GMR Management Report VW Ar22

4
G ROUP MANAG EMENT R EPORT

(Combined Management Report of the Volkswagen Group and Volkswagen AG)
100 Goals and Strategies

106 Internal Management System and Key Performance Indicators
109 Structure and Business Activities
113 Disclosures Required Under Takeover Law
116 Business Development
133 Shares and Bonds
141 Results of Operations, Financial Position and Net Assets
162 Volkswagen AG (condensed, in accordance with the German Commercial Code)
167 Sustainable Value Enhancement
206 EU Taxonomy
222 Report on Expected Developments
232 Report on Risks and Opportunities
273 Prospects for 2023
Group Management Report Goals and Strategies
Goals and Strategies

With the Group strategy NEW AUTO – Mobility for generations to come, we are
preparing ourselves for the global changes in mobility and thus playing a substantial
role in driving Volkswagen’s transformation into a software-oriented company.
In the context of the fast-changing environment and the challenges resulting from it, the Group Board of
Management adopted the Group strategy NEW AUTO – Mobility for generations to come in May 2021 with
the approval of the Supervisory Board. The strategy’s focus is the world of mobility in 2030.
As technology advances, the automotive industry is rapidly forging ahead with its transformation
toward e-mobility and digitalization. We therefore expect the market for electric vehicles to grow strongly
in the next few years, meaning that the cost-efficient and sustainable production of battery systems and
the expansion of the charging infrastructure will be crucial to success.
The shift to connected, intelligent and eventually self-driving vehicles will, however, bring more wide-
reaching changes for the automotive industry. Autonomous driving will change the customer's mobility
experience forever and lay the ground for new business models. Sources of revenue will gradually shift and
will expand beyond the core product of the automobile. Increasing software development capabilities in
order to excite customers with constantly improving digital functionality is the prerequisite for this.
In equal measure to technological trends, the global economic and geopolitical environment is also
posing increased challenges for the automotive industry. These include, for example, the economic influ-
ence of the largest mobility markets, China, the USA and Europe, and their diverging development.
Sustainability will continue to be a recurring theme in the business world and will gain further perti-
nence, driven by the increasingly noticeable consequences of climate change, a greater consciousness of
sustainable lifestyles on the part of the customer and, not least, underlying factors such as the Paris Climate
Agreement. As we transition from automotive manufacturer to mobility group, we are resetting our
priorities with NEW AUTO and positioning ourselves for the future. We are keeping our aim of being a
world-leading provider of sustainable mobility firmly in our sights and making the Group more focused,
efficient, innovative, customer-oriented and sustainable, as well as systematically gearing it toward profit-
able growth.
To this end, we have established 12 Group initiatives across the brand groups. We will use these to
develop the competences needed to implement the strategy. The focus is on the main multidisciplinary
areas addressed by our technology platforms – mechatronics, software, battery & charging, and mobility
solutions – on which the five tech initiatives described below are based. A further seven base initiatives
form the foundation for the Volkswagen Group’s strategic realignment.
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TH E 12 GROUP I N ITIATIVES OF TH E N EW AUTO STRATEGY
These are ESG, Decarbonization & Integrity, Business Model 2.0, North America (NAR) Region, China
Region, Group Steering Model, People & Transformation and Financing the Transformation.
To make the progress in the relevant Group initiatives of our strategy as transparent as possible for
management and employees, the Group Board of Management decided to structure and regularly measure
the strategic goals and milestones using the OKR (Objectives and Key Results) method. Accordingly,
achievable strategic objectives and envisaged key results are defined for each Group initiative. These are to
be realized largely through time-limited projects and work packages, each of which is measured by specific
key performance indicators. The degree of achievement is discussed three times a year with the Board of
Management. As such, the relevance of the initiatives, and their objectives, milestones, projects and work
packages, are regularly reviewed at Group level. Their focus is continuously monitored and adjusted as
necessary or integrated into standard operations.
The current Group initiatives covered by the strategy are described below. We report on the main
strategic objectives and interim results achieved in the reporting period in the chapters “Internal Manage-
ment System and Key Performance Indicators”, “Structure and Business Activities” and “Sustainable Value
Enhancement”.
MECHATRON ICS – BACKBON E AN D SCALABLE SYSTEMS PLATFORM

A future-oriented mechatronics platform will form the backbone for innovations, technology and lasting
competitiveness at Volkswagen. With the Scalable Systems Platform (SSP), we are creating the next gene-
ration of an all-electric, fully digital and highly scalable mechatronics platform based on a standardized
software architecture. With this standardized platform, which can be scaled from the smallest vehicles all
the way up to the premium segment, the Volkswagen Group aims to rapidly and efficiently provide its
customers with innovative functions and technologies in their vehicles, across all brands. By reducing
complexity and the number of versions, the SSP will offer maximum synergies and make fast, regular
technology updates possible, while lowering investment costs and ensuring the necessary differentiation
between the products of the individual brands in the Group’s portfolio.
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SOFTWARE – CARIAD: ON E E 3 PLATFORM AN D AUTONOMOUS DRIVI NG (AD) STACK

The purpose of the Group’s own software and technology company CARIAD is to create the technical basis
for data-based business models, new mobility services and automated driving (Level 4), and to leverage
cross-brand synergies. Our aim is to increase the proportion of software in the vehicle that is developed in
house.
CARIAD is already working with the Porsche and Audi brands to introduce the new E3 1.2 platform,
which optimizes the harmonization of the hardware with the vehicle software from CARIAD. This facilitates
the deployment of over-the-air updates and is a key lever for introducing new services even after vehicle
production has begun.
In the long term, the standardized E3 software architecture that is already being developed, together
with the VW.OS software platform and the Volkswagen Automotive Cloud, will form the basis of a complete
digital ecosystem, offering customers a wide range of software-based services throughout the product life-
cycle. The aim is for every function that is needed or requested and every service to be customized for the
users in the various markets and to be available for download at any time. This will also open up new
sources of revenue for us.
Applications at various levels of automated driving (up to Level 4) will be gradually introduced to the
new vehicle models in the Group brands.
BATTERY & CHARGI NG – CELL AN D BATTERY STRATEGY

The battery is a key component in an electric vehicle, and an important cost factor. The appeal and market
success of e-mobility is determined not only by the price, but also by the vehicle´s range and the charging
speed. We must become a profit-generating expert across the entire battery life cycle to achieve our
objective of transforming into a world-leading provider of sustainable mobility. To this end, the Cell and
Battery Strategy tech initiative pools expertise across the Group and is driving the transformation process
in cooperation with our strategic partners. The aspects covered include battery management, cell
production and recycling. Our aim is to develop battery cell technology into a core competence in the
Group, and we are also working with partners to achieve this. At the heart of this strategy is the new unified
cell, which can contain different chemistries and will be used in up to 80% of Group models by 2030. The
excellent economies of scale this generates will reduce costs by up to 50% and put us in a leading cost
position. To cover the high demand for battery cells, Volkswagen plans to build six gigafactories in Europe
alone, with a production capacity totaling 240 GWh.
BATTERY & CHARGI NG – CHARGI NG AN D EN ERGY SERVICES

Charging, energy and a sustainable energy supply infrastructure for all-electric vehicles are key prereq-
uisites for accelerating the transition to the battery-electric mobility of the future. It is therefore our
intention also to become a comprehensive charging and energy services provider in the future and we are
investing heavily in building an open fast-charging network worldwide. By 2025, we and our partners plan
to create around 45,000 high-power charging points in Europe, China and the USA. The product portfolio
also includes the full range of charging solutions for private customers and companies. In addition to our
own wallbox and flexible fast-charging station, the focus is particularly on contract-based charging services
and smart green electricity tariffs. Charging processes will then systematically use renewable energy and
reduce pressure on power grids. In a next step, Volkswagen intends to develop the electric vehicle as a
mobile power bank, thus helping electric vehicles to act as storage units and thus become an active part of
the energy system in the future. In this way, Volkswagen wishes to enable its customers to participate in
one of the leading smart-charging and energy ecosystems for decarbonized mobility.
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MOBI LITY SOLUTIONS

In keeping with its mission statement, “Mobility for generations to come”, the Volkswagen Group is
developing mobility solutions for the future, taking into account global trends and changes in customer
needs. The Group plans to bring together all of its brands’ mobility services on one mobility platform over
the coming years. Autonomous driving combined with new mobility solutions is expected to mark
Volkswagen’s transformation into a leading provider of sustainable mobility. A vehicle fleet covering all of
the many services, from vehicle rental to car subscription and ride pooling, will ensure high availability,
usage and profitability. With these solutions, we plan to gain market shares and generate long-term com-
petitive and attractive margins.
ESG, DECARBON IZATION AN D I NTEGRITY

ESG (Environmental, Social, and Governance) refers to the basic principles of doing business sustainably.
The Group’s stakeholders (e.g. investors, employees, customers and non-profit organizations) have high
expectations of the Company’s ESG performance, including in areas such as decarbonization and integrity,
and also of its conduct as an employer and as part of society. The Group's ESG performance therefore
directly affects its market capitalization, cost of capital and investing activities. We aim for a top position
relative to our competitors in sustainability ratings. We are committed to the Paris Climate Agreement and
align our own activities with the 1.5-degree target. We aim to achieve net carbon neutrality by 2050. By
2030, we have also set ourselves the target of reducing CO2 emissions from passenger cars and light com-
mercial vehicles over the total life cycle by 30% compared with 2018. As part of this effort, we are looking
for ways to increase the proportion of recyclable materials in our vehicles. We also wish to become the
benchmark for ethical corporate conduct. Volkswagen sees itself as an equal opportunities employer. The
intention is therefore for at least a fifth of Company management positions to be held by women by 2025,
and for at least a quarter to be held by international managers.
BUSI N ESS MODEL 2.0

The Business Model 2.0 base initiative is developing a Group-wide portfolio of services, the purpose of
which is to create a seamless and innovative product experience to connect brands, customers, dealerships,
our partners and whole markets. The aim is for the key technologies needed for this to be integrated into a
majority of the platform-based vehicles by 2030. Using connected vehicles, the Group’s brands are to be
able in future to remain in contact with their customers throughout the entire vehicle life cycle and thus to
offer them services and functions for their individual needs. This will allow us to build a competitive, data-
driven service portfolio that also maintains our leading position in the automotive market in future.
NORTH AMERICA (NAR) REGION

For the Volkswagen Group, North America, and particularly the USA, is the region with the greatest growth
potential, especially where e-mobility is concerned. We intend North America to become our third core
region alongside Europe and China by 2030. Our aim there is to achieve a very strong increase in total
market share for the Volkswagen Group by then.
We aspire to further expand our presence in the region with strong brands and prepare ourselves for the
future with market-specific products.
We also wish to participate to a disproportionately high extent in the growth of the increasingly elec-
trified markets in the USA and Canada. We will therefore substantially expand our range of all-electric
models across the Group and develop models specifically for these markets. The proportion of battery-
electric vehicles in our sales in the USA and Canada is to increase to 55% by 2030.
In addition, we wish to maximize the potential for synergies in the region and build significantly more
expertise, industrial capacity and vertical value chains in the North America region.
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CH I NA REGION
China is of major strategic significance to the Volkswagen Group as its largest single market, and we expect
it to continue growing in the future. All key measures are therefore brought together in this strategic base
initiative in order to continue Volkswagen’s success story in China. The activities include a comprehensive
program of measures with a focus on cost, long-term technological competitiveness, localized development
activities that are tailored to the market, and the further consolidation of our existing partnerships.
Our aim is to achieve high market shares in the electric vehicle segment and establish ourselves as a
leading provider. For vehicles with combustion engines, our aim is to maintain our share of the market, as
these will also make a contribution to profit in future with high unit sales. We are therefore continuing to
accelerate our Group-wide localization strategy in China so as to offer our Chinese customers tailor-made
products, and we are using not only global platform technologies (hardware and software), but are
increasingly employing platform technologies that have been developed locally. In this way, we wish to
stand our ground against the constantly growing competition in the new intelligent connected vehicle
(ICV) segment.
GROU P STEERI NG MODEL

To achieve the objectives of the Group strategy and thereby safeguard the Volkswagen Group’s long-term
success, we are extensively optimizing our Group steering model. It is essential that we establish a
consistently high level of mechanisms that facilitate swift decision-making, the development and use of
platform technologies and the exploitation of synergies, and that we constantly enhance these. The
updated Group Steering Model places the brand groups and technology platforms center stage in order to
scale up the latter while maximizing synergies across the entire Group product portfolio. A new strategy
and product planning process that has been optimized for efficiency is being developed on the basis of this
approach. The package of measures for this initiative hones the definition of roles and responsibilities in
the Group and improves transparency in this respect both inside and outside the Company. It also
promotes the entrepreneurship of the independent units and brands and at the same time strengthens
collaboration across the Group.
PEOPLE & TRANSFORMATION

As it becomes a global tech company, the Volkswagen Group will see the biggest transformation of its
workforce in its corporate history. To ensure the Group remains competitive in future, we need to attract
top talent and support existing employees by providing extensive training where required. Our aim is to
retain staff for the long term. It is therefore fundamental that we address the changing needs of our
employees and offer them an outstanding employee experience. To achieve our Group’s ambitious
objectives, we must also create and promote an environment for productive teams, resulting in a strong,
sustainable and socially responsible corporate culture that fosters a sense of belonging and loyalty to the
Company. A further focus is on aligning the Company with society and the environment.
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FI NANCI NG TH E TRANSFORMATION
The transformation being driven by digitalization and electrification will require extensive investment. To
meet this need for financing, the Financing the Transformation base initiative aims to leverage even more
Group-wide synergies across all functional areas along the value chain, focusing on costs and efficiency. The
Group has therefore set itself the objective of lasting improvements to its fixed-cost structure, plant
productivity, procurement costs, distribution expenses and working capital management.
STRATEGIC FI NANCIAL KEY PERFORMANCE I N DICATORS 1
2015 Target 2025
Operating return on sales2 6.0% 8 to 9%

Research and development ratio (R&D ratio) in the Automotive Division 7.4% ~6%
Ratio of capex to sales revenue in the Automotive Division 6.9% ~5%
Net cash flow in the
Automotive Division €8,887 million >€10 billion
Distribution ratio negative ≥30%
~10% of
Net liquidity in the €24,522 million, consolidated
Automotive Division 11.5% sales revenue
Return on investment (ROI) in the Automotive Division –0.2% >15%
1 The design of the strategic financial key performance indicators is currently under revision.
2 2015 before special items.
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Group Management Report Internal Management System and Key Performance Indicators
Internal Management System and

Key Performance Indicators
This chapter describes how the Volkswagen Group is managed and the key performance indicators
used for this purpose. In addition to financial measures, our management system also contains
nonfinancial key performance indicators.
The Volkswagen Group’s performance and success are expressed in both financial and nonfinancial key
performance indicators.
In the following, we first describe the internal management process and then explain the Volkswagen
Group’s most significant performance indicators, known as the core performance indicators.
I NTERNAL MANAGEMENT PROCESS I N TH E VOLKSWAGEN GROUP

Consistent, close integration of the Group and brand strategies with the operational planning process
ensures transparency at the Volkswagen Group when it comes to the financial assessment and evaluation
of strategic decisions. The operational medium-term planning that is conducted once a year and generally
covers a period of five years is incorporated into the strategic planning as a key management element of the
Group.
Medium-term planning forms the core of our operational planning and is used to formulate and
safeguard the requirements for realizing strategic projects designed to meet Group targets in both technical
and economic terms – and particularly in relation to earnings, cash flow and liquidity effects. In addition, it
is used to coordinate all business areas with respect to the strategic action areas concerned, namely
functions/processes, products and markets.
When planning the Company’s future, the individual planning components are determined on the basis
of the timescale involved:
> The long-term unit sales plan, which sets out market and segment growth and then derives the
Volkswagen Group’s delivery volumes from this
> The product program as the strategic, long-term factor determining corporate policy
> Capacity and utilization planning for the individual site.
The coordinated results of the upstream planning processes are used as the basis for the medium-term
financial planning: the Group’s financial planning, including the brands and business fields, comprises the
income statement, cash flow and balance sheet planning, profitability and liquidity, as well as the upfront
investments needed for alternative products and the implementation of strategic options in the future. The
first year of the medium-term planning period is fixed and a budget drawn up for the individual months.
This is planned in detail down to the level of the operating cost centers.
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The budget is reviewed each month to establish the target achievement level. Key internal management
instruments comprise target/actual comparisons, prior-year comparisons, variance analyses and, where
necessary, action plans to ensure targets are met. For the current fiscal year, detailed revolving monthly
forecasts are prepared for the coming three months and the full year, taking into account the current risks
and opportunities. The focus of intrayear internal management is therefore on adapting ongoing activities.
The current forecast serves as a corrective to the medium-term and budget planning that follows on from it.
CORE PERFORMANCE I N DICATORS I N TH E VOLKSWAGEN GROUP

Based on our management process, the Volkswagen Group has defined nine core performance indicators:
> Deliveries to customers
> Sales revenue
> Operating result
> Operating return on sales
> Research and development ratio (R&D ratio) in the Automotive Division
> Ratio of capex to sales revenue in the Automotive Division
> Net cash flow in the Automotive Division
> Net liquidity in the Automotive Division
> Return on investment (ROI) in the Automotive Division
Deliveries to customers are defined as handovers of new vehicles to the end customer. This figure shows
the popularity of our products and is the measure we use to determine our competitive position in the
various markets. Deliveries are closely related to our goal of transforming the Volkswagen Group into a
world-leading, software-oriented mobility provider. One of the most important prerequisites for the Com-
pany’s long-term success is a strong brand portfolio that – on the basis of outstanding quality – offers
tailor-made mobility solutions with safe, connected, resource-efficient and thus largely emission-free
vehicles that meet the diverse needs of customers. Demand for our products and mobility services guaran-
tees not only unit sales and production, but also full utilization of our sites and the jobs of our employees.
The goals we are striving for cannot be achieved without a skilled, flexible and dedicated workforce and a
consensus on shared values.
Sales revenue, which does not include the figures for our equity-accounted Chinese joint ventures,
reflects our market success in financial terms. Following adjustment for our use of resources, the operating
result reflects the Company’s actual business activity and documents the economic success of our core
business. The operating return on sales is the ratio of the operating result to sales revenue.
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The research and development ratio (R&D ratio) in the Automotive Division shows total research and
development costs in relation to sales revenue. Research and development costs comprise a range of
expenses, from futurology through to the development of marketable products. Particular emphasis is
placed on the environmentally friendly orientation and digitalization of our product portfolio, the expan-
sion of our battery expertise, the development of software and new platforms and the creation of new
technologies. The R&D ratio reflects our activities undertaken to safeguard the Company’s future viability.
The ratio of capex (investments in property, plant and equipment, investment property and intangible
assets, excluding capitalized development costs) to sales revenue in the Automotive Division reflects both
our innovative power and our future competitiveness. It shows our capital expenditure – largely for
modernizing, expanding, electrifying and digitalizing our product range and for environmentally friendly
drivetrains, as well as for adjusting production capacities and improving production processes – in relation
to the Automotive Division’s sales revenue.
Net cash flow in the Automotive Division represents the excess funds from operating activities available for
dividend payments, for example. It is calculated as cash flows from operating activities less cash flows from
investing activities attributable to operating activities.Net liquidity in the Automotive Division is the total
of cash, cash equivalents, securities, time deposits and loans not financed by third-party borrowings. To
safeguard our business activities, we have formulated the strategic target that net liquidity in the
Automotive Division should amount to approximately 10% of the consolidated sales revenue.
We use the return on investment (ROI) to calculate the return on invested capital for a particular period
in the Automotive Division, including the equity-accounted Chinese joint ventures on a proportionate
basis, by calculating the ratio of the operating result after tax to average invested capital. If the return on
investment (ROI) exceeds the market cost of capital, the value of the Company has increased. This is how we
measure the financial success of our brands, locations and vehicle projects.
To achieve our strategic goals, we are pursuing the Financing the Transformation base initiative. In fiscal
year 2022, we further stepped up our activities and concentrated on optimizing working capital manage-
ment.
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Group Management Report Structure and Business Activities
Structure and Business Activities

This chapter describes the legal and organizational structure of the Volkswagen Group
and explains the material changes in 2022 with respect to equity investments.
OUTLI N E OF TH E LEGAL STRUCTU RE OF TH E GROU P

Volkswagen AG is the parent company of the Volkswagen Group. It develops vehicles and components for
the Group brands, but 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 Bank GmbH 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 Handelsgesetzbuch (HGB – German
Commercial Code), which can be accessed at www.volkswagenag.com/en/InvestorRelations.html 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.
The Volkswagen AG Board of Management has sole responsibility for managing the Company. The
Supervisory Board appoints, monitors and advises the Board of Management; it is consulted directly on
decisions that are of fundamental significance for the Company.
ORGAN IZATIONAL STRUCTU RE OF TH E GROU P

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. 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
and vehicle software, 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.
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The Commercial Vehicles Business Area primarily comprises the development, production and sale of
trucks and buses, the corresponding 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 Financial Services Division’s activities comprise dealer and customer financing, vehicle leasing,
direct banking and insurance activities, fleet management and mobility services.
With its brands, the Volkswagen Group is present in all relevant markets around the world. The key sales
markets currently include Western Europe, China, the USA, Brazil, Poland, Mexico, Türkiye and Czech
Republic.
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 were divided among eleven board-level management functions starting
from January 1, 2022. In addition to the “Chair of the Board of Management”, a function which also includes
the “Volume” brand group, the other Board functions were “Purchasing”, “Technology”, “Finance”, “Human
Resources and Truck & Bus”, “Integrity and Legal Affairs”, “Premium”, “Sport & Luxury”, “IT”, “China” and
“Volkswagen Passenger Cars”. A new “Group Sales” function was created with effect from February 1, 2022.
As of September 1, 2022, the Volkswagen Group refined its Group management. The Board of Manage-
ment was streamlined and the division of responsibilities was reorganized. As a result, the “Purchasing”
and “Group Sales” Board functions were dissolved. Furthermore, the “Volkswagen Passenger Cars” function
was renamed “Volume”. Since then, responsibilities have been divided among ten board-level management
functions. In addition to the “Chair of the Board of Management”, the other Board functions are “Technol-
ogy”, “Finance”, “Human Resources and Truck & Bus”, “Integrity and Legal Affairs”, “Volume”, “Premium”,
“Sport & Luxury”, “IT” and “China”. The Chair of the Board of Management is also responsible for “Sport &
Luxury”.
Directly attached to the Board are a number of Group Management functions that act as an extension to
the board-level management functions. These comprise “Group Sales”, “Group Production”, “Procurement”
and “Technical Architecture” functions.
The allocation of responsibilities on the Board of Management is based on the schedule of respon-
sibilities decided by the Supervisory Board, which takes into account the changes in management during
the reporting period. The way this is structured helps 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 con-
nect the brands and divisions.
In addition, at Group level, Board of Management committees address key strategic issues relating to
products, technologies, investments, digital transformation, integrity and compliance, risk management,
human resources and management issues. We are continually revising and optimizing the committees in
order to verify that they still align with our corporate strategy and to further increase the efficiency of their
decision making. This reduces complexity and reinforces governance within the Group.
The matrix of brand groups and technology platforms created under the Group Steering Model base
initiative from the NEW AUTO Group strategy was enhanced in both dimensions during the reporting
period. This involved both strengthening the brand groups and creating new units for key technology areas
of the future within our strategic technology platforms. The Group steering model will be further refined in
future on this basis.
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The Volume brand group comprises the Volkswagen Passenger Cars, ŠKODA, SEAT/CUPRA and Volkswagen
Commercial Vehicles brands. The Premium brand group comprises the Audi, Lamborghini, Bentley and
Ducati brands. The Sport & Luxury brand group consists of the Porsche brand. The company responsible
for this brand, Dr. Ing. h.c. F. Porsche AG, has been listed on the stock market since the end of September
2022. In the Truck & Bus brand group, TRATON SE acts as the umbrella for the Scania, MAN, Volkswagen
Truck & Bus and Navistar commercial vehicles brands. TRATON SE is also a listed company.
As well as strengthening the brand groups, the reorganization and creation of new units enabled sub-
stantial progress with the Software, Battery & Charging and Mobility Solutions technology platforms in the
reporting period. The software subsidiary CARIAD was further expanded, getting a subsidiary of its own in
China, among other things.
In addition to this, Volkswagen founded PowerCo SE in the reporting period as part of the Battery &
Charging technology platform. This company will be responsible for the Group’s global battery business. In
addition to producing battery cells, it will also take on other activities along the battery value chain in
future.
In the Mobility Solutions technology platform, Volkswagen strengthened the Group’s expertise in
advanced fleet management through the equity investment in the Europcar Mobility Group in the
reporting period. The aim is to be able to achieve even better coverage of all customers’ mobility needs
based on a new mobility platform.
We are convinced that our corporate structure, which efficiently 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. Clear responsibilities and a
high degree of business responsibility in the brand groups and technology platforms will enable
comprehensive implementation of the Group’s NEW AUTO strategy.
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 with 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 be agreed upon, to the extent permitted by law. 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 manage-
ment 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 frame-
work laid down by law.
MATERIAL CHANGES I N EQUITY I NVESTMENTS

In 2021, together with investment firm Attestor Limited and Pon Holdings B.V., Volkswagen made a joint
public takeover offer for the shares of Europcar Mobility Group S.A., Paris/France through the consortium
company Green Mobility Holding S.A. (GMH) based in Strassen/Luxembourg. The European Commission
issued final antitrust approval at the end of May 2022. During the extended offer period, the French
Financial Markets Authority gave Europcar shareholders the opportunity to tender their shares to the
consortium company. In total, 93.6% of Europcar’s shareholders accepted the offer. The consortium jointly
assumed control of Europcar in mid-June 2022. Because the acceptance rate was over 90%, a squeeze-out
was initiated for the remaining Europcar shares in July 2022, and the company was delisted. Since July 13,
2022, the consortium company has held 100% of the shares in Europcar. The purchase price was 51 cents
per Europcar share. In addition, Volkswagen is the writer of put options held by the other members of the
consortium, and the other members have granted Volkswagen call options on their shares in the
consortium company. The options with Attestor were extended on a long-term basis in December 2022.
111
Since joint control has been contractually agreed, the company, in which Volkswagen holds 66% of the
shares, will be accounted for using the equity method in the Volkswagen consolidated financial statements.
Following the fulfillment of all closing conditions, Brose Fahrzeugteile SE & Co. Kommanditgesellschaft
(Brose) and Volkswagen Finance Luxemburg S.A., a subsidiary of Volkswagen AG, created a jointly operated
company in early 2022 for the development and manufacture of complete seat units, seat structures and
components, and solutions for vehicle interiors. As part of this arrangement, Brose acquired half of the
shares in the previous Volkswagen Group company SITECH Sp. z o.o., Polkowice/Poland. Brose and Volks-
wagen each hold 50% of the jointly operated company – Brose Sitech Sp. z o.o. – with Brose taking the
industrial lead and controlling the company.
Since late September 2022, non-voting preferred shares of Dr. Ing. h.c. F. Porsche AG (Porsche AG) have
been traded in the Regulated Market of the Frankfurt Stock Exchange. The no-par value bearer shares came
from the portfolio of Porsche Holding Stuttgart GmbH, Stuttgart – a wholly owned subsidiary of Volks-
wagen AG. Following the early termination of the stabilization period, the total number of preferred shares
issued in the IPO equated to 24.2% and comprised 110,080,801 preferred shares. The control and profit and
loss transfer agreement between Volkswagen AG and Porsche AG ended in accordance with section 307 of
the Aktiengesetz (AktG – German Stock Corporation Act) on December 31, 2022.
In connection with the IPO, Volkswagen additionally sold an interest of 25% of Porsche’s ordinary shares
plus one ordinary share to Porsche Automobil Holding SE, Stuttgart. As of the reporting date, Volkswagen
held 75.4 % of the total capital.
VO L K SWAG E N AG S H A R E H O L D I N G S
www.volkswagenag.com/en/InvestorRelations.html
LEGAL FACTORS I N FLU ENCI NG BUSI N ESS

Like other international companies, the business of Volkswagen companies is affected by numerous laws in
Germany and abroad. In particular, there are legal requirements relating to services, development, prod-
ucts, production and distribution, as well as supervisory, data protection, financial, company, commercial,
capital market, anti-trust and tax regulations and regulations relating to labor, banking, state aid, energy,
environmental and insurance law.
GROU P CORPORATE GOVERNANCE DECLARATION

The Group Corporate Governance Declaration can be found in this annual report and is permanently
available on our website at www.volkswagenag.com/en/InvestorRelations/corporate-governance/declaration-
of-conformity.html.
G R O U P CO R P O R AT E G OV E R N A N C E D E C L A R AT I O N
www.volkswagenag.com/en/InvestorRelations/corporate-governance/declaration-of-conformity.html
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Group Management Report Disclosures Required under Takeover Law
Disclosures Required under

