Key events
Diesel issue
On September 18, 2015, the US Environmental Protection Agency (EPA) publicly announced in a “Notice of Violation” that irregularities in relation to nitrogen oxide (NOx) emissions had been discovered in emissions tests on certain Volkswagen Group vehicles with 2.0 l diesel engines in the USA. In this context, Volkswagen AG announced that noticeable discrepancies between the figures recorded in testing and those measured in actual road use had been identified in type EA 189 diesel engines and that this engine type had been installed in roughly eleven million vehicles worldwide. On November 2, 2015, the EPA issued a “Notice of Violation” alleging that irregularities had also been discovered in the software installed in US vehicles with type V6 3.0 l diesel engines.
The so-called diesel issue is rooted in a modification of parts of the software of the relevant engine control units – which, according to Volkswagen AG’s legal position, is only unlawful under US law – for the type EA 189 diesel engines that Volkswagen AG was developing at that time. This software function was developed and implemented from 2006 on without knowledge at the level of the Board of Management. Members of the Board of Management did not learn of the development and implementation of this software function until the summer of 2015.
There are furthermore no findings that, following the publication in May 2014 of the study by the International Council on Clean Transportation, an unlawful “defeat device” under US law was disclosed to the persons responsible for preparing the 2014 annual and consolidated financial statements as the cause of the high NOx emissions in certain US vehicles with 2.0 l type EA 189 diesel engines. Rather, at the time the 2014 annual and consolidated financial statements were being prepared, the persons responsible for preparing these financial statements remained under the impression that the issue could be resolved with comparatively little expense. In the course of the summer of 2015, however, it became progressively apparent to individual members of Volkswagen AG’s Board of Management that the cause of the discrepancies in the USA was a modification of parts of the software of the engine control unit that was later identified as an unlawful “defeat device” as defined by US law. This culminated in Volkswagen’s disclosure of a “defeat device” to the EPA and the California Air Resources Board (CARB), a department of the Environmental Protection Agency of the State of California, on September 3, 2015. According to the assessment at the time by the responsible persons dealing with the matter, the magnitude of the costs expected to result for the Volkswagen Group (recall costs, retrofitting costs, and financial penalties) was not fundamentally dissimilar to that in previous cases involving other vehicle manufacturers. It therefore appeared to be manageable overall considering the business activities of the Volkswagen Group. This assessment by Volkswagen AG was based, among other things, on the advice of a law firm engaged in the USA for regulatory approval issues, according to which similar cases had in the past been amicably resolved with the US authorities. The EPA’s publication of the “Notice of Violation” on September 18, 2015, which the Board of Management had not expected, especially at that time, then presented the situation in an entirely different light.
In fiscal year 2024, there were no material special items in connection with the diesel issue.
Further information on the litigation in connection with the diesel issue can be found in the “Litigation” section.
Antitrust investigations
In 2011, the European Commission conducted searches at European truck manufacturers for suspected unlawful exchange of information during the period from 1997 to 2011; in November 2014, the Commission issued a statement of objections to MAN, Scania, and the other truck manufacturers concerned. In its settlement decision of July 2016, the European Commission assessed fines against five European truck manufacturers. MAN’s fine was waived in full as the company had informed the European Commission about the irregularities as a key witness. In September 2017, the European Commission fined Scania €0.88 billion. In a judgment rendered in February 2022, the European General Court (Court of First Instance) rejected in its entirety the appeal filed by Scania in this connection. Scania’s April 2022 appeal against this judgment was rejected in full by the ECJ, the court of last resort, in February 2024.
Furthermore, antitrust lawsuits seeking damages have been received from customers. As is the case in any antitrust proceedings, this may result in further lawsuits for damages. No provisions have been recognized for a large number of these legal disputes as they are not expected to result in final damage awards at the highest appeals level. For those actions in which, after reassessing the risks, the final outcome at the highest appeals level appears more likely than not to result in the payment of damages by MAN or Scania, provisions have been recognized in an amount of €162 million.
In March 2022, the European Commission and the Competition and Markets Authority (CMA), the English antitrust authorities, searched the premises of various automotive manufacturers and automotive industry organizations and/or served them with formal requests for information. In the Volkswagen Group, the investigation affects Volkswagen Group UK, which was searched by the CMA, and Volkswagen AG, which has received a Group-wide information request from the European Commission. The investigation relates to European, Japanese, and Korean manufacturers as well as national organizations operating in such countries and the European organization European Automobile Manufacturers’ Association (ACEA), which are suspected of having agreed from 2001/2002 to the initiation of the proceedings to avoid paying for the services of recycling companies that dispose of end-of-life vehicles (ELV) (specifically passenger cars and light utility vehicles). Also alleged is an agreement to refrain from competitive use of ELV issues, that is, not to publicize relevant recycling data (recyclates, recyclability, recovery) for competitive purposes. The violation under investigation is alleged to have taken place in particular in the ACEA Working Group Recycling and related sub-groups thereof. Volkswagen AG is responding to the European Commission’s information requests. In June 2024, the Chinese competition authorities also served Volkswagen AG with a request for information in this matter. The Korean competition authority KFTC also carried out a search of Volkswagen Group Korea in the same context. Volkswagen Group UK is cooperating with the CMA. In this matter, CMA furthermore issued requests for information to Volkswagen AG. In July 2022, Volkswagen AG filed an action for judical review challenging the CMA’s requests for information in particular because Volkswagen AG believes that they exceed the CMA’s jurisdiction. In February 2023, the court granted the claim. The CMA appealed this judgment in April 2023, and in January 2024 the appellate court ruled in the CMA’s favor. Volkswagen AG has appealed this decision to the Supreme Court. Concurrent therewith, Volkswagen AG continues to examine the possibilities for reasonable cooperation with the CMA.
