Results of Operations, Financial Position and Net Assets

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 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 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 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 segments are identical to the corresponding business areas. The Financial Services Division corresponds to the Financial Services segment.

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.

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.

CONTRIBUTION OF AUTONOMOUS INTELLIGENT DRIVING

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 noncash income of €0.8 billion, which was recognized in the other operating result. Argo AI will be accounted for as a joint venture and included in the consolidated financial statements using the equity method.

SQUEEZE-OUT UNDER THE GERMAN STOCK CORPORATION ACT AGREED AT AUDI AG

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.

SALE OF INTEREST IN RENK 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 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.

ACQUISITION OF ALL SHARES IN NAVISTAR

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.

CAPITAL INCREASE AT QUANTUMSCAPE CORPORATION

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.

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 contribution has been made and the new shares have been issued. This measurement and realization resulted in noncash income of €1.4 billion in fiscal year 2020, which are reported in the other financial result.