Takeover Law
This chapter contains the Volkswagen Group’s disclosures relating to
takeover law required by sections 289a and 315a of the HGB.
CAPITAL STRUCTU RE
Volkswagen AG’s share capital amounted to €1,283,315,873.28 (€1,283,315,873.28) on December 31, 2022. It
was composed of 295,089,818 ordinary shares and 206,205,445 preferred shares. Each share conveys a
notional interest of €2.56 in the share capital.
SHAREHOLDER RIGHTS AN D OBLIGATIONS

The shares convey pecuniary and administrative rights. The pecuniary rights include in particular the
shareholders’ right to participate in profits (section 58(4) of the Aktiengesetz (AktG – German Stock Cor-
poration Act)), the right to participate in liquidation proceeds (section 271 of the AktG) and preemptive
rights to shares in the event of capital increases (section 186 of the AktG), which can be disapplied by the
Annual General Meeting with the approval of the Special Meeting of Preferred Shareholders, where
appropriate. Administrative rights include the right to attend the Annual General Meeting, to speak there,
to ask questions, to propose motions and to exercise voting rights. When virtual Annual General Meetings
were held to avoid risks during the Covid-19 pandemic, these rights were partially restricted. Shareholders
can enforce their pecuniary and administrative rights in particular through actions seeking disclosure and
actions for avoidance.
Each ordinary share grants the holder one vote at the Annual General Meeting. The Annual General
Meeting elects shareholder representatives to the Supervisory Board and elects the auditors; in particular, it
resolves on the appropriation of net profit, formally approves the actions of the Board of Management and
the Supervisory Board, and resolves on amendments to the Articles of Association of Volkswagen AG,
capital measures and authorizations to purchase treasury shares; if required, it also resolves on the
performance of a special audit, the removal before the end of their term of office of Supervisory Board
members elected at the Annual General Meeting and the winding-up of the Company.
Preferred shareholders generally have no voting rights. However, in the exceptional case that they are
granted voting rights by law (for example, when preferred share dividends were not paid in one year and
not compensated for in full in the following year), each preferred share also grants the holder one vote at
the Annual General Meeting. Furthermore, preferred shares entitle the holder to a €0.06 higher dividend
than ordinary shares (further details on this right to preferred and additional dividends are specified in
Article 27(2) of the Articles of Association of Volkswagen AG).
The Gesetz über die Überführung der Anteilsrechte an der Volkswagenwerk Gesellschaft mit beschränkter
Haftung in private Hand (VW-Gesetz – Act on the Privatization of Shares of Volkswagenwerk Gesellschaft
113
mit beschränkter Haftung) of July 21, 1960, as amended on July 30, 2009, includes various provisions in
derogation of the German Stock Corporation Act, for example on the exercising of voting rights by proxy
(section 3 of the VW-Gesetz) and on majority voting requirements at the Annual General Meeting (sec-
tion 4(3) of the VW-Gesetz).
In accordance with the Volkswagen AG Articles of Association (Article 11(1)), the State of Lower Saxony is
entitled to appoint two members of the Supervisory Board of Volkswagen AG for as long as it directly or
indirectly holds at least 15% of Volkswagen AG’s ordinary shares. In addition, resolutions by the Annual
General Meeting that are required by law to be adopted by a qualified majority require a majority of
more than four-fifths of the share capital of the Company represented when the resolution is adopted
(Article 25(2)), regardless of the provisions of the VW-Gesetz.
SHAREHOLDI NGS EXCEEDI NG 10% OF VOTI NG RIGHTS

Shareholdings in Volkswagen AG that exceed 10% of voting rights are shown in the notes to the annual
financial statements of Volkswagen AG, which are available online at https://www.volkswagenag.com/en/
InvestorRelations.html. The current notifications regarding changes in voting rights in accordance with the
Wertpapierhandelsgesetz (WpHG – German Securities Trading Act) are also published on this website.
COMPOSITION OF TH E SU PERVISORY BOARD

The Supervisory Board consists of 20 members, half of whom are shareholder representatives. In accor-
dance with Article 11(1) of the Articles of Association of Volkswagen AG, the State of Lower Saxony is
entitled to appoint two of these shareholder representatives for as long as it directly or indirectly holds at
least 15% of the Company’s ordinary shares. The remaining shareholder representatives on the Supervisory
Board are elected by the Annual General Meeting.
The other half of the Supervisory Board consists of employee representatives elected by the employees
in accordance with the Mitbestimmungsgesetz (MitbestG – German Codetermination Act). A total of seven
of these employee representatives are Company employees elected by the workforce; the other three
employee representatives are trade union representatives elected by the workforce.
The Chairman of the Supervisory Board is generally a shareholder representative elected by the other
members of the Supervisory Board. In the event that a Supervisory Board vote is tied, the Chairman of the
Supervisory Board has a casting vote in accordance with the MitbestG.
The goals for the composition of the Supervisory Board and information about its composition are
described in the Group Corporate Governance Declaration.
STATUTORY REQUI REMENTS AN D REQUI REMENTS OF TH E ARTICLES OF ASSOCIATION WITH REGARD TO

TH E APPOI NTMENT AN D REMOVAL OF BOARD OF MANAGEMENT MEMBERS AN D TO AMEN DMENTS TO
TH E ARTICLES OF ASSOCIATION
The appointment and removal of members of the Board of Management are governed by sections 84 and 85
of the AktG, which specify that members of the Board of Management are appointed by the Supervisory
Board for a maximum of five years. Board of Management members may be reappointed or have their term
of office extended for a maximum of five years in each case. In addition, Article 6 of the Articles of
Association of Volkswagen AG states that the number of Board of Management members is stipulated by
the Supervisory Board and that the Board of Management must consist of at least three persons. The mem-
bers of the Volkswagen AG Board of Management must include at least one woman and at least one man.
The Annual General Meeting resolves amendments to the Articles of Association (section 119(1) of the
AktG). In accordance with section 4(3) of the VW-Gesetz as amended on July 30, 2009 and Article 25(2) of
the Articles of Association of Volkswagen AG, Annual General Meeting resolutions to amend the Articles of
Association require a majority of more than four-fifths of the share capital represented.
114
POWERS OF TH E BOARD OF MANAGEMENT, I N PARTICU LAR CONCERN I NG TH E ISSU E OF N EW SHARES

AN D TH E REPURCHASE OF TREASURY SHARES
According to German stock corporation law, the Annual General Meeting can authorize the Board of
Management, for a maximum period of five years, to issue new shares. It can also authorize the Board of
Management, for a maximum period of five years, to issue bonds on the basis of which new shares are to be
issued. The Annual General Meeting also decides the extent to which shareholders have preemptive rights
to the new shares or bonds. The maximum amount of authorized share capital or contingent capital
available for these purposes is determined by Article 4 of the Articles of Association of Volkswagen AG, as
amended.
At the Annual General Meeting on May 14, 2019, a resolution was passed authorizing the Board of
Management, with the consent of the Supervisory Board, to increase the Company’s share capital by a total
of up to €179.2 million (corresponding to 70 million shares) on one or more occasions up to May 13, 2024
by issuing new nonvoting preferred shares against cash contributions.
Further details of the authorization to issue new shares and their permitted uses may be found in the
notes to the consolidated financial statements.
MATERIAL AGREEMENTS OF TH E PARENT COMPANY I N TH E EVENT OF A CHANGE OF CONTROL

FOLLOWI NG A TAKEOVER BI D
At the end of fiscal year 2019, a banking syndicate granted Volkswagen AG a syndicated line of credit
amounting to €10.0 billion, which currently runs until December 2026. With the line of credit, the
syndicate members were granted the right to call their portion of the syndicated line of credit in the two
forms of a Change of Control described below. A call right exists if one individual or several individuals
acting jointly who as of the date of this agreement exercise control over the Company have legal or
economic ownership of shares that together make up more than 90% of the voting rights of the Company.
However, a call right also exists if one individual or several individuals acting jointly who as of the date of
this agreement do not exercise control over the Company obtain control over the Company. Such a call
right does not exist, however, if one shareholder or several shareholders of Porsche Automobil Holding SE
or one or several legal entities from the Porsche or Piëch family directly or indirectly obtain control over
the Company.
Volkswagen AG and the Ford Motor Company entered into a Master Collaboration Agreement in January
2019. This agreement sets out a framework of obligations, which are to apply to the further co-operation
agreements entered into between the parties, including those entered into in fiscal year 2021. It also covers
the Development Agreement concluded in January 2019 for the development of the next-generation
Amarok. The Master Collaboration Agreement provides for a right of termination with immediate effect in
the event of a Change of Control. A Change of Control has been defined to mean a change affecting more
than 50% of the voting capital of one of the companies or a change in the ability to directly or indirectly
control the management of a company through its decision-making bodies. The right of termination must
be exercised within 90 days of the company becoming aware of a Change of Control.
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Group Management Report Business Development
Business Development
The world economy recorded positive growth in fiscal year 2022. Global demand for vehicles was on
a level with the previous year. In a market that continued to be challenging, the Volkswagen Group
delivered 8.3 million vehicles to customers.
DEVELOPMENTS I N TH E GLOBAL ECONOMY

In the reporting period, the Russia-Ukraine conflict led to a humanitarian crisis and global market upheaval.
Prices rose substantially, particularly on the energy and commodity markets. Parts supply shortages also
intensified in this context. The Russia-Ukraine conflict led to increased uncertainty in respect of develop-
ments in the global economy and prompted large sections of the community of Western states to impose
sanctions on Russia, ranging from extensive trade embargoes to the partial exclusion of Russia from the
global financial system. Russia itself, in its role as an energy exporter, restricted gas deliveries to Europe.
The resulting increase in energy prices and intensified supply shortages had a sustained impact on infla-
tion in Europe particularly.
During 2022, the restrictive measures put in place to protect the population from the SARS-CoV-2 virus
were lifted to a large extent in many countries. The progress made in administering vaccines to the public
had a positive effect, while the emergence of the new Omicron variant and its subvariants led to a renewed
sharp rise in infections on a national scale, mostly causing milder symptoms but increased rates of sick
leave. In China particularly, local outbreaks of infection in the course of 2022 led to tight restrictions under
the zero-Covid strategy being pursued there, resulting in economic constraints and disruption to inter-
national supply chains. The departure from this strategy led to a rapid increase in infection rates in China at
the end of the year.
Following the slump in global economic output in 2020 and the incipient recovery due to baseline and
catch-up effects in 2021, the global economy recorded positive overall growth of +3.0 (+6.0) % in 2022. Both
the advanced economies and the emerging markets continued to recover on average, albeit with dimin-
ishing momentum and slower growth overall than in the prior year.
At national level, developments depended on the one hand on the scale of the negative impact of the
Covid-19 pandemic and the intensity with which measures were taken to contain it, and on the other the
extent to which national economies were affected by the consequences of the Russia-Ukraine conflict. In
response to the further rise of inflation rates around the world, many countries shifted to a more restrictive
monetary policy, which led central banks to increase their key interest rates and reduce bond purchases
during the reporting period. The gloomier economic outlook resulted in large losses on major stock markets.
On average, prices for energy and other commodities rose significantly in some cases year-on-year and short-
ages of certain intermediates and commodities remained high. Global trade in goods increased in 2022.
116
ECONOMIC GROWTH
Percentage change in GDP
Global economy
Western Europe
Germany
USA
China
10,0
5,0
0,0
-5,0
-10,0
2018 2019 2020 2021 2022
Europe/Other Markets
The economy in Western Europe recorded positive overall growth of +3.6 (+5.6) % in 2022. The reasons for
this included increased economic resilience in the face of high infection rates in many countries, and the
associated easing of the measures taken to contain the pandemic. However, significantly rising inflation
rates, among other things, resulted in a slowdown in economic momentum. This trend was seen in almost
all countries in Northern and Southern Europe.
At +0.7 (+6.4) %, the economies in Central and Eastern Europe recorded low real growth in absolute gross
domestic product (GDP) overall in the reporting period. While economic output in Central Europe saw
positive, albeit somewhat less dynamic growth of +4.4 (+7.8) %, GDP in the Eastern Europe region fell
significantly compared with the prior year as a consequence of the Russia-Ukraine conflict, with a negative
growth rate of –3.8 (+4.7) %. The sanctions imposed against Russia had a substantial impact in this region
from March 2022 onwards, causing Russian economic output to contract from the second quarter. Russia
saw a negative average growth rate for the year of –2.8 (+4.7) %. Inflation rates rose, in some cases sharply,
across the entire Central and Eastern Europe region.
In Türkiye, economic output for the year 2022 as a whole rose by +5.1 (+11.6) % amid very high inflation
and a fall in the value of the local currency. South Africa saw slight GDP growth of +2.2 (+4.9) % in the
reporting period, amid persistent structural deficits and political challenges.
Germany
Germany’s economic output recorded a positive growth rate of +1.9 (+2.6) % in the 2022 reporting year, with
declining momentum. The situation on the labor market improved compared with the previous year, with
the unemployment rate and notices of Kurzarbeit (short-time working) for economic reasons falling on
average. At the same time, monthly inflation rates reached the highest level in the history of the Federal
Republic of Germany, while at the same time historic lows were registered in consumer confidence.
117
EXCHANGE RATE MOVEMENTS FROM DECEMBER 2021 TO DECEMBER 2022

Index based on month-end prices: as of December 31, 2021 = 100
EUR to GBP
EUR to USD
EUR to CNY
EUR to JPY
115
110
105
100
95
90
85
D J F M A M J J A S O N D
North America
US economic output grew by +2.1 (+5.9) % in the reporting period. Given rising inflation and the tight labor
market, the US Federal Reserve consistently maintained its restrictive monetary policy and raised its key
interest rate seven times over the course of the reporting year. Unemployment declined further in 2022 from
the high level seen in the prior year. GDP rose by +3.6 (+5.0) % in neighboring Canada and by +3.1 (+4.9) %
in Mexico.
South America
Brazil’s economy posted GDP growth of +2.9 (+5.3) % in 2022. Argentina registered a positive economic per-
formance with year-on-year growth of +4.6 (+10.4) % amid very high inflation and continued depreciation
of the local currency.
Asia-Pacific
At the beginning of the Covid-19 pandemic, China was exposed to the negative effects at an earlier stage
than other economies and, due to the strict zero-Covid strategy pursued there, benefited from a relatively
low number of new infections as the pandemic progressed. This strategy resulted in temporary local
lockdowns in the reporting period in connection with the spread of the Omicron variant. The departure
from this strategy led to a rapid increase in infection rates in China at the end of the year. The Chinese
economy grew by only +3.0 (+8.5) % overall. India registered strong growth of +7.0 (+8.7) %. Japan recorded
positive growth of +1.0 (+2.2) % year-on-year.
TREN DS I N TH E MARKETS FOR PASSENGER CARS AN D LIGHT COMMERCIAL VEH ICLES

In fiscal year 2022, the volume of the passenger car market worldwide remained on a level with the prior
year at 69.6 million vehicles. Gains and losses in individual markets were very uneven, since shortages and
disruption in global supply chains, the effects of the Russia-Ukraine conflict and the further consequences
of the Covid-19 pandemic varied around the world in terms of the strength of their impact. Shortages of
semiconductors and other intermediates, which already occurred in the second half of 2021, and the
resulting supply bottlenecks, could also not be fully resolved in 2022.
Slight or noticeable growth was recorded in the overall markets of the Asia-Pacific and Middle East
regions respectively, while South America and Africa were on a level with the previous year. Sales fell in the
118
remaining regions: while market volume was slightly down in Western Europe and noticeably down in
North America, Central and Eastern Europe recorded a very strong decline.
In the reporting period, the global volume of new registrations for light commercial vehicles was slightly
(–3.0%) lower than in the previous year.
Sector-specific environment
Along with fiscal policy measures, factors substantially affecting the sector-specific environment were
shortages and disruption in global supply chains, the Covid-19 pandemic and the impacts of the Russia-
Ukraine conflict. This contributed considerably to the mixed trends in unit sales in the markets in 2022. As
a result of the Russia-Ukraine conflict, sanctions were imposed that restricted the production and sale of
vehicles, particularly in Russia. The fiscal policy measures included tax cuts or increases, incentive pro-
grams and sales incentives, as well as import duties. In addition, non-tariff trade barriers to protect the
respective domestic automotive industries made the movement of vehicles, parts and components more
difficult.
In Western Europe, the number of new passenger car registrations in the reporting period was slightly
down on the previous year’s weak level, declining by 4.3% to 10.2 million vehicles. While the first half of the
reporting year fell significantly short of the comparison period, the number of new registrations in the
subsequent months were up again on the – in some cases substantially weaker – prior-year figures. The per-
formance of the large individual passenger car markets was negative in fiscal year 2022: France (–7.7%), the
United Kingdom (–2.0%), Italy (–9.8%) and Spain (–7.1%) did not achieve their respective prior-year levels.
The volume of new registrations for light commercial vehicles in Western Europe was sharply lower than
in the previous year, falling by –20.7%.
After the slight recovery in the prior year, the volume of the passenger car market in the Central and
Eastern Europe region fell very sharply in the 2022 fiscal year and was down by 37.2% at 1.8 million
vehicles. The number of sales was also on an overall downtrend in the individual markets. The Russian
passenger car market in particular saw substantial losses and more than halved in the period under review
(–60.9%). In Central Europe, the decline in new registrations was smaller at –6.0% in Poland and –7.1% in the
Czech Republic.
The market volume of light commercial vehicles in Central and Eastern Europe was sharply below the
prior-year level (–28.6%). In Russia, the number of vehicles sold in the reporting period fell by 45.2%
compared with the previous year.
The volume of the passenger car market in Türkiye in the reporting period was slightly up on the weak
prior-year level. In South Africa, the growth trend in passenger car sales that began in 2021 continued
strongly with a rise of 20.4%.
The volume of new registrations of light commercial vehicles in Türkiye in the reporting period was on a
level (+0.5%) with 2021, while South Africa recorded slight growth (+3.6%).
Germany
At 2.7 million, the total number of new passenger car registrations in Germany in the 2022 fiscal year was
similar to the weak prior-year level (+1.1%). Shortages and disruption in global supply chains continued to
restrict vehicle availability. With delays in semiconductor deliveries persisting, and the associated measures
such as cutbacks in production and production shutdowns therefore continuing too, domestic production
and exports remained at a low level in the reporting period: passenger car production increased by 10.8%
to 3.4 million vehicles and passenger car exports grew by 10.1% to 2.6 million units.
The number of sales of light commercial vehicles in Germany in the reporting period was sharply down
on the 2021 figure (–21.1%).
119
North America
At 16.4 million vehicles, sales of passenger cars and light commercial vehicles (up to 6.35 tonnes) in the
North America region in fiscal year 2022 were noticeably lower compared with the prior-year (–7.3%). At
13.9 million units, the market volume in the USA declined by more than the average for this region (–8.0%).
The Canadian automotive market registered a noticeable fall in sales figures to 1.5 million units (–9.7%) in
the reporting period, while new registrations of passenger cars and light commercial vehicles in Mexico
saw a noticeable rise of 7.0% compared with the prior year to 1.1 million vehicles.
South America
In the South America region, the volume of new passenger car and light commercial vehicle registrations in
the reporting period was on a level with the prior year at 3.6 million units (+1.8%). This continued the
positive growth trend that began in the previous year, albeit at a slower pace. In Brazil, the number of new
registrations was also on the same level as the previous year at 2.0 million units (–0.8%). Total exports of
vehicles manufactured in Brazil increased by 28.9% to 450 thousand passenger cars and light commercial
vehicles. In the Argentinian market, demand for passenger cars and light commercial vehicles in the 2022
reporting period rose noticeably by 7.0% to 380 thousand units.
Asia-Pacific
In the Asia-Pacific region, the volume of the passenger car market in fiscal year 2022 was slightly higher
than the previous year’s figure at 33.8 million units (+3.6%). The absolute rise in demand for passenger cars
in the region was again primarily attributable to the positive trend in the Chinese passenger car market.
Here, the recovery seen in 2021 continued but was affected by the semiconductor shortage and local
lockdowns in connection with the spread of the Omicron variant of the SARS-CoV-2 virus. Overall, the
volume of demand in China totaled 21.0 million units (+1.6%), putting it on a level with the previous year.
In India, passenger car sales again rose strongly by 23.2% compared with the prior year to 3.6 million units.
New registrations in the Japanese passenger car market in the reporting period were noticeably down on
the already weak prior-year level at 3.5 million units (–6.9%).
The volume of demand for light commercial vehicles in the Asia-Pacific region in 2022 was slightly
above the previous year’s level (+2.1%). Registration volumes in China, the region’s dominant market and
the largest market worldwide, were slightly lower, falling 3.1% short of the prior-year figure. The number of
new vehicle registrations in India was strongly up on the prior-year level; in Japan this figure was slightly
lower than in the previous year.
TREN DS I N TH E MARKETS FOR COMMERCIAL VEH ICLES

Since July 1, 2021, Navistar has been a TRATON GROUP brand, making it part of the Volkswagen Group’s
Commercial Vehicles Business Area. This has expanded the relevant markets in the commercial vehicles
business to include North America (consisting of USA, Canada and Mexico).
In the markets that are relevant for the Volkswagen Group, global demand for mid-sized and heavy
trucks with a gross weight of more than six tonnes experienced noticeable growth in fiscal year 2022 versus
the comparison period (+5.5%). Global truck markets declined sharply. This was due to upheaval on the
Chinese market, which slumped dramatically on the back of purchases brought forward to 2021 prior to the
introduction of the new emission level and due to the zero-Covid strategy pursued there.
In the 27 EU states excluding Malta, but including the United Kingdom, Norway and Switzerland
(EU27+3), the number of new truck registrations was noticeably up on the prior-year level, increasing by
5.1% to a total of 337 thousand vehicles. Growth could be observed in many truck markets in the region,
albeit to differing degrees. The substantial market recovery seen in 2021 slowed during the reporting
period to a noticeable level of growth. New registrations in Germany, the largest market in this region, were
on a level with the previous year (–1.7%). The United Kingdom recorded a noticeable increase of 9.8%, while
demand in France was on a level with the previous year (–0.3%). The Russian market declined sharply as a
result of the Russia-Ukraine conflict. Türkiye, by contrast, recorded a strong rise in new registrations of
120
24.7%. In the South African market, demand rose significantly (+12.3%). The truck market in North America
is divided into weight classes 1 to 8. In the segments relevant for Volkswagen – Class 6 to 8 (8.85 tonnes or
heavier) – new registrations were significantly higher (+13.6%) than the previous year’s figure. In Brazil, the
largest market in the South America region, demand for trucks in the reporting period was slightly lower
year-on-year (–2.5%).
Demand in the bus markets relevant for the Volkswagen Group was on a level with the previous year
(+0.3%). Demand for buses in the EU27+3 markets in the reporting period was slightly down overall on the
level of the previous year (–3.8%), with the picture varying from country to country. The school bus
segment in the USA and Canada recorded a noticeable decline (–6.8%) compared with the prior year.
Demand for buses in Mexico also declined noticeably year-on-year (–7.4%). In Brazil, by contrast, demand
for buses increased and was strongly up on the previous year’s level (+23.4%).
TREN DS I N TH E MARKETS FOR POWER ENGI N EERI NG

The markets for power engineering are subject to differing regional and economic factors. Consequently,
their business growth trends are mostly independent of each other.
The marine market remained below the prior-year level in 2022. This is especially attributable to the fact
that the demand in merchant shipping declined. In this sub-market, there was a decline particularly in the
segment for container ships, tankers and bulk cargo carriers compared with the previous year’s high level.
The segment for gas tankers, in contrast, recorded a stable trend. Slightly positive development was evident
in the sub-market for cruise ships and passenger ferries. Here, the easing of Covid-19-related restrictions
enabled business activity to grow again. The special market for government vessels, which is supported by
state investment, was active due to the current geopolitical situation. In the offshore sector, the existing
overcapacity continued to curb investment in offshore oil production despite the sharp rise in oil and gas
prices. In contrast, demand for offshore special ships for wind turbines developed positively. The uncer-
tainty regarding future fuel and emissions regulations persisted once again in the overall market in 2022.
The market for power generation improved in 2022 compared with the previous year. Overall, a signifi-
cant market recovery was evident despite inflation and challenges in supply chains. The trend away from
oil-fired power plants towards dual-fuel and gas-fired power plants continued, underpinned by the resolu-
tion at the UN Climate Change Conference (COP26) and the resulting difficulties in financing oil-fired
power plants. However, the Russia-Ukraine conflict also had a noticeable impact in the form of increasing
gas and commodity prices, as well as a delayed availability of core components. There was still strong
demand for new energy solutions such as hydrogen and long-term energy storage, with an ongoing clear
trend towards greater flexibility and decentralized availability.
The market for turbomachinery improved again year-on-year. Prices for raw materials remained at a
very high level, resulting in an increased demand for production facilities with turbo compressors, in both
the raw materials and processing industry as well as the oil and gas business. The market of the new busi-
ness fields for turbomachinery used in the area of decarbonization improved further compared with the
prior year and was driven by persistently high but volatile prices for carbon dioxide certificates in European
trading and by favorable changes in US tax law. However, demand for steam turbines for power generation
improved only marginally, while demand for gas turbines declined slightly over the course of 2022.
The after-sales markets for engines in the marine and power plant business and for turbomachinery
experienced significantly stronger growth in the 2022 reporting period than in the prior-year period, in
which demand was hit by the Covid-19 pandemic.
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TREN DS I N TH E MARKETS FOR FI NANCIAL SERVICES

Demand for automotive financial services was at a high level in the first quarters of 2022 due, among other
things, to persistently low key interest rates in the main currency areas. In combination with the Covid-19
pandemic and continuing limits on vehicle availability, the rise in interest rates that began in the second
half of the year put pressure on demand for financial services in almost all regions.
The European passenger car market was still affected by parts supply shortages in the reporting period;
vehicle deliveries were down on the prior-year period. By contrast, the share of financial services products
in the new vehicle business grew positively and exceeded the 2021 figure. The main drivers of this trend
were positive changes in the sales mix that benefited the private customer business, which lends itself
particularly to financing, and an increased share of leasing contracts in the fleet business. The positive
trend in the financing of used vehicles continued in 2022; in particular, the sale of after-sales products such
as servicing, maintenance and spare parts agreements increased. Financial services activities in Russia were
negatively affected by the Russia-Ukraine conflict and the impact of the international sanctions.
In Germany, the continuing challenges presented by the faltering parts supply in vehicle production
impacted on vehicle sales and the financial services business. The decrease in deliveries of new vehicles led
to fewer new leasing and financing contracts being concluded in the reporting period than a year earlier.
New vehicle penetration was down slightly on 2021. Overall, the level of new contracts for used vehicles con-
tinued to be similar to that of the previous year. The number of new after-sales contracts was up in the
second half of the year and ended the reporting period only slightly down on 2021 levels. With few excep-
tions, the number of new contracts in the insurance business fell short of the figures achieved a year earlier.
In South Africa, demand for financing and insurance products for new and used cars remained subdued
in 2022. Coordinated campaigns to promote such products were scaled back due to limited vehicle avail-
ability. To counter rising inflation, the South African Reserve Bank has begun to raise interest rates.
In the North America region, supply bottlenecks meant that vehicle deliveries in 2022 were down on the
previous year. The US and Canadian markets also saw declining demand for leasing and financing contracts
because of interest rate hikes. In the Mexican market, the percentage of new leasing and financing contracts
remained on a level with the previous year and new contracts for after-sales products were up year-on-year.
In the South America region, there was excess demand for vehicles in a volatile environment, exacer-
bated in Argentina by restrictions on imports. The rise in interest rates kept the number of cash purchases
at a high level. In Brazil, there was an increase in the number of new financing contracts.
In the Chinese market, passenger car sales were impacted by parts supply shortages and local restric-
tions due to the pandemic. Both the proportion of credit-financed vehicle purchases and growth in new
contracts declined. The comparative prior-year figures were not achieved in the reporting period.
In fiscal year 2022, the financial services business in the market for heavy commercial vehicles was slightly
up on the comparative prior-year level, also affecting financing and leasing contracts in Europe and Brazil.
N EW GROUP MODELS I N 2022

