632
10,832
20,381
–28
–8
–1,121
9,675
1,991
11,667
–72
–38
–3,312
16,960
1,396
18,356
€ million
Sales revenue from
external customers
Intangible assets, property, plant
and equipment, lease assets and
investment property
1 Excluding Germany.
B Y R E G I O N 2 0 2 0
€ million
Sales revenue from
external customers
Intangible assets, property, plant
and equipment, lease assets and
investment property
1 Excluding Germany.
Germany
Europe/Other
markets¹
North
America
South
America
Asia-
Pacific
Hedges sales
revenue
Total
48,991
105,009
43,351
11,297
43,974
11
252,632
101,092
47,353
26,771
3,064
3,562
–
181,842
Germany
Europe/Other
markets¹
North
America
South
America
Asia-
Pacific
Hedges sales
revenue
Total
42,847
90,652
36,810
8,632
44,288
–345
222,884
105,630
47,680
23,852
2,323
3,611
–
183,096
Allocation of sales revenue to the regions follows the destination principle.
The allocation of interregional intragroup transactions regarding the segment assets has been presented
uniformly according to the economic ownership.
248
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
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 9
€ million
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
Passenger Cars
and Light
Commercial
Vehicles
154,377
13,329
12,583
11,496
–
603
986
235
–143
8,808
202,273
Commercial
Vehicles
Power
Engineering
Financial
Services
Total Segments
Reconciliation
Volkswagen
Group
17,387
3,464
1,415
641
–
–
1,735
5
–18
1,814
26,444
–
–
–
–
3,997
–
0
–
–
–
3,997
–
–
–
–
–
–
30,795
8,031
0
1,334
40,160
171,764
16,793
–14,552
–117
157,212
16,676
13,997
–549
13,449
12,137
3,997
603
33,517
8,271
–161
11,956
272,875
–21
–2
0
–4,370
–205
171
–597
–20,242
12,116
3,994
603
29,147
8,066
11
11,359
252,632
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 2 0
€ million
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
Passenger Cars
and Light
Commercial
Vehicles
129,913
11,755
11,716
12,625
–
567
767
192
–357
8,806
175,984
Commercial
Vehicles
Power
Engineering
Financial
Services
Total Segments
Reconciliation
Volkswagen
Group
13,385
3,249
1,455
669
–
–
1,698
8
–18
1,709
22,156
–
–
–
–
3,640
–
0
–
–
–
3,640
–
–
–
–
–
–
31,608
7,707
0
1,463
40,778
143,298
15,004
–13,703
–118
129,595
14,886
13,171
–637
12,535
13,294
3,640
567
34,073
7,907
–375
11,978
242,557
–41
–2
–
–4,334
–261
30
–608
–19,673
13,253
3,638
567
29,739
7,646
–345
11,370
222,884
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
249
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 €6,815 million (previous year:
€6,333 million) was included in contract liabilities as of January 1, 2020.
€345 million (previous year: €359 million) of the sales revenue recognized in the period under review is
attributable to performance obligations satisfied in a prior period.
In addition to existing performance obligations of €3,676 million (previous year: €3,967 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, 2021, the vast majority of the Volkswagen Group’s performance obligations that
were unsatisfied as of the reporting 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 2021. The calculation of the
amounts for the Power Engineering Business Area took account of both contracts with a term of up to one year
and service contracts under which the Volkswagen Group realizes sales revenue in exactly the same amount as
the customer benefits from the services rendered 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 reversed or adjusted downward.
2. Cost of sales
Cost of sales includes interest expenses of €2,303 million (previous year: €2,705 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 €1,180 million (previous year: €830 million). The impairment losses totaling €356 million (previous
year: €295 million) recognized during the reporting period on intangible assets and items of property, plant
and equipment result primarily from lower values in use of various products in the Passenger Cars segment,
due to market and exchange rate risks, and in particular from expected declines in volumes. The impairment
losses on lease assets in the amount of €824 million (previous year: €535 million) are predominantly attri-
butable to the Financial Services segment. They are based on constantly updated internal and external infor-
mation that is factored into the forecast residual values of the vehicles. €60 million (previous year: €25 million)
of this figure is reported in current lease assets.
Government grants related to income amounted to €1,001 million in the fiscal year (previous year:
€657 million) and were generally allocated to the functional areas.
3. Distribution expenses
Distribution expenses amounting to €18.4 billion (previous year: €21.0 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.
4. Administrative expenses
Administrative expenses of €9.4 billion (previous year: €9.8 billion) mainly include nonstaff overheads and
personnel costs, as well as depreciation and amortization charges applicable to the administrative function.
250
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
5. Other operating income
€ million
2020
2019
Income from reversal of loss allowances on receivables and other assets
Income from reversal of provisions and accruals
Income from foreign currency hedging derivatives within hedge accounting
Income from other hedges
Income from foreign exchange gains
Income from sale of promotional material
Income from cost allocations
Income from investment property
Gains on asset disposals and the reversal of impairment losses on noncurrent assets
Miscellaneous other operating income
1,334
1,086
1,185
1,709
2,588
312
1,039
10
299
2,876
12,438
1,482
969
686
1,177
2,346
498
985
12
1,182
2,116
11,453
Foreign exchange gains mainly comprise gains from changes in exchange rates between the dates of recognition
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.
6. Other operating expenses
€ million
2020
2019
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
316
2,302
1,034
1,806
3,123
743
391
212
3,979
13,904
317
1,783
997
1,332
2,013
563
54
119
5,712
12,890
Allowances on other receivables and other assets include allowances on receivables from long-term construction
contracts amounting to €1.2 million (previous year: €0.3 million).
Expenses from other hedges include 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.
Miscellaneous other operating expenses consist, among other items, of expenses in connection with the
diesel issue (see the “Key Events” section for more information).
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
251
7. Share of the result of equity-accounted investments
€ million
2020
2019
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
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
3,159
2,916
243
403
269
134
3,501
3,257
244
152
10
142
2,756
3,349
2020
793
788
5
–2,291
–1,499
–23
–206
–104
–459
2019
910
904
6
–2,524
–1,401
–6
–217
–238
–662
–1,498
–1,614
252
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
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 hedging instruments/derivatives
not included in hedge accounting
Gains and losses from fair value changes of hedging instruments/derivatives
included in hedge accounting
Other financial result
2020
23
–103
91
–433
–230
1,097
–1,620
–61
1,950
20
733
2019
19
–72
178
–374
27
877
–980
228
–240
0
–339
Gains and losses from changes in the fair value of hedges/derivatives to which hedge accounting is not applied
relate primarily to gains on the measurement and realization of forward purchase agreements for new shares in
QuantumScape Corporation in an amount of €1.4 billion. See the “Key Events” section for more information.
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
2020
2019
940
2,210
3,150
299
–1,026
719
–307
2,843
1,473
2,673
4,147
32
115
65
180
4,326
The statutory corporation
the 2020 assessment period was 15%.
Including trade tax and the solidarity surcharge, this resulted in an aggregate tax rate of 30.0% (previous year:
29.8%).
in Germany
rate
tax
for
A tax rate of 30.0% (previous year: 29.8%) was used to measure deferred taxes in the German consolidated
tax group.
The local income tax rates applied to companies outside Germany vary, as in the previous year, 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 2020 of €392 million (previous year: €692 million).
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
253
The tax loss carryforwards and the expiry of loss carryforwards that could not be used changed as follows:
€ million
Indefinitely to be carried forward
Carried forward within 10 years
Carried forward from 10 to 20 years
Total
€ million
Non-expiring tax loss carryforwards
Expiry within 10 years
Expiry from 10 to 20 years
Expiry over 20 years
Total
P R E V I O U S L Y U N U S E D T A X L O S S
C A R R Y F O R W A R D S
Dec. 31, 2020
Dec. 31, 2019
15,024
3,215
4,849
23,088
14,498
568
5,579
20,645
E X P I R Y O F U N U S A B L E T A X L O S S
C A R R Y F O R W A R D S
Dec. 31, 2020
Dec. 31, 2019
4,584
2,180
2,164
11
8,939
5,919
473
1,743
62
8,197
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 €55 million (previous year: €36 million). Deferred tax
expense was reduced by €134 million (previous year: €66 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 €470 million (previous year: €58 million). Deferred tax income resulting from
the reversal of a write-down of deferred tax assets amounts to €36 million (previous year: €35 million).
Tax credits granted by various countries amounted to €376 million (previous year: €378 million).
No deferred tax assets were recognized for deductible temporary differences of €899 million (previous year:
€897 million) and for tax credits of €105 million (previous year: €138 million) that would expire in the next 20
years.
In accordance with IAS 12.39, deferred tax liabilities of €166 million (previous year: €231 million) for temporary
differences and undistributed profits of Volkswagen AG subsidiaries were not recognized because control exists.
Deferred tax expense resulting from changes in tax rates amounted to €54 million at Group level (previous
year: €116 million).
Deferred tax assets of €12,591 million (previous year: €1,006 million) were recognized without being offset
by deferred tax liabilities in the same amount. In fiscal year 2020, the deferred tax assets of companies within the
German tax group recognized due to positive results in the past were included in this analysis. The companies
concerned are expecting positive tax income in the future, following losses in the reporting period or the
previous year.
254
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
€7,997 million (previous year: €7,820 million) of the deferred taxes recognized in the balance sheet was
credited to equity and relates to other comprehensive income. €53 million (previous year: €53 million) of this
figure is attributable to noncontrolling interests. In fiscal year 2020, deferred tax income of €73 million from the
remeasurement of pension plans directly through equity was reclassified within equity. The classification of
changes in deferred taxes is presented in the statement of comprehensive income.
In fiscal year 2020, tax effects of €5 million resulting from equity transaction costs were recognized in equity.
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 attributable to noncurrent assets and liabilities
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, 2020
Dec. 31, 2019
Dec. 31, 2020
Dec. 31, 2019
655
5,599
17
2,317
1,858
4,480
10,285
13,284
–499
37,997
3,465
271
41,733
27,924
31,172
2,925
13,486
267
5,576
18
2,348
2,270
3,768
9,013
13,358
–141
36,478
3,068
239
39,786
26,307
29,627
2,947
13,106
10,811
8,150
97
893
10,236
242
27
5,156
–
35,611
–
–
35,611
28,085
31,172
451
4,890
10,555
8,493
43
821
9,670
7
52
4,167
–
33,809
–
–
33,809
26,736
29,627
826
5,007
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
255
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 2020 of €2,843 million (previous year: €4,326 million) was €657 million lower
(previous year: €1,144 million) than the expected tax expense of €3,500 million that would have resulted from
application of a tax rate for the Group of 30.0% (previous year: 29.8%) 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 30.0%; previous year: 29.8%)
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
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 in %
2020
2019
11,667
18,356
3,500
5,470
–364
–843
–1,501
–1,124
540
520
65
–117
–211
54
419
–62
2,843
24.4
509
163
51
–54
–151
116
359
–170
4,326
23.6
256
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
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
there were no transactions in 2020 and 2019 that had a dilutive effect on the number of shares, diluted earnings
per share are equivalent to basic earnings per share.
In accordance with Article 27(2) No. 3 of the Articles of Association of Volkswagen AG, preferred shares are
entitled to a €0.06 higher dividend than ordinary shares.
Weighted average number of:
Ordinary shares – basic/diluted
Preferred shares – basic/diluted
Earnings after tax
Earnings attributable to noncontrolling interests
Earnings attributable to Volkswagen AG hybrid capital investors
Earnings attributable to Volkswagen AG shareholders
of which basic/diluted earnings attributable to ordinary shares
of which basic/diluted earnings attributable to preferred shares
Earnings per ordinary share – basic/diluted
Earnings per preferred share – basic/diluted
2020
2019
Shares
Shares
295,089,818
295,089,818
206,205,445
206,205,445
€ million
€ million
€ million
€ million
€ million
€ million
€
€
8,824
–43
533
8,334
4,898
3,435
16.60
16.66
14,029
143
540
13,346
7,849
5,497
26.60
26.66
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
257
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 9
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, 2019
Foreign exchange differences
Changes in
consolidated Group
Additions
Transfers
Classified as held for sale
Disposals
16,952
–18
23,318
–57
5
–
–
61
–
17
–
–
15
16
7,215
32,020
33
–
3,251
–4,301
–
8
77
–
1,920
4,299
–
1,421
36,895
Balance at Dec. 31, 2019
16,878
23,247
6,188
Amortization and impairment
Balance at Jan. 1, 2019
Foreign exchange differences
Changes in
consolidated Group
Additions to cumulative
amortization
Additions to cumulative
impairment losses
Transfers
Classified as held for sale
Disposals
Reversal of impairment losses
84
0
–
3
–
–
0
–
–
Balance at Dec. 31, 2019
86
1
–
–
–
15
–
–
16
–
–
42
16,768
0
–
–
7
–1
–
–
3
45
45
–
4,049
8
1
–
1,422
396
19,053
Carrying amount at
Dec. 31, 2019
16,793
23,247
6,143
17,842
Total
88,496
46
256
5,940
52
122
1,571
93,098
23,883
51
147
4,731
34
2
12
1,551
402
26,884
66,214
8,992
12
234
770
54
47
126
9,889
6,989
6
147
680
4
2
12
114
3
7,700
2,189
258
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
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 2 0
€ million
Brand names
Goodwill
Cost
Balance at Jan. 1, 2020
Foreign exchange differences
Changes in
consolidated Group
Additions
Transfers
Disposals
16,878
33
–
–
–
–
23,247
77
31
–
–
37
Balance at Dec. 31, 2020
16,911
23,318
Amortization and impairment
Balance at Jan. 1, 2020
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, 2020
Carrying amount at
Dec. 31, 2020
86
–5
–
3
–
–
–
–
83
–
–
–
–
37
–
37
–
–
Capitalized
development costs
for products under
development
Capitalized
development
costs for products
currently in use
Other
intangible assets
6,188
–77
8
4,576
–4,150
107
6,438
45
0
–
–
55
–6
–
7
87
Total
93,098
–548
111
7,511
–58
1,795
36,895
–299
15
1,897
4,150
1,341
9,889
–281
56
1,038
–58
310
41,316
10,334
98,317
19,053
–172
–
4,514
75
7
1,344
–
22,133
7,700
–232
9
733
62
0
226
0
8,046
2,288
26,884
–409
9
5,249
229
1
1,606
7
30,349
67,968
16,828
23,318
6,351
19,183
Other intangible assets comprise in particular concessions, purchased customer lists and dealer relationships,
industrial and similar rights, and licenses in such rights and assets.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
259
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 Energy Solutions
Ducati
Other
Goodwill by operating segment
Porsche
Scania Vehicles and Services
MAN Truck & Bus
MAN Energy Solutions
Ducati
ŠKODA
Porsche Holding Salzburg
Other
2020
2019
13,823
971
1,127
415
404
89
13,823
932
1,127
415
404
93
16,828
16,793
18,825
2,808
18,825
2,699
587
263
290
155
130
260
587
265
290
160
151
271
23,318
23,247
The impairment test for recognized goodwill and brand names is based on value in use, which has been
determined at the level of the respective brand. In this process, the WACC rates, based on the risk-free rate of
interest, a market risk premium and the cost of debt, are applied. For more information on the general
approach and key assumptions, please refer to the details provided on intangible assets in the “Accounting
policies” section.
Moreover, the following aspects were of significance for the brands with material recognized brand names and
goodwill:
The planning of the Porsche cash-generating unit is based on a significant increase in the proportion of electric
vehicles over the planning period and the implementation of further optimization measures.
Planning at Scania Vehicles and Services is based on the growing share of electric vehicles in the fleet, against a
backdrop of market demand for electric models, which tend to be more expensive.
For MAN Truck & Bus, the planning assumes a continuous improvement in the operating result in the course of
the detailed planning period.
For all cash-generating units, recoverability is not affected by a variation in the growth forecast with respect to
the perpetual annuity or in the discount rate of +/–0.5 percentage points.
260
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Research and development costs developed as follows:
€ million
2020
2019
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
13,885
6,473
46.6
4,644
12,056
14,306
5,171
36.1
4,064
13,199
%
–2.9
25.2
14.3
–8.7
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 9
€ million
Cost
Balance at Jan. 1, 2019¹
Foreign exchange differences
Changes in consolidated Group
Additions
Transfers
Classified as held for sale
Disposals
Balance at Dec. 31, 2019
Depreciation and impairment
Balance at Jan. 1, 2019¹
Foreign exchange differences
Changes in consolidated Group
Additions to cumulative depreciation
Additions to cumulative impairment losses
Transfers
Classified as held for sale
Disposals
Reversal of impairment losses
Balance at Dec. 31, 2019
Carrying amount at Dec. 31, 2019
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
39,976
46,684
74,702
8,536
169,898
198
56
1,862
1,867
124
303
181
16
1,716
2,776
206
1,077
43,531
50,090
15,418
48
0
1,927
53
151
26
149
32
17,389
26,142
34,052
131
3
3,407
2
20
88
1,014
14
36,498
13,592
303
28
5,403
2,946
54
1,331
81,997
57,821
218
15
6,237
63
38
30
1,169
331
62,862
19,135
36
8
6,104
–7,109
21
29
7,526
718
108
15,084
481
406
2,740
183,143
263
107,554
6
0
–
142
–59
–
–
109
242
7,284
402
18
11,572
260
149
145
2,332
487
116,991
66,152
1 Due to the initial application of IFRS 16, the values in the opening balance were adjusted.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
261
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 2 0
€ million
Cost
Balance at Jan. 1, 2020
Foreign exchange differences
Changes in consolidated Group
Additions
Transfers
Disposals
Balance at Dec. 31, 2020
Depreciation and impairment
Balance at Jan. 1, 2020
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, 2020
Carrying amount at Dec. 31, 2020
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
43,531
–907
153
1,914
852
392
50,090
–1,343
0
1,281
1,040
1,246
81,997
–1,765
47
3,935
2,096
1,920
45,151
49,822
84,389
17,389
–326
34
2,050
58
115
177
0
19,142
26,009
36,498
–973
9
3,226
46
–19
1,116
6
37,665
12,158
62,862
–1,393
28
6,561
18
98
1,760
7
66,408
17,981
7,526
–200
–32
4,410
–3,883
56
7,766
242
–9
–
–
6
–193
13
3
30
7,736
Total
183,143
–4,214
168
11,540
105
3,613
187,129
116,991
–2,701
71
11,838
127
2
3,066
16
123,245
63,884
Government grants of €156 million (previous year: €146 million) were deducted from the cost of property,
plant and equipment.
In connection with land and buildings, real property liens of €1,063 million (previous year: €1,221 million)
are pledged as collateral for partial retirement obligations, financial liabilities and other liabilities.
262
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
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 9
€ million
Lease assets
Investment property
Total
Cost
Balance at Jan. 1, 2019¹
Foreign exchange differences
Changes in consolidated Group
Additions
Transfers
Disposals
Balance at Dec. 31, 2019
Depreciation and impairment
Balance at Jan. 1, 2019¹
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, 2019
Carrying amount at Dec. 31, 2019
57,998
1,075
–46
24,906
–533
19,015
64,384
14,076
333
73
8,087
510
–151
7,314
169
15,446
48,938
803
5
–1
43
0
6
845
291
1
–
17
–
0
1
0
307
538
58,802
1,080
–48
24,949
–533
19,021
65,229
14,367
334
73
8,103
510
–151
7,315
169
15,753
49,476
1 Due to the initial application of IFRS 16, the values in the opening balance were adjusted.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
263
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 2 0
€ million
Lease assets
Investment property
Total
Cost
Balance at Jan. 1, 2020
Foreign exchange differences
Changes in consolidated Group
Additions
Transfers
Disposals
Balance at Dec. 31, 2020
Depreciation and impairment
Balance at Jan. 1, 2020
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, 2020
Carrying amount at Dec. 31, 2020
64,384
–2,972
15
24,772
67
19,139
67,127
15,446
–975
3
8,645
764
35
7,282
195
16,441
50,686
845
–23
–
27
39
19
869
307
–4
–
17
1
1
11
0
311
558
65,229
–2,995
15
24,799
106
19,159
67,996
15,753
–979
3
8,662
765
36
7,293
195
16,752
51,244
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 €1,199 million
(previous year: €1,206 million). Fair value is estimated using an investment method based on internal calculations
(Level 3 of the fair value hierarchy). Operating expenses of €55 million (previous year: €56 million) were incurred
for the maintenance of investment property in use. Expenses of €0.4 million (previous year: €0.1 million) were
incurred for unused investment property.
Rental income from investment property amounted to €58 million in the fiscal year (previous year:
€61 million).
