Financial Position

Principles and goals of financial management

Financial management in the Volkswagen Group covers liquidity management, the management of currency, interest rate and commodity price risks, and credit and country risk management. It is performed centrally for all Group companies by Group Treasury, based on internal guidelines and risk parameters. Some functions of the MAN Energy Solutions, Porsche AG, Porsche Holding Salzburg and TRATON GROUP subgroups and of the Financial Services Division are included in the financial management and, in addition, have their own financial management structures.

The goal of financial management is to ensure that the Volkswagen Group remains solvent at all times and, at the same time, to generate an adequate return from the investment of surplus funds. We use a liquidity pooling system to optimize the use of existing liquidity between the significant companies. Among other features of this system, the balances, either positive or negative, accumulating in cash pooling accounts are swept daily into a regional target account and thus pooled. The overriding aim of currency, interest rate and commodity risk management is to hedge, using derivative financial instruments and commodity forwards, the prices on which investment, production and sales plans are based when making planning assumptions and to mitigate interest rate risks incurred in financing transactions. In the management of credit and country risk, diversification is used to limit the Volkswagen Group’s exposure to counterparty risk. To achieve this, counterparty risk management imposes internal limits on the volume of business allowed per counterparty when financial transactions are entered into. Various credit rating criteria are applied in this process. These focus primarily on the capital resources of potential counterparties, as well as the ratings awarded by independent agencies. The relevant risk limits and the authorized financial instruments, hedging methods and hedging horizons are approved by the Group Board of Management Committee for Risk Management. For additional information on the principles and goals of financial management, please refer to the chapter on “Financial risk management and financial instruments” in the notes to the consolidated financial statements.

Financial position of the Group

In the period from January to December 2024, the Volkswagen Group’s gross cash flow decreased by €2.3 billion to €46.0 billion year-on-year, driven among other things by earnings-related factors. The negative non-cash measurement effects in connection with hedging transactions, which in particular affected prior-year earnings, must be eliminated from the cash flow statement. The change in working capital amounted to €−28.9 (−29.0) billion; in the reporting year, this was primarily attributable to an increase in lease assets, receivables and inventories, offset by a rise in other provisions.

Cash flows from operating activities went down by €2.2 billion to €17.2 billion in fiscal year 2024.

The Volkswagen Group’s investing activities attributable to operating activities increased by €0.8 billion to €28.9 billion in the reporting year. Investments in property, plant and equipment, investment property and intangible assets, excluding capitalized development costs (capex) were up, while both capitalized development costs and expenses for mergers and acquisitions decreased.

The Volkswagen Group’s financing activities generated a total cash inflow of €11.1 (16.0) billion. Financing activities mainly include the issuance and redemption of bonds and unlisted notes, changes in other financial liabilities, the dividend of €4.5 billion paid to the shareholders of Volkswagen AG, and the redemption of the hybrid note of €1.25 billion called in May 2024. At the end of the reporting year, the Volkswagen Group reported cash and cash equivalents of €40.3 billion in its cash flow statement. As of the end of December 2023 this figure stood at €43.5 billion.

On December 31, 2024, the Volkswagen Group’s net liquidity stood at €−169.1 billion; it had amounted to €−147.4 billion at the end of 2023.

AUTOMOTIVE DIVISION NET CASH FLOW 2024

€ billion

Financial position of the Automotive Division

In the 2024 fiscal year, the Automotive Division recorded gross cash flow of €33.0 (35.7) billion. The decline was attributable among other factors to lower earnings; it was set against a decrease in income tax payments. The non-cash measurement effects in connection with hedging transactions, which mainly affected prior-year earnings, must be eliminated from the cash flow statement. The change in working capital amounted to €0.0 (2.1) billion. Growth in receivables and inventories and a decrease in liabilities were offset by a rise in other provisions. Cash flows from operating activities went down by €4.9 billion to €33.0 billion.

In the period from January to December 2024, investing activities attributable to operating activities increased to €28.0 (27.2) billion. Within this figure, capex increased by €2.6 billion to €16.9 billion, including the acquisition of licenses from Rivian. The capex ratio was 6.4 (5.4)%. Here, significant portions of capex were allocated to the production of electric vehicles, the associated battery technologies, and electric toolkits and platforms as key components of the Company’s transformation to sustainable mobility. Other focus areas are the digitalization of our products, measures to cut CO₂ emissions, the promotion of sustainable production processes, and the expansion of our presence in markets such as North America and China. Additions to capitalized development costs were down noticeably at €10.2 (11.1) billion. The “Acquisition and disposal of equity investments” item decreased year-on-year to €−1.7 (−2.1) billion; it related primarily to strategic investments in a variety of companies, in particular Rivian.

The Automotive Division’s net cash flow decreased by €5.7 billion to €5.0 billion. The cash conversion rate, which is the ratio of the Automotive Division’s net cash flow to operating result, stood at 31.4 (57.1)% at the end of 2024.

The Automotive Division’s financing activities led to a cash outflow of €−5.3 (−12.9) billion in the reporting year. This related mainly to the issuance and redemption of bonds and unlisted notes, changes in other financial liabilities, the dividend paid to the shareholders of Volkswagen AG, and the redemption of the hybrid note called in May 2024. The prior-year period had also included the payment of a special dividend to the shareholders of Volkswagen AG in connection with the IPO of Dr. Ing. h.c. F. Porsche AG (Porsche AG).

At the end of fiscal year 2024, the Automotive Division reported sound net liquidity of €36.1 billion, compared with €40.3 billion at the end of December 2023. The Automotive Division’s net liquidity as a proportion of consolidated sales revenue decreased to 11.1 (12.5)% in the reporting year.

Financial position of the Financial Services Division

The Financial Services Division generated gross cash flow of €13.1 (12.7) billion in the 2024 fiscal year. The change in working capital amounted to €−28.9 (−31.2) billion. Higher lease assets and receivables were the main drivers of funds tied up in working capital in the reporting year. As a result, cash flows from operating activities stood at €−15.8 (−18.5) billion.

Investing activities attributable to operating activities were on a level with the previous year at €0.9 (0.9) billion.

The Financial Services Division’s financing activities generated a cash inflow of €16.5 (28.9) billion in the period from January to December 2024. This figure relates primarily to the issuance and redemption of bonds and to other financial liabilities.

At the end of December 2024, the Financial Services Division’s negative net liquidity, which is common in the industry, was €−205.2 billion as against €−187.7 billion on December 31, 2023.