The Volkswagen Group offers a broad portfolio of products covering almost all key segments and body
types so that its customers can choose the right vehicle for their needs. In fiscal year 2022, we added further
attractive vehicles, not only systematically expanding our portfolio of all-electric and hybrid vehicles, but
also bringing compelling new products with conventional combustion engines onto the market.
122
The Volkswagen Passenger Cars brand upgraded its best-selling T-Roc, among others, in 2022. The T-Roc
Cabriolet and the sporty R model also benefited from a design and technology update. The brand continued
its transformation to e-mobility with the new ID.5, which is also available as a particularly sporty GTX
model. In 2022, China saw the launch of the Tavendor, a new SUV in the upper range segment tailored to
the Chinese market. Other SUV models such as the Tayron, Tayron X and Teramont X were updated. In the
traditional MPV and notchback segments, the Viloran, Bora, Lavida and Sagitar models were updated. The
Lamando received a redesigned successor. The transformation also made great strides in the United States:
the ID.4 is now manufactured locally and has been customized further for the US market. The high-volume
Jetta received an update. In South America, there were product upgrades in the Polo and Jetta series.
The era of state-of-the-art electric mobility based on the MEB dawned at ŠKODA in 2021 with the rollout
of the Enyaq iV. An independent coupé version and the particularly sporty RS iV variants were added to the
series in 2022. ŠKODA underscored its growth plans in India with the market launch of the independent
Slavia on the modern MQB platform.
At Volkswagen Commercial Vehicles, 2022 was devoted to the all-electric ID. Buzz, which proved to be a
global sensation. The cooperation with Ford produced the next generation of the Amarok.
Audi updated its best-selling A8 model in 2022, expanding the series to include an especially luxurious
version tailored to the Chinese market. In China, the completely new A7L, the first vehicle produced with
the new joint venture partner SAIC, further underpins Audi’s premium positioning. Two SUVs adapted for
the local market were also launched, the all-electric Q5 e-tron and the Q6.
Bentley expanded its important Bentayga range by adding a particularly exclusive model with a long
wheelbase. A hybrid version of the Flying Spur came onto the market, while the Flying Spur Speed with its
impressive 12-cylinder engine rounds off the series at the upper end of the scale.
In 2022, Lamborghini brought out the Urus Performante, a new top-of-the-range model from its successful
SUV range. The new top-of-the line Tecnica version of the Huracan was also launched.
Porsche extended its Taycan range in 2022, adding the Taycan Sport Turismo and particularly attractive
GTS derivatives. The line of classic sports cars was also expanded: the 718 and 911 series received their most
sporty variants to date with the GT4 RS and GT3 RS, respectively. The 911 Sport Classic was also added to the
portfolio.
Scania was the first brand of the TRATON GROUP to introduce the integrated 13-liter drive in its models
in 2022. It offers fuel savings over the predecessor model and will also be introduced gradually in the other
brands of the TRATON GROUP.
MAN presented a new electric truck for long-distance transport in 2022.
Navistar rolled out the eMV International mid-sized electric truck and the IC Bus Electric CE Series school
bus in 2022.
Since 2022, Volkswagen Truck & Bus has offered customers a product for electric distribution transport
with its e-Delivery.
The motorcycles launched by Ducati in 2022 include the new Multistrada V2 and the Multistrada V4
Pikes Peak. The Streetfighter family was enhanced by the new Streetfighter V2 and Streetfighter V4 SP models.
In addition, the Scrambler 1100 Tribute PRO and the Scrambler Urban Motard were launched along with
the Panigale V4. The brand new Ducati Desert X also came on the market.
123
VOLKSWAGEN GROUP DELIVERI ES

The Volkswagen Group delivered 8,262,776 vehicles to customers worldwide in fiscal year 2022. This was
7.0% or 619,116 units less than in the previous year. While sales figures for the Passenger Cars Business
Area fell short of the prior-year figure, commercial vehicle deliveries to customers rose year-on-year,
mainly due to the inclusion of Navistar as from July 1, 2021. The chart in this section shows the trend in
deliveries worldwide for the individual months compared with the previous year. In the following, we report
separately on deliveries in the Passenger Cars Business Area and the Commercial Vehicles Business Area.
VOLKSWAGEN GROUP DELIVERI ES 1
2022 2021 %
Passenger Cars 7,957,288 8,610,702 –7.6

Commercial Vehicles 305,488 271,190 +12.6
Total 8,262,776 8,881,892 –7.0
1 Prior-year deliveries have been updated to reflect subsequent statistical trends. The figures include the Chinese joint ventures.
As of July 1, 2021, the figures include Navistar.
GLOBAL DELIVERI ES BY TH E PASSENGER CARS BUSI N ESS AREA

With its passenger car brands, the Volkswagen Group is present in all relevant automotive markets around
the world. The key sales markets currently include Western Europe, China, the USA, Brazil, Poland, Mexico,
Türkiye and the Czech Republic.
Sales of Volkswagen Group passenger cars and light commercial vehicles worldwide declined by 7.6% in
fiscal year 2022 to 7,957,288 units. In the reporting period, limited vehicle availability as a result of the
Covid-19 pandemic and bottlenecks in the supply of parts caused by the shortage of semiconductors and
the Russia-Ukraine conflict had a negative impact. In addition, disruptions in logistics resulted in delays.
While Porsche, Lamborghini and Bentley delivered a higher number of vehicles to customers, none of the
other Volkswagen Group brands reached their prior-year figures. We registered a year-on-year decline in
sales in all regions.
With additional model launches as part of the Group’s e-mobility campaign, sales increased in the
reporting period, bringing deliveries of all-electric vehicles to 572,110 units worldwide. This was 119,267 or
26.3% more units than in the previous year. Their share of the Group’s total deliveries rose to 6.9 (5.1) %. A
total of 245,174 of our plug-in hybrid models were delivered (–21.2%). Total electric vehicle deliveries went
up by 7.0% and their share of total Group deliveries rose year-on-year to 9.9 (8.6) %. The Group’s most suc-
cessful all-electric vehicles included the ID.4 and ID.3 from Volkswagen Passenger Cars, the ŠKODA Enyaq iV,
the CUPRA Born, the ID. Buzz from Volkswagen Commercial Vehicles, the Audi Q4 e-tron and Audi e-tron, as
well as the Porsche Taycan and Taycan Cross Turismo.
In an overall global market that was on a level with the previous year, we achieved a passenger car
market share of 11.0 (11.7) %.
The table at the end of this section gives an overview of passenger car deliveries to customers of the
Volkswagen Group in the regions and the key individual markets. The sales figures for Group models in
these markets and regions are explained below.
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VOLKSWAGEN GROUP DELIVERIES BY MONTH

Vehicles in thousands
2022
2021
1,100
1,000
900
800
700
600
500
400
J F M A M J J A S O N D
Deliveries in Europe/Other Markets

In Western Europe, the Volkswagen Group delivered 2,615,864 vehicles to customers in 2022 in an overall
market experiencing a slight contraction. Deliveries were thus down 5.3% on the already weak previous year.
In the reporting period, limited vehicle availability as a result of the Covid-19 pandemic and bottlenecks in
the supply of parts caused by the shortage of semiconductors and the Russia-Ukraine conflict had a nega-
tive impact. In addition, disruptions in logistics resulted in delays.
Customer interest in the Volkswagen Group’s electrified vehicles was strongest in Western Europe, where
we delivered almost three-quarters of our plug-in hybrids and more than half of our all-electric models to
customers in fiscal year 2022. In this region, electrified vehicles accounted for 19.1 (18.6) % of the Group’s
total deliveries; the share of all-electric vehicles stood at 12.6 (10.5) %. The Group models with the highest
sales volume were the T-Roc, Golf, Tiguan and Polo from the Volkswagen Passenger Cars brand. The ID.4
and Tiguan Allspace from Volkswagen Passenger Cars, the Audi Q3 and Q3 Sportback, the ŠKODA Kodiaq,
the CUPRA Formentor and the Porsche 911 were among the models that saw positive demand. In addition,
the following new or successor models introduced to the market during the previous year proved very
popular with customers: the Taigo from Volkswagen Passenger Cars, the ŠKODA Fabia and Enyaq iV, the
CUPRA Born, the Multivan from Volkswagen Commercial Vehicles, the Audi Q4 e-tron, Q4 Sportback e-tron
and Q5 Sportback, as well as the Porsche Macan and Porsche Taycan Cross Turismo. Among others, the
T-Roc, T-Roc Cabriolet and ID.5 models from Volkswagen Passenger Cars, the ŠKODA Karoq, the ID. Buzz and
Amarok from Volkswagen Commercial Vehicles, the Audi A8 and the Porsche Taycan Sport Turismo were
successfully launched on the market during the reporting period as new or successor models. The Volks-
wagen Group’s share of the passenger car market in Western Europe amounted to 23.3 (23.5) %.
In the Central and Eastern Europe region, the number of vehicles handed over to customers in 2022 was
down 33.0% year-on-year. This was due in particular to the slump in sales in the Russian market as a
consequence of the sanctions imposed in connection with the Russia-Ukraine conflict. The market as a
whole also recorded a very sharp decline in volumes at the same time. Demand developed encouragingly
for a number of models, including the Taigo and T-Roc from Volkswagen Passenger Cars, as well as for the
ŠKODA Superb, the CUPRA Formentor and the Audi Q5 Sportback.
The Volkswagen Group’s share of the passenger car market in the Central and Eastern Europe region
amounted to 21.7 (20.4) %.
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WORLDWIDE DELIVERIES OF THE MOST SUCCESSFUL GROUP MODEL RANGES IN 2022

Vehicles in thousands
Tiguan 458
Passat 426
Lavida 351
T-Roc 301
Q5 301
Golf 297
Jetta 285
Polo 278
In Türkiye, where the overall passenger car market expanded slightly, the Volkswagen Group delivered
15.7% fewer vehicles to customers than in 2021. The T-Roc from Volkswagen Passenger Cars was the most
sought-after Group model. In the South African market, the number of Group models sold decreased by
1.9%, while the overall market recorded strong growth. The Polo from the Volkswagen Passenger Cars brand
was the most sought-after Group model in this region.
Deliveries in Germany
In Germany, the number of Volkswagen Group vehicles handed over to customers in 2022 was up 4.0% on
the weak previous year in an overall market that was at prior-year levels. In the reporting period, limited
vehicle availability as a result of the Covid-19 pandemic and bottlenecks in the supply of parts caused by
the shortage of semiconductors and the Russia-Ukraine conflict had a negative impact. In addition, disrupt-
tions in the logistics chain resulted in delays.
The Group models with the highest sales volume were the Golf and T-Roc from the Volkswagen Passen-
ger Cars brand. Demand also increased for the Tiguan, ID.4 and Arteon Shooting Brake from Volkswagen
Passenger Cars, the CUPRA Formentor and the ŠKODA Karoq as well as the Audi A3, Q3, Q3 Sportback,
A4 Avant and Q5, among other models. In addition, the following new or successor models introduced to
the market during the previous year proved very popular with customers: the Taigo from Volkswagen
Passenger Cars, the ŠKODA Fabia, the CUPRA Born, the Multivan from Volkswagen Commercial Vehicles, the
Audi Q4 e-tron, Q4 Sportback e-tron and Q5 Sportback, as well as the Porsche Macan and Taycan Cross
Turismo. Seven Group models led the Kraftfahrt-Bundesamt (KBA – German Federal Motor Transport Author-
ity) registration statistics in their respective segments: the Golf, T-Roc, Tiguan, Passat, Audi A6, Porsche 911
and Multivan/Transporter. The Golf was again the most popular passenger car in Germany in terms of
registrations in 2022.
Deliveries in North America

In North America, the number of Volkswagen Group models delivered to customers in the reporting period
was down by 13.3% year-on-year in an overall market that saw a noticeable decline. The Group’s share of the
market in this region amounted to 4.6 (4.9) %. The Tiguan Allspace and Taos from Volkswagen Passenger
Cars as well as the Audi Q5 were the most sought-after Group models in North America.
In the US market, which witnessed a noticeable decline, the Volkswagen Group delivered 12.8% fewer
vehicles to customers in fiscal year 2022 than in the previous year. The volume of all-electric vehicles
delivered in the United States went up by 18.8% year-on-year to 44,173 units. Here, too, parts supply short-
126
ages acted as a drag on the Group’s sales figures. The Group models to record the greatest increases in abso-
lute terms included the Taos and ID.4 from Volkswagen Passenger Cars, the A3 saloon and Q5 Sportback
from Audi and the Porsche Cayenne. Sales of the Porsche Taycan Cross Turismo also developed encourag-
ingly. The ID.4 and Jetta from Volkswagen Passenger Cars, the Audi Q4 e-tron, the Audi Q4 e-tron Sportback
and the Porsche Macan were successfully launched on the market during the reporting period as new or
successor models.
In Canada, the number of vehicles delivered to Volkswagen Group customers was down 13.1% in the
reporting period compared with 2021. The overall market experienced a noticeable decline during this
period. The Taos and ID.4 from Volkswagen Passenger Cars, the Audi A3 saloon, Audi Q5 Sportback and the
Porsche Cayenne were some of the models that saw encouraging growth in demand.
In Mexico, where the market as a whole saw noticeable growth, we sold 16.1% fewer vehicles to custom-
ers in the past fiscal year than in the year before. Demand developed encouragingly for a number of models,
including the Saveiro, Taigun and Nivus from Volkswagen Passenger Cars.
Deliveries in South America

In the South American market for passenger cars and light commercial vehicles, which was on a level with
the previous year, the number of Group models handed over to customers in 2022 was down 9.0% on the
prior-year figure. The Gol, T-Cross and Nivus from Volkswagen Passenger Cars were the Group models with
the highest sales volumes. The Group’s share of the market in South America amounted to 11.1 (12.4) %.
In the Brazilian market, which performed at the prior-year level, the Volkswagen Group delivered 10.8%
fewer vehicles to customers in the reporting period than in the previous year. Sales of the Gol, T-Cross and
Nivus models from Volkswagen Passenger Cars developed particularly encouragingly.
In Argentina, the number of Volkswagen Group vehicles handed over to customers in 2022 decreased by
14.1% year-on-year in an overall market exhibiting noticeable growth. Group models with the highest sales
volume were the Taos from Volkswagen Passenger Cars and the Amarok from Volkswagen Commercial
Vehicles.
Deliveries in the Asia-Pacific region

In the past fiscal year, the Volkswagen Group saw deliveries to customers in the Asia-Pacific region drop by
2.7% compared with 2021 in a market that experienced slight growth overall. Parts supply shortages,
especially for semiconductors, affected this region as well, and in addition, local lockdowns in China in
connection with the spread of the Omicron variant of the SARS-CoV-2 virus resulted in restrictions. The
Group’s share of the passenger car market in this region amounted to 10.3 (11.0) %.
In China, the recovery of the market as a whole continued at a slower pace in 2022. The Volkswagen
Group delivered 3.6% fewer vehicles to customers there than in the preceding year. By contrast, the number
of all-electric vehicles delivered to customers in China was up by more than two thirds year-on-year to
155,723 units. The ID.3, ID.4 X, ID.4 CROZZ, ID.6 X, ID.6 CROZZ, Passat and Talagon models from Volkswagen
Passenger Cars, the Audi A3 L saloon and the Porsche Panamera, among others, introduced to the market as
new or successor models during the previous year, showed a positive trend. Some of the models that saw
encouraging demand were the Golf, T-Roc, CC and Magotan from Volkswagen Passenger Cars and the Audi
A4 saloon and Audi Q5. The T-Roc, Bora, Lamando, Lavida, Sagitar, Tayron, Tavendor, Teramont and Viloran
from Volkswagen Passenger Cars, the ŠKODA Kodiaq and the Q2L e-tron, Q4 e-tron, Q5 e-tron, Q6, e-tron GT
and Audi A7L saloon from Audi were successfully launched on the market during the reporting period as
new or successor models.
127
In the Indian passenger car market, which recorded strong growth, the Volkswagen Group registered a
surge in demand of over 80% in fiscal year 2022 compared with the weak previous year. The new Taigun
from the Volkswagen Passenger Cars brand as well as the new Kushaq from ŠKODA, which was introduced
in the previous year, were the most sought-after Group models there. The Virtus from Volkswagen Passen-
ger Cars, the Kodiaq and the Slavia from ŠKODA and the Porsche Taycan saloon were successfully launched
on the market during the reporting period as new or successor models.
In Japan, the number of Group vehicles delivered to customers in 2022 was down 6.8% year-on-year in
an overall market experiencing a noticeable decline. Among other models, sales figures for the Golf from
Volkswagen Passenger Cars and the Audi Q5 Sportback developed encouragingly.
PASSENGER CAR DELIVERI ES TO CUSTOMERS BY MARKET 1
DELIVERIES (UNITS) CHANGE
2022 2021 (%)
Europe/Other Markets 3,297,402 3,698,948 –10.9

Western Europe 2,615,864 2,761,629 –5.3
of which: Germany 998,000 959,748 +4.0
France 211,430 238,365 –11.3
United Kingdom 377,449 422,594 –10.7
Italy 223,864 248,414 –9.9
Spain 192,311 220,151 –12.6
Central and Eastern Europe 418,513 624,801 –33.0
of which: Czech Republic 103,223 114,250 –9.7
Russia 41,864 204,772 –79.6
Poland 112,389 120,831 –7.0
Other Markets 263,025 312,518 –15.8
of which: Türkiye 102,735 121,885 –15.7
South Africa 71,437 72,847 –1.9
North America 759,791 876,558 –13.3
of which: USA 564,705 647,521 –12.8
Canada 85,860 98,829 –13.1
Mexico 109,226 130,208 –16.1
South America 397,539 436,852 –9.0
of which: Brazil 277,806 311,519 –10.8
Argentina 48,263 56,186 –14.1
Asia-Pacific 3,502,556 3,598,344 –2.7
of which: China 3,182,428 3,301,334 –3.6
India 97,610 52,481 +86.0
Japan 61,112 65,549 –6.8
Worldwide 7,957,288 8,610,702 –7.6
Volkswagen Passenger Cars 4,563,340 4,896,874 –6.8
ŠKODA 731,262 878,202 –16.7
SEAT 385,592 470,531 –18.1
Volkswagen Commercial Vehicles 328,572 359,541 –8.6
Audi 1,614,231 1,680,512 –3.9
Lamborghini 9,233 8,405 +9.9
Bentley 15,174 14,659 +3.5
Porsche 309,884 301,915 +2.6
Bugatti2 – 63 x
1 Prior-year deliveries have been updated to reflect subsequent statistical trends. The figures include the Chinese joint ventures.
2 Until October 31, 2021.
128
COMMERCIAL VEH ICLE DELIVERI ES

In fiscal year 2022, the Volkswagen Group delivered 12.6% more commercial vehicles to customers world-
wide than in the previous year. We delivered a total of 305,488 commercial vehicles to customers. Trucks
accounted for 254,313 units (+10.5%) and buses for 29,591 units (+56.8%). A total of 21,584 (–2.8%) vehicles
from the MAN TGE van series were delivered. The American commercial vehicle manufacturer Navistar
became a TRATON GROUP brand on July 1, 2021. Navistar's sales totaled 81,888 units in the reporting period.
In the 27 EU states excluding Malta, but plus the United Kingdom, Norway and Switzerland (EU27+3),
sales in the reporting period were down by 2.9% on the previous year to a total of 115,532 units, of which
89,061 were trucks and 5,041 were buses. Here, the MAN brand delivered 21,430 vehicles from the MAN TGE
van series.
As a result of the sanctions imposed in connection with the Russia-Ukraine conflict, sales in Russia fell
year-on-year to 1,557 (11,293) units, comprising 1,550 trucks and 7 buses. Since the conflict began, no orders
for new vehicles have been accepted in Russia.
In fiscal year 2022, deliveries in Türkiye were on a level with the previous year, at 4,413 (4,398) vehicles.
Trucks accounted for 4,122 units and buses for 201 units, while 90 vehicles from the MAN TGE van series
were sold. In South Africa, deliveries of Volkswagen Group commercial vehicles decreased by 6.6% year-on-
year to a total of 3,681 units; of this figure 3,204 were trucks and 477 were buses.
Sales in North America rose to 82,824 (31,869) vehicles in the reporting year; this included 68,903 trucks
and 13,921 buses. From July 1, 2021, the figures also include Navistar’s sales (78,988) whose vehicles were
above all handed over to customers in the United States.
Deliveries in South America decreased to a total of 76,152 vehicles (–2.1%) in 2022, of which 68,211 were
trucks and 7,941 were buses. Sales in Brazil were down by 8.3%. Of the units delivered, 53,704 were trucks
and 5,926 were buses.
In the Asia-Pacific region, the Volkswagen Group sold 11,446 vehicles in the reporting year; among these,
10,528 were trucks and 911 were buses. Overall, this was 5.7% less than in the previous year.
COMMERCIAL VEH ICLE DELIVERI ES TO CUSTOMERS BY MARKET 1
DELIVERIES (UNITS) CHANGE
2022 2021 (%)
Europe/Other Markets 135,066 149,407 –9.6

of which: EU27+3 115,532 119,029 –2.9
of which: Germany 31,623 32,130 –1.6
Russia 1,557 11,293 –86.2
Türkiye 4,413 4,398 +0.3
South Africa 3,681 3,942 –6.6
North America 82,824 31,869 x
of which: USA 66,405 24,234 x
Mexico 11,131 5,375 x
South America 76,152 77,774 –2.1
of which: Brazil 59,630 65,005 –8.3
Asia-Pacific 11,446 12,140 –5.7
Worldwide 305,488 271,190 +12.6
Scania 85,232 90,366 –5.7
MAN2 84,377 93,578 –9.8
Navistar 81,888 29,876 x
Volkswagen Truck & Bus2 53,991 57,370 –5.9
1 Prior-year deliveries have been updated to reflect subsequent statistical trends. As of July 1, 2021, the figures include Navistar.
2 Until the first quarter of 2022, deliveries for Volkswagen Truck & Bus were reported within MAN.
129
DELIVERI ES I N TH E POWER ENGI N EERI NG SEGMENT

Orders in the Power Engineering segment are usually part of major investment projects. Lead times typi-
cally range from just under one year to several years, and partial deliveries as construction progresses are
common. Accordingly, there is a time lag between incoming orders and sales revenue from the new con-
struction business.
In 2022, sales revenue in the Power Engineering segment was largely driven by Engines & Marine Sys-
tems and Turbomachinery, which together generated more than three quarters of overall sales revenue.
ORDERS RECEIVED I N TH E PASSENGER CARS SEGMENT I N WESTERN EU ROPE

In the reporting period, orders received in Western Europe decreased by 14.2% compared with the previous
year. All key markets fell short of their respective prior-year level. The extent of the declines varied from
country to country: while Germany saw a single-digit decline, the figures for the United Kingdom, France,
Italy and Spain were down by more than 10%.
ORDERS RECEIVED FOR COMMERCIAL VEH ICLES

Orders received for mid-sized and heavy trucks, for buses and for commercial vehicles from the MAN TGE
van series declined by 7.1% year-on-year to 334,583 vehicles in 2022. This trend is mainly attributable to
continuing restrictive order acceptance. In addition, no further orders for new vehicles were accepted from
Russia owing to the Russia-Ukraine conflict. While order intake in the bus markets increased very sharply,
truck markets saw a noticeable decline, while the MAN TGE van series segment even recorded a significant
downturn. In the prior-year period, the truck and MAN TGE business received a particularly high level of
orders due to a Covid-19 catch-up effect. A higher order intake was recorded in the second half of 2022 in
particular.
Order intake in the bus business recorded a very sharp increase year-on-year across all commercial
vehicle brands. In the EU27+3 region, this was attributable, among other factors, to the slow recovery in the
coach market.
ORDERS RECEIVED I N TH E POWER ENGI N EERI NG SEGMENT

The long-term performance of the Power Engineering business is determined by the macroeconomic
environment. Individual major orders lead to fluctuations in incoming orders during the year that do not
correlate with these long-term trends.
Orders received in the Power Engineering segment in 2022 amounted to €4.3 (3.8) billion. Engines &
Marine Systems and Turbomachinery generated more than two-thirds of the order volume in a persistently
difficult market environment.
In the marine business, for example, deliveries of 20V32/44CR engines were ordered for four ships in
2022 (two engines per ship). In the power plant business, orders were won for 48 engines and component
sets for 11 completely knocked down engines of different types with an aggregate output of 865 MW. For
turbomachinery, we received several orders for new applications which were driven by the energy transi-
tion and decarbonization such as carbon capture and storage in Europe and in the USA, as well as an expan-
sion of an energy storage facility in England. We also received a significant number of orders for gas
production in West Africa and the North Sea.
VOLKSWAGEN GROUP FI NANCIAL SERVICES

The activities in the Financial Services Division cover the Volkswagen Group’s dealer and customer
financing, leasing, banking and insurance activities, fleet management and mobility services. The division
comprises Volkswagen Financial Services and the financial services activities of Scania and Porsche Holding
130
Salzburg and also extends to the contracts concluded by our international joint ventures. As of July 1, 2021,
it also includes the financial services business of Navistar.
The Financial Services Division's products and services were popular in fiscal year 2022. However,
demand was affected to varying degrees by the Covid-19 pandemic. Limited vehicle availability caused by
parts supply shortages, and exacerbated by the Russia-Ukraine conflict, also weighed on demand. The
number of new financing, leasing, service and insurance contracts signed worldwide fell by 0.7% to 8.5 mil-
lion. The ratio of leased and financed vehicles to Group deliveries (penetration rate) in the Financial
Services Division’s markets stood at 32.6 (36.4) % in the reporting period. The total number of contracts on
December 31, 2022 was 24.5 (24.5) million.
In fiscal year 2022, the financial services business in the Europe/Other Markets region was impacted by
the Covid-19 pandemic and by limited vehicle availability caused by parts supply shortages, as well as by
the Russia-Ukraine conflict. At 6.1 million, the number of new contracts signed in the reporting period was
down 1.7% on the previous year’s figure. The total number of contracts at the end of December 2022 was on
a level with December 31, 2021 at 18.1 (18.0) million. The customer financing/leasing area was responsible
for 7.2 (7.4) million of these contracts.
The number of new contracts signed in North America in the reporting period decreased year-on-year to
805 (983) thousand owing to the decline in vehicle deliveries. The total number of contracts came to 3.0
million on December 31, 2022, a 7.6% fall on the level reported at the end of 2021. The customer finan-
cing/leasing area recorded 1.7 (1.9) million contracts.
In the South America region, 360 (332) thousand new contracts were concluded in the past fiscal year.
Compared with December 31, 2021, the total number of contracts at the end of the reporting period rose to
828 (723) thousand. The contracts mainly related to the customer financing/leasing area.
The number of new contracts signed in the Asia-Pacific region in fiscal year 2022 increased to 1.2 (1.0)
million, exceeding the comparative prior-year figure. The total number of contracts stood at 2.6 (2.6) mil-
lion on December 31, 2022. The customer financing/leasing area recorded 1.6 (1.8) million contracts.
SALES TO TH E DEALER ORGAN IZATION

The Volkswagen Group’s unit sales to the dealer organization decreased in the reporting period by 1.1% to
8,481,278 units (including the equity-accounted companies in China). In the reporting period, limited
vehicle availability as a result of the Covid-19 pandemic and bottlenecks in the supply of parts caused by
the shortage of semiconductors and the Russia-Ukraine conflict had a negative impact. In addition,
disruptions in the logistics chain resulted in delays. Unit sales outside Germany fell by 1.7% to 7,476,003
vehicles. The United Kingdom, Brazil and France were particularly affected, as was Russia, since vehicle
exports to this region had been halted. Growth was recorded, however, in the USA, China and India. Unit
sales in Germany increased by 3.3% year-on-year. The proportion of the Group’s total unit sales attributable
to Germany increased to 11.9 (11.3) %.
The Tiguan, Passat, Polo, Golf, T-Roc, Jetta and T-Cross from the Volkswagen Passenger Cars brand were
our biggest sellers last year. The largest increases in unit sales were recorded for the Taigo, ID.4, Passat and
Tharu models from the Volkswagen Passenger Cars brand, the Q4 e-tron, A3 and e-tron from Audi, the
CUPRA Formentor and the ŠKODA Fabia. The Porsche Cayenne and Bentley Bentayga also achieved a strong
growth rate.
131
PRODUCTION
The Volkswagen Group produced 8,716,606 vehicles (including the equity-accounted companies in China)
from January to December 2022, 5.2% more than in the prior-year period. The shortage of semiconductors
and the disruption of supply chains caused by the Russia-Ukraine conflict and the Covid-19 pandemic
restricted production in the Volkswagen Group; the supply and production situation eased toward the end
of the reporting period. Against the backdrop of the Russia-Ukraine conflict and the resulting conse-
quences, Volkswagen decided to suspend the start of vehicle production in Russia until further notice. Pro-
duction in Germany increased by 11.1% to 1,647,611 vehicles in fiscal year 2022. The proportion of the
Group’s total production accounted for by Germany increased to 18.9 (17.9) %.
I NVENTORI ES
Global inventories of new vehicles at Group companies and in the dealer organization were higher at the
end of the reporting period than at year-end 2021. Disruptions in the logistics chain, among other factors,
had a negative impact in the reporting period.
EMPLOYEES
Including the Chinese joint ventures, the Volkswagen Group employed an average of 669,275 people in
fiscal year 2022, an increase of 0.2% year-on-year. In Germany, we employed 289,499 people on average; at
43.3 (44.1) %, their share of the total headcount was below the level of the previous year.
The number of active employees in the Volkswagen Group rose by 0.6% to 646,837 as of December 31,
2022. In addition, 12,378 employees were in the passive phase of their partial retirement and 16,590 young
people were in vocational traineeships. At the end of the reporting period, the Volkswagen Group had a
total of 675,805 employees worldwide. This represented an increase of 0.4% since the end of 2021. A total of
293,862 people were employed in Germany (–0.4%) and 381,943 outside Germany (+1.1%).
EMPLOYEES BY DIVISION/BUSINESS AREA

as of December 31, 2022
Passenger Cars 540,784

Commercial Vehicles 102,690
Power Engineering 14,571
Financial Services 17,760
132
Group Management Report Shares and Bonds
Shares and Bonds