264
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
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 9
€ million
Gross carrying amount
Balance at Jan. 1, 2019
Foreign exchange differences
Changes in consolidated Group
Additions
Transfers
Classified as held for sale
Disposals
Changes recognized in profit or loss
Dividends¹
Other changes recognized in other comprehensive income
Balance at Dec. 31, 2019
Impairment losses
Balance at Jan. 1, 2019
Foreign exchange differences
Changes in consolidated Group
Additions
Transfers
Classified as held for sale
Disposals
Reversal of impairment losses
Balance at Dec. 31, 2019
Carrying amount at Dec. 31, 2019
1 Dividends are shown before withholding tax.
Equity-accounted
investments
Other equity investments
Total
8,826
22
16
236
–
–
76
3,326
–3,786
75
8,639
392
1
–
143
–
–
–
67
470
8,169
2,142
6
–252
856
0
15
88
–
–
–34
2,616
668
0
–131
226
–
0
31
18
714
1,902
10,968
28
–236
1,093
0
15
164
3,326
–3,786
41
11,255
1,060
1
–131
369
–
0
31
85
1,183
10,071
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
265
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 2 0
€ million
Gross carrying amount
Balance at Jan. 1, 2020
Foreign exchange differences
Changes in consolidated Group
Additions
Transfers
Disposals
Changes recognized in profit or loss
Dividends¹
Other changes recognized in other comprehensive income
Balance at Dec. 31, 2020
Impairment losses
Balance at Jan. 1, 2020
Foreign exchange differences
Changes in consolidated Group
Additions
Transfers
Disposals
Reversal of impairment losses
Balance at Dec. 31, 2020
Carrying amount at Dec. 31, 2020
1 Dividends are shown before withholding tax.
Equity-accounted
investments
Other equity investments
Total
8,639
–49
–756
3,756
–
196
2,693
–3,195
–280
10,610
470
–5
–108
185
–
–
11
531
10,080
2,616
–24
–186
488
0
50
–3
–
–8
2,833
714
–5
57
245
–
41
1
968
1,865
11,255
–73
–943
4,244
0
246
2,690
–3,195
–288
13,443
1,183
–10
–52
429
–
41
12
1,499
11,945
Equity-accounted investments include joint ventures in the amount of €6,951 million (previous year:
€5,851 million) and associates in the amount of €3,129 million (previous year: €2,318 million).
In the fiscal year, under additions to equity-accounted investments, an amount of €1.7 billion is attributable
to the acquisition of shares in Argo AI, a total of €1.0 billion to the acquisition of additional shares in Volkswagen
(Anhui) Automotive Company (formerly: JAC Volkswagen Automotive Company) and shares in Anhui Jianghuai
Automobile Group Holdings; an amount of €0.5 billion relates to the capital increase at QuantumScape
Corporation and the realization of a forward purchase transaction in this context. Further information on
Argo AI and QuantumScape Corporation can be found in the “Key Events” section.
The main changes in the consolidated Group affecting equity-accounted investments in an amount of
€–0.8 billion relate to the reclassification of shares in Volkswagen (Anhui) Automotive Company following its first-
time consolidation.
Of the other changes recognized in other comprehensive income, €–239 million (previous year:
€53 million) is attributable to joint ventures and €–41 million (previous year: €22 million) to associates. They
are mainly the result of foreign exchange differences in the amount of €–319 million (previous year:
€94 million), pension plan remeasurements in the amount of €103 million (previous year: €1 million) and fair
value measurement of cash flow hedges in the amount of €16 million (previous year: €–27 million).
266
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
16. Noncurrent and current financial services receivables
€ million
Current
Noncurrent Dec. 31, 2020 Dec. 31, 2020
Current
Noncurrent Dec. 31, 2019 Dec. 31, 2019
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
26,758
12,435
307
46,157
1,994
7
72,916
14,428
314
75,296
14,400
315
22,873
16,781
305
49,175
2,512
5
72,048
19,293
310
73,248
19,270
310
39,500
48,157
87,658
90,010
39,958
51,692
91,650
92,827
379
–
379
379
285
–
285
285
18,127
58,006
34,408
82,565
52,534
54,604
140,571
144,994
18,371
58,615
35,281
86,973
53,652
54,742
145,588
147,855
The receivables from customer financing and finance leases contained in financial services receivables of
€140.6 billion (previous year: €145.6 billion) increased by €21 million (previous year: increased by €2 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
receivables, €33 million (previous year: €181 million) was furnished as collateral for financial liabilities and
contingent liabilities.
The receivables from dealer financing include €35 million (previous year: €22 million) receivable from
unconsolidated affiliated companies.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
267
17. Noncurrent and current other financial assets
€ million
Current
Noncurrent
Dec. 31, 2020
Current
Noncurrent
Dec. 31, 2019
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 values
of derivative financial
instruments
Receivables from loans,
bonds, profit
participation rights
(excluding interest)
Miscellaneous financial assets
2,616
3,435
6,051
1,622
1,628
3,250
6,421
4,197
13,234
3,568
832
7,834
9,988
5,029
21,068
6,639
3,955
12,216
3,278
646
5,553
9,917
4,601
17,769
Other financial assets include receivables from related parties of €9.7 billion (previous year: €9.7 billion). Other
financial assets amounting to €124 million (previous year: €244 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, miscellaneous financial assets include receivables from restricted deposits that serve as collateral
(mainly under asset-backed securities transactions).
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, 2020
Dec. 31, 2019
44
14
819
11
2,247
3,134
2,917
6,051
39
36
662
13
785
1,535
1,715
3,250
Positive fair values of €0 million (previous year: €6 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".
268
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
18. Noncurrent and current other receivables
€ million
Current
Noncurrent
Dec. 31, 2020
Current
Noncurrent
Dec. 31, 2019
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
4,063
3,318
7,381
1,058
1,810
2,867
5,121
5,128
10,248
4,244
3,028
7,272
806
1,916
2,722
5,050
4,945
9,995
Miscellaneous receivables include assets to fund post-employment benefits in the amount of €41 million
(previous year: €65 million). This item also includes the share of the technical provisions attributable to
reinsurers amounting to €46 million (previous year: €58 million).
Current other receivables are predominantly non-interest-bearing.
Other receivables include contingent receivables from long-term construction contracts recognized in accordance
with project progress. They correspond to the contract assets recognized under contracts with customers and
changed as follows:
€ million
Contingent construction contract receivables Balance at Jan. 1
Additions and disposals
Changes in consolidated Group
Change in valuation allowances
Classified as held for sale
Changes in estimates and assumptions as well as contract modifications
Foreign exchange differences
Contingent construction contract receivables at Dec. 31
2020
314
64
–
10
–
–
0
389
2019
352
–36
–
1
4
–
2
314
Costs to fulfill contracts were not capitalized in the Volkswagen Group. The Volkswagen Group capitalizes costs to
obtain a contract and amortizes them on a straight-line basis over the life of the contract only if they are material,
the underlying contract has a term of at least one year, and these costs would not have been incurred, if the
corresponding contract had not been entered into. On December 31, 2020, costs to obtain contracts amounting
to €63 million (previous year: €65 million) were recognized as assets. In 2020, amortization charges on capitalized
costs to obtain contracts amounted to €23 million (previous year: €13 million). No impairment losses were
recognized on capitalized costs to obtain contracts in 2020 and 2019.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
269
19. Tax assets
€ million
Current
Noncurrent
Dec. 31, 2020
Current
Noncurrent
Dec. 31, 2019
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
−
1,186
1,186
13,486
376
13,862
13,486
1,563
15,049
−
1,190
1,190
13,106
341
13,447
13,106
1,531
14,637
Deferred tax assets include an amount of €7,405 million (previous year: €7,490 million) arising from recognition
and measurement differences between IFRS carrying amounts and the tax base, which will reverse within one
year.
20. Inventories
€ million
Dec. 31, 2020
Dec. 31, 2019
Raw materials, consumables and supplies
Work in progress
Finished goods and purchased merchandise
Current lease assets
Prepayments
Hedges on inventories
6,966
4,022
27,204
5,337
288
6
6,099
4,110
30,617
5,699
222
–6
43,823
46,742
At the same time as the relevant revenue was recognized, inventories in the amount of €170 billion (previous
year: €192 billion) were included in cost of sales. Loss allowances (excluding lease assets) recognized as expenses
in the reporting period amounted to €697 million (previous year: €672 million). Vehicles with a value amounting
to €320 million (previous year: €340 million) were assigned as collateral for partial retirement obligations.
270
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
21. Trade receivables
€ million
Trade receivables from
third parties
unconsolidated subsidiaries
joint ventures
associates
other investees and investors
Dec. 31, 2020
Dec. 31, 2019
12,706
181
3,305
50
2
13,445
180
4,283
32
1
16,243
17,941
The fair values of the trade receivables correspond to the carrying amounts.
22. Marketable securities
The marketable securities serve to safeguard liquidity. They are mainly short-term fixed-income securities and
shares. Most securities are measured at fair value. Current securities amounting to €661 million (previous year:
€639 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.
23. Cash, cash equivalents and time deposits
€ million
Bank balances
Checks, cash-in-hand, bills and call deposits
Dec. 31, 2020
Dec. 31, 2019
33,403
507
33,909
25,264
659
25,923
Bank balances are held at various banks in different currencies and include time deposits, for example.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
271
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.
The Annual General Meeting on May 14, 2019 resolved to create authorized capital of up to €179 million,
expiring on May 13, 2024, to issue new preferred bearer shares.
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
2020
2019
€
2020
2019
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
payment 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 €4,028 million are eligible for distribution following the
transfer of €3,165 million to the revenue reserves. The Board of Management and Supervisory Board will propose
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 €4.80 per ordinary share and €4.86 per preferred share was distributed in fiscal year 2020.
272
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
H Y B R I D C A P I TA L
In June 2020, Volkswagen AG placed two unsecured subordinated hybrid notes with an aggregate principal
amount of €3.0 billion via a subsidiary, Volkswagen International Finance N.V., Amsterdam, the Netherlands
(VIF). The hybrid notes are perpetual, but may be called unilaterally by VIF. The first possible call date for the first
note (€1.5 billion and a coupon of 3.500%) is after five years, and the first possible call date for the second note
(€1.5 billion and a coupon of 3.875%) is after nine years. This resulted in an inflow of cash funds amounting to
€2,984 million, less transaction costs of €16 million. Additionally, there were noncash effects from the deferral of
taxes amounting to €5 million.
Interest may be accumulated depending on whether a dividend is paid to Volkswagen AG shareholders.
Under 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. IAS 32 only allows these hybrid notes to be classified as debt
once the respective hybrid note is called.
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, 2020, noncontrolling interests amounted to €1,734 million (previous year: €1,870 million).
Most of the noncontrolling interests in equity arose as a result of the IPO of the TRATON GROUP in fiscal year 2019.
On February 28, 2020, Volkswagen AG announced that it was planning to increase its interest in AUDI AG
from approximately 99.64% to 100%. On July 31, 2020, the Annual General Meeting of AUDI AG resolved to
implement a squeeze-out under stock corporation law (see “Key events” section).
The table below shows summarized financial information of the TRATON GROUP, including amortized
goodwill and fair value adjustments, which were determined at the acquisition date:
€ million
Equity interest in %¹
Equity interest
Noncurrent assets
Current assets
Noncurrent liabilities
Current liabilities
Sales revenue
Earnings after tax
Other comprehensive income, net of tax
Dividend paid to noncontrolling interest shareholders
Gross cash flow
Change in working capital
Cash flows from operating activities
Cash flows from investing activities
Net cash flow
1 The percentage only includes direct noncontrolling interests.
2020
2019
10.28
1,495
29,599
14,401
14,582
15,459
22,580
–161
–288
1
1,970
17
1,987
–1,293
694
10.28
1,640
29,623
16,728
14,938
16,664
26,901
1,517
–316
116
3,433
–2,346
1,087
634
1,721
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
273
25. Noncurrent and current financial liabilities
€ million
Bonds
Commercial paper and notes
Liabilities to banks
Deposits business
Loans and miscellaneous
liabilities
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, 2020
Current
Noncurrent
Dec. 31, 2019
25,909
16,146
18,060
26,735
794
1,005
88,648
66,717
21,380
17,273
2,411
1,909
5,119
92,626
37,526
35,333
29,145
2,702
6,124
114,809
203,457
19,789
18,103
17,337
30,252
1,429
1,002
87,912
68,839
20,147
15,337
2,395
1,629
5,208
88,629
38,250
32,674
32,647
3,058
6,210
113,556
201,468
26. Noncurrent and current other financial liabilities
€ million
Current
Noncurrent
Dec. 31, 2020
Current
Noncurrent
Dec. 31, 2019
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
1,474
604
8,512
10,590
1,935
97
2,224
4,257
3,409
702
10,737
14,847
2,245
691
7,922
10,858
1,950
116
2,434
4,499
4,195
807
10,356
15,358
274
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, 2020
Dec. 31, 2019
39
39
116
100
1,284
1,578
1,831
3,409
107
5
97
53
2,172
2,435
1,760
4,195
Negative fair values of €101 million (previous year: €63 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, 2020
Current
Noncurrent
Dec. 31, 2019
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
7,484
5,541
13,024
7,474
5,202
12,676
3,294
616
4,501
2,085
17,979
110
112
960
1,183
7,905
3,404
727
5,462
3,267
2,812
610
5,848
2,576
25,884
19,320
133
162
1,008
766
7,271
2,946
772
6,856
3,342
26,591
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
275
The liabilities from payments on account received under contracts with customers correspond to contract
liabilities under contracts with customers. They changed as follows:
€ million
2020
2019
Liabilities from advance payments received under contracts with customers at Jan. 1
Additions and disposals
Changes in consolidated Group
Classified as held for sale
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
10,907
847
13
–
–
–369
11,398
9,669
1,245
12
167
–
148
10,907
28. Tax liabilities
€ million
Current
Noncurrent
Dec. 31, 2020
Current
Noncurrent
Dec. 31, 2019
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
−
2,213
340
2,552
4,890
3,292
–
8,181
4,890
5,505
340
10,734
−
1,876
408
2,283
5,007
2,991
–
7,998
5,007
4,867
408
10,282
Deferred tax liabilities include an amount of €502 million (previous year: €387 million) arising from recognition
and measurement differences between IFRS carrying amounts and the tax base, which will reverse within
one year.
276
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
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
remuneration 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 recognized
as pension expenses of the period concerned. In 2020, they amounted to a total of €2,622 million (previous year:
€2,565 million) in the Volkswagen Group. Of this figure, contributions to the compulsory state pension system
in Germany amounted to €1,826 million (previous year: €1,796 million).
In the case of defined benefit plans, a distinction is made between pensions funded by provisions and
externally funded plans.
The pension provisions for defined benefits are measured by independent actuaries using the internationally
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, longevity
and increases in healthcare costs, which were determined for each Group company depending on the economic
environment. Remeasurements arise from differences between what has actually occurred and the prior-year
assumptions, from changes in assumptions, as well as from gains or losses on plan assets, excluding amounts
included in net interest income or expenses. They are recognized in other comprehensive income, 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 €25 million
for fiscal year 2021.
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 2020, €15 million (previous year: €18 million) was recognized as an expense for
healthcare costs. The related carrying amount as of December 31, 2020 was €228 million (previous year:
€266 million).
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
277
The following amounts were recognized in the balance sheet for defined benefit plans:
€ million
Dec. 31, 2020
Dec. 31, 2019
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
24,101
13,264
10,838
34,200
2
45,040
45,081
41
21,090
12,478
8,613
32,710
2
41,324
41,389
65
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 attractive,
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 aforementioned 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.
German pension plans funded solely by recognized provisions
The pension plans funded solely by recognized provisions comprise both contribution-based plans with
guarantees 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
obligation using the latest generational mortality tables – the “Heubeck 2018 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.
278
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
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
entitlement 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 guaranteed 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 deducted
from the obligations.
The amount of the pension assets is exposed to general market risk. The investment strategy and its
implementation 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 conducted 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 generational
mortality tables – the “Heubeck 2018 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.
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
1 Prior-year figures adjusted.
G E R M A N Y
A B R O A D
2020
0.70
3.31
1.49
1.16
–
2019
1.09
3.59
1.50
1.24
–
2020
1.70
2.74
2.50
4.36
5.30
2019
2.30
2.881
2.68
3.75
5.56
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
279
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 dis-
count rates are generally defined to reflect the yields on prime-rated corporate bonds with matching maturities
and currencies. The iBoxx AA Corporate Bond index was taken as the basis for the obligations of German Group
companies. Similar indices were used for foreign pension obligations.
Some steps in the calculation of the EUR discount rate were adjusted in the course of the fiscal year in order to
better reflect the persistently low interest rates in the valuation technique. The adjustment resulted in an increase
in the discount rate by 0.1 percentage points and, consequently, a €1.4 billion decrease in actuarial losses.
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.
The following table shows changes in the net defined benefit liability recognized in the balance sheet:
€ million
2020
2019
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
Classified as held for sale
Other changes
Foreign exchange differences from foreign plans
Net liability recognized in the balance sheet at December 31
41,324
2,215
459
–420
4,393
–394
677
0
929
–8
885
–99
7
11
–
25
–1
33,022
1,555
660
–67
8,689
27
654
21
969
–9
873
–25
2
–3
14
–8
–4
45,040
41,324
The change in the amount not recognized as an asset because of the ceiling in IAS 19 contains an interest
component, 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.
280
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
2020
2019
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
Classified as held for sale
Other changes
Foreign exchange differences from foreign plans
Present value of obligations at December 31
53,800
2,215
631
–420
4,393
–394
17
885
292
–99
7
16
–
–471
–219
58,301
43,918
1,555
921
–67
8,689
27
19
873
300
–25
–8
–7
182
–2
135
53,800
In fiscal year 2020, a pension plan in the USA funded by external plan assets was settled. The resulting decrease
in the present value of the defined benefit obligation in the amount of €520 million is shown under other
changes. The plan settlement led to a loss of €7 million.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
281
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 2 0
D E C . 3 1 , 2 0 1 9
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
52,604
–9.77
48,598
–9.67
64,981
11.46
59,888
11.32
61,360
5.25
56,633
5.27
55,552
–4.71
51,258
–4.73
58,808
0.87
54,331
0.99
57,843
–0.79
53,319
60,385
3.57
55,719
–0.89
3.57
The sensitivity analysis shown above considers the change in one assumption at a time, leaving the other
assumptions unchanged versus the original calculation, i.e. any correlation effects between the individual
assumptions 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
expectancy 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 21 years (previous year: 22 years).
282
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
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
2020
2019
36,124
3,642
18,535
58,301
33,027
3,136
17,637
53,800
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
Classified as held for sale
Other changes
Foreign exchange differences from foreign plans
Fair value of plan assets at December 31
2020
2019
1,162
5,334
51,806
58,301
1,161
5,121
47,518
53,800
2020
2019
12,478
10,920
172
677
929
9
291
–
5
–
–496
–219
13,264
261
654
969
9
299
10
–5
167
7
139
12,478
Other changes in fiscal year 2020 resulted primarily from the derecognition of plan assets in the context of the
settlement of a pension plan in the USA funded by external plan assets.
The investment of the plan assets to cover future pension obligations resulted in income of €849 million
(previous year: income of €915 million).
Employer contributions to plan assets are expected to amount to €851 million (previous year: €927 million)
in the next fiscal year.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
283
Plan assets are invested in the following asset classes:
D E C . 3 1 , 2 0 2 0
D E C . 3 1 , 2 0 1 9
€ million
Quoted prices
in active markets
No quoted prices
in active markets
Quoted prices
in active markets
No quoted prices
in active markets
Total
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
628
264
496
–
20
3,640
6,011
190
1,315
48
–
–
–
121
–6
15
133
–
28
360
628
264
496
121
14
3,655
6,144
190
1,344
408
501
401
850
–
15
2,653
5,729
170
1,225
83
–
–
5
110
–28
20
128
–
22
594
Total
501
401
855
110
–13
2,673
5,857
170
1,247
676
Plan assets include €12 million (previous year: €14 million) invested in Volkswagen Group assets and
€5 million (previous year: €14 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
2020
2019
2,215
459
–99
7
2,583
1,555
662
–25
2
2,194
The above amounts are generally included in the personnel costs of the functional areas in the income
statement. Net interest on the net defined benefit liability is reported in interest expenses.