In addition, a few national and international authorities initiated antitrust investigations. Volkswagen is cooperating closely with the responsible authorities in these investigations. An assessment of the underlying situation is not possible at this early stage.
Restructuring measures in the Volkswagen group
In fiscal year 2024, the Volkswagen Group recognized restructuring expenses of €3.0 billion, mostly in other operating expenses, which are primarily attributable to Volkswagen AG and the Audi Group.
To bring about a long-term reduction in personnel costs in the administrative areas of Volkswagen AG, the Board of Management resolved in April 2024 to support the downsizing activities by offering selective severance agreements. Expenses of €0.9 billion were recognized for this.
Against the backdrop of trends in demand for the Audi Q8 e-tron model family, which is manufactured in Brussels, the Board of Management of Audi Brussels S.A./N.V., Brussels/Belgium (Audi Brussels), conducted an information and consultation process with the competent social partners under Belgian law for the restructuring of the site from July to December 2024. The process plans to discontinue the operations as of February 28, 2025. A social plan was approved in January 2025. Expenses totaling €1.6 billion were recognized in fiscal year 2024 in connection with this restructuring. They include, among other items, anticipated amortization and depreciation charges on inventories and non-current assets, expenses from a change in the production process, legal and consulting costs, as well as employee-related expenses for the social plan.
Furthermore, restructuring programs were also introduced in other Group companies.
Effects of the collective bargaining agreement
On the basis of the collective bargaining agreement entered into between Volkswagen AG and the employee representatives in December 2024, it was necessary to adjust the calculation of various personnel-related provisions. This resulted in income of around €1 billion, which is largely presented in cost of sales. In addition, various assumptions about expected developments had to be adjusted when measuring pension obligations. This resulted in an actuarial gain of €0.2 billion, which was recognized in equity.
Material transactions of the current fiscal year
Cooperation with Rivian
Volkswagen Group (Volkswagen) and US electric vehicle manufacturer Rivian Automotive, Inc., Irvine/USA (Rivian), announced their intention to establish a joint venture in June 2024. After reaching technical milestones and obtaining the necessary official approvals, Rivian and VW Group Technology, LLC, Palo Alto/USA (Rivian and Volkswagen Group Technologies) commenced activities on November 13, 2024. The two partners hold equal shares in the joint venture, which functions as an independent company. It is included in the consolidated financial statements as a joint venture using the equity method.
The aim of the partnership is to develop next generation software-defined vehicle (SDV) architectures to be used in future vehicles of both companies. The joint venture builds on Rivian’s software and electronic architecture to facilitate the joint development of best-in-class architectures and software for the SDVs of both partners.
Volkswagen is planning to invest up to USD 5.8 billion in Rivian and the Rivian and Volkswagen Group Technologies joint venture by no later than January 2028. An initial investment in Rivian was made in June 2024, taking the form of an unsecured convertible note of USD 1 billion, which was converted into 95,377,269 ordinary shares of Rivian on December 3, 2024. Volkswagen thus holds around 8.6% of the outstanding class A shares of Rivian, representing a share of around 8% of the voting rights. The investment in Rivian is measured at fair value through other comprehensive income in the consolidated financial statements. When Rivian and Volkswagen Group Technologies commenced operations, Volkswagen invested a further USD 1.3 billion, in particular for the acquisition of the licenses in Rivian’s existing architecture technology and for the 50% share of the joint venture. When certain financial and technical milestones are reached in 2025, 2026 and 2027, Volkswagen expects to make further investments of up to USD 3.5 billion in the form of equity and debt, of which up to USD 2.5 billion will be for ordinary shares of Rivian; these investments are expected to be made in two tranches of USD 1 billion each in 2025 and 2026 and a third tranche of USD 0.5 billion in 2027 or, at the latest, at the beginning of January 2028. The price of the shares is to be determined ahead of each purchase date on the basis of a defined average market price for the ordinary shares of Rivian plus a premium. In 2026, an additional amount of USD 1 billion can be drawn as a loan by Rivian and Volkswagen Group Technologies and passed on to Rivian.
In fiscal year 2024, the conditional commitment to purchase additional ordinary shares of Rivian resulted in an expense from the measurement of a derivative of €409 million. This was set against a gain of €126 million on the measurement of the convertible note due to the positive performance of the Rivian share price. These non-cash amounts were recognized in the other financial result.
