Group Management Report

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Opportunities and risks from mergers and acquisitions and/or other strategic partnerships/investments

No risks with a score of 20 or more were reported for this risk category in the reporting year.

Opportunities and risks from partnerships

As part of our NEW AUTO strategy, we are stepping up our efforts to forge partnerships, both for the transformation of our core business and for the establishment of the new mobility solutions business.

In the field of battery cells, risks could arise from potential disagreement with our partners, possible delays in battery cell development or delayed battery cell production.

Close interaction with partners in the field of e-mobility in the form of partnerships and joint ventures supports technological change. Examples include the development of a comprehensive charging infrastructure. This cooperation involves risks such as an increased coordination workload, more complex decision-making processes and the loss of expertise. At the same time, opportunities are presented by the pooling of specialist knowledge, by horizontal and vertical integration and by better use of resources. Volkswagen has therefore created various teams in Group Components to closely support all such partnerships.

The marketing of the Modular Electric Drive Toolkit to third parties, for example as part of the strategic alliance with Ford, could result in damage claims in the event of problems with procurement, production and quality.

We are concentrating to a greater extent on partnerships, acquisitions and venture capital investments. In doing so, we are generating maximum value for the Group and its brands and are able to expand our expertise, particularly in new areas of business. Our innovative presence in the markets supports this process. By entering into partnerships at a local level, we aim to identify regional customer needs more precisely, establish competitive cost structures and thus develop and offer market-driven products. At the same time, partnerships bear the risk that the interests of business partners differ from our own or that common goals cannot be reached.

Volkswagen owns a large number of patents and other industrial property rights and copyrights. Patent and licensing infringements may also arise in partnerships and thus result in the unauthorized disclosure of company-specific expertise. Volkswagen monitors the sales markets and also protects its expertise with legal action.

Risks arising from the recoverability of goodwill or brand names and from equity investments

For the goodwill recognized in the financial statements and for brand names, as well as for equity investments, there is a risk that the carrying amount of goodwill may be higher than the recoverable amount and that an extraordinary impairment loss must therefore be recognized. Volkswagen tests at least once a year on the basis of underlying cash-generating units, whether the value of the goodwill or the brand names could have been impaired. We also regularly test the equity investments for impairment. The possible consequences of climate change and future regulatory requirements, especially where associated with the transformation of our business towards e-mobility, and the potential effects of these, are taken into account in our medium-term planning and thus in the calculation of future cash flows, including in impairment tests. If there are objective indications that the recoverable amount of the asset concerned is lower than the carrying amount, Volkswagen recognizes this as a non-cash impairment. An impairment can be caused, for example, by an increase in interest rates or deteriorating business prospects.

Risks from the disposal of equity investments

An unexpected need for funding may lead to a situation in which assets have to be sold for a lower amount not equivalent to their value.

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.