Results of Operations, Financial Position and Net Assets

Against the backdrop of a challenging market environment and intensifying competition in the automotive sector, the Volkswagen Group generated significantly higher sales revenue in the reporting year while maintaining its operating result at the same level as in the previous year.

The Volkswagen Group’s segment reporting comprises the four reportable segments of Passenger Cars and Light Commercial Vehicles, Commercial Vehicles, Power Engineering and Financial Services, in compliance with IFRS 8 and in line with the Group’s internal financial management and reporting structures.

The reconciliation covers activities and other operations that do not, by definition, constitute segments. These include the unallocated Group financing activities. Consolidation adjustments between the segments (including the holding company functions) are also contained in the reconciliation. The purchase price allocations for Porsche Holding Salzburg and Porsche, Scania, MAN and Navistar 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 segments are identical to the business areas of the same name. The Financial Services Division corresponds to the Financial Services segment.

At Volkswagen, segment profit or loss is measured on the basis of the operating result.

IFRS 17 – INSURANCE CONTRACTS

IFRS 17 specifies new accounting rules for insurance contracts. First-time application resulted in an insignificant change in equity as of January 1, 2023 and January 1, 2022, respectively. This is due primarily to the changed system for calculating provisions related to the insurance business. In addition, netting cash flows when measuring the provisions also led to a reduction of €0.7 billion each in assets and provisions related to the insurance business as of January 1, 2023. The change in the system for recognizing income and expenses has no material effect on the income statement. Prior-year figures have been adjusted accordingly.

SCOUT MOTORS INC.

Under the Volkswagen Group’s North America strategy, Scout Motors Inc., Arlington, Virginia/USA, a wholly owned subsidiary of Volkswagen Finance Luxemburg, Strassen/Luxembourg, was established in fiscal year 2022. A new vehicle brand is to be created under the name of Scout to distribute electrified all-terrain vehicles and pickups in the USA from 2026. In order to finance the creation of the Scout brand, as well as vehicle development and production planning, an amount of around USD 493 million was contributed to the company in fiscal year 2023. The company has been included in the Volkswagen consolidated financial statements since January 1, 2023.

ACQUISITION OF SHARES IN XPENG INC.

On December 6, 2023, Volkswagen acquired 4.99% of the ordinary shares of the electric vehicle company XPeng Inc., Cayman Islands, (XPeng) at a purchase price totaling USD 706 million. The realization of a forward purchase transaction dating from July 26, 2023 resulted in a non-cash gain of €74.2 million in fiscal year 2023, which is recognized in the other financial result. Along with the agreement to acquire the shares, a technological framework agreement was signed with Guangdong Xiaopeng Motors Technology Co. Ltd., Guangzhou/China, a subsidiary of XPeng, for the joint development of electric vehicles in China, among other things. The equity investment in XPeng is measured at fair value through other comprehensive income.

HORIZON ROBOTICS INC.

On December 7, 2023, Volkswagen acquired preferred shares of Horizon Robotics Inc., Cayman Islands (Horizon Robotics), a leading provider of energy-efficient computing platforms for autonomous driving in China, from Horizon Robotics at a purchase price of USD 200 million and issued a convertible loan to Horizon Robotics in an amount of USD 800 million. Both investments are classified as debt instruments in the financial statements and measured at fair value through profit or loss. The measurement resulted in non-cash gains of €0.7 million in fiscal year 2023, which are recognized in the other financial result.

To promote the development of highly automated and autonomous driving in China, Volkswagen has also agreed the establishment of a joint venture with Horizon Robotics. On December 14, 2023, Volkswagen invested an amount of CNY 2 billion to this end in exchange for an interest of 60% in the new company, CARIZON (Beijing) Technology Company Limited, Beijing/China (CARIZON). In addition, Volkswagen has undertaken to make future capital contributions of up to CNY 8.4 billion to the joint venture.

SALE OF OOO VOLKSWAGEN GROUP RUS

On May 18, 2023, the Volkswagen Group completed the sale of its shares in OOO Volkswagen Group Rus (Volkswagen Group Rus), Kaluga/Russia, and that company’s local subsidiaries (OOO Volkswagen Components and Services, Kaluga/Russia, OOO Scania Leasing, Moscow/Russia, OOO Scania Finance, Moscow/Russia, OOO Scania Insurance, Moscow/Russia) to OOO ART-FINANCE, Moscow/Russia, which is supported by the Russian dealer

AO Avilon Automotive Group, Moscow/Russia. On registration of the transaction on May 22, 2023, ownership of the shares in Volkswagen Group Rus was transferred from the seller to the buyer. The transaction comprises the production facilities in Kaluga, the importer structure of the Group brands Volkswagen Passenger Cars, Volkswagen Commercial Vehicles, Audi, Škoda, Bentley, Lamborghini and Ducati for potential after-sales business and the warehouse activities, as well as Scania’s financial services activities, including all associated employees.

In this context, the Volkswagen Group had already made significant impairments in fiscal year 2022 and recognized appropriate provisions. The selling price amounted to €0.1 billion. The deconsolidation of the affected companies resulted in a loss of €0.4 billion in fiscal year 2023, which is reported in the other operating result. This result is split between the Automotive Division (€−0.4 billion) and the Financial Services Division (€0.1 billion). The loss is mainly attributable to the realization of currency translation effects of €−0.3 billion, which have been reclassified from the currency translation reserve to other operating expenses.

EQUITY INVESTMENTS HELD FOR SALE

The assets and liabilities held for sale of the Russian subsidiaries of Volkswagen Financial Services and Porsche, as well as those of MAN Energy Solutions in connection with the gas turbine business were recognized in accordance with IFRS 5 at the lower of their carrying amount and fair value less expected disposal costs.

SPECIAL ITEMS

Special items consist of certain items in the financial statements whose separate disclosure the Board of Management believes can enable a better assessment of our economic performance.

No material special items in connection with the diesel issue were recognized in fiscal year 2023.