Return on investment (ROI) and value contribution in the reporting period

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 measurement of receivables and liabilities denominated in foreign currencies. One-off expenses for restructuring measures 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 capitalized development costs.

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 opportunity 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 Investor Relations website: www.volkswagenag.com/en/InvestorRelations/news-and-publications/More_Publications.html.