During the reporting period, Volkswagen AG’s ordinary and preferred shares followed the negative
trend on the stock markets, where some automotive stocks dropped at above-average rates.
EQUITY MARKETS AN D PERFORMANCE OF TH E PRICE OF VOLKSWAGEN’S SHARES

The trend in the international stock markets in fiscal year 2022 was initially overshadowed by investors’
concerns about possible interest rate hikes in the face of rising inflation rates and about the spread of the
Omicron variant of the SARS-CoV-2 virus. Following the outbreak of the Russia-Ukraine conflict in
February 2022, the imposing of sanctions against Russia and the rise in commodity and energy prices that
drove up inflation, the international stock markets came under pressure. In addition, the tight restrictions
under the zero-Covid strategy being pursued in China placed further strain on international supply chains.
The downward trend in stock prices intensified in the further course of the reporting period due to the
continuing confrontations in Ukraine, increasing concerns about a sufficient supply of energy, rising
material costs, persistently high inflation and the resulting tighter monetary policy of the central banks.
The German stock market index (DAX) began the year marginally up on its previous record achieved in
November 2021. After that, apprehension about the tightening of monetary policy in the USA dominated
investor sentiment. The Russia-Ukraine conflict and the fears this triggered of an energy crisis and its
economic fallout provoked uncertainty among market participants and strained the capital market. In view
of high inflation, the European Central Bank initiated an interest rate turnaround that, combined with fears
of recession, resulted in a further fall in the DAX. Stock prices rose significantly in the fourth quarter;
however, the DAX ended 2022 12% below the previous year’s level, primarily under the impact of the high
coronavirus infection rates in China.
Volkswagen AG’s preferred and ordinary shares followed the trend on the stock markets, where cyclical
automotive stocks dropped at above-average rates in some cases. With the announcement of the IPO of
Porsche AG, Volkswagen’s shares managed to temporarily detach themselves from the general trend.
Although the good operating results were received positively by the market, the 2022 year-end closing price
– after correcting for the special dividend of €19.06 per share – was down 34% for the preferred share and
43% for the ordinary share compared with the prior year figure.
133
PRICE DEVELOPMENT FROM DECEMBER 2021 TO DECEMBER 2022

Index based on month-end prices: December 31, 2021 = 100
Volkswagen ordinary share – 42.9%

Volkswagen preferred share – 34.4%
DAX – 12.3%
EURO STOXX Automobiles & Parts – 19.7%
110
90
70
50
D J F M A M J J A S O N D
VOLKSWAGEN SHARE KEY FIGU RES AN D MARKET I N DICES

FROM JAN UARY 1 TO DECEMBER 31, 2022
High Low Closing
Ordinary share Price (€) 279.40 145.00 147.65

Date Jan. 5 Dec. 28 Dec. 30
Preferred share Price (€) 193.10 114.88 116.42
Date Jan. 14 Dec. 22 Dec. 30
DAX Price 16,272 11,976 13,924
Date Jan. 5 Sep. 29 Dec. 30
ESTX Auto & Parts Price 684 453 506
Date Jan. 5 Jul. 5 Dec. 30
EXTRAORDI NARY GEN ERAL MEETI NG

On December 16, 2022, an Extraordinary General Meeting of Volkswagen AG took place in the CityCube
Berlin. The meeting was held in connection with the IPO of Dr. Ing. h.c. F. Porsche AG, where 25% of
Porsche AG’s preferred shares were placed on the capital market. At the same time, Porsche SE indirectly
acquired 25% of the ordinary shares in Porsche AG plus one ordinary share from Volkswagen AG. To enable
its shareholders to participate in the success of the entire transaction, Volkswagen AG proposed to the
Extraordinary General Meeting an amendment to the resolution on the appropriation of earnings already
adopted by the Annual General Meeting on May 12, 2022. The aim of this was to pay a special dividend to
ordinary and preferred shareholders of Volkswagen AG for fiscal year 2021 in addition to the dividends
already paid to shareholders in May 2022 of €7.50 per dividend-bearing ordinary share and €7.56 per
dividend-bearing preferred share.
94.02% of the ordinary share capital was present at the Extraordinary General Meeting. With a majority
of 99.9974% of the votes cast, the shareholders approved the payment of a special dividend of €19.06 per
dividend-bearing ordinary share and dividend-bearing preferred share. The special dividend was paid on
January 9, 2023.
134
DIVI DEN D POLICY

Our dividend policy matches our financial strategy. In the interests of all stakeholders, we aim for con-
tinuous dividend growth that allows our shareholders to participate appropriately in our business success.
The proposed dividend therefore reflects our financial management objectives – in particular, ensuring a
solid financial foundation as part of the implementation of our strategy.
The current dividend proposal can be found in the chapter entitled “Volkswagen AG (condensed, in
accordance with the German Commercial Code)” of this annual report. The Board of Management and
Supervisory Board of Volkswagen AG are proposing a dividend of €8.70 per ordinary share and €8.76 per
preferred share for fiscal year 2022. On this basis, the total dividend amounts to €4.4 (3.8) billion, excluding
the special dividend due to the Porsche IPO. The payout ratio is based on the Group’s earnings after tax
attributable to Volkswagen AG shareholders. This amounts to 29.4% for the reporting period and stood at
25.4% in the previous year, excluding the special dividend due to the Porsche IPO. A payout ratio of at least
30% is one of our strategic goals.
DIVI DEN D YI ELD

Based on the dividend proposal for the reporting period, the dividend yield on Volkswagen ordinary shares
is 5.9 (2.9) %, excluding the special dividend due to the Porsche IPO, measured by the closing price on the
last trading day in 2022. The dividend yield on preferred shares is 7.5 (4.3) %, excluding the special dividend
due to the Porsche IPO.
EARN I NGS PER SHARE

Basic earnings per ordinary share were €29.63 (29.59) in fiscal year 2022. Basic earnings per preferred share
were €29.69 (29.65). In accordance with IAS 33, the calculation is based on the weighted average number of
ordinary and preferred shares outstanding in the reporting period. Since the number of basic and diluted
shares is identical, basic earnings per share correspond to diluted earnings per share.
See also “Earnings per share” in the notes to the 2022 consolidated financial statements for the calcu-
lation of earnings per share.
135
SHAREHOLDER STRUCTU RE AS OF DECEMBER 31, 2022

At the end of the reporting period, Volkswagen AG’s subscribed capital amounted to €1,283,315,873.28. The
shareholder structure of Volkswagen AG as of December 31, 2022 is shown in the following chart.
SHAREHOLDER STRUCTURE AS OF DECEMBER 31, 2022

as a percentage of subscribed capital
Porsche Automobil Holding SE 31.9

Foreign institutional investors 22.2
Qatar Holding LLC 10.5
State of Lower Saxony 11.8
Private shareholders/Others 21.0
German institutional investors 2.6
The distribution of voting rights for the 295,089,818 ordinary shares was as follows at the reporting date:
Porsche Automobil Holding SE, Stuttgart, held 53.3% of the voting rights. The second-largest shareholder
was the State of Lower Saxony, which held 20.0% of the voting rights. Qatar Holding LLC was the third-
largest shareholder with 17.0%. The remaining 9.7% of ordinary shares were in free float.
Notifications of changes in voting rights in accordance with the Wertpapierhandelsgesetz (WpHG – Ger-
man Securities Trading Act) are published on our website at https://www.volkswagenag.com/en/Investor
Relations/news-and-publications/Voting_Rights.html
VOLKSWAGEN SHARE DATA
Ordinary shares Preferred shares
ISIN DE0007664005 DE0007664039

WKN 766400 766403
Deutsche Börse/Bloomberg VOW VOW3
Reuters VOWG.DE VOWG_p.DE
DAX, CDAX, EURO STOXX, EURO STOXX 50,
CDAX, Prime All Share, MSCI Euro, EURO STOXX Automobiles & Parts,
Primary market indices S&P Global 100 Index Prime All Share, MSCI Euro
Exchanges Berlin, Dusseldorf, Frankfurt, Hamburg, Hanover, Munich, Stuttgart, Xetra
136
VOLKSWAGEN SHARE KEY FIGU RES
Dividend development 2022 2021 2020 2019 2018
Number of no-par value shares at Dec. 31

Ordinary shares thousands 295,090 295,090 295,090 295,090 295,090
Preferred shares thousands 206,205 206,205 206,205 206,205 206,205
Dividend1
per ordinary share € 8.70 7.50 4.80 4.80 4.80
per preferred share € 8.76 7.56 4.86 4.86 4.86
Dividend paid1 € million 4,374 3,772 2,419 2,419 2,419
on ordinary shares € million 2,567 2,213 1,416 1,416 1,416
on preferred shares € million 1,806 1,559 1,002 1,002 1,002
Share price development2 2022 2021 2020 2019 2018
Ordinary share
Closing € 147.65 258.40 170.10 173.25 139.10
Price performance % – 42.9 + 51.9 – 1.8 + 24.6 – 17.5
Annual high € 279.40 327.20 183.10 182.50 188.00
Annual low € 145.00 165.70 101.50 135.60 131.10
Preferred share
Closing € 116.42 177.48 152.42 176.24 138.92
Price performance % – 34.4 + 16.4 – 13.5 + 26.9 – 16.5
Annual high € 193.10 246.55 185.52 184.24 188.50
Annual low € 114.88 144.80 87.20 134.76 133.70
Beta factor3 factor 1.55 1.16 1.26 1.17 1.17
Market capitalization at Dec. 31 € billion 67.6 112.8 81.6 87.5 69.7
Equity attributable to Volkswagen AG share-
holders and hybrid capital investors at Dec. 31 € billion 165.4 144.4 127.0 121.8 117.1
Ratio of market capitalization to equity factor 0.41 0.78 0.64 0.72 0.60
Key figures per share 2022 2021 2020 2019 2018
Earnings per ordinary share4

basic € 29.63 29.59 16.60 26.60 23.57
diluted € 29.63 29.59 16.60 26.60 23.57
Equity attributable to Volkswagen AG share-
holders and hybrid capital investors at Dec. 31 € 329.90 288.15 253.44 242.93 233.63
Price/earnings ratio5
Ordinary share factor 5.0 8.7 10.2 6.5 5.9
Preferred share factor 3.9 6.0 9.1 6.6 5.9
Dividend yield6
Ordinary share % 5.9 2.9 2.8 2.8 3.5
Preferred share % 7.5 4.3 3.2 2.8 3.5
Stock exchange turnover7 2022 2021 2020 2019 2018
Turnover of Volkswagen ordinary shares € billion 2.7 6.1 3.1 3.3 4.3
million shares 13.5 23.3 21.6 20.9 28.0
Turnover of Volkswagen preferred shares € billion 44.9 58.8 49.8 41.0 54.1
million shares 302.2 300.4 361.2 266.0 346.6
Volkswagen share of total DAX turnover % 4.7 6.6 4.7 4.6 5.4
1 Figures for the years 2018 to 2021 relate to dividends paid in the following year. For 2021, the figures exclude the special dividend due to the Porsche IPO. For 2022, the figures relate
to the proposed dividend.
2 Xetra prices.
3 For the calculation see chapter “Results of Operations, Financial Position and Net Assets” of this annual report.
4 For the calculation see “Earnings per share” in the notes to the consolidated financial statements.
5 Ratio of year-end-closing price to earnings per share.
6 Dividend per share based on the year-end-closing price.
7 Order book turnover on the Xetra electronic trading platform (Deutsche Börse).
137
REFINANCING STRUCTURE OF THE VOLKSWAGEN GROUP

as of December 31, 2022
Commercial paper Bonds

Asset-backed securities
6% 66%
28%
Money and capital

market instruments
≤ 1 year > 1 to < 5 years ≥ 5 years

28% 53% 19%
Maturities
EUR USD Others

64% 14% 22%
Currencies
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
REFI NANCI NG
The Volkswagen Group carried out several successful transactions in the international capital markets in
2022 despite volatile and difficult market conditions.
In February 2022, the hybrid note issued in March 2015 with a principal amount of €1.1 billion was
canceled with effect from March 20, 2022.
In March 2022, Volkswagen International Finance N.V. placed two hybrid notes with a total volume of
€2.25 billion. Some of the proceeds from this transaction were used to refinance the hybrid note issued in
2017, which had been duly canceled in November with effect from December 14, 2022. A second green
bond was issued in June 2022 under the Green Finance Framework presented in 2020. At €1.5 billion, this
was sufficient to almost completely refinance the expenses arising from the Green Project Portfolio for the
years 2017 to 2020. The Volkswagen Group unveiled a new Green Finance Framework in November 2022.
This allows the Company to finance capital expenditures that are aligned with the EU Taxonomy, whereby
Volkswagen will voluntarily limit itself to all-electric vehicles. On the basis of the new framework, an amount
of €2.5 billion was placed in the same month by way of three green bonds.
Volkswagen Group of America Finance, LLC, raised USD3 billion from investors over the US refinancing
market in May 2022. Notes with a volume of CAD750 million were issued in Canada in November 2022.
Official euro benchmark bonds with an aggregate volume of €2 billion were issued for the Financial
Services Division. In addition to this, securities were issued in various currencies and regions.
Alongside the placement of senior, unsecured bonds, asset-backed securities (ABS) transactions were
another element of our refinancing activities. In Europe, public ABS transactions with a total volume of
€2.75 billion were placed. Public ABS transactions were also issued in Japan and China.
The Volkswagen Group was also actively involved in the commercial paper market with several issuing
companies.
The proportion of fixed-rate instruments in the past year was about three times as high as the propor-
tion of floating-rate instruments.
In our refinancing arrangements, we generally aim to exclude interest rate and currency risk as far as
possible with the simultaneous use of derivatives.
138
The following table shows which financial instruments were utilized on the money and capital markets as
of December 31, 2022 and illustrates the financial flexibility of the Volkswagen Group:
Authorized Amount utilized

volume on Dec. 31, 2022
Financial instruments € billion € billion
Commercial paper 42.0 8.7

Bonds 194.3 95.7
of which hybrid issues 13.9
Asset-backed securities 104.9 41.3
Volkswagen AG’s syndicated credit line of €10.0 billion agreed in December 2019 was unused at the end of
2022.
Of the syndicated credit lines with a total of €12.4 billion at other Group companies, €0.4 billion has been
drawn down. The Volkswagen Group continued to have bilateral confirmed credit lines with national and
international banks in various countries for a total of €4.9 billion, of which €0.6 billion was drawn down.
RATI NGS
VOLKSWAGEN FINANCIAL VOLKSWAGEN

VOLKSWAGEN AG SERVICES AG BANK GMBH TRATON SE
2022 2021 2022 2021 2022 2021 2022 2021
Standard & Poor’s

short-term A –2 A –2 A –2 A –2 A –2 A –2 – –
long-term BBB+ BBB+ BBB+ BBB+ BBB+ BBB+ BBB BBB
outlook stable stable stable stable stable stable stable stable
Moody’s Investors Service
short-term P –2 P –2 P –2 P –2 P –1 P –1 – –
long-term A3 A3 A3 A3 A1 A1 Baa2 Baa1
outlook stable stable stable stable stable stable stable negative
139
In October and November of 2022, rating agency Standard & Poor’s confirmed its short-term and long-term
ratings for Volkswagen AG, Volkswagen Financial Services AG and Volkswagen Bank GmbH at A–2 and BBB+,
respectively. In July 2022, the long-term rating of BBB for TRATON SE was also confirmed. The outlook for
all companies remains unchanged at “stable”.
In June and December 2022, Moody’s Investors Service confirmed the short-term and long-term ratings
for Volkswagen AG and Volkswagen Financial Services AG at P–2 and A3, respectively, and those for Volks-
wagen Bank GmbH at P–1 and A1. The outlook was left unchanged at “stable”. For TRATON SE, the long-term
rating was lowered one notch from Baa1 to Baa2. The reason given was the higher level of debt in
connection with the acquisition of Navistar, the squeeze-out at MAN SE and the provisions in the EU anti-
trust proceedings. The outlook was raised to “stable”.
ESG RATI NGS

Analysts and investors are referring increasingly to companies’ sustainability profiles when making their
recommendations and decisions. They draw on ESG ratings, among other things, to evaluate a company’s
environmental, social and governance performance. At the same time, these ratings are instrumental in
determining whether we are meeting our goal in relation to the Group's NEW AUTO strategy, and they are
used to establish internal measures.
After the diesel issue became public knowledge, the Volkswagen Group was downgraded significantly in
numerous ESG ratings. With the successful completion of the Monitorship and reinstatement of the Group
in the UN Global Compact, an improvement in ESG performance was achieved. Compared with the previous
year, our score in the Sustainalytics ESG rating improved from 29.6 to 26.1 in 2022. Our MSCI score
remained at B and the ISS score continued to be C. Volkswagen is also listed in the Dow Jones Sustainability
Index Europe. In addition, Volkswagen maintained its score of A– in the CDP climate rating in fiscal year
2022 and its rating of A in the Water Disclosure Project (WDP).
140
Group Management Report Results of Operations, Financial Position and Net Assets
Results of Operations, Financial

Position and Net Assets
Against the backdrop of the global market slowdown and continued limited vehicle availability due
to parts supply shortages, the Volkswagen Group generated significantly higher sales revenue and
a higher operating result in the reporting year.
The Volkswagen Group’s segment reporting comprises the four reportable segments of Passenger Cars and
Light Commercial Vehicles, Commercial Vehicles, Power Engineering and Financial Services, in compliance
with IFRS 8 and in line with the Group’s internal financial management and reporting structures.
The reconciliation contains activities and other operations that do not, by definition, constitute
segments. These include the unallocated Group financing activities. Consolidation adjustments between
the segments (including the holding company functions) are also contained in the reconciliation. The
purchase price allocations for Porsche Holding Salzburg and Porsche, Scania, MAN and, since July 2021,
Navistar are allocated to their corresponding segments.
The Automotive Division comprises the Passenger Cars and Light Commercial Vehicles segment, the
Commercial Vehicles segment and the Power Engineering segment, as well as the figures from the recon-
ciliation. The Passenger Cars and Light Commercial Vehicles segment is combined with the reconcileation
to form the Passenger Cars Business Area, while the Commercial Vehicles and Power Engineering segments
are identical to the business areas of the same name. The Financial Services Division corresponds to the
Financial Services segment.
At Volkswagen, segment profit or loss is measured on the basis of the operating result.
KEY FIGURES FOR 2022 BY SEGMENT
Passenger Cars
and Light
Commercial Commercial Volkswagen
€ million Vehicles Vehicles Power Engineering Financial Services Total segments Reconciliation Group
Sales revenue 210,371 39,516 3,565 46,847 300,299 – 21,067 279,232

Segment profit or loss
(operating result) 17,153 1,588 281 5,656 24,677 – 2,553 22,124
as a percentage of sales
revenue 8.2 4.0 7.9 12.1 7.9
Capex, including capitalized
development costs 20,125 1,907 84 217 22,334 338 22,672
141
I PO OF PORSCH E AG
On September 28, 2022, as part of the IPO of Dr. Ing. h.c. F. Porsche AG, Stuttgart (Porsche AG), a total of
113,875,000 preferred shares of Porsche AG were successfully placed with investors at a placement price of
€82.50 per preferred share, totaling around €9.4 billion – including 14,853,260 preferred shares to cover
potential additional allocations. The non-voting no-par value bearer shares came from the portfolio of
Porsche Holding Stuttgart GmbH, Stuttgart – a wholly owned subsidiary of Volkswagen AG. The total
number of preferred shares offered in the IPO corresponded to up to 25% of the preference share capital of
Porsche AG (including additional allocations). The non-voting preferred shares of Porsche AG have been
traded on the Regulated Market of the Frankfurt Stock Exchange since September 29, 2022. Up to the early
termination of the stabilization period on October 11, 2022, a total of 3,794,199 preferred shares had been
bought back on the market. The free float of the preferred shares after the end of the stabilization period is
therefore 24.2% and comprises 110,080,801 preferred shares.
In connection with the IPO, Volkswagen additionally sold an interest of 25% of Porsche AG’s ordinary
shares plus one ordinary share to Porsche Automobil Holding SE, Stuttgart (Porsche SE). As consideration,
Porsche SE has undertaken to pay a purchase price of around €10.1 billion to Volkswagen; this purchase
price includes a premium of 7.5% on the placement price of the preferred shares per share. The purchase of
the ordinary shares will be completed in two tranches of 79,712,501 and 34,162,500 shares respectively.
As a result of the transactions, the Volkswagen Group’s equity increased by €19.1 billion, net of bank
commissions and fees in the amount of €0.1 billion taken directly to equity; of this amount, €10.8 billion is
reported as noncontrolling interests. The cash inflow for the preferred shares and the first tranche of the
ordinary shares occurred at the beginning of the fourth quarter of 2022.
The resolution of the extraordinary General Meeting of Volkswagen AG on December 16, 2022 gave rise
to the obligation to pay a dividend, which was increased by €19.06 per ordinary and preferred share
(“Special Dividend”) and led to a total obligation to the shareholders of Volkswagen AG amounting to
€9.6 billion. Taking into account the offsetting transaction described below, a corresponding liability was
recognized for this payment as of the balance sheet date. The cash outflow was scheduled for January 9,
2023 and occurred on that day.
Volkswagen AG and Porsche SE agreed to offset the obligation to pay a special dividend to Porsche SE
against Volkswagen AG’s claim to the payment of the purchase price still outstanding for the second
tranche of ordinary shares. In the consolidated financial statements as of December 31, 2022, the purchase
price receivable of €3.0 billion for the second tranche and the dividend liability of €3.1 billion were
therefore presented on a net basis. Upon payment of the special dividend on January 9, 2023, the netting
process was completed.
The employees of Volkswagen AG and Volkswagen Sachsen GmbH are to participate in the economic
success of the placement of the preferred shares and the sale of ordinary shares in Porsche AG by way of a
one-off payment of up to €2,000 per employee. A liability of €0.3 billion was recognized to this end as of the
balance sheet date. On October 17, 2022, the Board of Management and the Works Council of Porsche AG
communicated a special payment to employees to mark the successful IPO; the payment was made and
recognized in profit or loss in the fourth quarter of 2022. The total bonus for employees in connection with
the IPO of Porsche AG amounted to €0.5 billion in the Volkswagen Group as of the balance sheet date.
142
TAKEOVER OF EU ROPCAR
In 2021, together with investment firm Attestor Limited and Pon Holdings B.V., Volkswagen made a joint
public takeover offer for the shares of Europcar Mobility Group S.A., Paris/France (Europcar) through the
consortium company Green Mobility Holding S.A. (GMH) based in Strassen/Luxembourg. The European
Commission issued final antitrust approval at the end of May 2022. During the extended offer period, the
French Financial Markets Authority gave Europcar shareholders the opportunity to tender their shares to
the consortium company. In total, 93.6% of Europcar’s shareholders accepted the offer. The consortium
jointly assumed control of Europcar in mid-June 2022. Because the acceptance rate was over 90%, a
squeeze-out was initiated for the remaining Europcar shares in July 2022, and the company was delisted.
Since July 13, 2022, the consortium company has held 100% of the shares in Europcar. The purchase price
was 51 cents per Europcar share.
At the end of June 2022, the entire portion of the purchase price attributable to Volkswagen, amounting
to €1.7 billion, was contributed to GMH. Since joint control has been contractually agreed, the company, in
which Volkswagen holds 66% of the shares, will be accounted for using the equity method in the
Volkswagen consolidated financial statements. In addition, Volkswagen is the writer of put options held by
the other members of the consortium, and the other members have granted Volkswagen call options on
their shares in the consortium company. The options with Attestor were extended on a long-term basis in
December 2022. The measurement of the options led to a total non-cash expense of €0.3 billion in the
reporting year, which was recognized in the financial result.
BROSE SITECH SP. Z O.O. TRANSACTION

Following the fulfillment of all closing conditions, Brose Fahrzeugteile SE & Co. Kommanditgesellschaft
(Brose) and Volkswagen Finance Luxemburg S.A., a subsidiary of Volkswagen AG, created a jointly operated
company in early 2022 for the development and manufacture of complete seat units, seat structures and
components, and solutions for vehicle interiors. As part of this arrangement, Brose acquired half of the
shares in the previous Volkswagen Group company SITECH Sp. z o.o., Polkowice/Poland. Brose and
Volkswagen each hold 50% of the jointly operated company – Brose Sitech Sp. z o.o. – with Brose taking the
industrial lead and controlling the company. Given its significant influence, Volkswagen accounts for
Brose Sitech as an associate using the equity method. The change in the accounting policy did not have any
material effect on the Volkswagen Group’s profit or loss.
ACQUISITION OF NAVISTAR
On July 1, 2021, a TRATON GROUP company acquired all of the outstanding shares in Navistar International
Corporation (Navistar), a US manufacturer of commercial vehicles based in Lisle, Illinois/USA. Due to the
size of the transaction, it was not possible to complete the in-house reviews of the information underlying
the purchase price allocation until the current fiscal year. The update to the purchase price allocation did
not materially affect the results of operations, financial position and net assets of the Volkswagen Group.
IMPAI RMENT OF ARGO AI

In the third quarter of 2022, Volkswagen took the strategic decision not to make further investments in
Argo AI, LLC Pittsburgh/USA (Argo AI) to develop autonomous driving. Since Argo AI had previously been
unable to win new investors and no returns were consequently expected, an impairment loss on the entire
interest was therefore recognized. This resulted in an expense of €1.9 billion in fiscal year 2022, which is
recognized in the other financial result. There are plans to liquidate Argo AI.
143
RUSSIA-UKRAI N E CON FLICT

In the reporting year, the ongoing Russia-Ukraine conflict, Russia’s partial mobilization and additional,
more stringent sanctions imposed on Russia by the community of Western states led to the risk assess-
ment of the situation in Russia being adjusted.
This cemented the Volkswagen Group's decision to discontinue business activities in Russia. In this
context, a number of individual companies have already been sold and further sales negotiations have been
initiated. On the basis of this reassessment, comprehensive loss allowances on assets of production
facilities and financial services companies were recognized in the reporting period, as were risk provisions,
especially for third-party expenses expected from the discontinuation of activities in Russia.
Overall, total expenses of around €2 billion were recognized in the reporting year as a direct result of the
Russia-Ukraine conflict, which are reported in cost of sales and in the other operating result. Of this amount,
€1.5 billion was charged to the Automotive Division and €0.5 billion to the Financial Services Division.
EQUITY I NVESTMENTS H ELD FOR SALE

In December, Porsche AG entered into an agreement with an independent, non-Group investor for the sale of
two Russian sales companies in the Passenger Cars and Light Commercial Vehicles segment, OOO Porsche
Russland, Moscow/Russia, and OOO Porsche Center Moscow, Moscow/Russia, as well as one company
assigned to the Financial Services segment, OOO Porsche Financial Services Russland, Moscow/Russia. More-
over, a repurchase option was agreed with this investor, which can be exercised at the earliest five years and
at the latest ten years after the sale. As of the reporting date, the legal transfer of ownership of the Russian
subsidiaries of Porsche AG was still subject to approval by the Russian authorities. It is currently expected
that ownership will be legally transferred and the purchase price finally determined in the course of the
first quarter of 2023.
It was resolved in the fourth quarter of 2022 to sell the following fully consolidated subsidiaries
allocated to the Financial Services segment: OOO Volkswagen Bank RUS, Moscow/Russia, OOO Volkswagen
Group Finanz, Moscow/Russia, and OOO Volkswagen Financial Services RUS, Moscow/Russia. The resolution
by the competent governing body was immediately followed by the implementation of a disposal plan,
which is expected to be completed in the first half of 2023.
On December 15, 2022, the Supervisory Board of Volkswagen AG resolved to sell the MAN ES gas turbine
business of MAN Energy Solutions SE, Augsburg, and MAN Energy Solutions Schweiz AG, Zurich/Switzer-
land, by way of an asset deal to CSIC Longjiang GH Gas Turbine Co. Ltd., Harbin/China, and its subsidiaries,
which are still to be established under German and Swiss law. The transaction is expected to be completed
within the next 12 months.
In accordance with IFRS 5, the assets and liabilities held for sale were recognized at the lower of their
carrying amount and fair value less expected costs of disposal.
SPECIAL ITEMS
Special items consist of certain items in the financial statements whose separate disclosure the Board of
Management believes can enable a better assessment of our economic performance.
In fiscal year 2022, the operating result in the Passenger Cars Business Area was affected by negative
special items of €– 0.4 (– 0.8) billion in connection with the diesel issue. These special items were mainly
attributable to additional expenses for legal risks.
144
I NCOME STATEMENT BY DIVISION
VOLKSWAGEN GROUP AUTOMOTIVE1 FINANCIAL SERVICES
€ million 2022 2021 2022 2021 2022 2021
Sales revenue 279,232 250,200 232,385 206,237 46,847 43,963

