Business Model, Value Chain and Strategy
Business model and Group structure
Volkswagen AG is the parent company of the Volkswagen Group. It develops vehicles and components for the Group brands, and also produces and sells vehicles, in particular passenger cars and light commercial vehicles for the Volkswagen Passenger Cars and Volkswagen Commercial Vehicles brands. In its capacity as parent company, Volkswagen AG holds direct or indirect interests in AUDI AG, SEAT S.A., Škoda Auto a.s., Dr. Ing. h.c. F. Porsche AG, TRATON SE, Volkswagen Financial Services AG, Volkswagen Financial Services Overseas AG and a large number of other companies in Germany and abroad. More detailed disclosures are contained in the list of shareholdings in accordance with sections 285 and 313 of the HGB, which can be accessed at www.volkswagen-group.com/investor-relations and is part of the annual financial statements.
Volkswagen AG is a vertically integrated energy supply company as defined by section 3 no. 38 of the Energiewirtschaftsgesetz (EnWG – German Energy Industry Act) and is therefore subject to the provisions of the EnWG. In the electricity sector, Volkswagen AG generates, sells and distributes electricity as a group together with its subsidiaries. As a result of the power plant at the Volkswagen factory in Wolfsburg ceasing to use coal-fired power generation, sales revenue of €2.4 million was generated through the sale of coal in the fiscal year 2024.
A total of 614,082 employees were employed at the Volkswagen Group at the end of the 2024 reporting year. A comprehensive list broken down by region can be found in the “Employees and non-employees” chapter.
The Volkswagen Group is one of the leading multibrand groups in the automotive industry. The company’s business activities comprise the Automotive and Financial Services divisions. The Volkswagen Group’s significant products comprise passenger cars, commercial vehicles, and power engineering in the Automotive Division, as well as financial services.
Our core brands within the Automotive Division – with the exception of the Volkswagen Passenger Cars and Volkswagen Commercial Vehicles brands – are independent legal entities.
The Automotive Division comprises the Passenger Cars, Commercial Vehicles and Power Engineering business areas.
The Passenger Cars Business Area primarily consolidates the Volkswagen Group’s passenger car brands and the Volkswagen Commercial Vehicles brand. Activities focus on the development of vehicles, engines, motors, vehicle software and batteries, the production and sale of passenger cars and light commercial vehicles, and the genuine parts business. The product portfolio ranges from compact cars to luxury vehicles and also includes motorcycles, and is supplemented by mobility solutions.
The Commercial Vehicles Business Area primarily comprises the development of vehicles, engines, motors, the production and sale of trucks and buses, the genuine parts business and related services. The commercial vehicles portfolio ranges from light vans to heavy trucks and buses. The collaboration between the commercial vehicle brands is coordinated within TRATON SE.
The Power Engineering Business Area combines the large-bore diesel engines, turbomachinery and propulsion components businesses.
The activities of the Financial Services Division comprise dealership and customer financing, leasing, direct banking and insurance activities, fleet management and mobility services.
With its brands, the Volkswagen Group mainly serves individual, corporate and fleet customers in all markets around the world that are relevant for the Group, including Europe and other markets, North America, South America and Asia-Pacific.
Volkswagen AG and the Volkswagen Group are managed by the Volkswagen AG Board of Management in accordance with the Volkswagen AG Articles of Association and the rules of procedure for Volkswagen AG’s Board of Management issued by the Supervisory Board.
Accordingly, responsibilities in the Board of Management are currently divided among ten Board functions. In addition to the “Chair of the Board of Management” function, the other Board functions are “Technology”, “Finance and Operations”, “Human Resources and Trucks brand group”, “Integrity and Legal Affairs”, “Progressive brand group”, “Sport Luxury brand group”, “China”, “IT” and “Core brand group”. The Chair of the Board of Management is also responsible for the “Sport Luxury brand group” Board function.
Directly attached to the Board are a number of Group Management functions that act as an extension to the Board functions. These comprise the “Group Sales”, “Group Production”, “Group Procurement” and “Group Research and Development” functions.
The allocation of responsibilities on the Board of Management is based on the rules of procedure decided by the Supervisory Board. The way this is structured is intended to help the Board of Management to focus on key tasks such as strategy, central decisions on the Company’s direction, capital allocation and financial requirements. The task of the extended board-level management functions is to leverage synergies in the Group and to connect the brands and divisions. Board of Management committees exist at Group level for the following areas: products, technologies, investments, digital transformation, integrity and compliance, risk management and management issues. In addition to the responsible Board of Management members, the committees include representatives of the departments relevant to the subject, and of the brands, brand groups and companies involved. We are continually revising and optimizing these and other top management committees in the Group in order to verify that they still align with our Group strategy and to further increase the efficiency of their decision making. This reduces complexity and reinforces governance within the Group.
