Shares and Bonds

The intensifying competition in the automotive sector with increasingly aggressive pricing, particularly in China, put pressure on the price of Volkswagen AG’s ordinary and preferred shares in the reporting year.

EQUITY MARKETS AND PERFORMANCE OF THE PRICE OF VOLKSWAGEN’S SHARES

In fiscal year 2023, thanks to positive economic data, the international stock markets initially continued the upward trend that they had begun in October 2022 and recorded significant gains. Over time, however, hopes that national central banks would ease back on the pace of interest rate increases changed to growing concerns about further hikes to rein in persistently high inflation. What is more, the crisis in the international banking sector triggered by the higher interest rates deeply unsettled the financial markets, a situation that was exacerbated among other things by the debt ceiling debates in the United States. Encouraging economic and corporate data initially bolstered the stock markets as the year progressed, before prices came under pressure again. By the end of the reporting year, prices had recovered once more in anticipation of interest rate cuts in the year 2024.

The German stock market index (DAX) got off to a tremendous start in 2023, initially recording significant gains over the 2022 year-end closing price. Sentiment brightened on the back of falling energy prices, expectations of declining inflation rates and improved leading economic indicators. However, in the months that followed, stock prices were hit by continued interest rate hikes on the part of the European Central Bank in light of continued high inflationary pressure. The DAX transitioned into sideways movement. As the year went on, the turbulence at several international banks triggered by rising interest rates and the US debt ceiling dispute had an adverse effect on share prices. This was compounded by economic woes caused among other things by the muted economic data coming from China. Supported by receding inflation and speculation about interest rate cuts, market sentiment improved in the last trading weeks of the reporting year, with the DAX rising to a new record high in mid-December and ending 2023 up 20.3% on the previous year’s level.

The prices of Volkswagen AG’s preferred and ordinary shares initially developed very positively at the beginning of the reporting year. The sound results for the 2022 fiscal year published at the beginning of March 2023, the dividend proposed for 2022 and a favorable outlook for 2023 caused a temporary rally. The investment plans announced when the annual report was presented were received critically by the capital markets due to the high level of capital required for the transformation of the company. The intensifying competition in the automotive sector likewise acted as a damper on the share price. Price cuts by competitors, especially for electric vehicles, and concerns about increasingly aggressive pricing generated further uncertainty among investors. Declining market shares in China combined with the assessment by market participants regarding the Group’s high dependence on developments in this country also weighed on the share price. Expectations of falling margins in the automotive industry and lower demand for electric vehicles, which led to stiffer competition,

initially pushed down prices further. Buoyed by a positive overall market environment, the shares then regained some ground before stabilizing at a low level in the last trading weeks of the year. The 2023 year-end closing price was down 4.0% for the preferred share and 19.8% for the ordinary share compared with the prior-year figure. Assuming that the regular dividend (before deduction of taxes) was reinvested in Volkswagen shares at the time of distribution, the total return on the preferred shares was +3.1% and the total return on the ordinary shares was −15.1%. The return on the preferred shares was therefore lower than that of the benchmark indices, DAX and EURO STOXX Automobiles & Parts.

PRICE DEVELOPMENT FROM DECEMBER 2022 TO DECEMBER 2023

Index based on m onth-end prices: December 31, 2022 = 100

CAPITAL MARKETS DAY

At the Capital Markets Day held in June 2023, the Volkswagen Group presented the Group’s newly focused strategic alignment to the over 200 international financial analysts, institutional investors and representatives of rating agencies and banks in attendance. Its core element is a new leadership model based on customer orientation, entrepreneurship and team spirit. The “value over volume” principle thereby prioritizes sustainable value creation over volume growth. The shift in focus will give the brand groups a new steering model and sharpen brand positioning and the product range. Responsibility for return targets has been transferred to the brands, which will each implement an earnings improvement program to shore up profitability and cash flows and reduce capital intensity. The Group will reposition the “Architecture”, “Software”, “Battery, Charging & Energy” and “Volkswagen Group Mobility” technology platforms so that their economies of scale can be leveraged for the strengthened brands. Regionally, the Group is focusing its investments on the world’s most attractive profit pools. In this context, the refined strategies for the important growth markets of China and North America were also presented. In addition, Volkswagen has updated its medium-term and strategic financial targets. Along with the presentations and discussions with the members of the Group Board of Management, visitors to the Capital Markets Day had the chance to experience the Group’s vehicles and technologies for themselves. The Volkswagen Group also gave the general public the opportunity to follow the event online via a live webcast, with some 16,000 internal and external viewers watching the presentations live.

Capital Markets Day was the start of deeper dialogue with the capital markets. Further events are planned for the coming years at which investors and analysts will be briefed in detail on the strategies for the brand groups, technology areas and regional strategies.