Cost of sales – 227,005 – 202,959 – 189,567 – 167,645 – 37,437 – 35,314
Gross profit 52,228 47,241 42,818 38,592 9,410 8,649
Distribution expenses – 19,840 – 19,228 – 18,794 – 18,068 – 1,046 – 1,160
Administrative expenses – 11,689 – 10,420 – 9,074 – 7,964 – 2,616 – 2,456
Net other operating result 1,426 1,682 1,518 670 – 92 1,012
Operating result 22,124 19,275 16,468 13,230 5,656 6,045
Operating return on sales (%) 7.9 7.7 7.1 6.4 12.1 13.8
Share of profits and losses of equity-accounted
investments 2,395 2,321 2,287 2,232 109 89
Interest result and Other financial result – 2,476 – 1,470 – 2,292 – 1,316 – 184 – 154
Financial result – 81 851 –6 915 – 75 – 64
Earnings before tax 22,044 20,126 16,463 14,146 5,581 5,981
Income tax expense – 6,208 – 4,698 – 4,247 – 3,179 – 1,961 – 1,519
Earnings after tax 15,836 15,428 12,216 10,967 3,620 4,462
Noncontrolling interests 393 46 268 – 42 125 87
Earnings attributable to Volkswagen AG hybrid
capital investors 576 539 576 539 0 0
Earnings attributable to Volkswagen AG
shareholders 14,867 14,843 11,371 10,469 3,495 4,374
1 Including allocation of consolidation adjustments between the Automotive and Financial Services divisions.
S H A R E O F S A LE S R E V EN UE B Y M A R K ET 2 0 2 2 SHARE OF SALES REVENUE BY DIVISION/BUSINESS AREA 2022

in percent in percent
Europe (excluding Germany)/ 37%

Other Markets Passenger Cars 68%
Germany 18% Commercial Vehicles 14%
North America 22% Power Engineering 1%
South America 6% Financial Services 17%
Asia-Pacific 18%
RESULTS OF OPERATIONS
Results of operations of the Group
In the period from January to December 2022, the Volkswagen Group generated sales revenue of €279.2 bil-
lion, up 11.6% on the prior-year figure. Improvements, above all in the price positioning, the product mix
and exchange rate trends, as well as healthy business performance in the Financial Services Division had a
positive effect, while lower vehicle sales due to parts supply shortages had an adverse impact. Navistar,
which has been consolidated since July 1, 2021, is included in the Group’s sales revenue in an amount of
€10.7 (3.6) billion. In fiscal year 2022, 82.6 (82.3)% of the Volkswagen Group’s sales revenue originated
abroad. Gross profit improved by €5.0 billion to €52.2 billion. The gross margin was 18.7 (18.9)%.
145
The Volkswagen Group’s operating result before special items increased by €2.5 billion to €22.5 billion in
the reporting year. The operating return on sales before special items amounted to 8.1 (8.0)%. The rise in
the operating result was mainly attributable to improved price positioning and the product mix. Positive
effects amounting to €3.7 (2.7) billion from derivatives to which hedge accounting is not applied (in
particular commodity, currency and interest rate hedges) boosted the Group’s earnings. These factors were
offset by increased product costs, especially for commodities, and expenses of around €2 billion relating to
loss allowances and risk provisions as a consequence of the direct impact of the Russia-Ukraine conflict. In
the reporting period, the Passenger Cars Business Area reported one-off expenses for restructuring mea-
sures at SEAT in an amount of €0.2 billion. In the previous year, one-off expenses had been incurred for
restructuring measures in the Commercial Vehicles Business Area (€0.7 billion) as well as expenses in
connection with the EU antitrust proceedings against Scania (€0.5 billion). An expense of €0.1 billion was
recognized for transaction costs in connection with the IPO of Porsche AG. In addition, employees of
Volkswagen AG, Volkswagen Sachsen GmbH and the Porsche AG Group participated in the economic success
of the sale of shares in Porsche AG by way of a one-off payment; to this end, an amount of €0.5 billion was
recognized in personnel costs.
Special items in connection with the diesel issue reduced the operating result, which amounted to
€– 0.4 (– 0.8) billion. In the period from January to December 2022, the Volkswagen Group’s operating result
amounted to €22.1 billion, up €2.8 billion on the prior-year figure. The operating return on sales increased
to 7.9 (7.7)%.
The financial result amounted to €– 0.1 (0.9) billion. The interest expenses included in this item decreased
due to measurement-related factors resulting primarily from a change in the discount rates used in the
measurement of provisions. The other financial result was negatively impacted by the impairment loss of
€1.9 billion recognized on the equity investment in Argo AI, which weighed on net other investment
income, and by changes in share prices, mainly as a result of the Russia-Ukraine conflict, which affected net
income from securities and funds. Both factors were offset by favorable exchange rate effects. The mea-
surement of forward purchase agreements for new shares in QuantumScape had additionally weighed on
the previous year. The share of the result of equity-accounted investments of the Chinese joint ventures
was up on the previous year.
The Volkswagen Group’s earnings before tax were up €1.9 billion to €22.0 billion in fiscal year 2022. The
return on sales before tax amounted to 7.9 (8.0)%. Income taxes resulted in an expense of €6.2 (4.7) billion
in the reporting year, which in turn led to a tax rate of 28.2 (23.3)%. Earnings after tax rose by €0.4 billion
year-on-year to €15.8 billion.
Results of operations in the Automotive Division

The Automotive Division recorded sales revenue of €232.4 (206.2) billion in fiscal year 2022. Favourable
price positioning, product mix and exchange rate trends were set against the fact that vehicle availability
continued to be limited due to parts supply shortages. In the period from January to December 2022, sales
revenue in the Passenger Cars Business Area went up noticeably, by 9.5%. In the Commercial Vehicles
Business Area, sales revenue rose very sharply by 31.3% compared with the previous year; it should, how-
ever, be noted that the prior-year figure had included the Navistar business only from July 2021 onward.
The Power Engineering Business Area’s sales revenue was noticeably higher than in 2021. As our Chinese
joint ventures are accounted for using the equity method, the Group’s business performance in the Chinese
passenger car market is essentially reflected in the Group’s sales revenue only through deliveries of vehicles
and vehicle parts.
146
RESULTS OF OPERATIONS I N TH E PASSENGER CARS, COMMERCIAL VEH ICLES AN D POWER ENGI N EERI NG
BUSI N ESS AREAS FROM JAN UARY 1 TO DECEMBER 31
€ million 2022 2021
Passenger Cars
Sales revenue 189,304 172,868
Operating result 14,600 13,051
Operating return on sales (%) 7.7 7.5
Commercial Vehicles1
Operating result 1,588 134
Power Engineering
Operating result 281 45
1 From July 1, 2021, the figures include Navistar.
Cost of sales increased for reasons that included higher product costs (especially for commodities) and
higher research and development costs recognized in profit or loss. Its share of sales revenue was on a level
with the previous year. Driven by a sharp rise in total research and development costs, the research and
development ratio (R&D ratio), defined as total research and development costs as a percentage of the
Automotive Division’s sales revenue, was higher than in the previous year, at 8.1 (7.6)% for the reporting
year. In addition to new models, our activities focused above all on the electrification of our vehicle port-
folio, digitalization, new technologies and enhancements of our modular and electric toolkits and plat-
forms.
There was a year-on-year increase in both distribution and administrative expenses in fiscal year 2022.
The ratio of distribution expenses to sales revenue went down, while the ratio of administrative expenses
remained virtually unchanged. The other operating result stood at €1.5 (0.7) billion. Positive factors included,
at €2.9 (2.4) billion, the fair value measurement and realization of derivatives to which hedge accounting is
not applied, offset by negative special items in connection with the diesel issue and one-off expenses for
restructuring measures in both periods. The prior-year period had, moreover, been influenced by expenses
in connection with the EU antitrust proceedings against Scania in the Commercial Vehicles Business Area.
In the period from January to December 2022, the Automotive Division’s operating result improved by
€3.2 billion to €16.5 billion. The operating return on sales of the Automotive Division climbed to 7.1 (6.4)%.
The main contributing factors were improvements in price positioning and in the product mix. Compared
with the previous year, the decline in unit sales as a result of parts supply shortages, higher product costs
(especially for commodities), charges incurred because of the Russia-Ukraine conflict, and expenses in
connection with the IPO of Porsche AG had an adverse effect. The negative special items recognized in fiscal
year 2022 were lower than in the year before.
The operating result before special items increased by €2.9 billion to €16.9 billion, while the operating
return on sales before special items went up to 7.3 (6.8)%.
Our operating result largely benefits from the business performance of our equity-accounted Chinese
joint ventures only through deliveries of vehicles and vehicle parts and through license income, as these
joint ventures are included in the financial result.
147
Results of operations in the Financial Services Division

At €46.8 billion, the sales revenue reported by the Financial Services Division in 2022 was 6.6% higher than
in the prior-year period. Cost of sales increased proportionately.
The Financial Services Division’s operating result of €5.7 billion was €0.4 billion down on the previous
year. The decline was caused mainly by expenses relating to loss allowances and risk provisions due to the
direct impact of the Russia-Ukraine conflict; they were recognized in the other operating result. Continued
strong demand for used vehicles and positive effects from derivatives to which hedge accounting is not
applied (interest rate hedges) had a beneficial effect. The operating return on sales decreased to 12.1 (13.8)%.
The return on equity before tax was 14.0 (17.3)%.
Principles and goals of financial management

Financial management in the Volkswagen Group covers liquidity management, the management of
currency, interest rate and commodity price risks, and credit and country risk management. It is performed
centrally for all Group companies by Group Treasury, based on internal guidelines and risk parameters.
Some functions of the MAN Energy Solutions, Porsche AG, Porsche Holding Salzburg and TRATON GROUP
subgroups and of the Financial Services Division are included in the financial management and, in
addition, have their own financial management structures.
The goal of financial management is to ensure that the Volkswagen Group remains solvent at all times
and, at the same time, to generate an adequate return from the investment of surplus funds. We use a
liquidity pooling system to optimize the use of existing liquidity between the significant companies.
Among other features of this system, the balances, either positive or negative, accumulating in cash
pooling accounts are swept daily into a regional target account and thus pooled. The overriding aim of
currency, interest rate and commodity risk management is to hedge, using derivative financial instruments
and commodity forwards, the prices on which investment, production and sales plans are based when
making planning assumptions and to mitigate interest rate risks incurred in financing transactions. In the
management of credit and country risk, diversification is used to limit the Volkswagen Group’s exposure to
the so-called counterparty risk. To achieve this, counterparty risk management imposes internal limits on
the volume of business allowed per counterparty when financial transactions are entered into. Various
credit rating criteria are applied in this process. These focus primarily on the capital resources of potential
counterparties, as well as the ratings awarded by independent agencies. The relevant risk limits and the
authorized financial instruments, hedging methods and hedging horizons are approved by the Group
Board of Management Committee for Risk Management. For additional information on the principles and
goals of financial management, please refer to the chapter on “Financial risk management and financial
instruments” in the notes to the consolidated financial statements.
148
FI NANCIAL POSITION
Financial position of the Group
In the reporting year, the Volkswagen Group’s gross cash flow went up to €49.3 (43.7) billion for earnings-
related reasons. The change in working capital amounted to €– 20.8 (– 5.1) billion. A smaller rise in lease
assets and a higher rise in liabilities were unable to offset an increase in inventories and receivables and a
reduction in other provisions compared to the prior year. Cash outflows resulting from the diesel issue
were higher than in 2021. The payment of the fine arising from the EU antitrust proceedings against Scania
led to a cash outflow of €0.9 billion in fiscal year 2022. As a result, cash flows from operating activities went
down by €10.1 billion to €28.5 billion.
The Volkswagen Group’s investing activities attributable to operating activities grew by €1.3 billion to
€25.5 billon in fiscal year 2022. This also includes the full portion of the purchase price payable by Volks-
wagen for the acquisition of Europcar, amounting to €1.7 billion, which was contributed to Green Mobility
Holding.
Financing activities resulted in a cash inflow of €4.2 billion, compared with an outflow of €7.8 billion in
the previous year. Financing activities related primarily to the issuance and redemption of bonds and other
financial liabilities, the redemption of the hybrid notes called in February and November 2022, the issuance
of the hybrid notes successfully placed in March 2022, the payment of the €3.8 billion dividend to the
shareholders of Volkswagen AG from the appropriation of net profit for fiscal year 2021, and the cash
inflow of €16.1 billion from the IPO of Porsche AG (partial cash inflow from the sale of the ordinary and
preferred shares). At the end of the fiscal year, the Volkswagen Group reported cash and cash equivalents of
€29.7 (39.1) billion in its cash flow statement.
At the end of December 2022, the Volkswagen Group’s net liquidity stood at €– 125.8 billion, compared
with €– 136.6 billion on December 31, 2021.
Financial position of the Automotive Division

In the period from January to December 2022, the Automotive Division’s gross cash flow of €33.2 billion
exceeded the prior-year figure by €4.1 billion. The increase was mainly attributable to improved earnings.
The change in working capital amounted to €– 3.3 (3.4) billion, resulting mainly from higher inventories
and lower other provisions, offset by a larger increase in liabilities compared to the prior year.
Cash outflows resulting from the diesel issue were higher than in the prior-year period. The payment of
the fine arising from the EU antitrust proceedings against Scania led to a cash outflow in fiscal year 2022.
Consequently, cash flows from operating activities decreased by €2.5 billion to €29.9 billion.
149
CASH FLOW STATEMENT BY DIVISION
€ million 2022 2021 2022 2021 2022 2021
Cash and cash equivalents at beginning of period 39,123 33,432 24,899 23,758 14,224 9,674
Earnings before tax 22,044 20,126 16,463 14,146 5,581 5,981
Income taxes paid – 4,415 – 4,216 – 3,561 – 3,329 – 854 – 887
Depreciation and amortization expense2 30,670 27,473 20,854 18,378 9,816 9,094
Change in pension provisions 898 992 857 947 41 45
Share of the result of equity-accounted investments 575 787 639 839 – 64 – 52
Other noncash income/expense and reclassifications3 – 511 – 1,473 – 2,089 – 1,938 1,578 465
Gross cash flow 49,261 43,690 33,163 29,044 16,097 14,646
Change in working capital – 20,765 – 5,056 – 3,299 3,358 – 17,466 – 8,415
Change in inventories – 8,385 2,110 – 8,262 624 – 123 1,486
Change in receivables – 3,207 1,888 – 529 421 – 2,678 1,466
Change in liabilities 8,586 1,856 8,179 2,009 407 – 153
Change in other provisions – 2,754 951 – 2,934 938 180 14
Change in lease assets (excluding depreciation) – 8,711 – 16,205 406 – 536 – 9,117 – 15,669
Change in financial services receivables – 6,294 4,345 – 158 – 97 – 6,136 4,442
Cash flows from operating activities 28,496 38,633 29,865 32,402 – 1,369 6,231
Cash flows from investing activities attributable to operating
activities – 25,454 – 24,181 – 25,058 – 23,793 – 396 – 388
of which: investments in property, plant and equipment,
investment property and intangible assets, excluding
capitalized development costs – 12,948 – 10,655 – 12,731 – 10,496 – 217 – 159
capitalized development costs – 9,723 – 7,843 – 9,723 – 7,843 0 0
acquisition and disposal of equity investments – 3,219 – 6,151 – 2,997 – 5,882 – 222 – 268
Net cash flow4 3,042 14,453 4,807 8,610 – 1,765 5,843
Change in investments in securities and time deposits, as well as in
loans – 16,368 – 1,948 – 15,052 – 933 – 1,316 – 1,015
Cash flows from investing activities – 41,822 – 26,128 – 40,110 – 24,726 – 1,712 – 1,403
Cash flows from financing activities 4,225 – 7,754 8,621 – 7,375 – 4,396 – 380
of which: capital transactions with noncontrolling interests 16,198 – 590 16,198 – 590 0 0
capital contributions/capital redemptions – 235 – 1,071 – 235 – 1,575 –0 504
Effect of exchange rate changes on cash and cash equivalents – 285 942 – 233 839 – 52 102
Change of loss allowance within cash and cash equivalents 1 –1 1 –1 –0 –0
Net change in cash and cash equivalents – 9,385 5,691 – 1,856 1,141 – 7,529 4,550
Cash and cash equivalents at Dec. 315 29,738 39,123 23,042 24,899 6,695 14,224
Securities and time deposits, as well as loans 49,771 34,515 30,891 16,200 18,880 18,314
Gross liquidity 79,509 73,637 53,934 41,099 25,575 32,539
Total third-party borrowings – 205,312 – 210,213 – 10,919 – 14,413 – 194,393 – 195,800
Net liquidity6 – 125,803 – 136,576 43,015 26,685 – 168,818 – 163,261
1 Including allocation of consolidation adjustments between the Automotive and Financial Services divisions.
2 Net of impairment reversals.
3 These relate mainly to the fair value measurement of financial instruments and the reclassification of gains/losses on disposal of noncurrent assets and equity investments to
investing activities.
4 Net cash flow: cash flows from operating activities, net of cash flows from investing activities attributable to operating activities (investing activities excluding change in investments
in securities, time deposits and loans).
5 Cash and cash equivalents comprise cash at banks, checks, cash-in-hand and call deposits.
6 The total of cash, cash equivalents, securities and time deposits, as well as loans to affiliates and joint ventures net of third-party borrowings (noncurrent and current financial liabilities).
150
FI NANCIAL POSITION I N TH E PASSENGER CARS, COMMERCIAL VEH ICLES AN D POWER ENGI N EERI NG
BUSI N ESS AREAS FROM JAN UARY 1 TO DECEMBER 31
€ million 2022 2021
Passenger Cars
Gross cash flow 28,740 26,221
Change in working capital – 444 3,439
Cash flows from operating activities 28,296 29,659
Cash flows from investing activities attributable to operating activities – 23,060 – 19,266
Net cash flow 5,236 10,393
Gross cash flow 4,079 2,491
Change in working capital – 2,877 – 109
Cash flows from operating activities 1,201 2,382
Cash flows from investing activities attributable to operating activities – 1,953 – 4,453
Net cash flow – 752 – 2,071
Power Engineering
Gross cash flow 345 333
Change in working capital 23 29
Cash flows from operating activities 368 362
Cash flows from investing activities attributable to operating activities – 44 – 74
Net cash flow 323 287
Investing activities attributable to operating activities increased by €1.3 billion to €25.1 billion. Within this
figure, investments in property, plant and equipment, investment property and intangible assets, excluding
capitalized development costs (capex) increased by €2.2 billion to €12.7 billion. The ratio of capex to sales
revenue was 5.5 (5.1)%. A considerable portion of capex was above all allocated to our production facilities
and to models that we launched in 2022 or are planning to launch in 2023, or for which production is set to
start. This expenditure relates mainly to vehicles in the ID. family (ID. Buzz, ID.3, ID.7) and product upgrades
for the T-Roc, Amarok and Tiguan. Other vehicles in the volume segment are the ŠKODA Enyaq Coupé and
upgrades to the Scala, Kamiq and Superb Combi models. The Bentley Bentayga, the facelift of the Audi Q8
e-tron and the Q6 e-tron expand the range of models in the Premium segment, among others. In the sports
segment, the Cayman, Panamera, Cayenne, 911 and Taycan are among the models being updated, and the
Macan is being electrified. Other investment priorities include the electrification and digitalization of our
products and enhancements to the modular and all-electric toolkits and platforms. Additions to capitalized
development costs rose to €9.7 (7.8) billion in the reporting period. The “Acquisition and disposal of equity
investments” (M&A) item amounted to €–3.0 (– 5.9) billion. It included strategic investments in a variety of
companies, especially Europcar. The sale of Sitech Sp. z o.o. in the fiscal year under review had an offsetting
effect. The prior-year period had included, among other items, the acquisition of Navistar and the invest-
ment in the associate Gotion High-Tech.
In the period from January to December 2022, the Automotive Division’s net cash flow of €4.8 billion
was €3.8 billion down on the prior-year figure.
In fiscal year 2022, the Automotive Division’s financing activities led to a cash inflow of €8.6 billion,
compared with a cash outflow of €7.4 billion in the previous year. Hybrid notes with a total nominal
151
AUTOMOTIVE DIVISION NET CASH FLOW 2022

€ billion
35 33.2 –3.3
–12.7
30
25
20
–9.7
15
10
–3.0
0.4 4.8
5
Gross cash flow Change in Capex Capitalized M&A Other Net cash flow
working capital development costs
amount of €2.25 billion, which were successfully issued via Volkswagen International Finance N.V. in March
2022, led to a cash inflow. They comprise a €1.0 billion note with a coupon of 3.748%, which is noncallable
for five years and nine months, and a €1.25 billion note with a coupon of 4.375%, which is noncallable for
nine years. Both notes are perpetual and increase net liquidity and equity by the nominal amount less
transaction and other costs. The repayment of the hybrid notes called in February and November 2022
resulted in a cash outflow totaling €2.6 billion in the reporting year. The dividend payment to shareholders
of Volkswagen AG was made in May 2022 from the appropriation of net profits for fiscal year 2021. It was
set against cash inflows from the dividends paid by the financial services companies. The “capital trans-
actions with noncontrolling interests” item includes the cash inflow from the sale of the shares of
Porsche AG related to that company’s IPO. In the prior-year period, this item had included the present value
of the cash settlement for MAN noncontrolling interest shareholders in connection with the merger of
MAN SE and TRATON SE. In addition, the prior-year figure had included the repayment of a hybrid note.
Financing activities also include the issuance and redemption of bonds and changes in other financial
liabilities.
At the end of 2022, the Automotive Division’s net liquidity stood at €43.0 billion, compared with
€26.7 billion at the end of 2021. The Automotive Division’s net liquidity as a proportion of consolidated
sales revenue increased to 15.4 (10.7)% in the reporting year, mainly because of cash inflows from the IPO.
Financial position in the Financial Services Division

In fiscal year 2022, the Financial Services Division generated gross cash flow of €16.1 (14.6) billion. The
change in working capital amounted to €– 17.5 (– 8.4) billion, leading to higher funds tied up in working
capital than in the previous year because of an increase in receivables and inventories, which could not be
offset by a smaller rise in lease assets. As a result, cash flows from operating activities went down by
€7.6 billion to €– 1.4 billion.
Investing activities attributable to operating activities were on a level with the previous year, at
€0.4 (0.4) billion. The Financial Services Division’s financing activities resulted in a cash outflow of
€– 4.4 (– 0.4) billion in the period from January to December 2022. This figure relates primarily to the issu-
ance and redemption of bonds and to other financial liabilities, as well as dividend payments by the
financing companies.
On December 31, 2022, the Financial Services Division’s negative net liquidity, which is common in the
industry, was €– 168.8 billion as against €– 163.3 billion at the end of 2021.
152
N ET ASSETS
Consolidated balance sheet structure
On December 31, 2022, the Volkswagen Group had total assets of €564.8 billion, 6.8% more than at the end
of 2021. The increase was mainly attributable to the proceeds of the successful IPO of Porsche AG, higher
earnings and changes in exchange rates. A chart showing the structure of the consolidated balance sheet as
of the reporting date can be found in this chapter. The Volkswagen Group’s equity rose by €32.2 billion to
€178.3 billion. The IPO of Porsche AG led to a €19.1 billion rise in equity, of which €10.8 billion is reported
as noncontrolling interests. The equity ratio increased to 31.6 (27.6)%.
As of the end of fiscal year 2022, the Group had off-balance-sheet commitments in the form of contin-
gent liabilities in the amount of €10.6 (9.7) billion and in the form of financial guarantees in the amount of
€1.2 (1.4) billion. In addition, there were other financial obligations of €35.4 (34.7) billion. The contingent
liabilities relate primarily to legal risks in connection with the diesel issue, as well as to potential liabilities
from tax risks in the Commercial Vehicles Business Area in Brazil. Other financial obligations primarily
result from purchase commitments for property, plant and equipment, irrevocable credit commitments to
customers and from development and supply contracts. They also include commitments to invest in the
infrastructure for zero-emission vehicles and in initiatives to promote access to and awareness of this
technology. These commitments were made as part of the settlement agreements in the USA in connection
with the diesel issue. The other financial obligations include an amount of €0.5 (0.7) billion for this pur-
pose. In addition to the other financial obligations, there are purchase commitments for inventories with a
short turnover period, which arise primarily from the Master Collaboration Agreement with Ford Motor
Company for the joint development of vans and mid-sized pickups for the global market.
Automotive Division balance sheet structure

As of December 31, 2022, intangible assets in the Automotive Division were up on the previous year, driven
primarily by a rise in capitalized development costs. Property, plant and equipment was on a level with the
previous year. Equity-accounted investments were likewise virtually unchanged compared to the previous
year’s balance sheet date. The increase attributable to capital increases, in particular at Green Mobility
Holding, and the positive results of the Chinese joint venture companies were offset by the dividends of the
joint ventures resolved in fiscal year 2022 and the impairment loss recognized on the equity investment in
Argo AI. Noncurrent other receivables and financial assets increased, due mainly to positive effects from
the measurement of derivatives. In total, noncurrent assets ended the year at €178.7 (170.4) billion and
therefore higher than at the end of 2021.
Current assets rose by €21.2 billion compared with the figure at the end of 2021, to €122.8 billion. The
inventories included in this figure increased, primarily for production-related reasons, and were attri-
butable, among other factors, to disruptions in the logistics chain. Current other receivables and financial
assets stood at €18.8 billion – €0.5 billion more than at the end of 2021. The figure included higher trade
receivables and positive effects from the measurement of derivatives.
The Automotive Division’s cash and cash equivalents contracted by €2.5 billion to €23.0 billion. Total
securities amounted to €32.9 billion, thus exceeding the figure as of December 31, 2021 by €15.2 billion.
The “Assets held for sale” item comprises primarily the carrying amounts of the assets intended for
derecognition of subsidiaries of Volkswagen Financial Services and Porsche in Russia that are planned to be
divested as well as assets of MAN Energy Solutions. The “Liabilities held for sale” item comprises the
carrying amount of the corresponding liabilities intended for derecognition.
153
CONSOLI DATED BALANCE SH EET BY DIVISION AS OF DECEMBER 31
€ million 2022 2021 2022 2021 2022 2021
Assets
Noncurrent assets 340,464 328,261 178,667 170,391 161,797 157,871
Intangible assets 83,241 77,689 82,846 77,290 394 399
Property, plant and equipment 63,890 63,695 62,908 62,684 982 1,011
Lease assets 59,380 59,699 1,279 2,316 58,100 57,383
Financial services receivables 86,944 84,954 – 767 – 781 87,711 85,735
Investments, equity-accounted investments and
other equity investments, other receivables and
financial assets 47,009 42,224 32,400 28,882 14,609 13,342
Current assets 224,309 200,347 122,751 101,539 101,557 98,808
Inventories 52,274 43,725 48,768 40,361 3,506 3,363
Financial services receivables 61,549 56,498 – 799 – 936 62,348 57,434
Other receivables and financial assets 43,375 37,195 18,786 18,275 24,589 18,921
Marketable securities and time deposits 37,206 22,532 32,867 17,674 4,338 4,858
Cash and cash equivalents 29,172 39,723 23,034 25,491 6,137 14,232
Assets held for sale 733 674 95 674 638 0
Total assets 564,772 528,609 301,418 271,930 263,354 256,679
Equity and liabilities

Equity 178,327 146,154 135,936 109,022 42,392 37,131
Equity attributable to Volkswagen AG
shareholders 151,257 130,009 109,549 93,592 41,707 36,417
hybrid capital investors 14,121 14,439 14,121 14,439 0 0
shareholders and hybrid capital investors 165,378 144,449 123,670 108,031 41,707 36,417
Noncontrolling interests 12,950 1,705 12,265 991 684 714
Noncurrent liabilities 203,453 218,062 88,321 98,923 115,132 119,139
Financial liabilities 121,737 131,618 21,871 24,639 99,866 106,978
Provisions for pensions 27,553 41,550 27,104 40,769 449 781
Other liabilities 54,163 44,894 39,346 33,515 14,816 11,379
Current liabilities 182,992 164,393 77,161 63,984 105,831 100,409
Financial liabilities 83,448 78,584 – 10,953 – 10,237 94,401 88,821
Trade payables 28,748 23,624 26,106 20,977 2,641 2,647
Other liabilities 70,639 61,948 61,995 53,007 8,643 8,940
Liabilities associated with assets held for sale 158 238 12 238 146 0
Total equity and liabilities 564,772 528,609 301,418 271,930 263,354 256,679
1 Including allocation of consolidation adjustments between the Automotive and Financial Services divisions, primarily intragroup loans.
154
CONSOLIDATED BALANCE SHEET STRUCTURE 2022

in percent
Noncurrent assets Current assets

60.3 (62.1) 39.7 (37.9)
Total assets
Equity Noncurrent liabilities Current liabilities