Argo AI
The process of winding down Argo AI, LLC, Pittsburgh/USA (Argo AI) initiated in the third quarter of 2022 was completed in the third quarter of 2024. The inclusion of the investment in the consolidated financial statements using the equity method was ended as of September 30, 2024. This resulted in a gain of €265 million, which is reported in the share of the result of equity-accounted investments. The gain is the result of realizing currency translation effects, which had previously been recognized directly in equity. They were reclassified from other reserves attributable to equity-accounted investments to the share of the result of equity-accounted investments.
Northvolt AB
The Swedish company Northvolt AB, Stockholm/Sweden (Northvolt), in which the Volkswagen Group holds an equity investment, filed for bankruptcy protection under US law in November 2024. This had been preceded by reports regarding financial difficulties at the company. When the bankruptcy protection proceedings opened, the remaining net carrying amounts of the equity investment and the loan receivables from Northvolt were written down in full. Exempted are loan receivables from funds granted to Northvolt only after the opening of bankruptcy protection proceedings and backed by separate collateral. The write-down resulted in a non-cash expense totaling €661 million in fiscal year 2024; it is presented in the other financial result.
Material transactions of the previous fiscal year
Scout Motors Inc.
Under the Volkswagen Group’s North America strategy, Scout Motors Inc., Tysons/USA, a wholly owned subsidiary in the Volkswagen Group, was established in fiscal year 2022. A new vehicle brand is to be created under the name of Scout to manufacture electrified all-terrain vehicles and pickups in the USA from 2027. In order to finance the creation of the Scout brand, as well as vehicle development and production planning, an amount of USD 493 million was contributed to the company in fiscal year 2023. The company has been included in the Volkswagen consolidated financial statements since January 1, 2023.
QuantumScape Corporation
Due to the share price performance, the Volkswagen Group conducted an impairment test on the shares in QuantumScape Corporation, San José/USA (QuantumScape). The carrying amount was adjusted on the basis of the impairment test. This adjustment led to a non-cash expense of €0.4 billion in fiscal year 2023 which was presented in the other financial result.
XPeng Inc.
On December 6, 2023, Volkswagen acquired 4.99% of the ordinary shares of the electric vehicle company XPeng Inc., Cayman Islands (XPeng), at a purchase price totaling USD 706 million. The realization of a forward transaction dating from July 26, 2023 resulted in a non-cash gain of €74.2 million in fiscal year 2023, which was recognized in the other financial result under gains and losses from fair value changes of hedging instruments/derivatives not included in hedge accounting. Along with the agreement to acquire the shares, a technological framework agreement was signed with Guangdong Xiaopeng Motors Technology Co. Ltd., Guangzhou/China, a subsidiary of XPeng, for the joint development of electric vehicles in China, among other things.
The investment in XPeng is measured at fair value through other comprehensive income.
Audi FAW NEV Co.
On September 27, 2023, the shareholders AUDI AG, Ingolstadt, Volkswagen (China) Investment Co., Ltd., Beijing/China and China FAW Corporation Limited, Changchun/China resolved amendments to the Articles of Association of Audi FAW NEV Co., Ltd., Changchun/China (Audi FAW NEV Co.), effective from October 1, 2023. With equity interests unchanged, the amendments led to a loss of control over the company by the Volkswagen Group and resulted in its deconsolidation. The company has been jointly controlled within the meaning of IFRS 11 since October 1, 2023. Following on from this, the investment in Audi FAW NEV Co. is included in the consolidated financial statements as a joint venture using the equity method. As a result of the change to the way the investment is accounted for, the cash and cash equivalents declined by a low three-digit-million euro amount in fiscal year 2023. Other than that, there were no material effects on the Volkswagen Group’s net assets, financial position and results of operations.
Horizon Robotics Inc.
On December 7, 2023, Volkswagen acquired preferred shares of Horizon Robotics Inc., Cayman Islands (Horizon Robotics), a leading provider of energy-efficient computing platforms for autonomous driving in China, from Horizon Robotics at a purchase price of USD 200 million and issued a convertible loan to Horizon Robotics in an amount of USD 800 million. Both investments were initially classified as debt instruments in the financial statements and measured at fair value through profit or loss. The measurement resulted in non-cash gains of €0.7 million in fiscal year 2023, which were recognized in the other financial result under gains and losses from marketable securities and loans. Since the IPO of Horizon Robotics in October 2024, the shares in the equity investment have been classified as an equity instrument and measured at fair value through other comprehensive income.
To promote the development of highly automated and autonomous driving in China, Volkswagen has also agreed the establishment of a joint venture with Horizon Robotics. On December 14, 2023, Volkswagen invested an amount of CNY 2 billion to this end in exchange for an ownership interest of 60% in the new company, CARIZON (Beijing) Technology Company Limited, Beijing/China (CARIZON). In addition, Volkswagen has committed to contribute capital in the future of up to CNY 8.4 billion to the joint venture.