Group Management Report

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Investment and financial planning

To meet people’s needs for individual, sustainable, fully connected mobility and thus increase the Volkswagen Group’s future viability, we will continue to mobilize our strengths in innovation and technology and push the Volkswagen Group’s transformation into a software-oriented mobility provider while leveraging our economies of scale and maximizing synergies.

In our current planning for 2023, most of the capex (investments in property, plant and equipment, investment property and intangible assets, excluding capitalized development costs) will be spent on new products and the electrification of our model portfolio as well as further development of the modular toolkits, such as the all-electric platform for our volume brands – the Modular Electric Drive Toolkit (MEB) – and those for our premium and sports brands – the Premium Platform Electric (PPE) –, which are currently being rolled out throughout the Group. In addition, the Scalable Systems Platform (SSP) marks the development of a successor platform, which will bundle the requirements of the volume, premium and luxury brands and generate high levels of synergy in the future. We will also focus on the growing digitalization of our vehicles and sites and increase our capital expenditure on these. Moreover, we are investing in the gradual conversion of our locations for the production of electric vehicles and in the creation of battery manufacturing capacity with the aim of establishing a battery supply chain under our own control. The Automotive Division’s ratio of capex to sales revenue is expected to fluctuate around a level of around 6.5%.

Besides capex, investing activities will also cover additions to capitalized development costs. Among other things, these reflect upfront expenditures in connection with updating the model range as well as electrification and digitalization. Also included are the services of CARIAD, which is developing a standardized operating system for Group brand vehicles, along with other projects.

With the investments in our facilities and models, as well as in the development of electric drives and modular toolkits and in digitalization, we are laying the foundations for profitable, sustainable growth at Volkswagen. These investments also include commitments arising from decisions taken in previous fiscal years.

We aim to finance the investments in our Automotive Division from our own capital resources and expect cash flows from operating activities to exceed the Automotive Division’s investment requirements. We anticipate a very strong year-on-year increase in net cash flow for 2023. This will particularly include increasing investments for the future and cash outflows from mergers and acquisitions for battery factories, which are a cornerstone of the Volkswagen Group’s transformation. Net liquidity in the Automotive Division in 2023 is expected to be between €35 billion and €40 billion; this includes cash inflows and outflows in connection with the IPO of Porsche AG.

These plans are based on the Volkswagen Group’s current structures.

Our equity-accounted joint ventures in China are not included in the figures above. For 2023, these joint ventures plan to invest in e-mobility, further optimization of the model portfolio, the development of new mobility solutions and digitalization. Their capex will probably exceed the 2022 level and be financed from the companies’ own funds.

In the Financial Services Division, we are planning higher investments in 2023 than in the previous year. We expect the development of lease assets and of receivables from leasing, customer and dealer financing to lead to funds tied up in working capital, of which around half will be financed from the gross cash flow. As is common in the sector, the remaining funds needed will be met primarily through unsecured bonds on the money and capital markets, the issuing of asset-backed securities, customer deposits from the direct banking business, and through the use of international credit lines.

Modular Electric Drive Toolkit (MEB)
The modular system is for the manufacturing of electric vehicles. The MEB establishes parameters for axles, drive systems, high-voltage batteries, wheelbases and weight ratios to ensure a vehicle optimally fulfills the requirements of e-mobility. The production of the first vehicles based on the MEB started into series production in 2020.
Premium Platform Electric (PPE)
A new vehicle platform for all-electric premium, sport and luxury class vehicles. The components and functions of this platform are especially tailored to meet the high demands of this segment. This platform enables high synergies to be achieved particularly between the Audi, Porsche and Bentley brands.
Scalable Systems Platform (SSP)
The Scalable Systems Platform (SSP) is a futureoriented and industry-leading mechatronics platform for all-electric and fully digitalized vehicles based on a standardized software architecture. Innovative technologies and scalability enable high synergies from the smallest vehicles all the way up to the premium segment with the necessary differentiation between the brand groups Volume, Premium and Sport & Luxury, while at the same time enabling low investment requirements.