31.6 (27.6) 36.0 (41.3) 32.4 (31.1)
Total equity
and liabilities
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
At the end of December 2022, the Automotive Division’s equity of €135.9 billion was 24.7% up on the end
of 2021. The proceeds from the successful IPO of Porsche AG, healthy earnings performance, lower actuarial
losses from the remeasurement of pension plans and the hybrid notes issued in March 2022 pushed equity
higher. The dividend payment in May 2022 and the special dividend to shareholders of Volkswagen AG
resolved by the extraordinary General Meeting as well as the redemption of the hybrid notes called in
February and November 2022 reduced the Automotive Division's equity. Noncontrolling interests went up
as a result of the sale of shares in Porsche AG. They are now primarily held by the noncontrolling interest
shareholders of the Porsche AG Group and the TRATON Group. The equity ratio was 45.1 (40.1)%.
Noncurrent liabilities decreased by €10.6 billion to €88.3 billion. The noncurrent financial liabilities
included in this item were lower than at the end of 2021, mainly because of reclassifications from noncur-
rent to current liabilities reflecting shorter remaining maturities. Pension provisions decreased, driven
primarily by actuarial remeasurement following a change in the discount rate. Noncurrent other liabilities
went up, due among other things to the effects of the measurement of derivatives.
Current liabilities increased by €13.2 billion to €77.2 billion. Current financial liabilities amounted to
€– 11.0 (– 10.2) billion. The figures for the Automotive Division also contain the elimination of intragroup
transactions between the Automotive and Financial Services divisions. As the current financial liabilities
for the primary Automotive Division were lower than the loans granted to the Financial Services Division, a
negative amount was disclosed in both periods. Trade payables were up by 24.5% compared with the end
of 2021. Current other liabilities exceeded the figure as of December 31, 2021, driven primarily by the
special dividend, which was resolved in December 2022 and paid in January 2023. An offsetting transaction
was the netting of the payment claim from the second tranche of the ordinary shares of Porsche AG.
At the end of the reporting year, the Automotive Division reported total assets of €301.4 billion, 10.8%
more than at the end of 2021.
155
BALANCE SH EET STRUCTU RE OF TH E PASSENGER CARS, COMMERCIAL VEH ICLES AN D

POWER ENGI N EERI NG BUSI N ESS AREAS
€ million Dec. 31, 2022 Dec. 31, 2021
Passenger Cars
Noncurrent assets 142,467 133,857
Current assets 105,077 86,362
Total assets 247,544 220,218
Equity 119,637 93,894
Noncurrent liabilities 71,637 80,621
Current liabilities 56,270 45,704
Total assets 48,804 46,994
Equity 13,804 12,807
Noncurrent liabilities 16,252 17,778
Power Engineering
Total assets 5,070 4,718
Equity 2,495 2,322
Noncurrent liabilities 432 524
Financial Services Division balance sheet structure

At €263.4 billion, the Financial Services Division’s total assets on December 31, 2022 were 2.6% higher than
a year earlier.
Noncurrent assets rose to €161.8 billion, up 2.5% compared with the end of 2021; the lease assets
included in this item expanded mainly due to exchange rate movements. Noncurrent financial services
receivables increased, driven by business growth; noncurrent other receivables were also up on the pre-
vious year.
Current assets climbed by 2.8% to €101.6 billion. The current financial services receivables included in
this item went up, as did current other receivables and financial assets, buoyed among other factors by the
rise in trade receivables. The Financial Services Division’s cash and cash equivalents stood at €6.1 (14.2) bil-
lion on December 31, 2022. Total securities were €0.5 billion lower, at €4.3 billion.
On December 31, 2022, the Financial Services Division accounted for 46.6 (48.6)% of the Volkswagen
Group’s assets.
The Financial Services Division’s equity at the end of 2022 was €42.4 billion, exceeding the figure on the
2021 reporting date by 14.2%. The equity ratio increased to 16.1(14.5)%.
The Financial Services Division’s noncurrent liabilities were down 3.4% as of the balance sheet date. The
noncurrent financial liabilities included in this item saw a noticeable decline, while noncurrent other
liabilities rose sharply, driven by adverse effects from the measurement of derivatives. Current liabilities
were higher, driven above all by noticeable growth in current financial liabilities.
Deposits from the direct banking business amounting to €26.7 (26.7) billion were on a level with the
previous year.
156
RETURN ON I NVESTMENT (ROI) AN D VALUE CONTRI BUTION

The central focus of the Volkswagen Group’s financial target system is to continuously and sustainably
increase the value of the Company. In order to make efficient use of resources in the Automotive Division
and to measure the success of this, we have been using a value-based management system for a number of
years, with return on investment (ROI) as a relative indicator and value contribution1, a key performance
indicator linked to the cost of capital, as an absolute performance measure.
The return on investment serves as a constant target in strategic and operational management. If the
return on investment exceeds the market cost of capital, there is an increase in the value of the invested
capital and a positive value contribution. The concept of value-based management makes it possible to
assess the success of the Automotive Division and individual business units. It also enables the earning
power of our products, product lines and projects – such as new plants – to be measured.
Components of value contribution

Value contribution is calculated on the basis of the operating result after tax and the opportunity cost of
invested capital.
The operating result shows the economic performance of the Automotive Division and is initially a pre-
tax figure. Based on our companies’ income tax rates, which vary from country to country, we assume an
overall average tax rate of 30% when calculating the operating result after tax.
The cost of capital is multiplied by the average invested capital to give the opportunity cost of capital.
Invested capital is calculated as total operating assets reported in the balance sheet (property, plant and
equipment, intangible assets, lease assets, inventories and receivables) less non-interest-bearing liabilities
(trade payables and payments on account received). Average invested capital is derived from the balance at
the beginning and the end of the reporting period.
As the concept of value-based management only comprises our operating activities, assets relating to
investments in subsidiaries and associates and the investment of cash funds are not included when
calculating invested capital. Interest charged on these assets is reported in the financial result.
1 The value contribution corresponds to the Economic Value Added (EVA®). EVA® is a registered trademark of the consulting firm Stern Value Management.
157
Determining the current cost of capital

The cost of capital is the weighted average of the required rates of return on equity and debt.
The cost of equity is determined using the Capital Asset Pricing Model (CAPM). This model uses the
yield on long-term risk-free Bunds, increased by the risk premium attaching to investments in the equity
market. The risk premium comprises a general market risk and a specific business risk. The general risk
premium of 7.5% reflects the general risk of a capital investment in the equity market. The specific business
risk – price fluctuations in Volkswagen preferred shares – is modeled in comparison to the MSCI World Index
when calculating the beta factor. The MSCI World Index is a global capital market benchmark for investors.
The analysis period for the beta factor calculation spans five years with annual beta figures calculated on
a weekly basis followed by the subsequent calculation of the average. A beta factor of 1.55 (1.16) was deter-
mined for 2022.
The cost of debt is based on the average yield for long-term corporate bonds. As borrowing costs are tax-
deductible, the cost of debt is adjusted to account for the tax rate of 30%.
A weighting on the basis of a fixed ratio for the fair values of equity and debt results in an effective cost
of capital for the Automotive Division of 8.3 (6.2) % for 2022.
COST OF CAPITAL AFTER TAX I N TH E AUTOMOTIVE DIVISION
% 2022 2021
Risk-free rate 2.0 0.1

Market risk premium 7.5 7.5
Volkswagen-specific risk premium 1.1 1.2
(Volkswagen beta factor) (1.55) (1.16)
Cost of equity after tax 10.7 8.8
Cost of debt 5.0 1.3
Tax –1.5 –0.4
Cost of debt after tax 3.5 0.9
Proportion of equity 66.7 66.7
Proportion of debt 33.3 33.3
Cost of capital after tax 8.3 6.2
158
Return on investment (ROI) and value contribution in the reporting period

The operating result after tax for the Automotive Division, including the proportionate operating result of
the equity-accounted Chinese joint ventures, increased to €14,078 (11,740) million in fiscal year 2022. The
year-on-year improvement resulted primarily from favorable price positioning and positive changes in the
product mix. Negative impacts during the reporting period arose primarily from a decline in unit sales as a
result of parts supply shortages, higher product costs (especially for commodities), negative impacts from
the Russia-Ukraine conflict, and the recognition of negative special items in the reporting period. The effect
of purchase price allocation on earnings and assets is not taken into account as this cannot be influenced
by management in the course of business operations.
At €117,412 (113,386) million, invested capital increased slightly in the reporting year compared with
the prior year.
The return on investment (ROI) is the return on invested capital for a particular period based on the
operating result after tax. Due to the improved operating result, the ROI of 12.0 (10.4) % exceeded both the
prior-year figure and our minimum required rate of return on invested capital of 9%.
At €9,702 (6,984) million, the opportunity cost of capital – invested capital multiplied by the cost of
capital – was strongly up on the previous year. Improvements in the operating result after tax, net of the
opportunity cost of invested capital, led to a positive value contribution of €4,376 (4,756) million, which fell
short of the prior-year figure, mainly because of the increased cost of capital.
More information on value-based management is contained in our publication entitled “Financial
Control System of the Volkswagen Group”, which can be downloaded from our Investor Relations website:
www.volkswagenag.com/en/InvestorRelations/news-and-publications/More_Publications.html.
RETURN ON I NVESTMENT (ROI) AN D VALUE CONTRI BUTION I N TH E AUTOMOTIVE DIVISION 1
€ million 2022 2021
Operating result after tax 14,078 11,740

Invested capital (average) 117,412 113,386
Return on investment (ROI) in % 12.0 10.4
Cost of capital in % 8.3 6.2
Cost of invested capital 9,702 6,984
Value contribution 4,376 4,756
1 Including proportionate inclusion of the Chinese joint ventures (including the relevant sales and component companies) and allocation of consolidation adjustments between the
Automotive and Financial Services Divisions.
159
SUMMARY OF BUSI N ESS DEVELOPMENT AN D ECONOMIC POSITION

In view of the political and economic developments in 2022 and the transformation of the industry, the
Board of Management of Volkswagen AG considers business development and the economic position chal-
lenging, but positive overall.
In the reporting period, the Volkswagen Group’s business was impacted by the global economic slow-
down, the limited availability of parts and disruptions in the logistics chain. As a result, we had to adjust
some aspects of our forecast. In this environment, we consequently delivered 8.3 million vehicles in the
past fiscal year to customers and thereby fewer than planned.
The Group’s sales revenues rose – in line with our expectations – by 11.6%, which was primarily due to
prices, product mix and exchange rate effects as well as the good performance in the Financial Services
Division.
The operating result before special items increased to €22.5 billion. The operating return on sales before
and after special items was 8.1% and 7.9% respectively, and thus within the forecast range.
Research and development costs reflect our activities undertaken to safeguard the Company’s future
viability. The R&D ratio in the Automotive Division met our adjusted expectations at 8.1%.
The ratio of capex to sales for the Automotive Division was on a level with the forecast at 5.5%.
Net cash flow amounted to €4.8 billion and therefore fell short of the previous year’s level; this was mainly
attributable to cash tied up in working capital, caused in particular by disruptions in the supply chain.
Net liquidity stood at €43.0 billion at the end of fiscal year 2022, exceeding the originally expected range
thanks to the cash inflow from the successful IPO of Porsche AG.
Return on investment (ROI) in the Automotive Division improved to 12.0% and was therefore, as antici-
pated, above our minimum required rate of return on invested capital.
160
FORECAST VERSUS ACTUAL FIGU RES
Original Forecast Adjusted Forecast

Actual 2021 for 2022 for 2022 Actual 2022
Deliveries to customers (units) 8.9 million 5–10% increase around the prior-year level 8.3 million
Volkswagen Group
Sales revenue €250.2 billion 8–13% increase 8–13% increase €279.2 billion
Operating return on sales before special items 8.0% 7.0 – 8.5% 7.0 – 8.5% 8.1%
Operating return on sales 7.7% 7.0 – 8.5% 7.0 – 8.5% 7.9%
Operating result before special items €20.0 billion in forecast range in forecast range €22.5 billion
Operating result €19.3 billion in forecast range in forecast range €22.1 billion
Passenger Cars Business Area
Sales revenue €172.9 billion 8–13% increase 5 – 10% increase €189.3 billion
Operating return on sales before special items 8.0% 7.0 – 8.5% 8.0 – 9.0% 7.9%
Operating return on sales 7.5% 7.0 – 8.5% 8.0 – 9.0% 7.7%
Operating result before special items €13.8 billion in forecast range in forecast range €15.0 billion
Operating result €13.1 billion in forecast range in forecast range €14.6 billion
Commercial Vehicles Business Area
Sales revenue €30.1 billion strong increase strong increase €39.5 billion
Operating return on sales 0.4% 5.0 – 7.0% 4.0–5.0% 4.0%
Operating result €134 million in forecast range in forecast range €1.6 billion
Power Engineering Business Area
Sales revenue €3.3 billion moderate increase moderate increase €3.6 billion
low positive triple-digit low positive triple-digit
Operating result €45 million million euro range million euro range €281 million
Financial Services Division
Sales revenue €44.0 billion noticeable increase noticeable increase €46.8 billion
Operating result €6.0 billion ~€4.5 billion ~€5 billion €5.7 billion
R&D ratio in the Automotive Division 7.6% ~7.0% ~8.0% 8.1%
Capex/sales revenue in the Automotive Division 5.1% ~5.5% ~5.5% 5.5%
Net cash flow in the Automotive Division €8.6 billion around the prior-year level around the prior-year level €4.8 billion
Net liquidity in the Automotive Division €26.7 billion up to 15% increase up to 15% increase €43.0 billion
Return on investment (ROI) in the
Automotive Division 10.4% 12–15% 12–15% 12.0%
161
Group Management Report Volkswagen AG
Volkswagen AG
(Condensed, in accordance with the German Commercial Code)
The year 2022 was impacted by the global market slowdown, the limited
availability of parts and disruptions in the logistics chain.
AN N UAL RESULT
Special items in connection with the diesel issue were recognized in 2022 and amounted to €0.3 (0.7) bil-
lion. These related in particular to further provisions for legal risks. Special items had an impact of €–0.3
(–0.7) billion on net other operating result.
In the fiscal year under review, the Russia-Ukraine conflict negatively affected Volkswagen AG in an
amount of approximately €1 billion. This was due to write-downs on the shares in OOO Volks-
wagen Group Rus, Kaluga, as well as loss allowances and risk provisions following the discontinuation of
business activities in Russia.
Sales revenue increased by 12.1% year-on-year to €79.5 billion in the reporting year, driven mainly by
higher sales volumes and a more favorable price-product mix. Sales generated abroad accounted for a share
of €46.3 billion or 58.2%. Cost of sales increased faster than sales revenue, rising by 17.9% to €79.5 billion,
mainly because of higher commodity prices for vehicle production.
Gross profit on sales fell accordingly to €–0.0 (3.5) billion.
I NCOME STATEMENT OF VOLKSWAGEN AG
€ millon 2022 2021
Sales 79,491 70,917

Cost of Sales –79,499 –67,424
Gross profit on sales –8 3,494
Distribution, general and administrative expenses –7,292 –6,973
Net other operating result 1,997 66
Financial result1 16,825 8,545
Taxes on income 955 –1,091
Earnings after tax 12,477 4,041
Net income for the fiscal year 12,477 4,041
Retained profits brought forward 5,774 1,609
Release of/appropriation to revenue reserves –6,230 13,450
Net retained profits 12,021 19,101
1 Including write-downs of financial assets.
162
The other operating result amounted to €2.0 billion, up €1.9 billion on the previous year, driven in
particular by a decline in expenses for legal and litigation risks, positive effects from the measurement and
settlement of hedging transactions and foreign currency translation.
The financial result went up by €8.3 billion to €16.8 billion, mainly because of a rise in income from profit
transfers, which resulted primarily from higher profit transferred by Porsche Holding Stuttgart GmbH,
Stuttgart, in connection with the IPO of Dr. Ing. h.c. F. Porsche AG, Stuttgart (Porsche AG).
Taxes on income amounted to €1.0 (–1.1) billion, particularly due to higher tax expenses for prior years.
Net income for fiscal year 2022 thus amounted to €12.5 (4.0) billion.
N ET ASSETS AN D FI NANCIAL POSITION

Total assets amounted to €225.2 billion on December 31, 2022, up €38.9 billion on the comparative 2021
figure. Intangible assets and property, plant and equipment were up by €0.3 billion, with capital expen-
diture exceeding depreciation and amortization charges. Financial assets rose to €138.9 (127.6) billion as a
result of a number of capital increases, including a capital increase at Porsche Holding Stuttgart GmbH,
Stuttgart, in the amount of €2.8 billion in connection with the IPO of Dr. Ing. h.c. F. Porsche AG, Stuttgart.
To finance the acquisition of Europcar by Green Mobility Holding S.A., Strassen, Volkswagen AG paid con-
tributions of €1.7 billion to the capital reserves of Volkswagen Finance Luxemburg S.A., Strassen (VFL). In
addition, Volkswagen AG paid contributions of €0.9 billion to finance several capital increases by VFL at
Volkswagen do Brasil Indústria de Veículos Automotores Ltda., São Bernardo do Campo. In addition, a capital
increase of €1.7 billion was implemented at Porsche Siebte Vermögensverwaltung GmbH, Wolfsburg, to
finance the creation of battery cell production by PowerCo SE, Salzgitter.
Fixed assets accounted for a share of 65.9 (73.5) % of total assets.
Current assets (including prepaid expenses) amounted to €76.7 (49.4) billion as of December 31, 2022.
Inventories went up by €0.9 billion to €7.8 billion. In particular finished goods and merchandise were
higher than in the previous year because of a shortage of transport capacity. Receivables and other assets
rose to €59.7 (32.3) billion. Their rise is attributable to higher receivables from profit transfers from sub-
sidiaries and an increase in time deposits with maturities of more than three months without call right.
Cash instruments were down, driven particularly by the decrease in restricted short-term time deposits.
BALANCE SH EET OF VOLKSWAGEN AG AS OF DECEMBER 31
€ million 2022 2021
Fixed assets 148,516 136,892

Inventories 7,816 6,921
Receivables1 59,773 32,355
Cash-in-hand and bank balances 9,122 10,168
Total assets 225,227 186,336
Equity 40,323 41,172
Special tax-allowable reserves 17 17
Long-term debt 33,717 40,748
Medium-term debt 38,647 38,087
Short-term debt 112,523 66,312
1 Including prepaid expenses.
163
Equity at the end of the reporting year was €40.3 billion; the decrease was primarily due to earnings-related
factors. The equity ratio was 17.9 (22.1) %.
Other provisions decreased by €1.6 billion to €17.7 (19.2) billion, due mainly to the reduction in pro-
visions for litigation risks and sales-related provisions. Provisions for pensions rose by €4.0 billion to
€25.3 billion, particularly as a result of a change in measurement inputs, while provisions for taxes
decreased by €1.4 billion to €3.4 billion.
The €38.8 billion increase in liabilities, including deferred income, to €138.6 billion was mainly the
result of higher loan liabilities to affiliated companies and of liabilities for the special dividend in connec-
tion with the IPO of Dr. Ing. h.c. F. Porsche AG, Stuttgart.
Volkswagen AG’s cash funds, comprising cash instruments with a maturity of less than three months,
less bank liabilities repayable on demand and cash pooling liabilities, improved year-on-year from
€–2.1 billion to €–1.0 billion. The interest-bearing portion of debt amounted to €107.7 (84.3) billion. In our
assessment, given the context created by political and economic developments in 2022, the limited parts
availability and disruptions in the logistics chain, the economic position of Volkswagen AG is challenging,
but just as positive overall as that of the Volkswagen Group.
DIVI DEN D POLICY

Our dividend policy matches our financial strategy. In the interests of all stakeholders, we aim for con-
tinuous dividend growth that allows our shareholders to participate appropriately in our business success.
The proposed dividend therefore reflects our financial management objectives – in particular, ensuring a
solid financial foundation as part of the implementation of our strategy.
In our Group strategy, we have set ourselves the goal of achieving a payout ratio of at least 30%. The
payout ratio is based on the Group’s earnings after tax attributable to Volkswagen AG shareholders. This
amounts to 29.4% for the reporting period and stood at 25.4% in the previous year.
SPECIAL DIVI DEN D FOLLOWI NG PORSCH E AG I PO

The resolution of the extraordinary General Meeting of Volkswagen AG on December 16, 2022 gave rise to
the obligation to pay a dividend, which was increased by €19.06 per ordinary and preferred share and led to
a total obligation to the shareholders of Volkswagen AG amounting to €9.6 billion. A corresponding
liability was recognized for this payment as of the balance sheet date. The cash outflow was scheduled for
January 9, 2023 and occurred on that day.
164
DIVI DEN D PROPOSAL

In fiscal year 2022, net retained profits amounted to €12.0 billion. The Board of Management and Super-
visory Board are proposing to pay a total dividend of €4.4 billion, i.e. €8.70 per ordinary share and €8.76 per
preferred share.
PROPOSAL ON TH E APPROPRIATION OF N ET PROFIT
€ 2022
Dividend payout on subscribed capital (€1,283 million) 4,373,641,114.80

of which: ordinary shares 2,567,281,416.60
preferred shares 1,806,359,698.20
Appropriation to other revenue reserves 7,645,000,000.00
Balance (carried forward to new account) 2,390,656.18
Net retained profits 12,021,031,770.98
EMPLOYEE PAY AN D BEN EFITS AT VOLKSWAGEN AG
€ million 2022 % 2021 %
Direct pay including cash benefits 8,231 56.7 7,816 67.5

Social security contributions 1,510 10.4 1,340 11.6
Compensated absence 1,208 8.3 1,084 9.4
Retirement benefits 3,557 24.5 1,345 11.6
Total expense 14,506 100.0 11,585 100.0
VEH ICLE SALES

Volkswagen AG sold a total of 1,882,535 (1,775,556) vehicles in fiscal year 2022. During the reporting period,
demand recovered from the declines in sales in the prior-year period precipitated by the Covid-19
pandemic. However, the limited vehicle availability due to bottlenecks in the supply of parts caused by the
shortage of semiconductors and the Russia-Ukraine conflict had a detrimental impact. In addition, disrupt-
tions in the supply chain resulted in delays. Vehicles sold abroad accounted for a share of 64.1 (66.3) %.
PRODUCTION
Volkswagen AG manufactured a total of 666,722 vehicles (+5.6%) in the reporting year at its vehicle
production plants in Wolfsburg, Hanover and Emden. In fiscal year 2022, supply shortages, especially for
semiconductors, continued to limit production.
EMPLOYEES
As of December 31, 2022, a total of 116,677 (117,633) people were employed at the sites of Volkswagen AG,
excluding staff employed at subsidiaries; of this figure, 4,452 (4,635) were vocational trainees. 7,528 (7,235)
employees were in the passive phase of their partial retirement.
Female employees accounted for 18.3 (17.9) % of the workforce. Volkswagen AG employed 7,908 (7,227)
part-time workers. The percentage of foreign employees was 6.5 (6.5) %. In the reporting period, 83.3 (83.3) %
of the employees in Volkswagen AG’s production area had completed vocational or additional training. The
proportion of graduates was 21.9 (21.4) % in the same period. The average age of employees in fiscal year
2022 was 45.1 (44.8) years.
165
RESEARCH AN D DEVELOPMENT
Volkswagen AG’s research and development costs as defined in the German Commercial Code amounted to
€4.6 (3.5) billion in the reporting period. 15,053 (+11.5%) people were employed in this area at the end of
the reporting period. The year-on-year rise is attributable, among other factors, to a change in the data
collection method.
BUSI N ESS DEVELOPMENT OF VOLKSWAGEN AG

As the parent of the Volkswagen Group, Volkswagen AG is fundamentally subject to the same expected
developments and risks and opportunities. The forecast is explained in the chapter entitled “Report on
Expected Developments” and the risks and opportunities in the chapter entitled “Report on Risks and
Opportunities” of this annual report.
RISKS ARISI NG FROM FI NANCIAL I NSTRUMENTS

Risks for Volkswagen AG arising from the use of financial instruments are generally the same as those to
which the Volkswagen Group is exposed. An explanation of these risks can be found in the chapter “Report
on Risks and Opportunities” of this annual report.
DEPEN DENT COMPANY REPORT

The Board of Management of Volkswagen AG has submitted to the Supervisory Board the report required by
section 312 of the Aktiengesetz (AktG – German Stock Corporation Act) and issued the following concluding
declaration:
“We declare that, based on the circumstances known to us at the time when the transactions with affiliated
companies within the meaning of section 312 of the AktG were entered into, our Company received
appropriate consideration for each transaction. No transactions with third parties or measures were either
undertaken or omitted on the instructions of or in the interests of Porsche or other affiliated companies in
the reporting period.”
The Annual Financial Statements of Volkswagen AG (in accordance with the German Commercial Code) can be accessed from the electronic company register at
www.unternehmensregister.de.
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Group Management Report Sustainable Value Enhancement
Sustainable Value Enhancement

Our goal is to run our business responsibly along the entire value chain. Everyone should benefit
from this – our customers, our employees, the environment and society. Even in our Group strategy
NEW AUTO – Mobility for generations to come, we aim to make mobility sustainable for
present and future generations.
The main financial performance indicators for the Volkswagen Group are described in the “Results of
Operations, Financial Position and Net Assets” chapter. Nonfinancial key performance indicators also
provide information on the efficiency of our Company’s value drivers. These include the processes in the
areas of research and development, procurement, technology, production, marketing and sales, informa-
tion technology and quality assurance. In all of these processes, we are aware of our responsibility towards
our customers, our employees, the environment and society. In this chapter we provide examples of how
we want to increase the value of our Company in a sustainable way.
SUSTAI NABI LITY

Sustainability means maintaining intact environmental, social and economic systems with long-term
viability at a global, regional and local level. The Volkswagen Group can influence these systems in various
ways, and actively takes responsibility to make a contribution to their sustainability. We have thus devel-
oped a sustainable style of company management and put in place the necessary management structures.
We have also anchored our goal to sustainably shape mobility for present and future generations in our
Group strategy NEW AUTO. Especially the Group’s ESG, Decarbonization and Integrity base initiative will
drive this topic further.
The materiality process is used to identify and evaluate the most important sustainability issues for the
Group. Based on the business model of Volkswagen AG and its social impacts, the focus is on key ESG
requirements, stakeholder expectations and adherence to legal regulations and internationally established
reporting standards.
We conducted another materiality analysis in the reporting period. In reviewing potentially material
issues, we considered perspectives from within and outside the company and reviewed whether the focus
topics of the Group’s NEW AUTO strategy are still in keeping with the times. As a result of this process, the
six focus areas already defined – decarbonization, circular economy, supply chain and human rights,
people & transformation, diversity, and integrity – were confirmed and classified as material by the Group
Sustainability Steering Committee. The six focus areas cover most of the requirements formulated in the
ESG ratings for assessment criteria applied. Wherever this is already possible, each focus area is linked to
clear goals and milestones, KPIs and appropriate packages of measures. ESG-related KPIs such as the
decarbonization index and the diversity index are already today reflected in the remuneration of members
of the Board of Management.
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Decarbonization
The decarbonization of the Group and in particular its portfolio of products is a major part of the NEW
AUTO Group strategy, where it has been defined as one of the focus areas in the base initiative. We have
established the decarbonization index (DKI) as a key performance indicator: the decarbonization index
measures the emissions of CO2 and CO2 equivalents (jointly referred to as CO2e) by the brands that produce
passenger cars and light commercial vehicles in the regions of Europe (EU27, United Kingdom, Norway and
Iceland), China and the USA over the entire life cycle. In this index, the use phase is calculated over
200,000 km and with reference to region-specific fleet values without statutory flexibilities. The CO2e
intensity of the charging current of the electric vehicles is also calculated based on region-specific elec-
tricity mixes. Our vehicle life cycle assessments, which are used as the data basis for calculating supply
chain and recycling emissions, have been verified externally and independently in accordance with ISO
14040. The DKI gives us an informative measuring tool that makes our progress and interim results public
and verifiable. The DKI calculation methodology is regularly adapted according to internal and external
requirements, such as new test cycles for fleet emissions. Published DKI values can therefore also be
adjusted to the new methodology and thus changed to facilitate the presentation of a time series that is
methodologically consistent. In 2021, the methodology was adjusted to the WLTP test cycle for fleet emis-
sions. By 2030, the DKI is to be reduced by 30% compared with the base year 2018, and emissions offsetting
will not be included in the figure. In the reporting year, the DKI value averaged 48.0 t CO2e/vehicle. This
represents a reduction of 0.4 t CO2e/vehicle compared with the figure adjusted for 2021 due to a change in
the assumption on which the calculation is based, for example the first-time inclusion of region-specific
life cycle assessments for Chinese models.
Circular economy
The finite nature of natural resources and the social and environmental consequences of mining raw
materials make decoupling economic growth from resource consumption and the development of a
circular economy key sustainability topics. Policymakers at both international and national level have
addressed these challenges and made it their mission to regulate markets more aggressively in the future in
an effort to speed up the transformation towards resource efficiency and a circular economy. Recognizing
the importance of the topic, Volkswagen anchored the topic of circular economy in the NEW AUTO Group
strategy through its ESG, Decarbonization and Integrity base initiative.
The Volkswagen Group created and implemented concepts for the reconditioning and recycling of
vehicle components from an early stage. Going forward, we plan to intensify our efforts for a transition to a
loop-oriented and resource-conserving approach to doing business by pooling expertise within the Group
and working on projects and measures on a cross-brand basis.
We are stepping up efforts to use recyclable materials in our vehicle projects. These currently include
raw materials from production residues as well as renewable raw materials or natural fibers such as flax,
cotton, wood and cellulose, provided they comply with all the technical requirements. In the future, the use
of raw materials from end-of-life vehicles will be increasingly taken into account and simplified.
To preserve circular materials from electric vehicles, Volkswagen Group Components opened the
Group’s first pilot facility for recycling high-voltage vehicle batteries at the Salzgitter site in early 2021. The
objective is industrialized recovery of valuable raw materials such as lithium, nickel, manganese and cobalt.
More information on the focus areas can be found in the sections on integrity and compliance,
procurement and employees, as well as in our Sustainability Report for fiscal year 2022.
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Parameters and guiding principles