284
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
30. Noncurrent and current other provisions
€ million
Balance at Jan. 1, 2019¹
Foreign exchange differences
Changes in consolidated Group
Classified as held for sale
Utilization
Additions/New provisions
Unwinding of discount/effect of change in
discount rate
Reversals
Balance at Dec. 31, 2019
of which current
of which noncurrent
Balance at Jan. 1, 2020
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, 2020
of which current
of which noncurrent
Obligations
arising from
sales
Employee
expenses
Litigation and
legal risks
Miscellaneous
provisions
Total
27,035
5,155
199
–1
33
9,442
11,618
3
2,391
26,988
13,468
13,520
26,988
–653
18
9,625
10,890
17
1,637
25,998
12,394
13,604
15
3
10
1,899
2,633
225
128
5,993
2,466
3,527
5,993
–56
16
2,275
2,707
108
223
6,270
2,174
4,096
4,913
–14
–1
–
1,913
2,835
–29
531
5,260
3,112
2,147
5,260
–170
0
2,347
1,781
–20
586
3,918
2,037
1,881
7,639
44,742
41
0
12
2,404
3,486
20
795
7,976
5,388
2,588
7,976
–222
522
2,086
4,393
0
1,117
9,465
6,359
3,107
241
2
55
15,658
20,572
220
3,845
46,217
24,434
21,783
46,217
–1,101
556
16,333
19,771
105
3,564
45,652
22,964
22,688
1 Due to the initial application of IFRS 16, the values in the opening balance were adjusted.
The obligations arising from sales contain provisions covering all risks relating to the sale of vehicles, components
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.
In addition to residual provisions relating 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 proceedings may occur in relation to suppliers, dealers, customers,
employees, or investors. Please refer to the “Litigation” section for a discussion of the legal risks.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
285
Miscellaneous provisions relate to a wide range of identifiable specific risks, price risks and uncertain obligations,
which are measured in the amount of the expected settlement value. Depending the jurisdiction concerned,
they also include risk provisions for any non-compliance with legal emissions limits. Their measurement takes
into account, among other things, the respective sales volume and the legally defined fee or the cost of
acquiring emission rights from other manufacturers. Advantage has been taken of synergies between individual
brands of the Volkswagen Group by establishing emission pools where possible.
Miscellaneous provisions additionally include provisions amounting to €1,265 million (previous year:
€568 million) relating to the insurance business. The increase is mainly due to the expansion of the consolidated
Group following an initial consolidation.
31. Trade payables
€ million
Trade payables to
third parties
unconsolidated subsidiaries
joint ventures
associates
other investees and investors
Dec. 31, 2020
Dec. 31, 2019
22,163
21,948
186
156
167
3
222
375
195
5
22,677
22,745
286
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Other disclosures
32. IAS 23 (Borrowing Costs)
Capitalized borrowing costs amounted to €65 million (previous year: €68 million) and related mainly to capitalized
development costs. An average cost of debt of 1.5% (previous year: 1.6%) was used as a basis for capitalization in
the Volkswagen Group.
33. IFRS 16 (Leases)
1 . L E S S E E A C C O U N T I N G
The Volkswagen Group is a lessee, mainly as a result of leasing office equipment, real estate and other means of
production. The leases are negotiated individually and include a large number of contract terms and conditions.
The following amounts for right-of-use assets resulting from leases are included in the balance sheet items:
P R E S E N TAT I O N O F A N D C H A N G E S I N R I G H T - O F - U S E A S S E T S F R O M L E A S E S F O R T H E P E R I O D
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 9
€ million
Cost
Balance at Jan. 1, 2019
Foreign exchange differences
Changes in consolidated group
Additions
Transfers
Classified as held for sale
Disposals
Balance at Dec. 31, 2019
Depreciation and impairment
Balance at Jan. 1, 2019
Foreign exchange differences
Changes in consolidated group
Additions to cumulative depreciation
Additions to cumulative impairment losses
Transfers
Classified as held for sale
Disposals
Reversal of impairment losses
Balance at Dec. 31, 2019
Carrying amount at Dec. 31, 2019
Right of use on
land, land rights
and buildings incl.
buildings on third
party land
Right of use on
technical
equipment and
machinery
Right of use on
other equipment,
operational and
office equipment
5,139
82
13
1,201
–8
9
166
6,253
63
3
1
810
–
–8
1
19
–
848
5,404
77
0
–
5
–39
–
0
44
17
0
–
6
–
–
–
0
–
23
21
294
1
0
459
–5
1
11
738
4
0
–
126
–
0
0
4
0
126
611
Total
5,510
83
13
1,666
–52
10
177
7,034
84
4
1
942
–
–8
1
23
0
998
6,036
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
287
P R E S E N TAT I O N O F A N D C H A N G E S I N R I G H T - O F - U S E A S S E T S F R O M L E A S E S F O R T H E P E R I O D
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 2 0
€ million
Cost
Balance at Jan. 1, 2020
Foreign exchange differences
Changes in consolidated group
Additions
Transfers
Disposals
Balance at Dec. 31, 2020
Depreciation and impairment
Balance at Jan. 1, 2020
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, 2020
Carrying amount at Dec. 31, 2020
Right of use on
land, land rights
and buildings incl.
buildings on third
party land
Right of use on
technical
equipment and
machinery
Right of use on
other equipment,
operational and
office equipment
6,253
–210
47
1,240
–24
297
7,009
848
–37
5
896
27
0
130
0
1,608
5,401
44
–3
–
16
–1
1
56
23
–2
–
8
–
0
0
0
28
27
738
–8
7
102
2
97
744
126
–3
1
158
1
–1
78
0
204
540
Total
7,034
–221
54
1,358
–23
394
7,809
998
–43
6
1,062
27
–1
209
0
1,840
5,969
Subleases of right-of-use assets generated income of €16 million (previous year: €20 million) in the fiscal year.
The measurement of right-of-use assets from leases and the associated lease liabilities is based on a best
estimate regarding the exercise of extension and termination options. If there are material changes in
circumstances or in the contract, this estimate is updated.
288
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
The tables below show how the lease liabilities are assigned in the balance sheet and give an overview of their
contractual maturities:
A S S I G N M E N T O F L E A S E L I A B I L I T I E S TO T H E R E S P E C T I V E B A L A N C E S H E E T I T E M S
€ million
Financial liabilities – Noncurrent
Financial liabilities – Current
Lease liabilities – Total
M AT U R I T Y A N A LY S I S O F L E A S E L I A B I L I T I E S
Dec. 31, 2020
Dec. 31, 2019
5,119
1,005
6,124
5,208
1,002
6,210
€ million
Lease liabilities at Dec. 31, 2020
Lease liabilities at Dec. 31, 2019
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
under one year
within one
to five years
over five years
1,005
1,002
2,591
2,613
2,528
2,595
Total
6,124
6,210
Interest expenses of €216 million (previous year: €230 million) were incurred for lease liabilities in the fiscal
year.
No right-of-use assets are recognized for low-value or short-term leases. Expenses for leasing low-value assets
totaled €285 million (previous year: €270 million) in the fiscal year. This figure does not include any expenses for
short-term leases, which totaled €268 million (previous year: €333 million) in the fiscal year. Variable lease
expenses not included in the measurement of lease liabilities accounted for €1 million (previous year:
€1 million) in the fiscal year.
Leases gave rise to cash outflows totaling €1,865 million (previous year: €1,797 million) in the fiscal year.
The table below shows a summary of potential future cash outflows, that have not been included in the
measurement of the lease liabilities:
€ million
2020
2019
Future cash outflows to which the lessee is potentially exposed
Variable lease payments
Residual value guarantees
Extension options
Termination options
Obligations under leases not yet commenced
0
0
3,350
8
270
3,628
1
0
3,575
3
359
3,938
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
289
2 . L E S S O R A C C O U N T I N G
The Volkswagen Group is a lessor in both the finance lease business and the operating lease business. The subject
of these transactions is primarily motor vehicles and, to a small extent, land and buildings and items of
equipment for dealerships.
The Volkswagen Group fully accounts for the default risk on lease receivables by recognizing loss allowances,
which are recognized in accordance with the requirements of IFRS 9. As lessor, the Volkswagen Group covers
risks arising from the assets underlying the leases by, among other measures, taking account of residual value
guarantees received for parts of the lease portfolio and by taking account of forward-looking residual values
forecast on the basis of internal and external information as part of residual value management. The forecast
residual values are regularly reviewed.
2 . 1 O P E R AT I N G L E A S E S
Assets leased under long-term operating leases amounted to €51,244 million at the end of the fiscal year (previous
year: €49,476 million). While €558 million (previous year: €538 million) is attributable to investment property,
assets separately reported as lease assets in the balance sheet amount to €50,686 million (previous year:
€48,938 million). They relate primarily to vehicles in an amount of €50,605 million (previous year:
€48,853 million) as well as land, land rights and buildings, including buildings on third-party land, in an
amount of €79 million (previous year: €78 million). The remaining assets relate to technical equipment and
machinery as well as other equipment, operating and office equipment. More information on changes in value of
investment property and lease assets can be found in the section entitled “Lease assets and investment property”.
The following cash inflows from expected outstanding, non-discounted operating lease payments are expected
over the coming years:
D I S C L O S U R E A S O F D E C E M B E R 3 1 , 2 0 1 9
€ million
2020
2021
2022
Lease payments¹
8,138
5,526
3,139
2023
829
2024
From 2025
Total
338
344
18,315
1 Prior-year figures adjusted.
D I S C L O S U R E A S O F D E C E M B E R 3 1 , 2 0 2 0
€ million
2021
2022
2023
2024
2025
From 2026
Total
Lease payments
7,893
5,636
3,178
1,220
452
362
18,741
B R E A K D O W N O F I N C O M E F R O M O P E R AT I N G L E A S E S
€ million
Lease income
Income from variable lease payments
Total
2020
2019
12,429
7
12,436
12,014
13
12,027
290
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
2 . 2 F I N A N C E L E A S E S
Interest income from the net investment in the leases amounted to €2.4 billion (previous year: €2.4 billion) in
the fiscal year. Furthermore, a selling profit from the finance leases in the amount of €0.8 billion (previous year:
€1.2 billion) was recognized.
The following table shows the reconciliation of outstanding lease payments under finance leases to the net
investment:
€ million
Dec. 31, 2020
Dec. 31, 2019
Non-discounted lease payments
Non-guaranteed residual value
Unearned interest income
Loss allowance on lease receivables
Net investment
53,162
4,255
–3,468
–1,414
52,534
54,302
4,112
–3,789
–971
53,652
The following cash inflows from expected outstanding, non-discounted finance lease payments are expected
over the coming years:
D I S C L O S U R E A S O F D E C E M B E R 3 1 , 2 0 1 9
€ million
2020
2021
2022
2023
2024
From 2025
Total
Lease payments
19,428
14,590
12,179
6,883
847
373
54,302
D I S C L O S U R E A S O F D E C E M B E R 3 1 , 2 0 2 0
€ million
2021
2022
2023
2024
2025
From 2026
Total
Lease payments
19,059
15,299
12,051
5,684
612
456
53,162
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
291
34. IFRS 7 (Financial Instruments)
The table below shows 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 F R S 9 M E A S U R E M E N T C AT E G O R Y
€ million
Dec. 31, 2020
Dec. 31, 2019
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)
of which classified as held for sale
Financial assets measured at amortized cost
of which classified as held for sale
Financial liabilities at fair value through profit or loss
Financial liabilities measured at amortized cost
of which classified as held for sale
21,898
3,545
152
–
16,331
3,139
68
3
151,497
149,203
–
2,403
230,904
–
158
1,760
229,229
44
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).
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.
For reconciliation to the carrying amounts, the “Not allocated to a measurement category” column in the table
also includes items other than financial instruments.
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.
292
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 9
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
I N S T R U M E N T S
T O 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 9
€ 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
Tax receivables
Current assets
Trade receivables
Financial services receivables
Other financial assets
Tax receivables
Marketable securities
Cash, cash equivalents and
time deposits
Assets held for sale
Noncurrent liabilities
Noncurrent financial liabilities
Other noncurrent
financial liabilities
Current liabilities
Current financial liabilities
Trade payables
Other current
financial liabilities
Tax payables
Liabilities associated with
assets held for sale
–
54
288
1,012
–
1
22
1,477
–
16,681
–
3
–
–
–
51,404
3,625
–
17,940
39,936
10,120
9
88
25,923
158
–
–
52,581
3,628
–
17,940
39,936
10,120
9
88
25,923
158
108,348
110,679
–
–
–
916
–
–
–
619
–
–
–
–
–
8,169
1,848
35,281
–
341
–
18,656
–
1,181
–
–
634
8,169
1,902
86,973
5,553
341
17,941
58,615
12,216
1,190
16,769
25,923
795
5,208
113,556
943
2,549
2,554
1,007
–
4,499
–
–
817
–
–
86,911
22,745
86,911
22,745
–
–
8,614
8,614
1,427
19
44
19
44
–
–
1,002
–
–
389
326
87,912
22,745
10,858
408
370
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
293
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 2 0
M E A S U R E D
A T F A I R
V A L U 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
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 2 0
I N S T R U M E N T S
T O A
B A L A N C E S H E E T
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
€ 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
Tax receivables
Current assets
Trade receivables
Financial services receivables
Other financial assets
Tax receivables
Marketable securities
Cash, cash equivalents and
time deposits
Noncurrent liabilities
Noncurrent financial
liabilities
Other noncurrent
financial liabilities
Current liabilities
Current financial liabilities
Trade payables
Other current
financial liabilities
Tax payables
–
177
279
1,512
–
52
26
2,402
–
21,146
–
–
–
–
47,879
4,105
–
16,191
39,474
9,915
9
15
–
–
50,231
4,220
–
16,191
39,474
9,915
9
15
33,909
33,909
109,690
115,282
1,188
2,322
2,317
–
–
1,215
–
87,643
22,677
8,545
38
87,643
22,677
8,545
38
–
–
–
2,217
–
–
–
917
–
–
–
–
748
–
–
831
–
10,080
1,688
34,408
–
376
–
18,506
–
1,177
–
–
10,080
1,865
82,565
7,834
376
16,243
58,006
13,234
1,186
21,162
33,909
5,119
114,809
–
4,257
1,005
–
–
301
88,648
22,677
10,590
340
The carrying amount of lease receivables was €52.9 billion (previous year: €53.9 billion) and their fair value
(fair value hierarchy level 3) was €55.0 billion (previous year: €55.0 billion).
294
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Uniform valuation techniques and inputs are used to measure fair value. The fair value of Level 2 and 3 financial
instruments is measured in the individual divisions on the basis of Group-wide specifications. The measurement
techniques used are explained in the section entitled “Accounting policies”. The fair value of Level 3 receivables
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.
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, 2019
Level 1
Level 2
Level 3
Noncurrent assets
Other equity investments
Financial services receivables
Other financial assets
Current assets
Trade receivables
Financial services receivables
Other financial assets
Marketable securities
Assets held for sale
Noncurrent liabilities
Other noncurrent financial liabilities
Current liabilities
Other current financial liabilities
54
288
1,012
1
22
1,477
16,681
3
943
817
43
–
–
–
–
–
16,681
–
–
–
0
–
595
–
–
1,304
–
–
425
570
11
288
417
1
22
173
–
3
518
247
€ million
Dec. 31, 2020
Level 1
Level 2
Level 3
Noncurrent assets
Other equity investments
Financial services receivables
Other financial assets
Current assets
Trade receivables
Financial services receivables
Other financial assets
Marketable securities
Noncurrent liabilities
Other noncurrent financial liabilities
Current liabilities
Other current financial liabilities
177
279
1,512
52
26
2,402
21,146
1,188
1,215
40
–
–
–
–
–
21,060
–
–
0
–
784
–
–
2,242
86
644
851
137
279
729
52
26
160
–
543
364
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
295
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, 2019
Level 1
Level 2
Level 3
Fair value of financial assets measured at amortized cost
Financial services receivables
Trade receivables
Other financial assets
Tax receivables
Cash, cash equivalents and time deposits
Assets held for sale
Fair value of financial assets measured at amortized cost
Fair value of financial liabilities measured at amortized cost
Trade payables
Financial liabilities
Other financial liabilities
Tax payables
Liabilities associated with assets held for sale
92,518
17,940
13,748
9
25,923
158
150,296
22,745
197,590
11,168
19
44
–
–
456
–
24,912
4
25,372
–
42,828
707
–
–
–
17,940
4,534
9
1,010
154
23,648
22,745
152,329
10,069
19
44
92,518
–
8,758
–
–
–
101,276
–
2,433
392
–
–
Fair value of financial liabilities measured at amortized cost
231,566
43,535
185,205
2,825
€ million
Dec. 31, 2020
Level 1
Level 2
Level 3
Fair value of financial assets measured at amortized cost
Financial services receivables
Trade receivables
Other financial assets
Tax receivables
Cash, cash equivalents and time deposits
Fair value of financial assets measured at amortized cost
Fair value of financial liabilities measured at amortized cost
Trade payables
Financial liabilities
Other financial liabilities
Tax payables
89,705
16,191
14,135
9
33,909
153,950
22,677
202,925
10,862
38
–
–
466
–
33,721
34,187
–
41,909
691
–
–
16,191
4,834
9
188
89,705
–
8,834
–
–
21,223
98,540
22,677
161,016
9,851
38
–
–
320
–
320
Fair value of financial liabilities measured at amortized cost
236,502
42,600
193,582
296
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
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, 2019
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
916
619
1,007
1,427
–
–
–
–
916
619
1,007
1,427
–
–
–
–
€ million
Dec. 31, 2020
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
2,217
917
748
831
–
–
–
–
2,217
917
748
728
–
–
–
102
The allocation of fair values to the three levels in the fair value hierarchy is based on the availability of observable
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 incorporate
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 measurement 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 receivables, 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 programs requires in particular
the use of the corresponding vehicle price.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
297
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, 2019
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
Classified as held for sale
Balance at Dec. 31, 2019
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, 2020
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, 2020
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
Financial assets
measured at fair value
Financial liabilities
measured at fair value
Financial assets held for sale
990
22
0
154
157
–3
13
–215
–46
–3
913
157
161
115
–4
–4
816
9
–
293
293
–
–
–301
–51
–
765
–293
–292
–238
–1
–
–
–
–
–
–
–
3
–
–
–
3
–
–
–
–
–
Financial assets
measured at fair value
Financial liabilities
measured at fair value
913
–39
66
433
425
8
312
–203
–100
1,383
425
407
313
18
7
765
–9
–
551
452
99
–
–323
–77
908
–452
–452
–370
0
0
298
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
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 further
extrapolation 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 December 31,
2020, earnings after tax would have been €263 million (previous year: €168 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 as of December 31, 2020 had been 10% higher, earnings after tax would
have been €4 million (previous year: €3 million) higher. If the assumed enterprise values as of December 31,
2020 had been 10% lower, earnings after tax would have been €4 million (previous year: €3 million) lower.
Residual value risks result from hedging agreements with dealerships under which earnings effects caused
by market-related fluctuations in residual values that arise from buy-back 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, 2020, earnings after tax would have been €382 million (previous year: €354 million) higher. If the
prices of the used cars covered by the residual value protection model had been 10% lower as of December 31,
2020, earnings after tax would have been €419 million (previous year: €374 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, 2020, earnings after tax would have been €2 million (previous year: €3 million) lower.
If the risk-adjusted interest rates as of December 31, 2020 had been 100 basis points lower, earnings after tax
would have been €2 million (previous year: €3 million) higher.
If the corresponding vehicle prices used in the vehicle financing programs had been 10% higher as of Decem-
ber 31, 2020, earnings after tax would have been €2 million (previous year: €5 million) higher. If the corresponding
vehicle prices used in the vehicle financing programs had been 10% lower as of December 31, 2020, earnings
after tax would have been €2 million (previous year: €5 million) lower.
If the result of operations of equity investments measured at fair value had been 10% better as of December 31,
2020, equity would have been €5.8 million (previous year: €0.2 million) higher, and earnings after tax would
have been €2.1 million (previous year: €– million) higher. If the result of operations of equity investments
measured at fair value had been 10% worse, equity would have been €5.8 million (previous year: €0.2 million)
lower, and earnings after tax would have been €2.1 million (previous year: €– million) lower.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
299
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, 2019
3,396
146,218
17,952
16,769
25,923
14,436
–146
–630
–11
–
–
146
3,250
145,588
17,941
16,769
25,923
14,581
–2,010
–
0
–
–
0
–45
–98
–
–
–
–
1,195
145,490
17,941
16,769
25,923
14,581
€ 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, 2020
6,216
141,185
16,253
21,162
33,909
15,203
–165
–614
–10
–
–
–
6,051
140,571
16,243
21,162
33,909
15,203
–1,770
–
0
–
–
0
–35
–98
–
–
–
–
4,246
140,473
16,243
21,162
33,909
15,203
€ 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 €9 million (previous year: €9 million).
300
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
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, 2019
4,195
201,468
22,756
11,812
0
–
–11
–630
4,195
201,468
22,745
11,182
–1,900
–
0
–
–53
–1,729
–
–
2,241
199,740
22,745
11,182
€ million
Derivatives
Financial liabilities
Trade payables
Other financial liabilities
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, 2020
3,417
203,457
22,687
12,247
–8
–
–10
–771
3,409
203,457
22,677
11,476
–1,769
–
0
–
–2
–1,955
–
–
1,638
201,502
22,677
11,476
€ million
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 liabilities include liabilities from tax allocations of €38 million (previous year: €19 million).