Each brand within the Volkswagen Group is managed by a brand board of management, which is responsible for the brand’s independent and self-contained development and business operations. To the extent permitted by law, the board adheres to the Group targets and requirements laid down by the Board of Management of Volkswagen AG, as well as to the agreements in the brand groups. This allows Group-wide interests to be pursued, while at the same time safeguarding and reinforcing each brand’s specific characteristics. Matters that are of importance to the Group as a whole are submitted to the Volkswagen AG Board of Management to enable synergetic implementation, to the extent permitted by law. Group policies decided by the Group Board of Management are an important instrument in this regard. Volkswagen AG employs Group policies as steering instruments to communicate its requirements, such as uniform standards and frameworks for action, to the Group companies. The rights and obligations of the statutory bodies of the relevant brand company thereby remain unaffected.
The Volkswagen Group companies are managed solely by their respective managements. The management of each individual company takes into account not only the interest of its own company but also the interests of the Group, the relevant brand group and the individual brands in accordance with the framework laid down by law.
We are convinced that our corporate structure, which connects not only the brand groups but also the technology platforms, will enable us to make better use of existing expertise and economies of scale, leverage synergies more systematically and accelerate decision making. In our view, clear responsibilities and a high degree of business responsibility in the brand groups and technology platforms form the basis for our sustainable success.
The Volkswagen Group value chain
To safeguard the Volkswagen Group’s business, the Group has a broadly distributed and complex value chain. Both upstream and downstream process steps in this value chain are increasingly vertically integrated into the Group’s own business activities.
Upstream value chain
The upstream segment of the value chain comprises the extraction of raw materials and the production of components and parts. The Volkswagen Group maintains close relationships with a large number of suppliers who play a key role in the provision of raw materials and intermediates.
It also operates its own production facilities and plants in which key components such as engines, motors, transmissions and suspensions are made. Its control of these key production steps means Volkswagen can ensure high quality standards and also directly implement innovative technologies and processes.
The Volkswagen Group also works closely with a large number of suppliers that provide specialized components and services to further improve the efficiency and quality of production.
Core business
The core business comprises the following central activities: the development of vehicles, engines, motors and vehicle software, the production and sale of passenger cars, light commercial vehicles, trucks, buses and motorcycles, as well as businesses for genuine parts, large-bore diesel engines, turbomachinery and components. The particularly relevant stakeholders in this regard are employees and the Works Council.
In the development phase, the Volkswagen Group invests in advanced technologies and innovative designs with the aim of producing state-of-the-art and environmentally friendly vehicles. Production takes place in globally distributed production facilities, which focus on efficiency and quality. Efficient logistics processes are designed to ensure seamless integration of all steps, from production to delivery, and also to help to reduce emissions and costs. Distribution takes place via a global network of authorized Volkswagen dealers and distributors who promptly and reliably make the vehicles available to customers.
This is where the value chain of Volkswagen Group Mobility comes in, with its range of services including vehicle leasing and financing, insurance and other vehicle-related mobility products – for private and individual commercial buyers as well as for fleet customers. In addition, the authorized dealers and business partners also offer maintenance contracts.
Downstream value chain
The downstream segment of the value chain covers the vehicle’s use phase and end-of-life management. The use of the vehicles and associated services play a key role in this phase. The authorized dealers and service facilities offer comprehensive servicing and repair services, and ensure that customers always have access to high-quality replacement parts. On top of this, the growing mobility services segment addresses customers’ needs in terms of flexibility and comfort. This includes offering vehicles as needed, such as through leasing, rental and car subscriptions, as well as mobility on demand such as ride pooling and ride hailing – in the future also in autonomous form.
Over the next few years, the Group is planning to consolidate the entire ecosystem of its brands’ mobility services and offer it to customers across up to three vehicle lifecycles. On the one hand, this will generate additional income over the lifecycle of a vehicle. On the other hand, within the context of circular materials, it encourages the use of raw materials from used vehicles that are kept on the Group’s books.
End-of-life management is an integral part of the Volkswagen Group’s sustainability strategy. The focus here is on product and battery recycling.