Our actions are determined by the Volkswagen Group Essentials as the foundation of values and the basis
for our shared corporate culture. The Volkswagen Group Essentials support managers and employees in
overcoming legal and ethical challenges that arise in their daily work. At the same time, we are guided in
our activities by several internal guidelines on sustainability.
On this basis, we seek to align the Volkswagen Group's actions with international agreements and
frameworks such as the Sustainable Development Goals (SDGs) of the United Nations (UN), the declarations
of the International Labour Organization (ILO), the principles and conventions of the Organisation for
Economic Co-operation and Development (OECD) and the UN covenants on basic rights and freedoms.
UN Global Compact
Since 2021, after a five-year hiatus, the Volkswagen Group has officially been reinstated as a participant of
the UN Global Compact (UNGC), the world’s largest corporate sustainability initiative, and participates in
national and international initiatives together with Audi, Porsche, TRATON, MAN Truck & Bus and Scania.
Investors and asset managers in the capital markets view membership of the UNGC as an important factor
when deciding to invest in shares and bonds of Volkswagen AG. ESG funds have become very popular in
recent years and indispensable for stakeholders.
Management and coordination

The Volkswagen Group has established a Group-wide sustainability management. The related structures,
processes and responsibilities are codified in a specific Group policy. We view sustainability management
as a continuous improvement process. The core elements include assumption of cross-functional overall
responsibility for sustainability by the Chair of the Board of Management of Volkswagen AG, specification
of the competence of the responsible Board members for specific sustainability management concepts and
implementation of the Group Sustainability Steering Committee as a top management committee. The
members of this steering committee include managers from central Board of Management business areas
and Group divisions as well as representatives from the brands and the Group Works Council. The steering
committee defines concrete strategic goals and programs, establishes measures for uniform further devel-
opment of sustainability management across divisions, brands and regions and decides on fundamental
sustainability issues. The office of the Group Sustainability Steering Committee is the responsibility of the
Group’s Sustainability function.
Strategic stakeholder management

Our stakeholders are individuals, groups, or organizations who have an influence on or are influenced by
the course or the result of corporate decisions. Our customers and employees are at the center of our
stakeholder network. Based on continuous stakeholder analysis, we have also identified eight more stake-
holder groups. The Group’s supervisory and advisory bodies – i.e. the Supervisory Board, the Works Council
and the Sustainability Council – act as interfaces between internal and external stakeholder groups.
We understand stakeholder management as systematic interaction with key interest and stakeholder
groups in line with our NEW AUTO Group strategy. Our goal is an open, constructive and also critical
exchange with the stakeholder groups shown in the following chart. We aim to actively shape and promote
implementation of their requirements and expectations, as well as central strategic issues.
169
To be able to continuously incorporate our stakeholders’ suggestions and recommendations, we have given
our stakeholder management an organizational structure that also includes external committees. At Group
level, this is the Sustainability Council. In addition, we offer our stakeholders a broad range of opportunities
for interaction including regular discussion panels and surveys. Following the pandemic-related interrup-
tion, we were able to resume the exchange in the reporting period.
Sustainability Council
The Sustainability Council provides assistance to the Volkswagen Group with important, strategic sustain-
ability issues and is made up of internationally renowned experts from the academic world, politics and
society. This advisory body establishes its own working methods and areas of focus independently, has far-
reaching rights for the purposes of exchanging information, consultation and initiating action, and
consults regularly with the Board of Management, top management and the employee representatives.
Dialogue between Volkswagen and the Sustainability Council in 2022 focused specifically on the Liefer-
kettensorgfaltspflichtengesetz (German Supply Chain Due Diligence Act), the use of digital technologies for
sustainable development, the Zero Impact Factory concept, promotion of transformation and training,
Volkswagen’s further decarbonization, and the future alignment of mobility solutions with the NEW AUTO
Group strategy. The Sustainability Council also discussed the impact of the Russia-Ukraine conflict on the
Group.
Furthermore, the projects launched by the Council to examine the importance of digitalization for
sustainability, the transformative potential of employment and training and the inclusivity and effect-
tiveness of climate legislation in the transport sector were completed in the reporting period. Further links
to the letters of recommendation to the Group Board of Management and the results of the Council
projects are provided on the Sustainability Council internet page.
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Corporate citizenship
As a good corporate citizen, we aim to be a source of economic impetus for local structural development
and equal opportunities. We have always believed in the importance of recognizing our social respon-
sibilities toward our stakeholders. The main focus of our corporate social engagement activities is on sup-
porting future, environmental, educational and community projects at many of our sites across the world.
In 2022, the brands and companies supported around 800 projects and initiatives worldwide.
Environmental Strategy
As one of the largest automobile manufacturers, Volkswagen takes responsibility for the environmental
impact of its activities. Based on the NEW AUTO Group strategy, we have put greater focus on our ambitious
environmental targets. With our environmental mission statement goTOzero, we aspire to reduce environ-
mental impact along the entire life cycle – from raw material extraction until end-of-life – for all our products
and mobility solutions in order to keep ecosystems intact. Compliance with environmental regulations,
standards and voluntary commitments is a basic prerequisite of our actions.
Our focus is on four prioritized action areas:
> Climate action. We are committed to the Paris Climate Agreement and align our activities with the
1.5 degree goal. We consistently focus on the electrification of our products, decarbonization of our entire
value chain and expansion of renewable energy generation to supply our sites and customers. We intend
to be a net-carbon-neutral company by 2050 at the latest.
> Conservation of resources. We reduce the volumes of primary raw materials needed by using recycled
material and renewable raw materials. We maximize our energy and resource efficiency and establish
loops for materials and water. Together with our business partners we cut down on the amount of natural
resources utilized throughout our supply chain.
> Conservation of ecosystems. We reduce harmful emissions in air, soil and water. We mitigate the impact
of our business operations on biodiversity and ecosystems and support projects to conserve these.
> Environmental compliance. Where integrity and compliance are concerned, we aim to be a role model for
a modern, transparent, successful enterprise. With this in mind, we use environmental compliance man-
agement systems to identify and manage environmental risks and opportunities throughout the lifetime
of our mobility solutions. We conduct open dialog with our stakeholders and incorporate their expecta-
tions into our decisions.
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Organization of environmental protection

Volkswagen has created an environmental policy that sets out guidelines for environmental decision-
making, for the management of projects and for the Group’s environmental stewardship. Thus, parameters
are set for the conduct and working methods of management and staff in five areas: management behavior,
compliance, environmental protection, collaboration with stakeholders and continuous improvement.
The Board of Management of Volkswagen AG is the highest internal decision-making body for environ-
mental issues. Both it and the brands’ boards of management take not only business, but also social and
environmental criteria into account when making key company decisions. The Group-wide management of
environmental protection is the responsibility of the Group Steering Committee for the Environment and
Energy. Other bodies take responsibility for steering key individual aspects. They include the Group CO2
Steering Committee, the Group Steering Committee for Fleet Compliance and Exhaust Gas, and the Group
Sustainability Steering Committee.
The Volkswagen Group coordinates the activities of the brands, which in turn steer the measures in the
regions. The brands and companies are responsible for their own environmental organization. They base
their own environmental protection activities on the targets, guidelines and principles that apply through-
out the Group.
Our declared aim is to comply with legal and regulatory requirements. Furthermore, we are guided by
Company standards and targets. The intention of our environmental compliance management systems is
to ensure that environmental aspects and obligations are given appropriate consideration in our business
operations. Disregard for the rules is treated as a severe compliance violation, as are fraud and deliberate
misconduct. Compliance with our Environmental Policy Statement and with other Group environmental
requirements is evaluated annually and reported to the Board of Management of Volkswagen AG, and the
respective brand boards of management or the managing directors of the companies.
CSR-PROJECTS
https://www.volkswagenag.com/en/sustainability/strategy-policy-engagement/engagement/cc-projects.html
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HOLISTIC I NTEGRITY AN D COMPLIANCE MANAGEMENT SYSTEM

Integrity and compliance are major priorities in the Volkswagen Group. We firmly believe that, for long-
term commercial success, it is important that each and every individual complies with laws, regulations
and commitments. Compliant behavior must be a matter of course for all Group employees. This is why
integrity and compliance remain key elements of our Group's NEW AUTO strategy and a focus topic in
matters of sustainability.
Our objective is to be a role model and deepen the trust of our employees, customers, shareholders and
partners in our Company. Our regulations, processes and corporate culture are designed in such a way that
all employees can act with integrity and comply with the rules at all times.
At the same time, we have embedded integrity in our decision-making processes. For example, every
resolution proposal submitted to the Board of Management must demonstrate that the intended decision
is in line with integrity and compliance, what risks may be associated with it, and how the risks can be
reduced. Similar requirements apply to Group brands and companies and to Group bodies to which the
Board of Management has delegated decision-making powers.
As performance indicators, integrity and compliance must have the same strategic and operational
priority in our Company as sales revenue, profit, product quality and employer attractiveness. We have
been building a holistic integrity and compliance management system (ICMS) since 2018. This system was
set up in line with the five internationally recognized ECI (Ethics and Compliance Initiative) principles:
strategy, risk management, a culture of integrity, a speak-up environment and resolute accountability.
We employ our Together4Integrity (T4I) program as a means of making integrity and compliance a
mainstay throughout the Group. This program brings the vast majority of the Group’s integrity and com-
pliance activities together under one roof, applying uniform, robust process and implementation standards.
Thus, we are not only establishing a worldwide ICMS for all Group and brand companies, we are also
advancing one of the most extensive change and cultural programs in the history of the Volkswagen Group.
T4I: eleven key initiatives

The rollout of T4I is almost complete, with full implementation scheduled for 2025. The Group is over-
seeing the program planning and also the rollout of T4I. The managing directors of the individual com-
panies are responsible for implementing the program at a local level. The packages of measures may differ
depending on local circumstances. The implementation time will also vary.
The packages of measures are divided into eleven key initiatives:
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1. HR (Human Resources) Compliance Policies and Procedures

The aim of this key initiative is the integration of integrity and compliance into the standard HR processes
such as recruitment, training, promotion and remuneration (bonus payments). Integrity and compliance
are also a compulsory topic in annual employee appraisals and are a component of the training measures
for employees across all levels of the Company.
2. Code of Conduct
The Code of Conduct (CoC) is a key instrument for reinforcing employee awareness of responsible action
and decision making, creating the basis for compliance within the Company. The CoC serves as an aid,
provides support in finding the right contact persons where needed and is binding for all Group employees.
We and our employees undergo regular mandatory training in the key contents of the CoC.
3. Integrity Program
The integrity program is designed to reinforce the culture of integrity. Its objective is to communicate to
employees the importance of integrity and motivate employees to behave with integrity in their everyday
work. We regard integrity as an attitude; it provides an inner compass for correct action and becomes par-
ticularly decisive in gray areas, when explicit rules are missing or conflicting goals exist. We place particular
emphasis on making decisions with integrity. Appropriate training modules on this topic provide support
to all management levels, from foremen up to executives.
4. Risk Management and Internal Controls

Binding structures and processes are designed to help create transparency and manage risk. These include
the quarterly risk process, which focuses on acute risks, the standard internal control system (ICS), which is
designed to protect key processes, and root cause analysis.
5. Internal Compliance Risk Assessment

The internal compliance risk assessment (ICRA) identifies and addresses compliance risks in the Group, in
particular those risks involving corruption, money laundering and embezzlement. In the reporting period,
the ICRA process was brought into line with the requirements of the Lieferkettensorgfaltspflichtengesetz
(LkSG - German Supply Chain Due Diligence Act). Compliance measures are developed and defined for each
company on the basis of the risk profiles derived from the ICRA.
6. Whistleblower System
The whistleblower system is the central point of contact for reporting cases of rule-breaking by Group
employees or by direct and indirect suppliers. This includes white collar crimes, acts of corruption, tax
offenses, environmental offenses, human rights violations, infringements of antitrust and competition
legislation, money laundering and terrorism financing, breaches of product safety and licensing regula-
tions, and serious breaches of privacy. Employees and third parties can report misconduct at any time and
in many languages. A wide range of channels is available for this purpose, and the information can be
lodged completely anonymously, if preferred. The aim is to use binding principles and a clearly governed
process to avert damage to the Company and its employees.
7. M&A and NCS compliance

In the event of planned mergers and acquisitions (M&A transactions), the relevant companies are audited
for commercial risks such as corruption, breaches of trust or fraud, and for human rights risks. The analyses
provide recommendations for the mitigation of the risks identified. This also applies to joint ventures and
to industrialization and cooperation projects with external partners. Furthermore, the Group Compliance
organization works to achieve appropriate compliance management at non-controlled shareholdings (NCSs),
i.e. companies that are not controlled by a Volkswagen Group company as a majority shareholder.
174
8. Business Partner Due Diligence

In the business partner due diligence process, the integrity of business partners and suppliers is reviewed,
especially with regard to corruption risks and compliance with ethical standards. The aim is to identify
these risks at an early stage, to avoid such business partners, and to define measures to minimize risk and
implement these with the business partner. If this is not possible, options for terminating the business
relationship are explored, or the business relationship is not established in the first place.
9. Product Compliance
The product compliance management system (PCMS) is designed to ensure that our products comply with
the legal and regulatory requirements of the exporting and importing country, internal and external
standards, contractually agreed customer requirements and externally communicated voluntary commit-
ments over their life cycle.
10. Environmental Compliance

Statutory environmental regulations and voluntary commitments are binding at all locations and in all
business fields. The Group’s environmental policy and the environmental compliance management system
stipulate the relevant requirements and responsibilities for all strategy, planning and decision-making
processes in the Group brands and companies. This includes a system of key indicators to determine
progress in meeting environmental targets in the fields of renewable energy, CO2 emissions and resource
efficiency.
11. Anti-Corruption
The Volkswagen Group has a zero-tolerance policy on active or passive corruption. This is anchored in both
our internal Code of Conduct and our Code of Conduct for Business Partners. Our investigation offices look
into and process any reported violations of our principles, and sanctions are imposed on the employees
concerned. Tackling corruption also includes the development and implementation of mandatory training
for employees in divisions or companies with a high risk exposure.
The aim of T4I is thus not only to strengthen uniform corporate governance throughout the Group in
relation to integrity and compliance, but also to advance the culture of integrity. This includes steadfast-
ness in adhering to principles of integrity regardless of economic or social pressures. T4I and the ICMS
therefore contribute significantly to increasing sustainability in the Volkswagen Group.
Sustainably measuring success

Methods for monitoring effectiveness and measuring progress are an integral part of the compliance
management system. The central planning and reporting system of the T4I program provides continuous
transparency on the implementation status of the key initiatives. It is used for internal reporting to the
Group Board of Management and the Brand Board of Management, makes project advances known and can
provide assistance when countermeasures are being introduced in response to project delays.
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In addition to this, the annual opinion survey provides information about the extent to which our culture
of integrity has developed. This Group-wide employee survey asks a number of questions, including
whether each individual is able to act with integrity. Where a fixed threshold value is not achieved, the
relevant manager must identify and remove possible obstacles together with the team.
To measure the level of target achievement in relation to integrity and legal matters, we have defined an
indicator for the major brands that manufacture passenger cars: compliance, a culture of dealing openly
with mistakes and acting with integrity. This is based on an evaluation of the answers to three questions in
the opinion survey that address compliance with regulations and processes, dealing with risks and errors,
and the possibility of acting with integrity. In the event of negative deviations, the relevant departments
develop and implement measures.
Compliance: clear rules in the Group

Compliance with the rules must be a matter of course for all employees of the Volkswagen Group. The
Group compliance organization provides support worldwide in the form of programs, guidelines, processes
and practical advice. It helps the Group and brand companies to comply with the rules when carrying out
their business activities and to comply with the relevant laws and internal regulations. The compliance
work focuses on the anti-corruption measures, and preventing fraudulent breaches of trust and money
laundering.
The Compliance Infopoint has established itself as the central help center for compliance questions in
the Volkswagen Group. The team either directly issues a recommendation on the matter in question or
forwards the query to a competent body. Case studies derived from these consultations are regularly
incorporated into communications about compliance. Employees can also contact the Compliance Info-
point directly via the Volkswagen 360° app, an option of particular benefit to employees without a computer
workstation of their own.
In addition, the Group Compliance organization offers training and communication formats tailored to
specific target groups – management discussions and training courses for key personnel being two of these.
Moreover, compliance content is part and parcel of all career development paths from the induction
program for trainees to programs for leadership and management development to the senior management
program. The measures are supplemented by information and communication activities such as awareness
campaigns, film and dialogue formats, newsletters and interactive games for learning about laws and rules.
The Group Compliance organization's program of activities addresses areas of importance for the
future. The activities include projects for cross-Group collaboration in the markets, further development of
IT-based compliance tools and exchange formats with internal and external compliance experts.
For more information on integrity and compliance, as well as the topic of business and human rights,
please see our 2022 Group Sustainability Report.
W H I ST L E B LO W E R SY ST E M
https://www.volkswagenag.com/en/group/compliance-and-risk-management/whistleblowersystem.html
Phone: + 49 5361 9 46300
E-mail: [email protected]
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CO 2 EMISSIONS OF THE VOLKSWAGEN GROUP‘S EUROPEAN (EU27+2) NEW PASSENGER CAR FLEET
in grams per kilometer (WLTP)
2
2022 119
2
2021¹ 119
2020 100
2019 124
2018 123
0 20 40 60 80 100 120 140 160
1 The European Commission switched its calculation of CO2 fleet emissions from NEDC to WLTP in 2021.
2 Subject to confirmation of CO2 data within the scope of official publication by the European Commission.
RESEARCH AN D DEVELOPMENT
Forward-looking mobility solutions with brand-defining products and services would be unthinkable
without innovation. This makes our research and development work essential for sustainably increasing
the value of the Company.
Together with our Group brands, we have launched measures based on our NEW AUTO strategy to link
development activities across the Group. At the heart of this is an efficient, cross-brand development
alliance characterized by a close network of our experts, collaboration on an equal footing, an innovative
working environment and the pooling of development activities. The aim is to make use of synergies across
the Group and act as a role model for the environment, safety and integrity. The development alliance plays
a major part in driving the Volkswagen Group’s transformation and helping to make it fit for the future.
In view of this strategic focus, we concentrated in the reporting period on continuing to develop
forward-looking mobility solutions, establishing technological expertise to strengthen our competitive-
ness, expanding our range of products and services and improving the functionality, quality, safety and
environmental compatibility of our products and services.
CO 2 fleet emissions
We use the strategic indicator of CO2 fleet emissions in Europe and the United States to evaluate the
effectiveness of our measures to reduce CO2 emissions when driving our vehicles.
The Volkswagen Group’s new passenger car fleet in the EU (EU27+2) (from 2022 including Lamborghini
and Bentley) emitted an average of 119 g CO2/km (Worldwide Harmonized Light Vehicles Test Procedure –
WLTP)1 in the reporting period in accordance with the statutory measurement bases. The statutory target is
122 g CO2/km (WLTP)1. The Volkswagen Group thus more than met the EU’s CO2 fleet target. All figures are
subject to confirmation of CO2 data within the scope of official publication by the European Commission.
The targets are expected to be tightened as from 2025 (subject to publication in the EU Official Journal): the
European Commission has thus set a target of a 15% reduction in CO2 emissions, which corresponds to a
CO2 target of less than 105 g CO2/km for our new passenger car fleet in the EU. A reduction of 55% has been
defined for 2030, equivalent to a CO2 target of less than 55 g CO2/km. We assume that our new passenger car
fleet in the EU will meet the target for 2025 and more than meet the target for 2030. A CO2 reduction target
of 100% for passenger cars has been set for 2035.
The Volkswagen Group’s new light commercial vehicles fleet in the EU emitted an average of 193 g
CO2/km (WLTP)1 in the reporting period according to the statutory measurement bases. The statutory
target is 199 g CO2/km (WLTP)1. The Volkswagen Group thus more than met the EU’s CO2 fleet target. All
figures are subject to confirmation of CO2 data within the scope of official publication by the European
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CO2 EMISSIONS IN VOLKSWAGEN GROUP PASSENGER CARS AND LIGHT COMMERCIAL VEHICLES UNDER GHG STANDARDS IN THE USA
in grams per kilometer for the model year
1
2022 141
2
2021 146
2020 152
2019 144
2018 158
0 20 40 60 80 100 120 140 160
1 Subject to submission of the final MY report MY22 and subsequent confirmation by EPA and CARB (internal data as of September 2022).
2 Subject to confirmation by EPA and CARB (final MY report MY21 submitted but not yet confirmed).
Commission. The targets are expected to be tightened as from 2025 (subject to publication in the EU
Official Journal): the European Commission has thus stipulated a 15% reduction of CO2 emissions, which
corresponds to a CO2 target of less than 184 g CO2/km for our new light commercial vehicle fleet in the EU.
A reduction of 50% has been defined for 2030, equivalent to a CO2 target of less than 108 g CO2/km. We
assume that our new light commercial vehicles fleet in the EU will meet this target for 2025 and more than
meet the target for 2030. A CO2 reduction target of 100% for light commercial vehicles has been set for
2035. In the United Kingdom and Switzerland/Liechtenstein markets, the Volkswagen Group’s light com-
mercial vehicle fleets met the statutory requirements for the reporting period. In Switzerland, the Volks-
wagen Group’s passenger car fleet fell just short of the statutory requirements for the reporting year. The
CO2 pool established together with other manufacturers in the UK achieved its target.
In the United States, the emission pool – comprising the Group brands Volkswagen Passenger Cars, Audi,
Lamborghini, Bentley and Porsche – commits to the Greenhouse Gas (GHG) and Corporate Average Fuel
Economy (CAFE) regulations. Due to a model year – the accounting period used in the USA – differing in
length from the calendar year, internal calculations are used to determine the figures for the current and
preceding model year. The average GHG CO2 value (internal data as of September 2022) for the passenger car
and light commercial vehicle fleets in model year 2022 is 141 g CO2/km (model year 2021: 146 g CO2/km). The
statutory target is 136 g CO2/km (model year 2021: 142 g CO2/km). Application of the statutory flexibility
offered by GHG and CAFE together with externally acquired credits enabled the Volkswagen Group to
comply with the applicable requirements for model year 2021 subject to confirmation by the authorities.
The figure given for model year 2022 is also subject to confirmation by the Environmental Protection
Agency (EPA). For 2025, we anticipate a CO2 target in the USA of approximately 110 g CO2/km and expect to
meet this target. For 2030, we aim to increase the share of electric vehicles in our new vehicle fleet to
significantly more than 50%, which would put us within the target range of the current administration.
Fuel and drivetrain strategy

With a view to the legal regulations on emissions, we are currently developing a forward-looking vehicle
and drivetrain portfolio: we have set ourselves the objective of increasing drive system efficiency with each
new model generation – irrespective of whether it is a combustion engine, a hybrid or a purely electric drive
system. The Volkswagen Group closely coordinates technology and product planning with its brands so as
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to avoid breaches of fleet fuel consumption limits. Around one in five new Volkswagen Group vehicles
worldwide is therefore to have a purely electric drive already by the year 2025; depending on market
development, this could be over two million electric vehicles a year. As part of our electrification campaign,
we aim to offer our customers worldwide around 50 completely battery-electric models by 2030. By 2030,
the Volkswagen Group aims to have electrified its entire model portfolio, from high-volume models to
premium vehicles. This will mean offering at least one electric version – battery electric or hybrid vehicles –
of each of our passenger car models across all Group brands. To this end, in addition to the Modular Electric
Drive Toolkit (MEB), we have also developed an all-electric platform for our premium and sports brands – the
Premium Platform Electric (PPE). Furthermore, we are currently concentrating our energies on designing the
Scalable Systems Platform (SSP), the successor platform for our future all-electric vehicles, in the Mecha-
tronics technology initiative within the Group's NEW AUTO strategy. The strategic goals of this SSP plat-
form are to further reduce variance by consistently enhancing synergies and thus tapping into considerable
potential for cost savings. A first deployment of the SSP platform is currently under appraisal.
To offer sustainable, affordable mobility in the future for as many people around the world as possible,
we offer a range of drivetrains with a focus on electrification. From today’s perspective, conventional com-
bustion engines will continue to make up a large share of the drive portfolio in the coming years. In the
interest of using resources responsibly, it is therefore essential to further enhance this engine segment and
systematically consolidate it for specific markets. Powertrain measures such as significantly more sophisti-
cated exhaust gas purification or mild hybridization of our vehicles, as well as vehicle measures such as
optimized aerodynamics or reduced rolling resistance will be necessary to fulfill future emissions stan-
dards. We are preparing intensively for this as we develop our product portfolio.
It is more important to us than ever to rigorously pursue the modular approach. We are reducing the
number of individual modules so that we can make a large product portfolio economically viable. For
example, we are reducing the number of versions of conventional combustion engines in the Group in the
long term as part of our transformation towards e-mobility. This will create capacity for the development
and production of new electric drives.
Life cycle engineering and recycling

Technological innovation for reducing fuel consumption is not enough on its own to minimize the effect of
vehicles on the environment. We consider the environmental impact caused by our products throughout
the entire vehicle life cycle and at all stages of the value chain. This includes the manufacturing process
with the associated extraction of raw materials, the production of materials, the processes at our suppliers
and our own production operations at our sites, the use phase with the resulting vehicle emissions and the
necessary supply of fuel and charging current, and ultimately the recycling of the vehicle at the end of its
life cycle. We identify the stages of the life cycle at which improvements will have the greatest effect and
develop appropriate solutions. We call this life cycle engineering. Recycling, for example, is an important
means of reducing environmental impact and conserving resources. We therefore already take the recy-
clability of the required materials into consideration when developing new vehicles, use high-quality
recycled material and avoid pollutants. One of the recommendations for achieving this goal is avoiding
substances on the EU REACH Candidate List of Substances of Very High Concern. Under the European
Directive on end-of-life vehicles, passenger cars and light commercial vehicles must be 85 % recyclable and
95 % recoverable. Our vehicles registered in Europe comply with these standards.
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Leveraging synergies increases efficiency

When developing vehicles, we cooperate closely with our brands to leverage synergies. The joint strategy of
our development alliance involves, for example, making the Group more competitive and viable in the long
term by deploying resources more effectively and efficiently in the research and development of new
mobility-related technologies, products and services. In our Group-wide development alliance, the brands
therefore not only work with each other, but also for each other on key technologies, forming cross-brand
networks of expertise to address topics of importance for the future.
The Volkswagen Group further streamlined its innovation portfolio, gearing it towards multibrand
technologies of the future in order to provide effective support for the brands’ capacity for innovation. In
the reporting period, we invigorated the new leading roles assigned to the brands in Technical Develop-
ment in 2020 to increase efficiency and leverage synergies in module variance, components, parts and
processes.
We coordinate the use of modules centrally to reduce costs, capital expenditure and complexity. We are
seeking to reduce expenditure in the modular toolkits, while at the same time facilitating widespread elec-
trification and a focus on autonomous systems. We wish to achieve this through a considerable reduction
in complexity using streamlined platforms that synergize but do not overlap. To this end, the individual
Group brands draw on the modular toolkits, thus creating synergies between the various models of a
product line, as well as across the product lines. By optimizing the toolkits, we are giving ourselves the
financial leeway needed for developments in topics of importance for the future.
Sustainable mobility, connectivity and automated driving