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
301
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 €30.6 billion (previous year adjusted:
€30.8 billion) 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 €34.5 billion (previous year: €34.1 billion).
Collateral of €48.9 billion (previous year: €47.9 billion) in total was furnished as part of asset-backed securities
transactions. The expected payments were assigned to structured entities and the equitable 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 different terms and
conditions and the share of the securitized paper and notes held by the Volkswagen Group itself.
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 10% of the original transaction volume is outstanding. 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, 2020, the fair value of the assigned receivables still recognized in the balance sheet was
€35.4 billion (previous year: €34.8 billion). The fair value of the related liabilities was €30.6 billion (previous
year adjusted: €30.7 billion) at that reporting date.
The Volkswagen Bank GmbH Group is contractually obliged, under certain conditions, to transfer funds to
the structured entities that are included in its financial statements. Since the receivables 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.
302
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
A D D I T I O N A L I N C O M E STAT E M E N T D I S C L O S U R E S I N A C C O R D A N C E W I T H I F R S 7 ( F I N A N C I A L I N ST R U M E N T S )
The table below shows 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 F R S 9 M E A S U R E M E N T C AT E G O R Y
€ 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
2020
2019
2,309
2,899
4
–3,242
1,970
–242
6,282
7
–4,420
1,628
Net gains and losses in the category "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 interest
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
303
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
€ million
2020
2019
Financial assets and liabilities measured at amortized cost
Interest income
Interest expenses
Financial assets (debt instruments) and liabilities measured at
fair value through other comprehensive income
Interest income
Interest expenses
G A I N S A N D L O S S E S O N T H E D I S P O S A L 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
€ million
Gains arising from the derecognition of financial assets measured at amortized cost
Losses arising from the derecognition of financial assets measured at amortized cost
6,982
3,707
4
–
2020
810
–1,527
–717
7,563
4,120
8
–
2019
845
–978
–133
In the fiscal year, €2 million (previous year: €2 million) was recognized as an expense and €29 million (previous
year: €44 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.
304
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
35. 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. 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 the redemption of bonds,
inflows from capital increases and the 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 the fiscal year, cash flows from operating activities include interest received amounting to €7,192 million
(previous year: €7,640 million) and interest paid amounting to €2,677 million (previous year: €2,604 million).
Cash flows from operating activities also include dividend payments (net of withholding tax) received from
joint ventures and associates of €3,098 million (previous year: €3,679 million).
Dividends amounting to €2,419 million (previous year: €2,419 million) were paid to Volkswagen AG
shareholders.
€ 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, 2020
Dec. 31, 2019
33,909
–477
33,432
25,923
–1,593
24,329
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.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
305
The following table shows the classification of changes in financial liabilities into cash and non-cash transactions:
Jan. 1, 2019
Cash-effective
changes
Foreign
exchange
differences
Changes in
consolidated
Group
Classified as
held for sale Other changes
Dec. 31, 2019
N O N - C A S H C H A N G E S
€ million
Bonds
81,549
6,132
496
Other total third-party
borrowings
Finance lease liabilities¹,²
108,886
5,567
Total third-party borrowings
196,001
–3,392
–957
1,783
Put options and
compensation rights granted
to noncontrolling interest
shareholders³
Other financial assets and
liabilities
Financial assets and
liabilities in financing
activities
1,853
–1,135
–182
18
–
–193
16
–177
–
–
1,616
81
2,193
–
–3
197,672
666
2,189
–177
–
0
9
9
–
–
9
452
88,629
–287
1,513
1,678
–718
87
106,630
6,210
201,468
–
–81
1,046
201,387
1 Due to the initial application of IFRS 16, the values in the opening balance were adjusted.
2 Other changes in lease liabilities largely contain noncash additions of lease liabilities.
3 Other changes in put options/compensation rights granted to noncontrolling interest shareholders largely contain the reclassification of the residual liability to
equity after the put options granted expired in the fiscal year.
€ million
Bonds
Other total third-party
borrowings
Finance lease liabilities¹
Total third-party borrowings
Other financial assets and
liabilities
Financial assets and liabilities
in financing activities
Jan. 1, 2020
Cash-effective
changes
Foreign exchange
differences
Changes in
consolidated
Group
N O N - C A S H C H A N G E S
88,629
5,366
–979
106,630
6,210
201,468
3,404
–1,100
7,670
–5,638
–195
–6,812
–81
172
132
201,387
7,843
–6,680
–
267
39
306
–
306
Other changes
Dec. 31, 2020
–389
92,626
44
1,170
825
–202
104,707
6,124
203,457
21
622
203,478
1 Other changes in lease liabilities largely contain noncash additions of lease liabilities.
306
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
36. 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
instruments 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 the control of risks from financial
instruments. The Group Board of Management Committee for Risk Management 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. Some functions of the MAN Energy Solutions, Porsche Holding Salzburg
and TRATON GROUP subgroups are included in Group Treasury’s operational risk management and control for
risks relating to financial instruments. Subgroups have their own risk management structures.
For more information, see the section on financial risks in the Report on Risks and Opportunities of the
group management report.
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
therefore 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
comprises 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 level 4 financial assets with objective indications of impairment as of the reporting date, the
collateral provided led to a reduction in risk by €1.2 billion (previous year: €1.3 billion). Collateral of
€237 million (previous year: €285 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 default risk is determined by the guarantee
amount. The corresponding 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 banking
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 6.0% at the end of 2020 compared with 5.2 % at the end of 2019. Any
existing concentration of risk is assessed and monitored both at the level of individual counterparties or
counterparty 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 26.1% at the end of 2020, as against 34.2 % at the
end of 2019. There were no other concentrations of credit and default risk exposures in individual countries.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
307
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.
The expected 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 approach.
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
significant financing component in accordance with IFRS 15. The same applies to receivables under operating or
finance leases accounted for under IFRS 16. Under the simplified approach, the expected losses are consistently
determined for the entire life of the asset.
308
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
The tables below show the reconciliation of the loss allowance for various financial assets and financial guarantees
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
€ million
Stage 1
Stage 2
Stage 3
Simplified
approach
Stage 4
Total
946
896
Carrying amount at Jan. 1, 2019
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
750
6
2
464
–64
39
–91
–45
4
–
–
–222
–75
206
–76
Financial instruments derecognized during the period
(disposals)
–146
–106
Utilization
Changes to models or risk parameters
Classified as held for sale
Carrying amount at Dec. 31, 2019
–
–2
0
913
–
1
–
677
3
0
–
157
–12
–16
334
–145
–322
0
–
893
634
3
1
255
–3
–
–
–
47
–177
2
–2
760
146
3,372
0
–
1
–32
–
–
–
–4
–16
–
–
94
16
3
719
–165
–48
98
213
–354
–516
1
–2
3,336
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
€ million
Stage 1
Stage 2
Stage 3
Simplified
approach
Stage 4
Total
Carrying amount at Jan. 1, 2020
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
913
–33
13
415
79
22
–126
–167
677
–32
–2
–
69
–61
320
–88
Financial instruments derecognized during the period
(disposals)
Utilization
Changes to models or risk parameters
Carrying amount at Dec. 31, 2020
–197
–121
–
9
929
–
23
786
893
–89
24
–
–35
–14
–42
513
–170
–257
1
825
760
–29
2
252
16
–
–
–
–154
–33
1
814
94
–5
–
18
5
–
–
–
–6
–21
2
87
3,336
–189
37
685
134
–53
152
258
–647
–311
36
3,440
The gross carrying amount of assets measured at amortized cost is €136.0 billion (previous year: €137.7 billion),
of which €16.7 billion (previous year: €18.5 billion) is attributable to the simplified approach.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
309
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
€ million
Stage 1
Stage 2
Stage 3
Stage 4
Total
Carrying amount at Jan. 1, 2019
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
Classified as held for sale
Carrying amount at Dec. 31, 2019
18
0
0
10
0
0
–2
0
–9
–
0
0
17
1
0
–
0
0
0
1
0
0
–
0
–
2
1
0
–
0
–1
–
–
–
–
0
–
–
0
0
0
–
0
0
–
–
–
0
–
–
–
0
19
0
0
10
0
0
–1
0
–10
0
0
–
18
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
€ million
Stage 1
Stage 2
Stage 3
Stage 4
Total
Carrying amount at Jan. 1, 2020
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, 2020
17
–1
0
8
1
0
0
0
–4
–
0
19
2
0
–
0
1
0
1
0
–1
–
0
3
0
0
–
0
0
–
–
0
–
–1
–
0
0
0
–
0
0
–
–
–
0
–
–
0
18
–1
0
8
2
0
1
0
–5
–1
0
22
310
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 A N D C O N T R A C T A S S E T S
€ million
Carrying amount at Jan. 1
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
Classified as held for sale
Carrying amount at Dec. 31
S I M P L I F I E D A P P R O A C H
2020
2019
1,312
1,193
–29
0
377
225
–314
–107
51
–
1,516
14
6
249
261
–282
–88
–42
0
1,312
The gross carrying amounts of lease receivables and contract assets declined from €55.6 billion to €54.8 billion
in the fiscal year under review.
The loss allowance on assets measured at fair value in Stage 1 rose by €0 million (previous year: €2 million)
in fiscal year 2020, resulting in a closing balance of €3 million (previous year: €3 million). Of this amount,
€2 million is attributable to Stage 1 (previous year: €2 million) and €1 million to Stage 2 (previous year
€1 million).
The amount contractually outstanding for financial assets that have been derecognized in the current year
and are still subject to enforcement proceedings is €221 million (previous year: €331 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 derecognition
of the asset. These were primarily attributable to credit ratings and relate to financial assets for which loss
allowances were measured in the amount of the expected 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 €493 million (previous year:
€120 million). In the reporting period, contract modifications resulted in net income/net expenses of
€6.4 million (previous year: €–0.2 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 €81 million (previous year: €28 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
311
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 reporting
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
€ million
Financial instruments measured at fair value
Financial instruments measured at amortized cost
Financial guarantees and credit commitments
Not allocated to a measurement category
Total
Dec. 31, 2020
Dec. 31, 2019
3,545
151,497
3,788
52,914
211,744
3,139
149,045
5,988
53,938
212,109
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 scoring
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:
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 9
€ 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
120,926
8,272
3,240
5,031
–
–
–
–
124,166
13,303
2,514
2,514
66,344
3,226
901
70,470
89
43
359
490
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 2 0
€ 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
112,446
10,109
5,278
12,926
–
–
–
–
117,725
23,035
2,709
2,709
65,040
2,877
1,157
69,074
106
64
288
458
312
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 9
€ 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
1 Prior-year figures adjusted.
3,3731
100
–
3,474
178
25
–
203
–
–
7
7
0
0
3
4
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 2 0
€ 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
3,368
66
–
3,434
201
82
–
283
–
–
10
10
0
1
2
3
Collateral that was accepted for financial assets in the current fiscal year was recognized in the balance sheet in
the amount of €159 million (previous year: €149 million). This mainly relates to vehicles.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
313
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 €27.9 billion
as of December 31, 2020 (previous year: €27.0 billion), of which €2.3 billion (previous year: €3.8 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.
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
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
€ million
up to one year
within one
to five years
more than
five years
2020
up to one year
within one
to five years
more than
five years
2019
Financial liabilities
Trade payables
Other financial
liabilities
Derivatives
89,371
22,675
9,151
73,927
98,159
25,106
212,636
1
–
22,677
2,156
56,294
152
11,460
6,736
136,958
90,137
22,745
8,633
70,932
96,135
25,542
211,814
0
–
22,745
2,355
57,182
176
5,912
11,164
134,027
379,750
195,125
156,611
31,995
383,731
192,447
155,672
31,630
The cash outflows on other financial liabilities include outflows on liabilities for tax allocations amounting to
€38 million (previous year: €19 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
presented would be substantially lower. This also particularly applies if hedges have been closed with offsetting
transactions.
The cash outflows from irrevocable credit commitments are presented in the section entitled "Other financial
obligations”, classified by contractual maturities.
As of December 31, 2020, the maximum potential liability under financial guarantees amounted to
€447 million (previous year: €425 million). Financial guarantees are assumed to be due immediately in all
cases.
314
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
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, interest
rate, commodity price, equity price and fund price risk. Corporate policy is to limit such risk by means of hedging.
Generally, all necessary hedging transactions are executed or coordinated centrally by Group Treasury; exceptions
include the MAN Energy Solutions, Porsche Holding GmbH, Salzburg and TRATON GROUP subgroups, as well as
some regions such as South America.
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.
The following table shows the gains and losses from fair value 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 F A I R VA L U E H E D G E S
€ 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
Dec. 31, 2020
Dec. 31, 2019
–
–43
–
–12
–
0
–
–5
–
–39
–
2
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
315
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
€ 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 commodities 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
2020
2019
–46
0
–
–1
1,434
–5
–15
69
38
–6
–
–19
0
–
–
–1
–41
0
–
–1
–2,136
–1
4
137
–4
2
–
2
–
–
–
–4
The table presents effects taken to equity, reduced by deferred taxes.
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 differences in the parameters for the
hedging instrument and the hedged item. Such income and expenses are recognized in other operating
income/expenses or in the financial result.
316
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
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 measurement, interest rate and foreign
currency risk in the Volkswagen Financial Services subgroup is measured using a value-at-risk (VaR) model on
the basis of a historical simulation, while market risk in the other Group companies 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 instruments 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 variables
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 9
€ 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, currency options, cross-currency swaps
Combined interest rate and currency risk hedging
Cross-currency interest rate swaps
55,443
650
6,807
580
74
13
97
111
1
586
–17
12
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 2 0
€ 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, currency options, cross-currency swaps
Combined interest rate and currency risk hedging
Cross-currency interest rate swaps
48,371
819
6,433
48
56
2
116
79
–
626
1
2
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
317
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 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 C A S H F L O W H E D G E S I N 2 0 1 9
€ 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
Cross-currency interest rate swaps
14,017
87,271
15,198
1,648
6
689
73
29
48
–32
2,090
68
19
96
1
11
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 2 0
€ 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
Cross-currency interest rate swaps
13,461
84,862
19,021
1,607
1
96
–93
1,866
347
43
1,174
74
40
1,824
132
2
The change in the fair value to determine ineffectiveness corresponds to the change in fair value of the designated
component.
318
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 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 9
€ million
Hedging interest rate risk
Financial services receivables
Other financial assets
Financial liabilities
Hedging currency risk
Financial services receivables
Other financial assets
Financial liabilities
Combined interest rate and currency risk hedging
Financial services receivables
Other financial assets
Financial liabilities
Carrying amount
Cumulative hedge
adjustments
Hedge adjustments
current period/
fiscal year
Cumulative hedge
adjustments from
discontinued hedging
relationships
20,680
194
40,704
–
991
1,595
–
209
48
17
24
519
–
–3
32
–
–26
3
32
7
278
–
–55
–4
–
2
3
–
–
–
–
–
–
–
–
–
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 2 0
€ million
Hedging interest rate risk
Financial services receivables
Other financial assets
Financial liabilities
Hedging currency risk
Financial services receivables
Other financial assets
Financial liabilities
Combined interest rate and currency risk hedging
Financial services receivables
Other financial assets
Financial liabilities
Carrying amount
Cumulative hedge
adjustments
Hedge adjustments
current period/
fiscal year
Cumulative hedge
adjustments from
discontinued hedging
relationships
19,059
150
35,924
–
602
951
–
–
50
18
7
873
–
18
30
–
–
5
14
–17
423
–
8
–2
–
–
5
0
–
–
–
–
–
–
–
–
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
319
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 9
€ 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
–29
–
–
–29
143
–
–
143
20
–
–
20
–
–
–
–
–30
–
7
–23
184
–1,380
366
–830
–2
–
1
–2
–
–
–
–
0
–
0
0
–5
–6
0
–11
–26
–
8
–18
1
–
0
1
320
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 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 2 0
€ 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
–90
–
–
–90
1,956
–
–
1,956
0
–
–
0
–
–
–
–
–90
–
19
–71
1,952
–1,008
–299
644
–1
–
0
–1
–
–
–
–
1
–
0
1
4
0
–1
3
–
–
–
–
0
–
0
0
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 recognized
in OCI I. Any changes in excess of the fair value of the designated component are recognized as ineffectiveness
through profit or loss.
The tables below show 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 )
€ million
Interest rate risk
Currency risk
Interest rate/
currency risk
Commodity
price risk
Balance at Jan. 1, 2019
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, 2019
19
–41
–
–1
–23
1,783
–1,092
1
–557
135
–17
–4
–
2
–20
5
–
–
–4
1
Total
1,790
–1,137
1
–561
93
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
321
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 )
€ million
Interest rate risk
Currency risk
Interest rate/
currency risk
Commodity
price risk
Balance at Jan. 1, 2020
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, 2020
–23
–46
–
–1
–70
135
1,984
–41
–724
1,355
–20
38
–
–19
–1
1
0
–
–1
0
Total
93
1,976
–41
–744
1,284
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 generally 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
€ million
Balance at Jan. 1
Gains and losses from non-designated time value of options
Hedged item is recognized at a point in time
Reclassifications due to changes in whether the hedged item is expected to occur
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
C U R R E N C Y R I S K
2020
–35
50
0
43
59
2019
–1
–71
0
38
–35
322
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
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 )
€ million
Balance at Jan. 1
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
C U R R E N C Y R I S K
2020
–942
–600
749
26
–766
2019
–628
–973
656
3
–942
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 attributable
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 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 2020 as part of foreign currency risk management were amongst others
in Australian dollars, Brazilian real, British pound 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.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
323
The following table shows the sensitivities of the main currencies in the portfolio as of December 31, 2020:
€ million
Exchange rate
EUR / GBP
Hedging reserve
Earnings after tax
EUR / USD
Hedging reserve
Earnings after tax
EUR / CNY
Hedging reserve
Earnings after tax
EUR / CHF
Hedging reserve
Earnings after tax
EUR / SEK
Hedging reserve
Earnings after tax
EUR / JPY
Hedging reserve
Earnings after tax
EUR / AUD
Hedging reserve
Earnings after tax
EUR / KRW
Hedging reserve
Earnings after tax
EUR / CAD
Hedging reserve
Earnings after tax
CZK / GBP
Hedging reserve
Earnings after tax
CZK / PLN
Hedging reserve
Earnings after tax
EUR / TWD
Hedging reserve
Earnings after tax
EUR / CZK
Hedging reserve
Earnings after tax
BRL / USD
Hedging reserve
Earnings after tax
EUR / BRL
Hedging reserve
Earnings after tax
D E C . 3 1 , 2 0 2 0
D E C . 3 1 , 2 0 1 9
+10%
–10%
+10%
–10%
951
–59
168
–527
520
–114
454
–4
287
–78
280
–32
172
–22
114
–55
123
–11
109
–1
85
–3
75
–10
50
–31
–1
71
3
–64
–947
59
–75
527
–477
114
–442
4
–287
78
–274
32
–172
22
–114
55
–117
11
–109
1
–85
3
–75
10
–50
31
0
–71
–3
64
1,472
–172
964
–473
739
–155
414
–1
87
–122
342
–13
87
–25
79
–19
190
–14
136
0
105
1
88
–6
98
–62
–1
74
6
–111
–1,472
172
–979
473
–761
155
–396
1
–85
122
–344
13
–87
25
–78
19
–190
14
–136
0
–105
–1
–88
6
–98
62
1
–74
–6
111
324
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
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 liabilities.
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, 2020, equity would have been €218 million
(previous year: €98 million) lower. If market interest rates had been 100 bps lower as of December 31, 2020, equity
would have been €241 million (previous year: €90 million) higher.
If market interest rates had been 100 bps higher as of December 31, 2020, earnings after tax would have
been €16 million lower (previous year: €55 million higher). If market interest rates had been 100 bps lower as of
December 31, 2020, earnings after tax would have been €23 million higher (previous year: €47 million lower).
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,
commodities 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. Likewise, selected
commodities were purchased on the spot market, which led to a corresponding increase in inventories. 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, 2020, earnings after tax would have been €559 million (previous year: €415 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 market
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,
the Investment Guidelines define fixed minimum values, which are to be met by taking suitable risk management
measures. In addition, exchange rates are hedged 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, 2020, earnings after tax would have been
€160 million (previous year: €118 million) higher and equity would have been €2 million (previous year:
€3 million) higher. If share prices had been 10% lower as of December 31, 2020, earnings after tax would have
been €179 million (previous year: €175 million) lower and equity would have been €2 million (previous year:
€3 million) lower.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
325
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.