The rapid expansion of charging infrastructure is and remains an important prerequisite for ramping up e-mobility. In light of this, the Volkswagen Group is driving the expansion of charging infrastructure with its partners Elli in Europe, CAMS in China and Electrify America in North America. Furthermore, the Group and its partner Elli are also active within the energy sector with the aim of transitioning Elli from a provider of charging infrastructure into a full energy service provider.
Group strategy
Fast-moving global megatrends, rapid technological advances, changes in customer requirements and, last but not least, the macroeconomic and political climate and regulatory framework are presenting the automotive industry with historic challenges. Artificial intelligence is creating opportunities that were not even conceivable until recently and bringing about change in nearly all industries and walks of life. Society and its values are also in a state of flux. Awareness of our planet and how our way of life is impacting on it is becoming increasingly important.
Against this backdrop, we scrutinized our own direction in fiscal year 2024 and developed The Group Strategy – Mobility for generations. This new Group strategy addresses important topics from previous strategies and takes these to the next level.
The first step entailed formulating the main requirements and overarching targets for the strategy. They include resilience, so that we position our global business robustly in times of geopolitical tensions; adaptivity, so that we have the capacity to respond quickly to changes in the course of the transformation of the mobility industry; and financial robustness, so that we can finance the necessary investments in product innovations.
REQUIREMENTS AND OVERARCHING TARGETS OF THE GROUP STRATEGY
From these we derive our strategic vision of being the global automotive tech driver. This aggregates the material areas for action for the Volkswagen Group in three fields:
- resilient positioning in all relevant regions in order to leverage global synergies;
- refocusing areas of expertise within the value chain, also increasingly in conjunction with partners; and
- strong brands with profitable product and service offerings, to be managed by the Group in efficient brand groups.
CORE TOPICS AND IMPERATIVES OF THE GROUP STRATEGY
To realize our vision of becoming the global automotive tech driver, we defined clearly delineated corporate goals in the form of nine imperatives as part of the Group strategy assigned to three core topics:
- Excite customers globally:
We aim to excite customers globally by offering a strong product portfolio, an attractive range of services throughout the entire customer and product life cycle and competitive technologies. - Unleash our full potential:
We intend to unleash our full business potential by consciously deciding between synergies and implementation speed, making our Company more attractive to talented individuals and unlocking the opportunities provided by artificial intelligence. - Focus on fundamentals:
We are focusing on creating a robust company base with reduced cost structures and resilient structures, and we see sustainability as a basic maxim for our actions.
Our regenerate+ sustainability strategy is enshrined in the Group strategy within the core “Focus on fundamentals” issue in the “Elevate sustainability” imperative.
Group sustainability strategy
Sustainability is deeply rooted in the Volkswagen Group and an integral part of our Group strategy. We are providing important and goal-oriented new impetus with our regenerate+ Group sustainability strategy presented in the 2024 Annual Report. Society needs engagement that generates positive added value in order to help our planet to regenerate and to shape a future worth living in for current and future generations. We want to contribute to this and take a broad and comprehensive approach to sustainability – environmentally, socially and economically. Our vision is to become a mobility provider with positive added value for nature and society. To this end, we will seek to work in partnership with all our stakeholders in order to learn and further improve.
The Group sustainability strategy regenerate+ applies to the entire Volkswagen Group – i.e. to the Group departments, to all the brands, and to subsidiaries. This is how we comprehensively address our products, services, and stakeholders, who at brand level also include our customers. We want to use regenerate+ to differentiate ourselves as the Volkswagen Group and, at the same time, enable our brands to position themselves in their specific market environment.
Together, we follow a vision for the Volkswagen Group and drive sustainable value creation. Transformation is a process, and we are constantly in motion. We review our ambitious targets and continuously adapt them. We will continue along this path by systematically implementing our new Group sustainability strategy regenerate+, which features clear measures in four dimensions: nature, our people, society, and business.
The dimensions of regenerate+
Nature
As a mobility provider, the Volkswagen Group has an impact on nature and the environment throughout its entire value chain. A core objective of the Group sustainability strategy is therefore to achieve more than simply cutting emissions. Our vision is to have a positive impact on people and the environment, and to contribute to restoration and improvement of ecosystems and living conditions by means of regenerative actions.
Climate protection: The Volkswagen Group wants to achieve net carbon neutrality
The Volkswagen Group is committed to the Paris Agreement and aligns its own activities with the 1.5 degree goal. We aim to achieve net carbon neutrality by 2050. The intermediate target: To reduce the carbon footprint per kilometer traveled during the use phase of our passenger cars and light commercial vehicles by 30% by 2030 (compared to 2018).
