Investment and financial planning

To meet people’s needs for individual, sustainable, fully connected 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 Volkswagen 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 development 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 development 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 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%.

Besides capex, investing activities will also cover additions 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 Organisation, 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 investments also include commitments arising from decisions taken in previous fiscal years.

We aim to finance the investments in our Automotive Division from our own capital resources and expect cash flows from operating activities to exceed the Automotive Division’s investment requirements. 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 Corporation 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-mobility, 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 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 international credit lines.