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, 2020, the value at risk was €213 million (previous year: €147 million) for interest rate
risk and €148 million (previous year: €172 million) for foreign currency risk.
The entire value at risk for interest rate and foreign currency risk at the Volkswagen Financial Services subgroup
was €170 million (previous year: €170 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 prospective
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.
For hedges involving interest rate or cross-currency swaps, the Volkswagen Group is exposed to uncertainty
resulting from the IBOR reform, which may affect the timing, the amount of the IBOR-based cash flows, or the
hedged risk of the hedged item or the hedging instrument. The Volkswagen Group applies the practical expedients
allowed in connection with the amendments to the standard, irrespective of the remaining maturity of the hedged
items and hedging instruments included in the hedges, to all hedges affected by the aforementioned uncertainty
arising from the IBOR reform.
The uncertainty relates mainly to the following interest rate benchmarks: USD LIBOR, GBP LIBOR and CAD
CDOR. In the case of fair value hedges, the uncertainty relates to the identifiability of the risk component which
results from the change in the fair value used to hedge against risks of changes in the carrying amounts of
financial assets and financial liabilities. In cash flow hedges used to hedge against risks arising from changes in
future cash flows, the uncertainty relates to the highly probable requirement for hedged future variable cash
flows. The expected impact of the IBOR reform is being assessed on an ongoing basis. Any measures required
have already been initiated for certain interest rate benchmarks; for other interest rate benchmarks, they will be
initiated in good time in the future. By adapting systems and processes, these measures are intended to ensure
that new interest rate benchmarks can be rolled out to replace the interest rate benchmarks discontinued as a
result of the IBOR reform in a timely manner.
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 notional amounts of hedging instruments exposed to the uncertainty from the IBOR reform described
above are €25,466 million (previous year: €35,389 million) in total. In the fiscal year, €12,617 million of this
total was attributable to the USD LIBOR (previous year: €12,847 million), €9,147 million to the GBP LIBOR (previous
year: €13,112 million), €3,620 million to the CAD CDOR (previous year: €3,990 million) and €82 million to the
JPY LIBOR (previous year: €0 million). Compared with the previous year, we believe that the notional amounts of
AUD BBSW and NOK OIBOR hedging instruments are no longer exposed to any uncertainty from the IBOR
reform.
326
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
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
€ million
up to one year
within one to
five years
more than five
years
Dec. 31, 2020
Dec. 31, 2019
R E M A I N I N G T E R M
T O T A L
N O T I O N A L
A M O U N T
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
18,225
38,981
4,626
61,832
69,460
5,217
10,526
12,411
1,051
6,656
16,404
18,607
16,922
2,297
3,986
2,123
6,452
–
4,164
–
–
3,501
6,268
17,182
32,316
10,869
25,153
23,965
–
–
–
–
–
35,529
34,091
8,749
3,986
6,287
8,755
2,047
4,395
1,655
2,228
Cross-currency interest rate swaps
1,138
517
Notional amount of other derivatives
Hedging Interest rate risk
Interest rate swap
Hedging Currency risk
20,308
36,174
17,996
74,478
70,852
Currency forwards/Cross-currency swaps
Currency forwards/Cross-currency swaps in USD
6,636
Currency forwards/Cross-currency swaps
in other currencies
Currency options
Currency options in USD
Currency options in other currencies
Combined interest rate and currency risk hedging
13,654
82
41
4,479
1,291
–
–
608
32
–
–
11,722
11,498
14,977
21,105
82
41
188
487
Cross-currency interest rate swaps
3,870
8,088
2,542
14,501
13,499
Hedging Commodity price risk
Forward commodity contracts (aluminum)
Forward commodity contracts (copper)
Forward commodity contracts (nickel)
Forward commodity contracts (other)
1,001
333
267
96
2,099
604
1,451
47
–
–
608
–
3,099
938
2,326
143
3,041
956
2,075
188
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 transactions.
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, mainly in connection with fund investments.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
327
The notional volume with a remaining maturity of less than one year was €10.4 billion (previous year:
€18.2 billion), and the notional volume with a remaining maturity of more than one year amounted to
€0.2 billion (previous year: €– billion).
Also in connection with fund investments, the Group held credit default swaps with a notional amount of
€36.6 billion (previous year: €30.6 billion).
Existing cash flow hedges in the notional amount of €2.1 billion (previous year: €0.2 billion) were discontinued
because of a reduction in the projections. 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 0.72% 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 0.89; EUR/CNY at 8.02.
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
CAD
CHF
CNY
CZK
GBP
JPY
SEK
USD
Interest rate for
six months
Interest rate for
one year
Interest rate for
five years
Interest rate for
ten years
–0.4707
0.4178
–0.7357
2.8501
0.4538
0.0147
–0.1458
0.0495
0.1818
–0.5150
0.4386
–0.7293
2.9022
0.5548
–0.0131
–0.0958
0.0034
0.1821
–0.4645
0.8320
–0.5610
3.3500
1.1150
0.1926
–0.0375
0.1325
0.4300
–0.2650
1.2375
–0.2875
4.0700
1.2850
0.3966
0.0513
0.3880
0.9240
37. 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 ensure that resources are used as efficiently as possible 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 absolute 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 (property, 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 at the beginning and the end of the reporting period. In the reporting year, the Auto-
motive Division’s operating result was weighed down primarily by the continued negative impact of the spread
of the SARS-CoV-2 virus. This resulted in a negative value contribution of €54 million.
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 products and
product lines. The goal of generating a sustained return on investment of over 14% is anchored in Strategy
2025. The return on investment therefore serves as a consistent target in operational and strategic management
328
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
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 6.5% in the reporting period,
which is below the minimum rate of return on invested capital of 9% and on a level with the current cost of
capital of 6.5%.
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 average
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’ regulatory
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 performance.
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 requirements.
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 %
2020
2019
7,450
114,907
6.5
6.5
7,504
–54
2,776
31,463
8.8
13.2
13,019
116,016
11.2
6.3
7,328
5,691
3,219
29,684
10.8
12.8
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.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
329
38. Contingent liabilities
€ million
Dec. 31, 2020
Dec. 31, 2019
Liabilities under guarantees
Liabilities under warranty contracts
Assets pledged as security for third-party liabilities
Other contingent liabilities
525
165
19
7,912
8,621
574
192
19
7,708
8,494
It was considered improbable in the fiscal year under review that there would be an outflow of economic
resources relating to the contingent liabilities based on trust assets and liabilities of the savings and trust
entities belonging to the South American subsidiaries not included in the consolidated balance sheet.
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 €4.2 billion (previous
year: €3.7 billion), of which €3.5 billion (previous year: €3.4 billion) was attributable to investor lawsuits. Also
included are certain elements of the class action lawsuits and proceedings/misdemeanor proceedings 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. Where these lawsuits meet the definition of a
contingent liability, no disclosure was normally required because it had not been possible to measure the amount
involved.
In addition, other contingent liabilities include an amount of €0.5 billion for potential liabilities resulting
from the risk of tax proceedings instituted by the Brazilian tax authorities against MAN Latin America.
Since 2016, the U.S. National Highway Traffic Safety Administration (NHTSA) has announced further exten-
sions of the recalls for various models from different manufacturers containing certain airbags produced by the
Takata company. Recalls were also demanded by the local authorities in individual countries. The recalls also
included models manufactured by the Volkswagen Group. Appropriate provisions 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.
In line with IAS 37.92, no further statements have been made concerning estimates of financial impact or
regarding uncertainty as to the amount or maturity of provisions and contingent liabilities in relation to addi-
tional important legal cases. This is so as to not compromise the results of the proceedings or the interests of
the Company. Further information can be found under the section entitled “Litigation”.
330
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
39. Litigation
Volkswagen AG and the companies in which it is directly or indirectly invested are involved in a substantial
number of legal disputes and governmental proceedings in Germany and abroad. Such legal disputes and
other proceedings occur, among other things, in connection with products and services or in relation to employees,
public authorities, dealers, investors, customers, suppliers, or other contracting parties. For the companies in
question, these disputes and proceedings may result in payments such as fines or in other obligations or conse-
quences. 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 estimation of the objectively likely consequences
is often possible only to a very limited extent, if at all.
Various legal proceedings are pending worldwide, particularly in the USA, in which customers are asserting
purported product-related 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. Compliance
with legal or regulatory requirements (such as the GDPR) is another area in which risks may arise. This is
particularly true in gray areas where Volkswagen and the relevant public authorities may interpret the law
differently.
In connection with their business activities, Volkswagen Group companies engage in constant dialogue with
regulatory agencies including the German Kraftfahrt-Bundesamt (Federal Motor Transport Authority). It is
not possible to predict with assurance how government regulators will assess certain issues of fact and law in a
particular situation. For this reason, the possibility that certain vehicle characteristics and/or type approval
aspects may in particular ultimately be deemed deficient or impermissible cannot be ruled out. This is funda-
mentally a question of the regulatory agency's specific evaluation in a concrete situation.
Risks may also result from actions for infringement of intellectual property, including infringement of patents,
trademarks, or other third-party rights, particularly in Germany and the USA. If Volkswagen is alleged or determined
to have violated third-party intellectual property rights, it may have to pay damages, modify manufacturing
processes, or redesign products, and may be barred from selling certain products; this may result in delivery
and production restrictions or interruptions.
Criminal acts by individuals, which even the best compliance management system can never completely
prevent, are another potential source of legal risks.
Appropriate insurance has been taken out to cover these risks where they were sufficiently definite and such
coverage was economically sensible. Where necessary based on the information currently available, identified
and correspondingly measurable risks have been reflected by recognizing provisions in amounts considered
appropriate or disclosing contingent liabilities, as the case may be. As some risks cannot be assessed or can only
be assessed to a limited extent, the possibility of material loss or damage not covered by the insured amounts
or by provisions cannot be ruled out. This is, for instance, the case with regard to the legal risks assessed in
connection with the diesel issue.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
331
Diesel issue
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 Volkswagen Group vehicles with 2.0 l diesel engines in the USA. In this context, Volkswagen AG
announced that noticeable discrepancies between the figures recorded in testing and those measured 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.
The so-called diesel issue is rooted in a modification of parts of the software of the relevant engine 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. No member 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.
There are furthermore no findings that, following the publication in May 2014 of the study by the International
Council on Clean Transportation, an unlawful “defeat device” under US law was disclosed either to the
Ausschuss für Produktsicherheit (Product Safety Committee) or to the persons responsible for preparing the
2014 annual and consolidated financial statements as the cause of the high NOx emissions in certain US
vehicles with 2.0 l type EA 189 diesel engines. Rather, at the time the 2014 annual and consolidated financial
statements were being prepared, the persons responsible for preparing these financial statements remained
under the impression that the issue could be resolved with comparatively little expense.
In the course of the summer of 2015, however, it became progressively 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 that was later identified as an unlawful “defeat device” as
defined by US law. This culminated in Volkswagen's disclosure of a “defeat device” to the EPA and the California
Air Resources Board, a department of the Environmental Protection Agency of the State of California, on
September 3, 2015. According to the assessment at the time by the responsible persons dealing with the matter,
the magnitude of the costs expected to result for the Volkswagen Group (recall costs, retrofitting costs, and financial
penalties) was not fundamentally dissimilar to that in previous cases involving other vehicle manufacturers. It
therefore appeared to be manageable overall considering the business activities of the Volkswagen Group. This
assessment by Volkswagen AG was based, among other things, on the advice of a law firm engaged in the USA
for regulatory approval issues, according to which similar cases had in the past been amicably resolved with the
US authorities. The EPA's publication of the “Notice of Violation” on September 18, 2015, which the Board of
Management had not expected, especially at that time, then presented the situation in an entirely different
light.
The AUDI AG Board of Management members in office at the time in question have likewise stated that they
had no knowledge of the use of “defeat device” software that was prohibited by US law in the type V6 3.0 l TDI
engines until the EPA issued its November 2015 “Notice of Violation”.
Within the Volkswagen Group, Volkswagen AG has development 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 4.2 l diesel engines.
As a consequence of the diesel issue, numerous judicial and regulatory proceedings were initiated in various
countries. Volkswagen has in the interim succeeded in making substantial progress and ending many of these
proceedings. In the USA, Volkswagen AG and certain affiliates reached settlement agreements with various
government authorities and private plaintiffs, the latter represented by a Plaintiffs' Steering Committee in a
multidistrict litigation in the US state of California. The agreements in question include various partial consent
decrees as well as a plea agreement that resolved certain civil claims as well as criminal charges under US federal
law and the laws of certain US states in connection with the diesel issue. Although Volkswagen is firmly
committed to fulfilling the obligations arising from these agreements, a breach of these obligations cannot be
completely ruled out. In the event of a violation, significant penalties could be imposed as stipulated in the
agreements, in addition to the possibility of further monetary fines, criminal sanctions and injunctive relief.
The last remaining vehicle class settlement program for customers in the United States, which pertained to
second Generation 3.0 l TDI vehicles, ended in May 2020.
332
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
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. For all clusters (groups of vehicles)
within its jurisdiction, the Kraftfahrt-Bundesamt (KBA – German Federal Motor Transport Authority) determined
that implementation of the technical measures would not result in any adverse changes in fuel consumption,
CO2 emissions, engine output, maximum torque, and noise emissions.
Following the studies carried out by AUDI AG to check all relevant diesel concepts for possible irregularities
and retrofit potential, measures proposed by AUDI AG have been adopted and mandated by the KBA in various
recall orders pertaining to vehicle models with V6 and V8 TDI engines. AUDI AG currently anticipates that the
total cost, including recall expenses, of the ongoing largely software-based retrofit program that began in July
2017 will be manageable and has recognized corresponding balance-sheet risk provisions. AUDI AG has in the
meantime developed software updates for many of the affected powertrains and, after approval by the KBA,
already installed these in the vehicles of a large number of affected customers. The software updates still being
developed are expected to be submitted to the KBA in 2021 for approval.
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. Criminal and administrative proceedings worldwide (excluding the USA/Canada)
Criminal investigations, regulatory offense proceedings, and/or administrative proceedings have been commenced
in some countries. Criminal investigations into the core factual issues are being conducted by the Offices of the
Public Prosecutor in Braunschweig and Munich.
In May 2020, the criminal proceedings against the current Chairman of the Board of Management of
Volkswagen AG and a former member of its Board of Management (currently Chairman of the Supervisory Board)
regarding alleged market manipulation relating to capital market disclosure obligations in connection with the
diesel issue were definitively terminated by the Braunschweig Regional Court against payment in each case of a
court-imposed sum of €4.5 million, thereby also terminating to the same extent the proceedings against
Volkswagen AG as collateral participant. After permitting the charges against a former Chairman of the Board of
Management of Volkswagen AG and the related action against Volkswagen AG to go forward in September 2020,
the Braunschweig Regional Court in January 2021 terminated these proceedings – provisionally as regards the
indictment which is for the time being still pending against the former Chairman of the Board of Management,
but definitively as regards Volkswagen AG.
In September 2020, the Braunschweig Regional Court accepted the indictment of the same former Chairman
of the Board of Management of Volkswagen AG and others on charges that include fraud in connection with the
diesel issue involving type EA 189 engines and opened the main trial proceedings.
In June 2020, the Munich II Regional Court accepted the substantially unchanged indictment of the
Munich II Office of the Public Prosecutor, which also names the former Chairman of the Board of Management
of AUDI AG, and opened the main trial proceedings on charges of, among other things, fraud in connection
with the diesel issue involving 3.0 l TDI engines. Trial proceedings commenced in September 2020.
In August 2020, the Munich II Office of the Public Prosecutor issued a further indictment charging three former
members of the Board of Management of AUDI AG and others with, among other things, fraud in connection with
the diesel issue involving 3.0 l and 4.2 l TDI engines.
In connection with the diesel issue, the Stuttgart Office of the Public Prosecutor is conducting a criminal
investigation on suspicion of fraud and illegal advertising; this investigation also involves a member of the
Board of Management of Dr. Ing. h.c. F. Porsche AG.
The respective Group companies have appointed renowned law firms to clarify the matters underlying the
public prosecutor’s accusations. The Board of Management and Supervisory Board receive regular updates on
the current status.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
333
As the type approval authority of proper jurisdiction, the KBA is moreover continuously testing Audi,
Volkswagen, and Porsche brand vehicles for problematic functions. If certain functions are deemed impermissible
by the KBA, the affected vehicles are recalled pursuant to a recall order or they are brought back into compliance
by means of a voluntary service measure.
Moreover, additional administrative proceedings relating to the diesel issue are ongoing in other jurisdictions.
The companies of the Volkswagen Group are cooperating with the government authorities.
Risks may furthermore result from possible decisions by the European Court of Justice construing EU type
approval provisions.
Whether the criminal and administrative proceedings will ultimately result in fines or other consequences
for the Company, and if so what amounts these may entail, is currently subject to estimation risks. According to
Volkswagen’s estimates, the likelihood that a sanction will be imposed is 50% or less in the majority of these
proceedings. 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 less than 10%. Provisions were
recognized to a small extent.
2. Product-related lawsuits worldwide (excluding the USA/Canada)
A general possibility exists 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 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 organizations are
pending against Volkswagen AG and other Volkswagen Group companies in a number of countries including
Australia, Belgium, Brazil, England and Wales, France, Germany, Italy, the Netherlands, Portugal, and South
Africa. Alleged rights to damages and other relief are asserted in these actions. The pending actions include in
particular the following:
In Australia, various class action lawsuits had been pending against Volkswagen AG and other Volkswagen
Group companies, including the Australian subsidiaries. In December 2019, Volkswagen AG reached tentative
agreements with the Australian class action plaintiffs terminating the litigation; the court approved these agree-
ments in April 2020. Volkswagen AG anticipates that the total cost of settling these actions will be approximately
AUD 180 million. Two civil suits filed against Volkswagen AG and other Group companies by the Australian
Competition and Consumer Commission (ACCC) were settled in the second half of 2019. The settlement is not
yet legally final, however, as an appellate court has yet to rule on the amount of the fine. Depending on the
appellate court decision, Volkswagen AG continues to anticipate payment of a fine of up to AUD 125 million.
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. Given the opt-out rule, the class action potentially covers all vehicles
with type EA 189 engines purchased by consumers on the Belgian market after September 1, 2014, unless the
right to opt out is actively exercised. The asserted claims are based on purported violations of unfair competition
and consumer protection law as well as on alleged breach of contract.
In Brazil, two consumer protection class actions are pending. The first of these class actions pertains to
some 17 thousand Amarok vehicles and the second to roughly 67 thousand later generation Amaroks. In the
first class action, an appeals judgment was rendered in May 2019 that only partially upheld the lower court's
decision. This judgment initially reduced the damage liability of Volkswagen do Brasil considerably to around
BRL 172 million plus interest. This amount can increase as a result of the adjudicated inflation rate and the
assertion of individual claims alleging declines in the value of affected Amarok vehicles. The appeals judgment
remains non-final since Volkswagen do Brasil has appealed it to a higher court. So far no judgment has been
rendered in the second class action proceeding.
334
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
In Germany, Volkswagen AG and Verbraucherzentrale Bundesverband e.V. (Federation of Consumer Organizations)
entered into an out of court settlement on February 28, 2020 terminating the consumer action for model
declaratory judgment. The terms of the settlement require Volkswagen AG to offer individual settlements to
consumers who registered claims under the action for model declaratory judgment and meet the settlement
criteria. As a result, Volkswagen AG entered into individual settlements in the reporting year with some
245 thousand customers in an aggregate amount of roughly €770 million. The process of settling the consumer
action for model declaratory judgment is thus almost complete. Verbraucherzentrale Bundesverband e.V. withdrew
the action for model declaratory judgment on April 30, 2020.
In addition, various actions have been brought against companies of the Volkswagen Group in several German
regional courts by financialright GmbH, which is asserting rights assigned to it by a total of approximately
45 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). 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. To date, some
90 thousand plaintiffs have registered claims under the group litigation, for which the opt-in period has
expired. In these proceedings, the High Court in England and Wales ruled in April 2020 that the switch logic in
the EA 189 engine constituted an unlawful defeat device; the court believed that it was also bound by the findings
of the KBA (German Federal Motor Transport Authority) in this respect. In August 2020, the Court of Appeal
rejected Volkswagen's appeal against the High Court's ruling on these preliminary questions; this decision is
final. The question of liability on the part of Volkswagen was not a matter addressed by the High Court's ruling
and will be dealt with at a later stage of the proceedings. The main trial proceedings are to begin in January
2023.
In France, the French consumer organization Confédération de la Consommation, du Logement et du Cadre
de Vie (CLCV) filed a class action in September 2020 against Volkswagen Group Automotive Retail France and
Volkswagen AG for up to 950 thousand French owners and lessees of vehicles with type EA 189 engines. This is
an opt-in class action in which the affected consumers are not required to opt into the class action until a legally
final judgment is rendered.