A further goal is for global production sites to achieve net carbon neutrality by 2040 – ten years earlier than originally planned. To this end, greenhouse gas emissions are due to be reduced by 90% by 2040 compared to 2018, among other measures. In order to achieve this, the Volkswagen Group wants to change its energy supply, for example, and increase energy efficiency. The objective is to be procuring 100% of external electricity from carbon-neutral sources at all sites by 2030. The external electricity supply at our European sites is already 100% from renewable sources.
Our specific objective in the context of the “Zero Impact Factory” initiative is to gradually reduce the absolute negative environmental impacts of our production sites for passenger cars, light commercial vehicles and components by 37.5% by 2030, by 68.8% by 2040, and ultimately towards achieving net neutrality by 2050, all compared to 2018 levels. In the comparative period from 2010 to 2024, CO2 emissions and energy consumption per vehicle produced were reduced by 62.8% and 21.5%, respectively. Furthermore, per vehicle, water consumption has been reduced by 27.1%, waste by 79.4% and VOC emissions by 67.5%.
Resources: The Volkswagen Group is working to continuously reduce its demand for primary raw materials
The finite nature of natural resources and the social and environmental consequences of mining raw materials make the development of a circular economy a key sustainability topic. The focus here is primarily on conserving resources. In this context, the Volkswagen Group has set itself Group-wide ambitions for the first time. We are also aiming for 40% of the materials in our products to be made from recycled products by 2040.
Throughout the ID. family, headliners, fabrics, carpets, seats, door trim panels and decorative inlays are already made of recycled materials (e.g., seat covers with yarn made of ocean plastics and recycled PET bottles).
Ecosystem: The Volkswagen Group promotes biodiversity
The production and operation of our vehicles impact biodiversity through emissions, land use, and transportation. We want to minimize this impact by working to reduce our land use and thus add value to nature and improve biodiversity. We are working to increase biodiversity at our production sites and within the supply chain.
The Volkswagen Group is aware of its responsibility. We support conservation projects worldwide and have been involved in protecting and preserving biodiversity since 2007. As a founding member of the Biodiversity in Good Company e.V. initiative, we acknowledge the three goals of the international Convention on Biological Diversity (CBD). Moreover, we have defined corresponding action areas to make our contribution to achieving these goals within the framework of our business activities. We report on this every two years in our progress report.
We also want to support biodiversity by establishing a Biodiversity Fund with an annual allocation of up to €25 million for external projects starting in 2025. These projects will be carefully selected by an independent decision-making body.
Our people
The Volkswagen Group is a social employer. We stand for a diverse, inclusive, and non-discriminatory culture. By paying fair wages, we help to secure our employees’ standard of living at our locations. We invest extensively in the qualification, safety and health of our employees.
Culture: The Volkswagen Group promotes a diverse, inclusive, and non-discriminatory culture
At the Volkswagen Group, we reject discrimination in any form. We promote cooperative behavior in the workplace and are committed to inclusion. We are convinced that integrity and compliance can only be practiced in a culture free of fear, and we create the conditions for this. We are particularly focused on increasing the proportion of women at all levels of the workforce. As a company traditionally dominated by engineers and technical workers, we face special challenges, as do all automotive companies. By 2025, the proportion of women in management is to be increased to over 20%.
Diversity is also important to us with regard to culture, origin, and native language. Every year, we measure the degree of internationalization in the top management of the Volkswagen Group and our goal is to continuously increase it.
Workforce: The Volkswagen Group wants to be a unique employer and lead teams to success
The transformation of the automotive industry is making work at a company like the Volkswagen Group more diverse and interesting. Coding is taking its place alongside traditional engineering, artificial intelligence is relieving employees of routine tasks, and digital business models are increasingly taking their place alongside physical products. At the Volkswagen Group, we want to capitalize on these advantages to provide all employees with a unique working experience. It is important to us that everyone can keep pace with change. That is why we are investing heavily in training. We are aiming for 30 hours of training per employee per year by 2030.
Occupational health and safety: The Volkswagen Group is known for its excellent occupational health and safety
Ensuring a safe and healthy working environment is not only a key component of sustainable corporate management but also the basis for individual well-being, good work results, and effective collaboration. We will further expand our prevention programs for employees in the coming years. The Volkswagen Group favors preventive approaches to promote the physical and mental health and well-being of its employees. In the area of accident statistics, our goal is also to establish an accident frequency rate at a leading level for all brands and companies. For the systematic management and quality assurance of our health and safety activities, all Volkswagen Group production sites with more than 1,000 employees are to be certified in accordance with ISO 45001 by 2026.
