Shares and Bonds

The further intensifying competition in the automotive sector with continued 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

The international stock markets turned in an overall solid performance in the reporting year. Driven in particular by the hope that key interest rates would be lowered, they continued the upward trend that had started in October 2023 and soared to new record levels. Economic growth, in particular, also had a positive effect. Furthermore, central banks in the United States and Europe initiated a shift in monetary policy during the year with the first rate cuts, sending share prices even higher. The generally upbeat mood on the markets was not noticeably dented by the uncertain geopolitical environment and the prevailing confrontations in the Middle East.

After a favorable year on the stock markets in 2023, which saw the German stock index (DAX) rise by 20%, the new year started with sideways movement. An upward trend in the DAX then began at the end of January 2024, during which it hit new all-time highs. The German stock market barometer benefited particularly from positive corporate data in the reporting season and market participants’ expectations of an imminent turnaround in interest rates. In the second quarter of 2024, momentum weakened due to rising geopolitical tensions and political uncertainty. The DAX began the third quarter on a weaker note before share prices started moving upwards again, fueled by the turnaround in interest rates in Europe and the United States. The monetary and fiscal policy measures taken in China to stimulate the local economy also had a positive knock-on effect. The German equity market experienced a rally towards the end of the reporting year, with new records in anticipation of further interest rate cuts, although this was driven by a smaller number of single stocks. As a result, at year-end 2024 the DAX – a performance index calculated as if all dividend payments were reinvested – exceeded the prior year-end level by 18.8%. By contrast, the EURO STOXX Automobiles & Parts, which is purely a price index, posted losses of 12.1% in the period under review due to the difficult situation in the automotive industry.

The prices of Volkswagen AG’s preferred and ordinary shares initially showed a positive trend in the first three months of the reporting year. As the year progressed, the capital market took a critical view of the fact that investment requirements continued to be high, extending among other things to the construction of battery cell factories, vehicle development as part of the Company’s transformation, and provisions for acquisitions. The further intensification of competition in the automotive sector, expectations of falling margins and subdued demand, particularly for electric vehicles, as well as the possible costs for closing an impending gap in relation to European CO₂ fleet targets for 2025 also put a damper on the share price. The same was true of the decline in profits expected by the Company for the joint ventures in its largest single market, China, where competition is intense. On top of this came the European Union’s (EU) announcement of punitive tariffs on Chinese electric vehicles, coupled with the threat of retaliation by China in the form of import tariffs on European vehicles, among other things. The situation in the industry worsened progressively in the course of the year. As a consequence, and due to unplanned restructuring expenses in the Group, the Company repeatedly adjusted its full-year earnings guidance. The news was marked by increasing tension, primarily in light of the threat of trade barriers in the aftermath of the US election, uncertainty as to the outcome of the trade dispute and the cost-cutting measures planned by the Company. Increasing uncertainties with respect to the amount of the dividend for fiscal year 2024 also caused pressure, particularly given the additional potential impact on earnings from provisions for the planned restructuring measures. This continued to put pressure on the share prices, though these recovered slightly towards the end of the reporting year. At the end of December 2024, preferred shares were trading down 20.4% and ordinary shares down 22.2% compared with the end of 2023. Assuming that the dividend (before deduction of taxes) was reinvested in Volkswagen shares at the time of distribution, the total return on the preferred shares was −14.1% and the total return on the ordinary shares was −16.9%.

PRICE DEVELOPMENT FROM DECEMBER 2023 TO DECEMBER 2024

Index based on m onth-end prices: December 31, 2023 = 100

CAPITAL MARKETS DAY CHINA

The Volkswagen Group presented the Group’s newly focused strategic alignment for the Chinese market at the Capital Markets Day held in China in April 2024. The objective is to improve technological expertise and the product portfolio, cut costs, and thus consolidate our market position as a leading international manufacturer. The new China strategy with the slogan “In China for China” focuses on considerably higher local value creation and partnerships with leading technology companies, and is aimed at increased local market and customer centricity.