In Italy, a class action lawsuit filed by the consumer association Altroconsumo on behalf of Italian customers
is pending before the Venice Regional Court. This litigation involves damage claims based on alleged breaches
of contract as well as claims based on purported violations of Italian consumer protection law. Some
82 thousand customers have registered for the class action, whereby the validity of the majority of the registrations
is still unclear.
In the Netherlands, Stichting Volkswagen Car Claim has brought an opt-out class action seeking declaratory
rulings. Any individual claims would then have to be established afterwards in separate proceedings. In
November 2019 the Regional Court in Amsterdam held the requests for relief to be inadmissible in part.
Proceedings in the matter are presently suspended. Furthermore, in April 2020 an opt-out class action lawsuit
seeking monetary damages on behalf of Dutch consumers was served on Volkswagen by the Diesel Emissions
Justice Foundation. It is currently unclear whether other consumers in addition to those in the Netherlands
may join this class action. The class action relates to vehicles with type EA 189 engines, among others.
In Portugal, a Portuguese consumer organization has filed an opt-out class action. Potentially, up to approxi-
mately 139 thousand vehicles with type EA 189 engines are affected in the Portuguese market. The complaint
seeks vehicle return and alleges damages as well.
In South Africa, an opt-out class action seeking damages is pending that pertains to some 8 thousand vehicles
with V6 and V8 TDI engines in addition to approximately 72 thousand vehicles with type EA 189 engines.
Furthermore, individual lawsuits and similar proceedings are pending against Volkswagen AG and other
Volkswagen Group companies in various countries; most of these lawsuits are seeking damages or rescission of
the purchase contract. In Germany, over 55 thousand individual lawsuits are currently pending. In May 2020,
the Bundesgerichtshof (BGH – Federal Court of Justice) handed down its first decision ever in an individual
product-related lawsuit in connection with the diesel issue. The BGH held that the buyer, who had purchased a
vehicle with a type EA 189 engine prior to public disclosure of the diesel issue, had a claim for damages against
Volkswagen AG. While the buyer can require reimbursement of the vehicle's purchase price, he must accept a
deduction for the benefit derived from using the vehicle and must return it to Volkswagen AG. The judgment
clarified the BGH's stance on the fundamental issues underlying a large number of the individual diesel lawsuits
then still pending in Germany. On this basis, it has since been possible to conclude settlements and thus
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
335
significantly reduce the number of individual lawsuits pending. In a series of fundamental judgments rendered
in July 2020, the BGH decided further legal issues of major importance for the litigation still pending with
regard to vehicles with type EA 189 engines. The BGH held that plaintiffs who purchased their vehicle after the
ad hoc announcement of September 22, 2015 have no claim for damages. The court furthermore ruled that
purchasers of affected vehicles are not entitled to tort interest under section 849 of the German Civil Code. The
court also made it clear that a plaintiff's potential damage claim may be completely offset by the benefit de-
rived from using the vehicle.
Volkswagen estimates the likelihood that the plaintiffs will prevail to be 50% or less in the great majority of
cases: customer class actions, complaints filed by consumer and/or environmental organizations, and individual
lawsuits. 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 remote. Since most of these actions
are still in an early procedural stage, it is in many cases not yet possible to quantify the realistic risk exposure.
Furthermore, 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 addition
to those already pending and what prospect of success such lawsuits might have.
3. 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 before the Braunschweig Regional Court.
In August 2016, the Braunschweig Regional Court issued an order referring common questions of law and fact
relevant to the investor lawsuits pending before it to the Higher Regional Court in Braunschweig for binding
declaratory rulings pursuant to the Kapitalanleger-Musterverfahrensgesetz (KapMuG – German Capital Investor
Model Declaratory Judgment Act). In this proceeding, common questions of law and fact relevant to these
actions are to be adjudicated by the Braunschweig Higher Regional Court in a single consolidated proceeding
(model case proceedings). The lawsuits filed with the Braunschweig Regional Court are 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 the pending cases that have been stayed as described. The
model case plaintiff is Deka Investment GmbH. Oral argument in the model case proceedings before the
Braunschweig Higher Regional Court began in September 2018 and will be continued at subsequent hearings.
Further investor lawsuits have been filed with the Stuttgart Regional Court against Volkswagen AG, in some
cases along with Porsche SE as joint and several debtor. A further investor action for model declaratory judgment
is pending before the Stuttgart Higher Regional Court against Porsche SE; Volkswagen AG is involved in this
action as a third party intervening in support of a party to the dispute. The Wolverhampton City Council,
Administrating Authority for the West Midlands Metropolitan Authorities Pension Fund, has been appointed
model case plaintiff. The first hearing for oral argument in these proceedings has yet to take place.
Additional investor lawsuits have been filed with various courts in Germany and the Netherlands.
Excluding the United States and Canada, claims in connection with the diesel issue totaling roughly
€9.7 billion are currently pending worldwide against Volkswagen AG in the form of investor lawsuits, judicial
applications for dunning and conciliation procedures, and claims under the KapMuG. Volkswagen AG remains
of the opinion that it duly complied with its capital market obligations. Therefore, no provisions have been
recognized for these investor lawsuits. Contingent liabilities have been disclosed where the chance of success
was estimated to be not less than 10%.
336
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
4. Proceedings in the USA/Canada
In the USA and Canada, the matters described in the EPA’s “Notices of Violation” are the subject of various types
of lawsuits and requests for information that have been filed against Volkswagen AG and other Volkswagen
Group companies, in particular by customers, investors, salespersons, and various government agencies in
Canada and the United States, including the attorneys general of several US states.
The attorneys general of five US states (Illinois, Montana, New Hampshire, Ohio, and Texas) and some munici-
palities have suits pending in state and federal courts against Volkswagen AG, Volkswagen Group of America, Inc.,
and certain affiliates, alleging violations of environmental laws. The claims asserted by Illinois have been
dismissed in full, but Illinois has appealed the dismissal of a subset of its claims. Certain claims asserted by
Montana, Ohio, Texas, two Texas counties, Hillsborough County (Florida), and Salt Lake County (Utah) have
also been dismissed, but these suits are currently proceeding as to other claims. Volkswagen has asked the US
Supreme Court to review a decision by the US Court of Appeals for the Ninth Circuit that declined to dismiss
certain claims brought by Hillsborough and Salt Lake Counties. A Texas appellate court dismissed claims
asserted by Texas against Volkswagen AG and AUDI AG for lack of personal jurisdiction. Texas has indicated
that it will seek discretionary review by the Texas Supreme Court of that decision.
In March 2019, the US Securities and Exchange Commission (SEC) filed a lawsuit against, among others,
Volkswagen AG, Volkswagen Group of America Finance, LLC, and VW Credit, Inc., asserting claims under US
federal securities law based, among other things, on alleged misstatements and omissions in connection with
the offer and sale of certain bonds and asset-backed securities. In August 2020, the US District Court for the
Northern District of California granted in part and denied in part Volkswagen’s motion to dismiss. The claims
dismissed by the court included all claims against VW Credit, Inc. related to asset-backed securities. In
September 2020, the SEC filed an amended complaint that, among other things, removed the dismissed claims.
Furthermore, in December 2019, the Canadian federal environmental regulator filed charges against
Volkswagen AG in respect of 2.0 l and 3.0 l Volkswagen and Audi diesel vehicles at the conclusion of its criminal
enforcement-related investigation into the diesel emissions issue. Volkswagen AG cooperated with the investigation
and agreed to a plea resolution addressing all of the charges. In January 2020, Volkswagen AG pleaded guilty to
the charges and agreed to pay a penalty of CAD 196.5 million, which was approved by the court. Following this
approval, the Ontario provincial environmental regulator withdrew its action against Volkswagen AG charging
a quasi-criminal enforcement-related offense with respect to certain Volkswagen and Audi 2.0 l diesel vehicles.
As to private civil law matters, in an environmental class action lawsuit seeking punitive damages on behalf of
the residents of the Province of Quebec, after authorizing the case to proceed as a class, a Quebec court ruled in
October 2020 that issues raised as to the viability of plaintiffs’ damages theory should be deferred until trial. On
that basis, the court denied a motion to dismiss by Volkswagen. The case remains in the early stages.
In line with IAS 37.92, no statements have been made concerning estimates of financial impact or regarding
uncertainty as to the amount or maturity of provisions and contingent liabilities in relation to proceedings in
the USA/Canada. This is so as to not compromise the results of the proceedings or the interests of the Company.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
337
5. Special audit
In a November 2017 ruling, 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 the members of
the Board of Management and Supervisory Board of Volkswagen AG breached their duties in connection with
the diesel issue from June 22, 2006 onwards 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
constitutional complaint with the German Federal Constitutional Court alleging infringement of its constitutional
rights. 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. In
April 2020, the Celle Higher Regional Court issued a ruling appointing a different special auditor.
Volkswagen AG has filed a constitutional complaint with the Federal Constitutional Court contesting this
formally unappealable decision as well on grounds of infringement of its constitutional rights and has suggested
joinder of this matter with its initial constitutional complaint against the decision to appoint the special
auditor. It is currently unclear when the Federal Constitutional Court will rule on the two constitutional complaints.
The constitutional complaints have no suspensory effect.
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 stayed
pending a decision by the Federal Constitutional Court in the initial special auditor litigation.
6. Risk assessment regarding the diesel issue
An amount of around €1.9 billion (previous year: €2.9 billion) has been included in the provisions for litigation
and legal risks as of December 31, 2020 to account for the currently known legal risks related to the diesel issue
based on the presently available information and the current assessments. Where adequately measurable at
this stage, contingent liabilities relating to the diesel issue have been disclosed in the notes in an aggregate
amount of €4.2 billion (previous year: €3.7 billion), whereby roughly €3.5 billion (previous year: €3.4 billion) of
this amount results from lawsuits filed by investors in Germany. The provisions recognized, the contingent
liabilities disclosed, and the other latent legal risks in the context of the diesel issue are in part subject to
substantial estimation risks given the complexity of the individual relevant factors, the ongoing coordination
with the authorities, and the fact that the fact-finding efforts have not yet been concluded. Should these legal or
estimation risks materialize, this could result in further substantial financial charges. In particular, adjustment
of the provisions recognized in light of knowledge acquired or events occurring in the future cannot be ruled
out.
In line with IAS 37.92, no further statements have been made concerning estimates of financial impact or
regarding uncertainty as to 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) filed a claim for damages against Volkswagen AG and
Porsche SE 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 being sought based on
allegedly assigned rights currently amount to approximately €2.26 billion plus interest. In April 2016, the Hanover
Regional Court formulated numerous objects of declaratory judgment that the antitrust panel of the Higher
Regional Court in Celle will decide on in model case proceedings under the KapMuG. At the first hearing in
October 2017, the court already indicated that it currently sees no justification for claims against Volkswagen AG,
both because the pleadings are not sufficiently specific and for substantive legal reasons. Volkswagen AG sees
the court's statements as confirmation that the claims against the Company are absolutely baseless. The Higher
Regional Court has yet to render a decision as many hearings have been canceled, among other things due to
motions for recusal filed by the plaintiff side (so far in all cases without success) and, more recently, as a result
of the Covid-19 pandemic.
338
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, an adverse administrative appeal ruling was rendered against MAN Latin America. MAN
Latin America challenged this ruling before the regular court in 2018. Estimation of the risk in the event the tax
authorities prevail on all points is subject to uncertainty because of differences in the amount of penalties and
interest that might then apply under Brazilian law. However, a positive outcome for MAN Latin America
remains the expectation. Should this not occur, a risk of about BRL 3.1 billion could result for the contested
period from 2009 onwards; this amount has been included in contingent liabilities in the notes.
In 2011, the European Commission conducted searches at European truck manufacturers for suspected unlawful
exchange of information during the period from 1997 to 2011; in November 2014, the Commission issued a
statement of objections to MAN, Scania, and the other truck manufacturers concerned. In its settlement decision
of July 2016, the European Commission assessed fines against 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 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 seeking damages have been received from customers. As is the case in any
antitrust proceedings, this may result in further lawsuits for damages. No provisions have been recognized or
contingent liabilities disclosed for these cases as most of them are still in an early stage and currently cannot be
assessed for this reason. In other cases, the chance of a decision by a court of last resort that awards damages
against MAN or Scania currently appears remote.
In April 2019, the European Commission issued a statement of objections to Volkswagen AG, AUDI AG, and
Dr. Ing. h.c. F. Porsche AG in connection with the Commission's antitrust investigation of the automobile industry.
These objections state the European Commission's preliminary evaluation of the matter and afford the oppor-
tunity to comment. The subject matter of the proceedings is limited to the cooperation of German automobile
manufacturers on technical questions in connection with the development and introduction of SCR systems
and gasoline particulate filters for passenger cars that were sold in the European Economic Area. The manufac-
turers are not charged with any other misconduct such as price fixing or allocating markets and customers.
After receiving access to the investigation files starting in July 2019, Volkswagen in December 2019 filed its
reply to the European Commission's statement of objections. The Chinese, South Korean, and Turkish competition
authorities have also instituted proceedings in this matter.
In October 2020, the US District Court for the Northern District of California dismissed two antitrust class
action complaints. The plaintiffs in these actions alleged that several automobile manufacturers including
Volkswagen AG and other Group companies had conspired to unlawfully increase vehicle prices in violation of
US antitrust and consumer protection law. The court held that the plaintiffs have not stated a claim for relief
because the allegations in the complaints do not plausibly support that the alleged agreements unreasonably
restrained competition in violation of US law. Plaintiffs have appealed this ruling. Plaintiffs in Canada filed
claims with similar allegations on behalf of putative classes of purchasers against several automobile manufac-
turers, including Volkswagen Group Canada Inc., Audi Canada Inc., and other Volkswagen Group companies.
Neither provisions nor contingent liabilities are stated because the early stage of the proceedings makes an
assessment of the realistic risk exposure currently impossible.
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.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
339
A settlement between Volkswagen and the Plaintiffs’ Steering Committee resolving civil claims relating to
approximately 98 thousand gasoline-powered Volkswagen, Audi, Porsche, and Bentley vehicles with automatic
transmissions received final approval from the US District Court for the Northern District of California in
February 2020.
Porsche AG has discovered potential regulatory issues relating to vehicles for various markets worldwide. There
are questions as to the permissibility of specific hardware and software components used in type approval
measurements. Differences compared with production versions may also have occurred in certain cases. Based
on the information presently available, current production is not affected, however. The issues are unrelated to
the defeat devices that were at the root of the diesel issue. Porsche AG is cooperating with the relevant authorities
including the Stuttgart Office of the Public Prosecutor, which is investigating the matter in Germany. Based on
the available information, no formal criminal investigation has been opened against the company, however.
Porsche's own internal investigations are still in progress.
Five complaints related to these matters were filed with the US District Court for the Northern District of
California. The complaints alleged that the affected vehicles used certain software and/or hardware that resulted
in increased emissions and/or overstated fuel economy estimates as compared to the results of certification
testing. The suits named Volkswagen AG, Dr. Ing. h.c. F. Porsche AG, AUDI AG, and Porsche Cars North America,
Inc. as defendants; however, each defendant was not named in all the complaints. A consolidated complaint
merging the five putative class actions into a single lawsuit was filed in January 2021. AUDI AG is no longer
named as a defendant in the consolidated complaint.
Provisions were recognized by Volkswagen Bank GmbH and Volkswagen Leasing GmbH for possible claims in
connection with financial services provided to consumers. These relate to actions involving certain features of
customer loan and leasing agreements that may toll the running of the statutory cancellation time periods.
In February 2020, Volkswagen AG and another defendant were served with a lawsuit filed by GT Gettaxi Ltd. The
lawsuit in particular alleges large damage claims. Volkswagen is assessing the alleged claims and defending
itself against them.
In line with IAS 37.92, no further statements have been made concerning estimates of financial impact or
regarding uncertainty as to 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.
340
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
40. Other financial obligations
€ million
2020
2021 – 2024
from 2025
Dec. 31, 2019
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 equipment¹
intangible assets
investment property
Obligations from loan commitments and irrevocable credit
commitments¹
Obligations from leasing and rental contracts
Miscellaneous other financial obligations
1 Prior-year figures adjusted.
7,423
913
24
3,242
329
3,257
15,189
1,412
275
–
54
172
1,712
3,626
1
1
–
3
151
997
1,153
8,836
1,189
24
3,300
652
5,966
19,968
€ million
2021
2022 – 2025
from 2026
Dec. 31, 2020
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 and irrevocable credit
commitments
Obligations from leasing and rental contracts
Miscellaneous other financial obligations
6,402
1,225
6
3,352
313
6,291
17,589
1,037
107
–
72
265
2,160
3,641
–
–
–
6
167
575
748
7,438
1,332
6
3,431
746
9,026
21,978
Other financial obligations include an amount of €0.9 billion for investments to which the Group has committed
itself, both 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. In addition, this item includes payment of the purchase price for the acquisition
of all Navistar’s outstanding shares totaling around USD 3.7 billion, because the merger agreement between
TRATON SE and Navistar contains conditions precedent and the purchase price payment cannot be capitalized at
present.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
341
41. Total fee of the Group auditor
Under the provisions of the Handelsgesetzbuch (HGB – German Commercial Code), Volkswagen AG is obliged to
disclose the total fee charged for the fiscal year by the Group auditor, Ernst & Young GmbH
Wirtschaftsprüfungsgesellschaft (previous year: PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesell-
schaft).
€ million
Financial statement audit services
Other assurance services
Tax advisory services
Other services
2020
2019
19
5
21
7
53
19
4
1
32
56
The financial statement audit services related to the audit of the consolidated financial statements of
Volkswagen AG and to the annual financial statements of German Group companies, as well as to reviews of the
interim consolidated financial statements of Volkswagen AG and of the interim financial statements of German
Group companies. Other assurance services mainly related to statutory and non-statutory audits as well as non-
statutory assurance services for capital market transactions. Other services provided by the auditors in the
reporting period focused on advice on how to implement new legal standards and advice on corporate governance
matters. The tax advisory services provided by the auditors in the reporting period related primarily to assistance
in the preparation of tax returns for employees on delegations abroad.
42. Personnel expenses
€ million
Wages and salaries
Social security, post-employment and other employee benefit costs
2020
2019
32,103
8,413
40,516
34,683
8,231
42,913
342
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
43. 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
2020
2019
261,165
307,342
568,508
10,762
17,678
586,185
79,260
665,445
265,092
304,174
569,266
9,554
18,180
587,446
80,302
667,748
44. Events after the balance sheet date
In January 2021, Volkswagen AG called a hybrid note with a principal amount of €1.25 billion, which had been
placed in 2014 via Volkswagen International Finance N.V., Amsterdam, the Netherlands (issuer). The note, including
all unpaid interest accrued up to that point, will be repaid in March 2021. Once called, the note has to be classified
as debt in accordance with IAS 32, thus reducing equity and the liquidity of the Volkswagen Group.
On January 26, 2021, the Executive Boards of MAN SE and MAN Truck & Bus SE and the employee representatives
signed an agreement covering the key points of a comprehensive realignment of MAN Truck & Bus SE. The
agreement reached provides for restructuring of all areas of the MAN Truck & Bus business. The planned
measures include reconfiguring the development and production network, with a strong focus on future
technologies, as well as cutting around 3,500 jobs across all divisions in Germany by the end of 2022.
The cost of all restructuring measures (including as yet unspecified measures in connection with the production
network) over the entire restructuring period is currently expected to be in the upper three-digit million range.
Most of the cost will be attributable to HR measures.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
343
45. Remuneration based on performance shares and phantom shares (share-based
payment)
At the beginning of 2017, the Supervisory Board of Volkswagen Aktiengesellschaft resolved to adjust the remunera-
tion system of the Board of Management with effect from January 1, 2017. The remuneration system of the
Board of Management comprises non-performance-related and performance-related components. The perfor-
mance-related remuneration now 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 payment was made in 2019.
The group of beneficiaries of the performance share plan was expanded at the end of 2018 by including
members of top management and at the end of 2019 by adding all other members of management and selected
participants below management level. Performance shares were first granted to members of top management
at the beginning of 2019. All other beneficiaries were allocated benefits on the basis of performance shares for
the first time at the beginning of 2020. The function of the performance share plan for top management and
other beneficiaries is largely identical to the performance share plan that was granted to the members of the
Board of Management. When the performance share plan was launched, members of top management were
guaranteed a minimum bonus amount for the first three years on the basis of the remuneration for 2018, while
all other beneficiaries were given a guarantee for the first three years on the basis of the remuneration for 2019.