Society
As one of the world’s largest automotive manufacturers, the Volkswagen Group has a great responsibility toward its partners, stakeholders and society. The aim is not only to live up to this responsibility and role but, above and beyond this, to have a positive impact. The holistic approach of our regenerate+ sustainability strategy provides the basis for advancing sustainability together with our partners and stakeholders.
Supply chain: The Volkswagen Group creates responsible and sustainable supply chains
The Volkswagen Group is committed to enabling sustainable mobility for future generations. This entails meeting our legal, social, and environmental responsibilities not only within the Group but also in our supply chain. This includes more than 63,000 supplier locations in 96 countries around the world, which will be organized responsibly, not only to minimize risks, but also to ensure a positive contribution for all partners.
The aim is to be able to show by 2040 that, in terms of sales revenue, over 95% of suppliers have a positive sustainability rating (S-Rating).
Customers & stakeholders: The Volkswagen Group is a reliable partner
The Volkswagen Group prides itself on being a trustworthy partner, both now and in the future. Our reputation is based not only on our rich heritage but also on our clear commitment to shaping the sustainable mobility landscape of tomorrow.
As a globally active company, our business activities impact the lives of an array of different people. We consider it our responsibility to actively shape the framework for our business activities in dialog with all stakeholders. To this end, we participate in ongoing dialog characterized by openness, structure, and constructive and critical engagement with all stakeholders. Central to this approach is the cultivation of relationships, understanding various needs, and working together for mutual benefit. Our goal is to cultivate meaningful connections, build trust, and forge lasting partnerships through this dialog.
Social engagement: The Volkswagen Group is increasing its positive social impact
Society and the Volkswagen Group are inextricably linked, each shaping and influencing the other. With this interconnectedness comes a profound responsibility to promote positive change – within our own locations and beyond. To achieve this goal, the Volkswagen Group supports various projects through donations. Our employees’ direct involvement in voluntary work also contributes to this goal. Through the Group sustainability strategy regenerate+, we consolidate and harmonize these efforts under the banner of Societal Impact, integrating them into our holistic approach to sustainability.
At the heart of our Societal Impact efforts is the promotion of Corporate Citizenship projects in the form of forward-looking initiatives that prioritize environmental protection, education and community development at many of our locations around the world. In addition to donations made by the Group, our companies and our employees, the Volkswagen Group is planning to establish a new Sustainability Impact Fund with an annual allocation of up to €20 million starting in 2025. This fund will be specifically dedicated to sustainability projects. In this way, we want to improve our social impact.
Business
The Volkswagen Group is advancing its business model through the holistic approach of regenerate+, driving innovation in new business areas, products, services, and financing models. The Volkswagen Group also gears its operations to its sustainability approach with investors on the capital market.
Sales Revenue: The Volkswagen Group uses and promotes sustainability-oriented business areas.
Sustainability and climate-friendly business practices are of central strategic and operative importance to the Volkswagen Group and represent a key pillar of the Group’s ambitious Group sustainability strategy. The impact on all investment decisions is therefore large.
Sustainability remains fundamental for our business and will continue to become even more relevant. The escalating perceptible impact of climate change, growing consumer awareness of sustainable living and voluntary frameworks such as the Paris Agreement are key drivers in this context.
Electric mobility plays a key role in reducing emissions from road traffic. In 2024, the share of BEVs in the Volkswagen Group was 8.3% (previous year: 8.3%). The global share is due to reach 50% by 2030. Production ramp-up is a process that the Volkswagen Group continuously reviews and adapts.
Through MAN Energy Solutions, we also offer technologies (e.g. for carbon capture and storage, heat pumps, and large engines powered by future fuels) that play a key role in the decarbonization of critical industries.
Since 2023, the Volkswagen Group has also been investing in decarbonization efforts both internally and externally through a venture capital fund. Established with an initial anchor investment of USD 300 million, this fund aims to accelerate the development of innovative decarbonization technologies and solutions across the mobility value chain.
Financing: The Volkswagen Group is strengthening and intensifying its sustainable financing.
Positioned as one of the leaders in the global automotive sector, our goal is to actively shape sustainability-oriented financing.
By 2030, the Volkswagen Group aims to finance at least 30% of its outstanding bond volume through green bonds, with the aim to increase this figure to 50% by 2040. In order to achieve these goals, the majority of our annual euro bond issues are already structured as green bonds or comply with the EU taxonomy classification system.