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. For members of the Board of
Management and of top management, the annual target amount under the LTI is converted at the time of granting
into performance shares on the basis of the initial reference price of Volkswagen’s preferred shares. This annual
target amount is allocated to the respective beneficiaries as a pure calculation position. Based on the degree of
target achievement for the annual earnings per Volkswagen preferred share, the number of performance shares
is definitively determined on the basis of a three-year, forward-looking performance period. After the end of the
performance period, a cash settlement is made. The payment amount corresponds to the number of deter-
mined performance shares, multiplied by the closing reference price at the end of the period plus a dividend
equivalent.
For all other beneficiaries, the payment amount is determined by multiplying the target amount by the degree
of target achievement for the annual earnings per Volkswagen preferred share and the ratio of the closing
reference price at the end of the period, plus a dividend equivalent, to the initial reference price. Target
achievement is determined on the basis of a three-year performance period with a forward-looking horizon of
one year. As a departure from this, target achievement in 2020 will initially be determined on the basis of a one-
year forward-looking performance period, and in 2021 on the basis of a two-year performance period with a
forward-looking horizon of one year. For all beneficiaries, the payment amount under the performance share
plan is limited to 200% of the target amount; the payment amount is reduced by 20% if the average ratio of capex
to sales revenue or the R&D ratio in the Automotive Division is smaller than 5% during the performance period.
344
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
B O A R D O F M A N A G E M E N T
Total expense of the reporting period
Carrying amount of the obligation
Intrinsic value of the obligation
Fair value on granting date
Granted performance shares
of which granted during the reporting period
Dec. 31, 2020
Dec. 31, 2019
2
39
30
16
22
57
31
20
389,524
99,150
431,800
155,418
€ million
€ million
€ million
€ million
Shares
Shares
The disclosure relates to current and former members of the Board of Management.
M E M B E R S O F TO P M A N A G E M E N T
Total expense of the reporting period
Carrying amount of the obligation
Intrinsic value of the obligation
Fair value at grant date
Granted performance shares
of which granted during the reporting period
Dec. 31, 2020
Dec. 31, 2019
133
132
130
84
115
115
104
71
1,040,271
509,181
531,090
531,090
€ million
€ million
€ million
€ million
Shares
Shares
M E M B E R S O F M A N A G E M E N T A N D S E L E C T E D PA R T I C I PA N T S B E L O W M A N A G E M E N T L E V E L
In the fiscal year, beneficiary members of management and selected participants below management level were
allocated a target amount of €629 million (previous year: €– million) on which target achievement of 100% is based.
As of December 31, 2020, the total carrying amount of the obligation, which corresponded to the intrinsic value
of the liabilities, was €609 million (previous year: €– million). A total expense of €613 million (previous year:
€– million) was recognized for this commitment in the reporting period.
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. 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 contract of service. The other phantom shares were settled as
planned in fiscal year 2019. The payment amount totaled €5.3 million. In the previous year, changes in the
value of the phantom shares led to the recognition of expenses of €0.3 million.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
345
46. 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 control
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 regularly conducted on an arm’s length basis.
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. This means that Porsche SE cannot elect all shareholder representatives to
Supervisory Board of Volkswagen AG 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 deci-
sions 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
Comprehensive 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 undertaken 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 statements, a compensation obligation estimated in the low triple-digit million
euro range will arise for Volkswagen AG. New information emerging in the future could result in an increase
or decrease in the potential compensation obligation.
346
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
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
investment 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 subsidiaries
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.
> Moreover, Porsche SE indemnifies Volkswagen AG, Porsche Holding Stuttgart, Porsche AG and their subsidiaries
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 in the contribution agreement.
According to a notification dated January 4, 2021, 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,
2020. 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
347
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
2020
2019
2020
2019
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
5
4
0
872
17,660
230
1
0
11
5
5
0
1,243
16,627
181
1
0
10
0
1
0
1,160
632
1,332
1
1
4
1
1
0
1,597
646
1,312
3
1
4
€ million
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2020
Dec. 31, 2019
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
1 Prior-year figures adjusted.
4
0
0
1,164
12,207
397
1
0
25
4
0
0
1,497
12,953
326
1
0
1
0
167
31
1,477
2,250
951
–
198
2
0
170
601
1,667
2,683
1,063
–
264
0
The tables above do not contain the dividend payments (net of withholding tax) of €3,098 million (previous
year: €3,679 million) received from joint ventures and associates and dividends of €756 million (previous year:
€753 million) paid to Porsche SE.
Receivables from joint ventures are primarily attributable to loans granted in an amount of €8,534 million
(previous year: €8,290 million) as well as trade receivables in an amount of €3,349 million (previous year:
€4,375 million). Receivables from non-consolidated subsidiaries also result primarily from loans granted in an
amount of €642 million (previous year: €938 million) as well as trade receivables in an amount of €190 million
(previous year: €188 million).
348
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Impairment losses of €24 million (previous year: €56 million) were recognized on the outstanding related party
receivables. In the fiscal year, expenses of €14 million (previous year: €37 million) were incurred in this context.
In addition, the Volkswagen Group has furnished guarantees to external banks on behalf of related parties
in the amount of €354 million (previous year: €322 million).
In the reporting period, the Volkswagen Group made capital contributions of €505 million (previous year:
€668 million) to related parties.
The changes in supplies and services rendered to and received from joint ventures and their majority interests
are primarily attributable to supply relationships with the Chinese joint ventures.
As in the previous year, obligations to members of the Supervisory Board and other related parties relate
primarily to interest-bearing bank balances of Supervisory Board members and other related parties that were
invested at standard market terms and conditions 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 in the amount of €24.2 million (previous year: €50.1 million) granted to
Board of Management members.
In addition to the amounts shown above, the following expenses were recognized for benefits and remunera-
tion granted to 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 virtual shares
Post-employment benefits (service cost only)
Termination benefits
2020
2019
30,682,893
36,307,352
6,570,097
7,248,486
19,606,328
12,901,219
11,577,039
10,100,271
56,078,514
78,915,169
Benefits paid on the basis of performance shares include the cost of €6.6 million (previous year: €19.5 million)
attributable to the performance shares granted to Board of Management members under the remuneration
system applicable as from 2017.
In fiscal year 2020, the share price performance up to the settlement date led to the recognition of expense
of €– million (previous year: expense of €0.1 million) for the phantom shares.
The post-employment benefits relate to additions to pension provisions for current members of the Board
of Management. The termination benefits relate to the payments made to Mr. Sommer in connection with his
early departure from the Board of Management on June 30, 2020 and to Mr. Renschler in connection with his
early departure from the Board of Management on July 15, 2020.
Disclosures on the pension provisions for members of the Board of Management and more detailed explana-
tions of the remuneration of the Board of Management and the Supervisory Board can be found in the section
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
349
47. German Corporate Governance Code
On November 13, 2020, 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.
In December 2020, the Executive Board and Supervisory Board of TRATON SE likewise issued their declaration of
conformity with the German Corporate Governance Code and made it permanently available to the shareholders at
ir.traton.com/websites/traton/English/5000/corporate-governance.html.
In December 2020, the Executive Board and Supervisory Board of MAN SE issued their declaration of conformity
with the German Corporate Governance Code as required by section 161 of the AktG and made it permanently
available to the shareholders at www.corporate.man.eu/en/investor-relations/corporate-governance/corporate-
governance-at-man/Corporate-Governance-at-MAN.html.
48. Remuneration of the Board of Management and the Supervisory Board
€
2020
2019
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
18,578,569
13,332,515
6,903,129
17,647,682
12,746,420
14,414,075
38,228,118
45,394,271
4,770,194
571,002
5,341,196
4,547,188
779,967
5,327,155
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. In addition, Mr. Duesmann was granted compensation of lost entitlements in the amount of
€7.3 million due to the change of employer. The fringe benefits result from noncash benefits granted 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 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. For details on performance share plans for members of the Board of Manage-
ment, please refer to the information in the section entitled “Remuneration based on performance shares and
phantom shares (share-based payment)”.
Advances granted to members of the Board of Management under the performance share plan amounted to
€6.5 million as of December 31, 2020 (previous year: €12.3 million). In the fiscal year, a total of €4.3 million
(previous year: €– million) of the advances paid to members of the Board of Management were deducted
from the payment amount under the performance share plan.
350
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
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
The remuneration of the members of the Supervisory Board of Volkswagen AG is comprised entirely of non-
performance-related remuneration components. Remuneration for supervisory board work at subsidiaries
comprises a mix of non-performance-related and performance-related components.
P E N S I O N E N T I T L E M E N T S A N D B E N E F I T S TO R E T I R E D 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
On December 31, 2020, the pension provisions for members of the Board of Management amounted to
€36.6 million (previous year: €60.5 million). Current pensions are index-linked in line 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.
For former members of the Board of Management and their surviving dependents €35.9 million (previous year
adjusted: €14.5 million) were granted. Pension provisions in accordance with IFRSs for this group of individuals
amounted to €396.3 million (previous year: €373.7 million).
In connection with his departure from the Board of Management effective March 31, 2020, Mr. Schot was
granted the following amounts:
a non-performance-related component of €2.4 million (previous year: €– million),
a performance-related component of €3.8 million (previous year €– million) and
a long-term incentive component of €3.0 million (previous year: €– million).
In connection with his departure from the Board of Management effective June 30, 2020, Mr. Sommer was granted
a non-performance-related component of €1.5 million (previous year: €– million).
In connection with his departure from the Board of Management effective July 15, 2020, Mr. Renschler was granted
a non-performance-related component of €10.1 million (previous year: €– million).
The individual remuneration of the members of the Board of Management and the Supervisory Board is explained
in the remuneration report, which is part of the group management report. A comprehensive assessment of the
individual remuneration components, including the LTI in the form of the performance share plan, can also be
found there.
Wolfsburg, February 16, 2021
Volkswagen Aktiengesellschaft
The Board of Management
Consolidated Financial Statements
Responsibility Statement
351
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 16, 2021
Volkswagen Aktiengesellschaft
The Board of Management
Herbert Diess
Murat Aksel
Oliver Blume
Markus Duesmann
Gunnar Kilian
Thomas Schmall-von Westerholt
Hiltrud Dorothea Werner
Frank Witter
352
Independent auditor’s report
Consolidated Financial Statements
Independent auditor’s report
To VOLKSWAGEN AKTIENGESELLSCHAFT, Wolfsburg
REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS AND OF THE GROUP MANAGEMENT
REPORT
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 consolidated income statement and consolidated statement of
comprehensive income for the fiscal year from 1 January to 31 December 2020, and the consolidated balance
sheet as at 31 December 2020, consolidated statement of changes in equity and consolidated cash flow statement
for the fiscal year from 1 January to 31 December 2020, 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 management report,
for the fiscal year from 1 January to 31 December 2020. In accordance with German legal requirements, we have
not audited the content of the parts of the group management report specified in the appendix to the auditor’s
report and the company information stated therein that is provided outside of the annual report and is referenced
in the group management 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 Sec. 315e (1)
HGB [“Handelsgesetzbuch”: German Commercial Code] and, in compliance with these requirements, give
a true and fair view of the assets, liabilities and financial position of the Group as at 31 December 2020
and of its financial performance for the fiscal year from 1 January to 31 December 2020, and
the accompanying group management report as a whole provides an appropriate view of the Group’s
position. In all material respects, this group management report is consistent with the consolidated
financial statements, complies with German legal requirements and appropriately presents the opportuni-
ties and risks of future development. Our opinion on the group management report does not cover the
content of the parts of the group management report listed in the appendix to the auditor’s report.
Pursuant to Sec. 322 (3) 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 O P I N I O N S
We conducted our audit of the consolidated financial statements and of the group management report in
accordance with Sec. 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 promul-
gated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Our responsibilities
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 auditor’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 Art. 10 (2) f) of the EU Audit Regulation,
we declare that we have not provided non-audit services prohibited under Art. 5 (1) of the EU Audit Regulation.
Consolidated Financial Statements
Independent auditor’s report
353
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinions on the consolidated financial statements and on the group management report.
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 fiscal year from 1 January to 31 December 2020. These matters
were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming
our opinion thereon; we do not provide a separate opinion on these matters.
Below, we describe what we consider to be the key audit matters:
1. Accounting treatment of the risk provisions for the diesel issue
Reasons why the matter was determined to be a key audit matter
Due to indications of irregularities in connection with exhaust gas emissions from diesel engines in certain
vehicles of the Volkswagen Group, regulatory authorities in numerous countries (particularly in Europe, the
USA and Canada) commenced investigations in the past few years, some of which are still ongoing.
On the basis of its own findings and those of the authorities, the Volkswagen Group implemented various
measures, which differed according to the country in some cases and included hardware and software measures,
vehicle buybacks and early termination of leases as well as compensation payments to vehicle owners in some
instances. The hardware and software measures had largely been completed as of the reporting date. The risk
provisions for the diesel issue mainly include provisions for criminal, administrative and civil proceedings.
Furthermore, there are legal risks from other criminal and administrative proceedings as well as civil actions,
particularly by customers and holders of securities.
The provisions recognized as of 31 December 2020 and the contingent liabilities disclosed in the notes to
the consolidated financial statements are subject to a significant estimation risk in view of the extensive ongoing
criminal and administrative investigations and proceedings, the complexity of the different issues, developments
in court rulings and market conditions for used diesel vehicles. Whether provisions need to be recognized or
contingent liabilities disclosed for the legal risks from the diesel issue, and in what amount, depends to a large
extent on the assessments and assumptions made by the executive directors. As described in the “Key events”
section of the notes to the consolidated financial statements and in the “Report on Expected Developments,
Risks and Opportunities” section of the group management report, the executive directors considered in their
assessments in particular the fact that, based on the various measures taken to resolve the diesel issue to date,
there is still no confirmation that members of the Board of Management were aware of any deliberate manipu-
lation of the engine control unit software prior to the summer of 2015.
In light of the significance of the risk provisions and the extent of the assumptions and scope for judgment
by the executive directors, this matter was a key audit matter.
Auditor’s response
To assess the recognition and measurement of the provisions for legal risks and the disclosure of contingent
liabilities from legal risks arising from the diesel issue, we considered, in particular, work and opinions by
experts engaged by the executive directors of the Volkswagen Group in addition to available official notices and
court judgments as part of a risk-based selection of significant transactions. Moreover, with the involvement of
our own legal and forensic specialists, we held regular meetings with the internal Legal department and the
external lawyers engaged by the executive directors of the Volkswagen Group to obtain oral explanations about
the current developments and reasons leading to the assessments of the ongoing proceedings. We compared
confirmations received from external lawyers with the risk assessment by the executive directors. We also
regularly reviewed publicly available information, such as media reports, to assess the completeness of the
provisions.
354
Independent auditor’s report
Consolidated Financial Statements
In addition, we reviewed on a sample basis the input factors (quantity and value) of the provisions and contin-
gent liabilities for individual matters using statements of claims received, settlement agreements and court
judgments. With regard to the valuation, we also compared the current assessments by the executive directors
with past experience, where observable. For significant additions to provisions, we examined whether they were
due to new matters or to changes in the estimation inputs and obtained corresponding evidence. To analyze
significant utilizations of the provisions, we examined a sample to determine whether they were based on
settlement agreements or court judgments and whether corresponding payments were made.
Furthermore, inquiries were made of the executive directors and the external law firms engaged to carry out
the investigations, with the assistance of our own forensic specialists, in order to understand and assess the investi-
gations undertaken in terms of when former and current members of the Board of Management became aware
of the diesel issue.
Our audit procedures did not lead to any objections relating to the accounting treatment of the risk provisions
for the diesel issue.
Reference to related disclosures
The information presented and the statements made in connection with the diesel issue, including the comments
on the underlying causes, on when the members of the Board of Management became aware of the issue and
on the effects on the accompanying financial statements are contained in the “Key events” and “Litigation”
sections of the notes to the consolidated financial statements and in the “Report on Risks and Opportunities”
section of the group management report, subsection “Legal risks.”
2. Recoverability of goodwill and the acquired brand names
Reasons why the matter was determined to be a key audit matter
The result of the impairment testing of goodwill and the acquired brand names is highly dependent on the
executive directors’ estimate of future cash flows and which discount rates they use. The recoverable amount of
the cash-generating units is calculated on the basis of their value in use, applying discounted cash flow models.
The COVID-19 pandemic has negatively affected the cash inflows of the Volkswagen Group and its brands as
a result of the global drop in demand and the temporary production stops. The executive directors of the
Volkswagen Group expect cash inflows to continue to be affected in subsequent years.
In addition, the executive directors have scope for judgment in determining the cash-generating units
for impairment testing, in determining the discount rates used and the long-term growth rates assumed.
In view of the foregoing, the materiality of goodwill and the acquired brand names in relation to total
assets, the complexity of the valuation and the judgment exercised during valuation, the impairment testing of
goodwill and the acquired brands was a key audit matter.
Consolidated Financial Statements
Independent auditor’s report
355
Auditor’s response
During our audit, we involved valuation specialists to assess among other things the methodology used to
perform the impairment tests in light of the provisions of IAS 36. We also checked the arithmetical accuracy of
the valuation models used.
On the basis of the Volkswagen Group’s internal reporting, we assessed for the acquired brands whether the
brands represent the lowest level within the Group at which independent cash inflows are generated and
whether goodwill is monitored at brand level for internal management purposes.
We analyzed the planning process established in the Volkswagen Group and tested the operating effectiveness
of the controls implemented in the planning process. As a starting point, we compared the Volkswagen Group’s
five-year operational plan prepared by the executive directors and acknowledged by the Supervisory Board with
the forecast figures in the underlying impairment tests. We discussed the key planning assumptions for selected
brands to which significant goodwill and acquired brand names are allocated with the executive directors
and compared them with past earnings and cash inflows to assess the planning accuracy. Our plausibility
testing of the inputs for the impairment tests was based among other things on a comparison with general and
industry-specific market expectations underlying the expected cash inflows. We discussed with the executive
directors the effects of the COVID-19 pandemic on the development of cash inflows in the individual cash-
generating units and compared them with current market expectations. With respect to the rollforward from
the medium-term plan to the long-term forecast, we assessed the plausibility of the assumed growth rates by
comparing them with observable data.
To assess the discount rates and growth rates applied, we analyzed the inputs used to determine them on
the basis of publicly available information and obtained an understanding of the methods used with regard to
the relevant requirements of IAS 36.
We also assessed the sensitivity analyses performed by the executive directors in order to estimate any
potential impairment risk associated with a reasonably possible change in one of the significant assumptions
used in the valuation.
Our procedures did not lead to any reservations relating to the recoverability of goodwill and the acquired
brand names.
Reference to related disclosures
With regard to the recognition and measurement policies applied for goodwill and the acquired brand names,
refer to the disclosure on intangible assets in the “Accounting policies” section of the notes to the consolidated
financial statements. For the related disclosures on judgments by the executive directors and sources of estima-
tion uncertainty as well as the disclosures on goodwill and the acquired brand names, refer to the disclosure in
the “Accounting policies” and “Estimates and assumptions by management” sections and in note 12 “Intangible
assets” in the “Balance Sheet disclosures” section of the notes to the consolidated financial statements.
3. Capitalization and recoverability of development costs
Reasons why the matter was determined to be a key audit matter
Key criteria for capitalizing development costs are the ability to implement the development projects (including
their technical feasibility, the intention to complete them and the ability to use them) as well as the realization
of an expected future economic benefit. The complexity of research and development projects is mounting in
view of the technological transformation of the Volkswagen Group and the resulting new development areas
(including high investments in electromobility, software and autonomous driving). Assessments of project
feasibility are playing an ever greater role in this connection and entail the use of considerable judgment.
Where capitalized development costs are not yet subject to amortization, they must be tested for impairment
as part of the related cash-generating unit at least annually at the level of the brands defined as cash-generating
units. The assumption of realizing future economic benefits and the result of testing the recoverability of
capitalized development costs during the analyses and impairment tests performed are highly dependent on
the executive directors’ estimate of future cash flows and which discount rates they use. The recoverable
amount of the cash-generating units is calculated on the basis of their value in use, applying discounted cash
flow models. The COVID-19 pandemic has negatively affected the cash inflows of the Volkswagen Group and its
brands as a result of the global drop in demand and the temporary production stops. The executive directors of
the Volkswagen Group expect cash inflows to continue to be affected in subsequent years.
356
Independent auditor’s report
Consolidated Financial Statements
In light of the foregoing, the materiality of the capitalized development costs in relation to total assets, the total
amount of research and development costs and the judgment exercised during valuation, the capitalization of
development costs and the impairment test were a key audit matter.
Auditor’s response
During our audit, we examined the process for identifying the research and development costs, particularly
with reference to the criteria for capitalization. In this connection, we tested process-related controls, carried
out analytical audit procedures such as comparisons of project budgets and capitalization rates and inspected
documentation on project feasibility. We also assessed the future economic benefit criterion for capitalization
based on the assumptions regarding the cash inflows of the cash-generating unit to which the capitalized
development work is allocated.
Moreover, we involved valuation specialists to assess among other things the methodology used to determine
the relevant cash-generating units and perform the impairment tests in light of the provisions of IAS 36. We
also checked the arithmetical accuracy of the valuation models used, analyzed the planning process established
in the Volkswagen Group and tested the operating effectiveness of the controls implemented in the planning
process.
We discussed with the executive directors the key planning assumptions for a sample we selected of brands
with significant capitalized development costs and compared them with past earnings and cash inflows to
assess the planning accuracy. Our plausibility testing of the inputs for the impairment tests was based among
other things on a comparison with general and industry-specific market expectations underlying the expected
cash inflows. We discussed with the executive directors the effects of the COVID-19 pandemic on the develop-
ment of cash inflows in the individual cash-generating units and compared them with current market expec-
tations. Furthermore, we analyzed the inputs used to determine the discount rates on the basis of publicly
available information and obtained an understanding of the calculation with regard to the relevant requirements
of IAS 36.
We also assessed the sensitivity analyses performed by the executive directors in order to estimate any
potential impairment risk associated with a reasonably possible change in one of the significant assumptions
used in the valuation.
Our procedures did not lead to any reservations relating to the recognition and recoverability of the capitalized
development costs.
Reference to related disclosures
With regard to the recognition and measurement policies applied for capitalized development costs, refer to the
disclosure on intangible assets in the “Accounting policies” section of the notes to the consolidated financial
statements. For the related disclosures on judgments by the executive directors and sources of estimation uncer-
tainty as well as the disclosures on capitalized development costs, refer to the disclosures in the “Accounting
policies” and “Estimates and assumptions by management” sections and in note 12 “Intangible assets” in the
“Balance Sheet disclosures” section of the notes to the consolidated financial statements.
Consolidated Financial Statements
Independent auditor’s report
357
4. Completeness and measurement of provisions for warranty obligations
Reasons why the matter was determined to be a key audit matter
Obligations for warranty claims are calculated on the basis of estimated warranty costs at the level of individual
models and model years by reference to claims to date, including their nature, frequency and remediation cost,
and by reference to historical and expected policy on ex gratia arrangements. Where unusual individual tech-
nical risks are anticipated, an individual assessment is made whether and, if so, to what extent measures are
required to remediate them and provisions need to be recognized.
The amount of provisions for warranty claims is significant overall. Besides the general use of judgment in
selecting the valuation methods and assessing the obligations, increasing estimation uncertainty stems from
the rise in hybrid and battery electric vehicles entering the market and a lack of experience of their susceptibility
to faults. In light of the amount of the provisions and the judgment exercised during valuation, the completeness
and measurement of provisions for warranty obligations was a key audit matter.
Auditor’s response
With regard to the accounting for the provisions for warranty obligations, we examined the underlying processes
for recording previous claims, calculating and valuing the estimated future warranty costs and recognizing the
provisions, and tested controls.
In light of the uncertainty in relation to the estimated future losses, we assessed the underlying valuation
assumptions, especially the expected claim rate per vehicle and the cost thereof, using analyses of historical
data. Where there was a lack of past experience, we obtained an understanding of the assumptions made by the
executive directors and tested their plausibility using historical data for comparable items. Using the calcula-
tion bases derived from these historical data, we checked the estimated costs for expected claims per vehicle. To
assess the completeness of the provisions, we also reconciled the number of sold vehicles used to recognize the
provision with the sales volumes. We obtained an understanding of the method used for calculating the provisions,
including the discounting, and reperformed the calculations.
For significant individual technical risks, we assessed the expected incidence of technical faults and the
calculation of expected costs per claim/vehicle using documentation on previous claims, inspecting resolutions
passed by technical committees and holding discussions with the departments responsible.
Our audit procedures did not lead to any reservations relating to the completeness and valuation of provisions
for warranty obligations.
Reference to related disclosures
With regard to the recognition and measurement policies applied in accounting for provisions for warranty
obligations, refer to the disclosures in the “Accounting policies” and “Noncurrent and current other provisions”
sections of the notes to the consolidated financial statements.
358
Independent auditor’s report
Consolidated Financial Statements
5. Calculation of the expected residual values of lease assets during impairment testing
Reasons why the matter was determined to be a key audit matter
Lease assets comprise vehicles under leases that are due to expire. There is an impairment risk for these vehicles
which is primarily dependent on the residual value expected at the end of the lease. The expected residual value of
these vehicles is a significant area which is subject to estimation uncertainty and in which the executive directors
of Volkswagen Financial Services AG exercise judgment.
The expected residual value is reviewed quarterly using internal and external marketing results and on the
basis of estimates of future market price development.
In light of the existing estimation uncertainty, the judgment exercised in calculating the residual values
and the significance of the amount for impairment testing, the calculation of expected residual values was a
key audit matter. As it is not possible to make a conclusive assessment of the impact of the global COVID-19
pandemic, the estimation uncertainty in relation to the calculation of the expected residual values is significantly
heightened.
Auditor’s response
During our audit, we analyzed the process implemented by the executive directors of Volkswagen Financial Ser-
vices AG for monitoring and calculating the residual values to identify any risks of material misstatement and
obtained an understanding of the process steps and controls. On this basis, we tested the operating effective-
ness of the implemented controls over the calculation of the expected residual values. To assess the forecasting
model used to calculate the residual values, we assessed the validation plan on the basis of the model design
and analyzed the validation procedures performed and the backtesting results as to whether any need for an
impairment allowance was identified and whether there had been an unusual number of outliers. Furthermore,
we assessed whether the assumptions underlying the forecasting model and the inputs used for calculating the
expected residual values were clearly documented. We obtained evidence for the main inputs and assumptions
used for age, mileage and lifecycle phase of the vehicles to calculate the residual values and examined them for
currentness and transparency. We assessed whether the marketing assumptions used reflect current marketing
results and industry-specific and general market expectations.
Our audit procedures did not lead to any reservations relating to the calculation of the expected residual
values of the lease assets during impairment testing.
Reference to related disclosures
With regard to the recognition and measurement policies applied for lease assets, refer to the disclosure on
intangible assets in the “Accounting policies” section of the notes to the consolidated financial statements. For
the related disclosures on judgments by the executive directors and sources of estimation uncertainty, refer to
the disclosures in the “Accounting policies” and “Estimates and assumptions by management” sections and
in note 14 “Lease assets and investment property” in the “Balance Sheet disclosures” section of the notes to
the consolidated financial statements.
Consolidated Financial Statements
Independent auditor’s report
359
OT H E R I N F O R M AT I O N
The Supervisory Board is responsible for the Report of the Supervisory Board. The executive directors and the
Supervisory Board are responsible for the declaration pursuant to Sec. 161 AktG [“Aktiengesetz”: German Stock
Corporation Act] on the German Corporate Governance Code, which is part of the group corporate governance
declaration. In all other respects, the executive directors are responsible for the other information. The other
information comprises the parts of the annual report listed in the appendix.
Our 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 opinion or any other form of assurance 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 comply,
in all material respects, with IFRSs as adopted by the EU and the additional requirements of German commer-
cial law pursuant to Sec. 315e (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 performance of
the Group. In addition, the executive directors are responsible for such internal control as they have deter-
mined necessary to enable the preparation of consolidated financial statements that are free from material mis-
statement, 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.
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 responsi-
ble 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 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 con-
sistent 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 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 accordance
with Sec. 317 HGB and the EU Audit Regulation and in compliance with German Generally Accepted Standards
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.
360
Independent auditor’s report
Consolidated Financial Statements
We exercise professional 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 opinions.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting 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 order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an 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 dis-
closures in the consolidated financial statements and in the group management report or, if such disclo-
sures are inadequate, to modify our respective opinions. Our conclusions are based on the audit evidence
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.
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, liabilities,
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 Sec. 315e (1) HGB.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express 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 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.
Consolidated Financial Statements
Independent auditor’s report
361
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 reasonably
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
precludes public disclosure about the matter.
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
Report on the assurance in accordance with Sec. 317 (3b) HGB on the electronic reproduction of the consolidated financial
statements and the group management report prepared for publication purposes
Opinion
We have performed assurance work in accordance with Sec. 317 (3b) HGB to obtain reasonable assurance about
whether the reproduction of the consolidated financial statements and the group management report (herein-
after the “ESEF documents”) contained in the attached electronic file VWAG_JFB_Konzern_2020-12-31 and
prepared for publication purposes complies in all material respects with the requirements of Sec. 328 (1) HGB
for the electronic reporting format (“ESEF format”). In accordance with German legal requirements, this assur-
ance only extends to the conversion of the information contained in the consolidated financial statements and
the group management report into the ESEF format and therefore relates neither to the information contained
in this reproduction nor to any other information contained in the abovementioned electronic file.
In our opinion, the reproduction of the consolidated financial statements and the group management report
contained in the abovementioned attached electronic file and prepared for publication purposes complies in all
material respects with the requirements of Sec. 328 (1) HGB for the electronic reporting format. We do not
express any opinion on the information contained in this reproduction nor on any other information con-
tained in the abovementioned file beyond this reasonable assurance opinion and our audit opinion on the
accompanying consolidated financial statements and the accompanying group management report for the
fiscal year from 1 January 2020 to 31 December 2020 contained in the “Report on the audit of the consolidated
financial statements and of the group management report” above.
Basis for the opinion
We conducted our assurance work on the reproduction of the consolidated financial statements and the group
management report contained in the abovementioned attached electronic file in accordance with Sec. 317 (3b)
HGB and Exposure Draft of IDW Assurance Standard: Assurance in Accordance with Sec. 317 (3b) HGB on the
Electronic Reproduction of Financial Statements and Management Reports Prepared for Publication Purposes
(ED IDW AsS 410). Our responsibilities under that standard are further described in the “Group auditor’s
responsibilities for the assurance work on the ESEF documents” section. Our audit firm applied the requirements
for quality control systems set forth in IDW Standard on Quality Control: “Requirements for Quality Control in
Audit Firms” (IDW QS 1).
362
Independent auditor’s report
Consolidated Financial Statements
Responsibilities of the executive directors and the Supervisory Board for the ESEF documents
The executive directors of the Company are responsible for the preparation of the ESEF documents including the
electronic reproduction of the consolidated financial statements and the group management report in accordance
with Sec. 328 (1) Sentence 4 No. 1 HGB and for the tagging of the consolidated financial statements in accordance
with Sec. 328 (1) Sentence 4 No. 2 HGB.
In addition, the executive directors of the Company are responsible for such internal control as they have
considered necessary to enable the preparation of ESEF documents that are free from material non-compliance
with the requirements of Sec. 328 Abs. 1 HGB for the electronic reporting format, whether due to fraud or error.
The executive directors of the Company are also responsible for the submission of the ESEF documents
together with the auditor’s report and the attached audited consolidated financial statements and the audited
group management report as well as other documents to be published to the operator of the Bundesanzeiger
[German Federal Gazette].
The Supervisory Board is responsible for overseeing the preparation of the ESEF documents as part of the
financial reporting process.
Group auditor’s responsibilities for the assurance work on the ESEF documents
Our objective is to obtain reasonable assurance about whether the ESEF documents are free from material non-
compliance with the requirements of Sec. 328 (1) HGB, whether due to fraud or error. We exercise professional
judgment and maintain professional skepticism throughout the engagement. We also:
Identify and assess the risks of material non-compliance with the requirements of Sec. 328 (1) HGB, whether
due to fraud or error, design and perform assurance procedures responsive to those risks, and obtain assurance
evidence that is sufficient and appropriate to provide a basis for our assurance opinion.
Obtain an understanding of internal control relevant to the assurance on the ESEF documents in order to
design assurance procedures that are appropriate in the circumstances, but not for the purpose of expressing
an assurance opinion on the effectiveness of these controls.
Evaluate the technical validity of the ESEF documents, i.e., whether the electronic file containing the ESEF
documents meets the requirements of Delegated Regulation (EU) 2019/815, in the version valid as of the
reporting date, on the technical specification for this electronic file.
Evaluate whether the ESEF documents enable an XHTML reproduction with content equivalent to the audited
consolidated financial statements and to the audited group management report.
Evaluate whether the tagging of the ESEF documents with Inline XBRL technology (iXBRL) enables an appropriate
and complete machine-readable XBRL copy of the XHTML reproduction.
Further information pursuant to Art. 10 of the EU Audit Regulation
We were elected as group auditor by the Annual General Meeting on 30 September 2020. We were engaged by the
Supervisory Board on 23 November 2020. We have been the group auditor of VOLKSWAGEN AKTIENGESELLSCHAFT
since fiscal year 2020.
We declare that the opinions expressed in this auditor’s report are consistent with the additional report to
the Audit Committee pursuant to Art. 11 of the EU Audit Regulation (long-form audit report).
German Public Auditor responsible for the engagement
The German Public Auditor responsible for the engagement is Martin Matischiok.
Consolidated Financial Statements
Independent auditor’s report
363
A P P E N D I X TO T H E A U D I TO R ’ S R E P O R T:
1. Parts of the group management report whose content is unaudited
We have not audited the content of the following part of the group management report:
The group corporate governance declaration which is published on the website stated in the group management
report and is part of the group management report.
2. Further other information
The other information comprises the following parts of the annual report, of which we obtained a copy prior to
issuing this auditor’s report:
To our shareholders
Divisions
Further information
Responsibility statement
Non-financial report
but not the consolidated financial statements, not the group management report disclosures whose content is
audited and not our auditor’s report thereon.
3. Company information outside of the annual report referenced in the group management report
The group management report contains other cross-references to webpages of the Group. We have not audited
the content of the information to which these cross-references refer.
Hanover, 26 February 2021
Ernst & Young GmbH
Wirtschaftsprüfungsgesellschaft
Meyer
Wirtschaftsprüfer
[German Public Auditor]
Matischiok
Wirtschaftsprüfer
[German Public Auditor]
364
Five-Year Review
Additional Information
Five-Year Review
1 Adjusted.
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
2020
2019
2018
20171
2016
9,157
1,108
8,049
8,900
1,633
7,267
665
295
370
222,884
–183,937
38,947
–18,407
–9,399
–1,466
9,675
1,991
11,667
–2,843
8,824
10,956
1,347
9,609
10,823
2,112
8,712
668
295
373
252,632
–203,490
49,142
–20,978
–9,767
–1,437
16,960
1,396
18,356
–4,326
14,029
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
40,516
42,913
41,158
38,950
37,017
302,170
194,944
497,114
128,783
1,734
202,921
165,410
497,114
300,608
187,463
488,071
123,651
1,870
196,497
167,924
488,071
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
Cash flows from operating activities
24,901
17,983
7,272
–1,185
9,430
Cash flows from investing activities attributable to operating
activities
Cash flows from financing activities
1 Adjusted.
18,372
7,637
20,076
–865
19,386
24,566
18,218
17,625
16,797
9,712
Additional Information
Financial Key Performance Indicators
365
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
2020
2019
2018
20171
2016
17.5
18.2
4.3
5.2
4.0
25.9
- 16.4
- 14.3
7.6
3.7
24,462
6.5
13.6
10.1
6.1
12.0
24.7
15.4
4.4
38.1
0.7
8.8
13.2
19.5
17.0
6.7
7.3
5.6
25.3
+ 0.5
+ 5.7
6.7
6.5
29,706
11.2
14.5
9.4
6.6
8.4
26.4
17.0
4.8
37.6
7.9
10.8
12.8
19.7
17.5
5.9
6.6
5.2
25.6
+ 1.1
+ 2.7
6.8
5.5
26,707
11.0
9.2
9.4
6.6
8.2
23.3
17.6
5.0
37.9
11.2
9.9
12.7
19.0
17.0
6.0
6.0
5.0
25.8
+ 3.7
+ 5.3
6.7
5.7
26,094
12.1
6.0
9.0
6.5
9.7
23.7
16.3
5.1
36.9
6.0
9.8
13.7
18.9
17.0
3.3
3.4
2.5
22.7
+ 3.8
+ 1.1
7.3
2.5
18,999
8.2
10.9
8.6
6.9
12.5
23.4
15.9
5.5
31.4
8.3
10.8
12.5
1 Adjusted.
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 the section entitled “Return on investment (ROI) and value contribution in the reporting period” in the chapter entitled
“Results of Operations, Financial Position and Net Assets”.
6 Ratio of property, plant and equipment to total assets.
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.
366
Glossary
Additional Information
Glossary
Selected terms at a glance
Big Data
Modular Electric Drive Toolkit (MEB)
Test procedure
Big data is a term used to describe new ways of
The modular system is for the manufacturing of
Levels of fuel consumption and exhaust gas
analyzing and evaluating data volumes that are
electric vehicles. The MEB establishes parameters
emissions for vehicles registered in Europe were
too vast and too complex to be processed using
for axles, drive systems, high-voltage batteries,
previously measured on a chassis dynamometer
manual or conventional methods.
wheelbases and weight ratios to ensure a vehicle
with the help of the “New European Driving
optimally fulfills the requirements of e-mobility.
Cycle (NEDC)”. Since fall 2017, the existing test
Hybrid drive
The production of the first vehicles based on the
procedure for emissions and fuel consumption
Drive combining two different types of engine
MEB started into series production in 2020.
used in the EU is being gradually replaced by the
and energy storage systems (usually an internal
Worldwide Harmonized Light-Duty Vehicles Test
combustion engine and an electric motor).
Modular Transverse Toolkit (MQB)
Procedure (WLTP). This has been in place for new
As an extension of the modular strategy, this
vehicle types since fall 2017 and for all new
Hybrid notes
platform can be deployed
in vehicles whose
vehicles since fall 2018. The aim of this new test
Hybrid notes issued by Volkswagen are classified
architecture permits a transverse arrangement of
cycle is to state CO2 emissions and fuel consump-
in their entirety as equity. The issuer has call
the engine components. The modular perspective
tion
in a more practice-oriented manner. A
options at defined dates during their perpetual
enables high synergies to be achieved between
further important European regulation is the
maturities. They pay a fixed coupon until the
the vehicles in the Volkswagen Passenger Cars,
Real Driving Emissions (RDE) for passenger cars
first possible call date, followed by a variable
Volkswagen Commercial Vehicles, Audi, SEAT and
and light commercial vehicles, which also moni-
rate depending on their terms and conditions.
ŠKODA brands.
tors emissions using portable emission measur-
ing technology in real road traffic.
Industry 4.0
Plug-in hybrid
Describes the fourth industrial revolution and
Performance levels of hybrid vehicles. Plug-in
Turntable concept
the systematic development of real-time and
hybrid electric vehicles (PHEVs) have a larger
Concept of flexible manufacturing enabling the
intelligent networks between people, objects and
battery with a correspondingly higher capacity
production of different models in variable daily
systems, exploiting all of the opportunities of
that can be charged via the combustion engine,
volumes within a single plant, as well as offering
information technology along the entire value
the brake system, or an electrical outlet. This
the facility to vary daily production volumes of
added chain.
Intelligent machines,
inventory
increases the range of the vehicle.
one model between two or more plants.
systems and operating equipment that inde-
pendently exchange information, trigger actions
Premium Platform Electric (PPE)
Vocational groups
and control each other will be integrated into
A new vehicle platform for all-electric premium,
For example, electronics, logistics, marketing, or
production and logistics at a technical level. This
sport and luxury class vehicles. The components
finance. A new teaching and learning culture is
offers tremendous versatility, efficient resource
and functions of this platform are especially
gradually being established by promoting
utilization, ergonomics and the integration of
tailored to meet the high demands of this seg-
training in the vocational groups. The specialists
customers and business partners in operational
ment. This platform enables high synergies to be
are actively involved in the teaching process by
processes throughout the entire value chain.
achieved particularly between the Audi, Porsche
passing on their skills and knowledge to their
and Bentley brands.
colleagues.
Liquefied Natural Gas (LNG)
LNG is needed so that natural gas engines can be
Rating
Zero-Emissions Vehicle (ZEV)
used in long-distance trucks and buses, since this
Systematic assessment of companies in terms of
Vehicles that operate without exhibiting any
is the only way of achieving the required energy
their credit quality. Ratings are expressed by
harmful emissions
from combustion gases.
density.
means of rating classes, which are defined
Examples of zero-emissions vehicles
include
differently by the individual rating agencies.
purely battery-powered electric vehicles (BEV) or
fuel cell vehicles.
Additional Information
Glossary
367
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.
Scheduled Dates 2021
F I N A N C I A L C A L E N D E R
March 16
Volkswagen AG Annual Media Conference
and Investor Conference
May 6
Interim Report January – March
July 29
Half-Yearly Financial Report
October 28
Interim Report January – September
Contact Information
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