The mobility of people and goods is a prerequisite for economic growth and social development. But
natural resources are dwindling and climate change is advancing. This calls for comprehensive mobility
concepts to minimize the environmental impact. Such solutions need to be efficient, sustainable, crisis-
proof, customer-oriented and accessible anytime and anywhere.
We are researching and developing such concepts in our Group-wide alliance: when shaping the future
of mobility, we are looking not only at the automobile and related services, but at all modes of transport,
transport infrastructures and people’s mobility habits. Digital connectivity and automated driving allow
for completely new approaches to solving problems. They can help us play our part in a comprehensive
mobility system for the future and drive forward our industry’s transformation.
New software solutions are the basis for this. This is why the Volkswagen Group has declared software
development to be one of its target core competencies in its NEW AUTO strategy. Our software subsidiary
CARIAD is responsible for this. It is to develop a sustainable, convenient, connected, safe automotive experi-
ence for the customers of our Group brands. CARIAD aims to provide answers to the strategic aspects of
digitalization and pool the Group's software expertise.
Developers from CARIAD work at plants in Germany and Europe and collaborate with development
teams from the Volkswagen Group in North America. CARIAD established a subsidiary in China in 2022. Its
mission of ‘In China for China’ allows the local development teams to sharpen their focus on the wishes of
Chinese customers. CARIAD SE employs around 5,500 specialists who are developing the following solu-
tions in the Group:
> VW.OS, a uniform software platform for all Group vehicles
> Uniform end-to-end electronics architectures
> Connectivity with VW.AC, a uniform Volkswagen Automotive Cloud
> An infotainment platform with an app store for third-party providers
> Driver assistance systems, automated parking functions and highly automated driving for private
mobility
> A data marketplace
> New mobility services and digital business models
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In 2022, the teams of developers from CARIAD worked closely together with the Audi and Porsche brands to
complete the E³ 1.2 architecture that will optimize the alignment of the hardware with CARIAD’s vehicle
software. This is designed not only to improve the performance of the vehicle’s computers but also to make
it easier to install over-the-air updates – a key lever for the introduction of new services – even after vehicle
production has begun.
CARIAD is already supplying updatable software for current vehicle generations on its E³ 1.1 architecture
to the Group brands with the goal of making the software secure and traceable. It is already being installed
in the vehicles as over-the-air updates.
In the long term, CARIAD is to pool all of its solutions on an enhanced, scalable software platform that
will be made available to the Group brands, from the volume segment up to the premium platform. This is
expected to generate economies of scale and to lower the cost of growing software requirements in the
vehicle for all brands.
The new platform is also set to pave the way for the autonomous driving functions of the future. The
development of autonomous driving is a core element of the NEW AUTO strategy, with CARIAD responsible
for developing partially and highly automated driving functions (up to Level 4) for the Volkswagen Group’s
brands. These applications will be progressively introduced in their new vehicle models at different
performance levels (Levels 2+, 3 or 4). Volkswagen Commercial Vehicles is responsible specifically for the
areas of Mobility as a Service and Transportation as a Service (MaaS/TaaS). The strategic Mobility Solutions
technology initiative is promoting autonomous driving in conjunction with new service models, i.e. shared
mobility in these areas using robotic shuttles and vans.
CARIAD and Volkswagen Commercial Vehicles will continue to drive the future rollout of autonomous
drive technologies together with development partners.
Pooling strengths with strategic alliances

The aim of our NEW AUTO strategy is to transform our core business activities and to expand the mobility
solutions business area at the same time. It is decisive to the success of this plan that we place our
innovative strength on even broader foundations.
Within the Volkswagen Group, we combine our technological innovation activities in the Volkswagen
Group Innovation unit. At seven locations worldwide in the USA, Europe and Asia, employees are working
on sustainable solutions for urban and interurban mobility systems in line with our motto “Mobility for
generations to come”. Technologies and activities that are ready for pre-development are regularly trans-
ferred from Volkswagen Group Innovation to our Group brands to ensure that the areas of digitalization,
sustainability and e-mobility receive continuous support in innovative projects. In this way, we are creating
an agile innovation structure that allows us to initiate new milestone projects with innovative international
partners, even at short notice.
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Growth in the mobility sector is strongly defined through regional innovation activities. Volkswagen
therefore concentrates its strategic venture-capital activities and partnerships in the Group’s international
innovation ecosystem. This helps us to identify the regional needs of customers more precisely, to adjust
our product range accordingly and to establish competitive cost structures. In doing so, we rely to a greater
extent than in the past on partnerships, acquisitions and venture-capital investments and manage invest-
ment selection centrally so as to generate maximum value for the Group and its brands. It is against this
backdrop that we formed an alliance with Ford Motor Company. At the beginning of June 2020, Ford Motor
Company and Volkswagen AG signed additional contracts within their existing global alliance for light
commercial vehicles, electrification and autonomous driving. Among other things, the contracts serve as
the foundation for a total of three vehicle projects: a mid-sized pickup, a city van and a one-tonne cargo
van. In addition, Ford will use the Modular Electric Drive Toolkit (MEB) developed by Volkswagen for two
electric volume models that are expected to be offered in Europe from 2023. The aim of the cooperation is
to place both Volkswagen and Ford in a position that enables them to improve their competitiveness, tailor
their products to better meet the needs of customers worldwide and at the same time to leverage synergies
related to cost and investment.
We are transforming ourselves into a mobility provider with a digital ecosystem and a fully connected
vehicle fleet. Together with our strategic partner Microsoft, we intend to press ahead with software develop-
ment for the automobile of tomorrow. The Automated Driving Platform being built with Microsoft is
accelerating the agile development of cloud-based driver assistance systems and automated driving and
parking functions by our software teams.
To design the framework conditions for the approval and introduction of our own self-driving system,
we are actively involved in public projects. The experience we are gathering here benefits the Group brands
and thus our customers.
Software subsidiary CARIAD is responsible for developing automated driving functions for our brands’
customers, for which it entered into several major partnerships in 2022. In the Automated Driving Alliance,
CARIAD and Bosch are striving to make partially and highly automated driving suitable for mass use, i.e.
also in the volume segment. The aim is to provide functions for Group vehicles that allow drivers to take
their hands off the steering wheel at times where this is possible in regulatory terms. In the alliance, both
companies are jointly developing Level 2 hands-free systems for driving in cities, the countryside and on
the highway, and a system in which the vehicle takes over the complete task of driving on the highway.
CARIAD has entered into a local partnership with Horizon Robotics to drive up development expertise in
highly automated driving functions in the Chinese market. The companies also plan to develop a high-tech
semiconductor, a system on a chip (SoC), as part of a new joint venture to push the integration of numerous
functions on a single chip.
Over and above this, CARIAD is committed to open collaboration in the global developer community.
CARIAD joined the Eclipse Foundation open source community in 2022, where as a strategic member of the
Software Defined Vehicle working group it is involved in developing basic automotive software more
efficiently and promoting innovation.
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Key R&D figures

In fiscal year 2022, we filed 5,305 (5,638) patent applications worldwide for employee inventions, the
majority of them in Germany. The fact that an ever-increasing share of these patents is for important
cutting-edge fields underscores our Company’s innovative power. These fields include driver assistance
systems and automation, digitalization, connectivity, as well as alternative drive systems.
The Automotive Division’s total research and development costs in the reporting period amounted to
€18.9 (15.6) billion and were 21.3% higher than in the previous year; their percentage of the Automotive
Division’s sales revenue – the R&D ratio – was 8.1 (7.6)%. In addition to new models, our activities focused
above all on the electrification of our vehicle portfolio, digitalization, new technologies and enhancements
of our modular and all-electric toolkits and platforms. The capitalization ratio was 51.4 (50.3)%. Research
and development expenditure recognized in profit or loss in accordance with the IFRSs increased to
€14.3 (12.8) billion.
As of December 31, 2022, our Research and Development departments – including the equity-accounted
Chinese joint ventures – employed 58,912 people (+11.1%) Group-wide, corresponding to 8.7% of the total
workforce. The year-on-year increase is partly due to a change in the data collection methodology.
RESEARCH AN D DEVELOPMENT COSTS I N TH E AUTOMOTIVE DIVISION
€ million 2022 2021
Total research and development costs 18,908 15,583

of which capitalized development costs 9,723 7,843
Capitalization ratio in % 51.4 50.3
Amortization of capitalized development costs 5,144 5,050
Research and development costs recognized in profit or loss 14,329 12,790

Total research and development costs 18,908 15,583
R&D ratio 8.1 7.6
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PROCUREMENT
In fiscal year 2022, the main task for Procurement was to make a decisive contribution to the Group’s result
in five areas: costs, supplies, sustainability, quality and innovation. The challenges related to supplies and
costs were the area of focus. 2022 was mainly devoted to safeguarding the supply of parts. Through pin-
pointed task force work, we minimized impending vehicle losses due particularly to the shortage of parts in
connection with the Russia-Ukraine conflict. In the second half of 2022, the focus was additionally on rising
energy prices, the resulting supplier receivables, and safeguarding the energy supply at the company’s own
plants and at those of its suppliers.
Procurement strategy
The NEW AUTO Group strategy also stands for more speed, focus and stringency within the Procurement
division, accelerating change even more. In 2022, we continued to drive forward and improve our
functional area strategy. Alongside short-term cost targets, our strategy seeks to improve our supply
situation, increase product quality and boost innovativeness and sustainability. The goals are based on the
NEW AUTO Group strategy and are driving Volkswagen’s transformation also from within the Procurement
division. In addition, we are also creating optimized structures for our procurement staff and establishing
further focus areas with the digitalization of our processes and increased employee orientation.
E-mobility
A key task for Procurement is to safeguard supplies for the continually growing requirements of the
e-mobility offensive over the next five to ten years in a sustainable way, while optimizing cost structures.
When awarding contracts to our electric mobility partners, we lay down requirements as regards
sustainable supplier practices, transparent, traceable supply streams, and energy- and carbon-optimized
supply chains. Global demand from the European, American and Asian markets is bundled in the awarding
of Group contracts with the aim of achieving cost leadership for electric mobility solutions. To this end, we
consider diversification in conjunction with dual-supplier strategies as well as localization of the supplier
portfolio for all core components of the electric vehicle fleet in an effort to reduce economic and geo-
political risks.
Digitalization of supply
We are working systematically to implement a completely digitalized supply chain. This is intended to help
us to safeguard supply and leverage synergies throughout the Group. We are therefore creating a shared
database and using innovative technologies to enable efficient, networked collaboration in real time – both
within the Group and with our partners. The Procurement division aims to standardize transactions with
our suppliers in the future and automate them where possible. This will not only reduce transaction costs
but will also accelerate business processes. The integration of Catena-X, the data network for the auto-
motive industry, is one important part of this. It will allow possible supply risks to be identified at an earlier
stage and appropriate measures and alternatives to be jointly developed faster. Procurement’s digitalization
strategy is being consistently followed with the specific aim of not only eliminating the weaknesses of Pro-
curement’s IT system environment but also increasing the organization’s effectiveness, efficiency and
future viability. The initial systems or modules such as a cloud-based module for automating procurement
activities in the vehicle project phase and an acclaimed online negotiation tool have already been
implemented and integrated into the existing system environment.
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Structure of key purchasing markets

The procurement process is organized at a global level, with a presence in the key markets around the
world. This allows us to purchase production materials, investments in property, plant and equipment, and
services worldwide at the quality required and on the best possible terms. Networking among the brands’
procurement organizations enables us to leverage synergies across the Group in the various purchasing
markets.
In addition to the brands’ procurement units, the Volkswagen Group operates seven regional offices. In
growth markets, we identify and train local suppliers to generate cost advantages for all Group production
sites. In this context, we are also focusing on start-ups and software suppliers.
Supply chain management in Procurement

Supply chain management activities at Procurement are focused on safeguarding supplies during start-up
phases and for series production. This entails providing support in our suppliers’ industrialization pro-
cesses, monitoring series production and managing supply crises, for example energy and raw material
shortages related to the Covid-19 pandemic and the Russia-Ukraine conflict.
Even in the early stages of new projects, we conduct audits to ensure that our suppliers will be able to
deliver. Furthermore, we provide support for purchased parts along the individual project milestones up to
the start of production. Complex components in particular frequently require onsite support from our
supplier management team. Finally, an acceptance test of production capacities is carried out to facilitate
the timely start of series production of the vehicles at our plants.
In addition, regular checks are carried out during series production, for example related to the con-
tinuous matching of demand and capacity or possible capacity adjustments at suppliers. This also safe-
guards the capacity at suppliers when using existing components in new projects.
Thanks to our established crisis management structure and global supplier network, we are able to
overcome complex challenges along the supply chain and have access to a wide range of locations and
technologies. This structure has been instrumental in helping us cope in particular with the impact of the
Russia-Ukraine conflict, which has necessitated the construction of backup sites. Cross-divisional work
among Procurement, Quality Assurance, Development, Production and Logistics reduced short-term losses
and successfully industrialized the backup sites.
The measures pursued as a consequence of the Russia-Ukraine conflict demonstrate that global supplier
management is working effectively. However, the precarious supply situation, especially for semiconduc-
tors, resulted in limited vehicle availability for customers.
Sustainability in supplier relationships

Successful relationships with our business partners are based on respecting human rights, compliance with
occupational health and safety standards, active environmental protection and combating corruption.
These sustainability standards are defined in the contractually binding Volkswagen Group Requirements
for Sustainability in Relations with Business Partners (Code of Conduct for Business Partners). The Code of
Conduct for Business Partners also sets out the expectation that business partners will take steps to ensure
compliance in their supply chain. We review compliance with the requirements, which has been an explicit
condition for the award of contracts since 2019, using sustainability ratings for relevant suppliers. The
relevance of a business partner for this rating depends, among other things, on the size of the company or
the risk exposure arising from the type of service provided.
In our sustainability rating, we determine suppliers’ sustainability performance by means of self-
disclosures and risk-based on-site audits. By the end of the reporting period, we had obtained 12,660
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ratings for suppliers, covering 75% of the total order volume. Both the validation of the questionnaire and
the on-site audits are carried out by selected service providers. As a rule, contracts are not awarded to
suppliers who fail to meet our requirements concerning compliance with sustainability standards. Tying
award decisions to sustainability criteria is one of the strongest levers for enforcing these. We address
existing sustainability risks and violations of sustainability principles by systematically defining and
implementing measures to correct the violations; this also includes the upstream supply chain. In the
reporting period we continued to offer advanced and continuing training for suppliers. In fiscal year 2022,
more than 2,900 suppliers took advantage of our training programs such as digital supplier training
courses and e-learning.
With regard to decarbonization, the Volkswagen Group is striving to continuously reduce greenhouse
gas emissions or avoid them altogether over the entire life cycle of a vehicle. The Group’s transformation
into a provider of sustainable mobility solutions and in particular the trend towards electric mobility are
shifting the action required from the service life of the vehicle to supply chains and the manufacture of
vehicles and components. We are aware of our social responsibility and are committed to the Paris Climate
Agreement. We have therefore incorporated the use of renewable energy, among other things, into the
specifications for cell manufacturers.
In our sustainable supply management, we are also involved in protecting groups of people who may be
subject to a high risk of potential human rights violations at any point in our supply chain. We imple-
mented a human rights focus system in 2022 to comply with international frameworks and requirements
and specifically the Lieferkettensorgfaltspflichtengesetz (German Supply Chain Due Diligence Act). The
system aims to identify particularly high risks in our supply chain in connection with human rights
violations and the environment and to manage these appropriately. We continued to implement our raw
material due diligence management system to manage the sometimes extensive risks in the raw material
supply chains. This sets out in detail the prioritization and processing of the raw material supply chains
that we classify as particularly high risk. Transparency requirements for our battery suppliers constitute an
important basis for responsible raw material purchasing. Within the framework of these contractual
requirements, we ask, for example, that our battery suppliers disclose their entire upstream supply chain
before we award new contracts.
For more information on human rights, please see the section on Supply Chain and Human Rights in our
2022 Sustainability Report.
TECH NOLOGY
The Technology Board position is responsible for the following focus areas: all activities of Volkswagen
Group Components, the marketing of the Volkswagen platforms and components to third parties, the
development, manufacturing and procurement of battery cells (Cell and Battery technology initiative), and
all topics relating to charging and energy for the Group worldwide (Charging and Energy Services technol-
ogy initiative).
The aim is further improvement of future viability and competitiveness through cross-brand manage-
ment of technology activities and a value creation strategy coordinated throughout the Group. Synergies
are to be leveraged across both traditional technologies and future areas to advance the transition to
e-mobility.
The Volkswagen Group formalized its objectives for battery and charging for 2030 in its technology
roadmap. With the battery roadmap we aim to significantly reduce the complexity and cost of this key
component so as to make electric vehicles attractive and affordable for as many people as possible.
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Battery
In 2022, Volkswagen founded the battery company PowerCo SE that will be responsible for the Group’s
global battery activities. From the new European battery hub in Salzgitter, this company will manage the
development of international factory operations, continuous development of cell technology, vertical
integration of the value chain and supplies of machinery and equipment to factories. Other products such
as large-scale storage systems for the energy grid are planned for further down the line.
At the ceremony for laying the foundation stone for the Group’s first battery cell factory in Salzgitter,
which is due to start production in 2025, PowerCo presented two key concepts with which it intends to set
industry standards in the future. One is the unified battery cell, which allows flexible use of many different
chemical elements and is to be fitted in up to 80% of all Group models. The second key concept is the
standard factory, which aims to enable the rapid rollout of in-house production with standardized build-
ings, equipment, IT and infrastructure and will thus be able to be adapted quickly and flexibly to future
innovations.
A second cell factory will be built in Valencia, Spain and possible locations for three more cell factories in
Europe are currently being explored. PowerCo is already conducting a site search for further gigafactories in
North America as well. Each factory is to operate solely on renewable power and be designed for future
closed-loop recycling. In addition to the cell manufacturer PowerCo, a center of excellence has also been
established, whose responsibilities include Group-wide product management for battery cells and battery
systems, the development of battery systems and supplier quality.
Vertical integration
Vertical integration of value creation is one of the main components of the battery strategy. By building up
its own cell production, Volkswagen will progressively take charge of further stages of the value chain so
that it can exercise greater influence over the availability, cost and sustainability of key raw materials and
other items. Examples include a long-term supply agreement with Vulcan Energy Resources for carbon-
neutral lithium from the Rhine Rift Valley and a memorandum of understanding with the Canadian
government for accelerating the development of sustainable, regional raw material supply chains in North
America.
Cathode materials have a key role to play in the transformation to e-mobility as a major cost factor and
one of the main components in batteries. PowerCo and the Belgian materials technology group Umicore
have formed a joint venture that aims to supply cathode and primary materials to the European cell
factories starting in 2025. The partners aim to be producing materials for 160 GWh of cell capacity per year
by the end of the decade.
Charging and Energy

Since early 2021, all activities in the Charging and Energy area have been combined and managed by the
Technology Board position, which will thus play a key role in the Group’s electric mobility strategy in its bid
to become the leading provider of a smart charging and energy ecosystem.
As part of the Group’s strategic alignment, the Charging and Energy area is focusing on two key areas.
Firstly, sales of electric vehicles are being underpinned by the international development of a widespread
charging infrastructure. With a joint participation of our Group brands Volkswagen Passenger Cars, Audi
and Porsche in the pan-European high power charging (HPC) joint venture IONITY, the Ewiva joint venture
in Italy formed by Volkswagen and Enel and other partnerships, an extensive charging infrastructure is
being developed to safeguard mobility. The number of public fast charging points in Europe is to be
increased to 18,000 by 2025. At the same time, the charging network in North America is to be increased to
10,000 fast charging points in collaboration with Electrify America, while the charging network in China is
planned to be expanded to 17,000 fast charging points in conjunction with CAMS. Secondly, sustainable
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business models are being developed by expanding value creation, such as smart and energy market-
integrated charging. The Group acts as a vehicle charging subscription provider in Europe with its charging
and energy brand Elli. This proprietary charging service gives customers with any electric vehicle access to
some 450,000 charging points with approximately 20,000 fast chargers operated by around 800 providers
across 27 countries. In addition, Elli’s product portfolio also includes the full range of charging solutions for
private customers and companies, from the Company’s own wallboxes to flexible fast-charging stations
and smart green electricity tariffs.
Drivetrain and Platform

The independent corporate entity Volkswagen Group Components, under the umbrella of Volkswagen AG,
employs around 70,000 people worldwide. The focus of their expertise is the development and manu-
facture of vehicle components. As part of the restructuring of Group Components, the former business unit
structure was transferred to the Drivetrain and Platform area in a modified form as product lines (con-
ventional powertrain, chassis and electric drivetrain) with effect from April 1, 2021. The product lines
assume responsibility for product management and product costs across all locations, covering Group
Components’ conventional portfolio.
Besides the product lines, the development areas of Group Components are combined in the Drivetrain
and Platform area. The development portfolio focuses on the following areas: chassis components, steering
systems, drive shafts, transmissions, electric drives and thermal management systems in the electric
drivetrain. The new Systems and Innovation Development department, which was created when all compo-
nents were bundled at organizational level, is working on the holistically optimized electric drivetrain
across all business areas. Close integration of product management and development in the Drivetrain and
Platform area are expected to optimize product costs, further sharpen the portfolio of Group Components
and play a key role in shaping the electric drivetrain of the future.
Platform Business
Group-wide responsibility for external sales of platforms and components has been combined in the
Technology Board position. The scope of this Platform Business organizational unit extends to successful
initiation and acquisition (including contract design) as well as to support of customer projects including
the related order processing (logistics, billing). In the cooperation project with Ford, the necessary cross-
brand structures and processes have been created within the Volkswagen organization so that other
external customers can also be efficiently served in the future. Expansion of the cooperation with Ford was
agreed in 2022. The automaker aims to manufacture around 1.2 million vehicles based on the MEB – double
the volume of prior arrangements. Volkswagen is also exploring a supply agreement with Indian
automaker Mahindra for MEB components such as electric motors and battery systems.
PRODUCTION
The international, cross-brand production network enables the process from the supplier to the factory and
assembly line, and from the factory to dealers and customers. Enduring efficiency is a prerequisite for our
competitiveness. To be able to meet the challenges of the future, we rely on holistic optimizations, forward-
looking innovations, robust supply streams and structures, and a flexible team. At 8.72 million vehicles,
global vehicle production in fiscal year 2022 was 5.2% up on the prior-year figure. Productivity increased by
1.2% year-on-year.
The shortage of semiconductors and the disruption of supply chains caused by the Russia-Ukraine
conflict and the Covid-19 pandemic restricted production in the Volkswagen Group; the supply and produc-
tion situation eased toward the end of the reporting period.
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one.PRODUCTION production strategy

Production is supporting the NEW AUTO Group strategy with its one.PRODUCTION functional area strategy.
By adopting a common approach for the thematic focus of our activities, we aim to pool the strengths and
potential of our global production and logistics across brands and take advantage of the resulting synergy
effects.
We have created content clusters around the following topics: production network, efficient processes,
environment, digitalization and innovation, and cooperation. Within these five strategic goals, expert teams
work on the strategic topics relevant for production in the Group. Examples include the design of our global
production network, increasing efficiency in production processes, the reduction and offsetting of environ-
mental impact throughout the production process, and the digital transformation of production and
working processes and of collaboration formats.
Our scenario-based strategy process provides the thematic framework for the strategic goals. The over-
arching aim is to increase productivity and profitability. This will enable us to manufacture high-quality
products at our sites that give customers maximum benefit at competitive prices.
Global production network

The Group’s production network encompasses 119 production sites, including our Chinese joint ventures.
72 of which are vehicle production plants. Standardizing production with uniform product concepts, plants,
operating equipment and production processes within a product family is a key factor in our forward-
looking production. We are constantly enhancing our production concepts and aligning them with new
technologies to achieve ambitious targets in the individual projects. In a challenging environment, the
Volkswagen Group succeeded in starting up 38 vehicle projects in 2022, 12 of which were new products or
successor products and 26 were product upgrades and derivatives.
The flexible production capacities provided by our platforms allow us to respond to market challenges,
make requirements-based use of the production network and leverage synergies across brands through
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multibrand sites. Currently, almost half of the 46 passenger car locations are already multibrand locations.
The Bratislava plant continues to serve as a prime example in the Group, producing vehicles for the Volks-
wagen Passenger Cars, ŠKODA, Audi and Porsche brands.
With its NEW AUTO Group strategy, the Volkswagen Group has set itself the goal of becoming one of the
world’s leading providers of sustainable mobility. Here, the priority is to make mobility solutions which are
innovative, efficient, sustainable and customer-oriented, as well as geared towards profitable growth. The
foundation for these efforts was the introduction of the Modular Electric Drive Toolkit (MEB), which we are
using to complement our range with additional battery-electric vehicles. We have been manufacturing
battery-electric vehicles based on the MEB in Zwickau, the Volkswagen Group’s first electric car factory,
since 2019. One example is the ID.3 from the Volkswagen Passenger Cars brand. The portfolio of the MEB
platform in Zwickau was expanded in 2021 through the addition of the CUPRA Born and the Audi Q4 e-tron,
and in 2022 through the addition of the ID.5 from Volkswagen Passenger Cars. Furthermore, we use an all-
electric platform for premium and sports brands – the Premium Platform Electric (PPE) – to leverage
synergies in production across brands. This meant that electric vehicles were manufactured at 14 sites
across the global production network as of year-end 2022.
New technologies and digitalization

Digital and innovative technologies are systematically validated in the Volkswagen Group and their use for
production and logistics is piloted and rolled out. This is to enable the Group to exploit potential for cost
savings in the value chain and realize more flexible implementation options as well as quality improve-
ments. The goal of the digital transformation in production and logistics is to simplify the entire process
chain, make the best possible use of new technologies and establish autonomous processes. Fields of
innovation in 2022 included computer vision, augmented reality, process mining and AI robotics.
Based on Volkswagen’s proprietary computer vision platform, artificial intelligence, for example, is
being used for complex image inspections, among other things, and implemented across brands at other
sites. Innovative applications are also being developed locally at the plants and are made available to the
Group via the central cloud-based Digital Production Platform (DPP). Despite the Covid-19 pandemic and
difficult conditions, the expansion of the DPP was driven forward in collaboration with Amazon Web Ser-
vices (AWS) and Siemens. Since 2019, 26 production sites have been fully linked up to the DPP and
equipped with applications developed in-house for improving production and logistics. 2022 also saw
increased exchange of local solutions between the sites via the DPP. Examples of overarching solutions on
the DPP include localization services for vehicles and car bodies on the factory premises, intelligent plant
monitoring systems, digital shop floor management, and quality processes and end-to-end quality control
loops supported by artificial intelligence. This will also allow conventional processes for example test drives
conducted at the factories for vehicle acceptance purposes to be replaced by applications developed in-
house such as the road test predictor – or reduced to a minimum. Modern, efficient management of the IT
environment in the production network will help to drive the success of the digital transformation in
production and logistics. Here, an architecture management system has been defined for this and
established as an interdisciplinary collaboration model for coordinating and harmonizing requirements
from strategy, governance and reference development.
Catena-X will enable Volkswagen to shape the future of the automotive supply chain in conjunction with
other manufacturers and suppliers. The aim is to build a global data network with shared values regarding
collaboration, data sovereignty, trust and cooperation. Material traceability along with overarching demand
and capacity management and comprehensive bottleneck management are some examples of how we
intend to increase the efficiency of our plants and meet future supply chain requirements at the same time.
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Zero Impact Factory

We are planning the production of tomorrow with our one.PRODUCTION functional area strategy. Emission
levels and the use of resources at Volkswagen Group sites require particular attention. The Zero Impact
Factory program is developing specific steps for production that no longer has an adverse environmental
impact and supports our environmental vision goTOzero. In 2023, as part of an internal survey phase for
the Zero Impact Factory, we will start collecting extensive data and information at all sites where we
produce passenger cars and light commercial vehicles. To map the environmental impact in absolute terms,
we will collect data on 22 quantitative indicators as impact points. With the site checklist, we will review the
implementation status of 143 qualitative environmental criteria.
The impact points and the site checklist will be used to gather data on criteria in the fields of climate
protection and energy, emissions, water and waste. However, the focus will also be on aspects such as the
appearance of the factory, commitment to biodiversity, protection of soil, avoidance of operational disrup-
tions, functioning environmental compliance management, improvement of resource efficiency towards a
circular economy, and environmentally neutral mobility management for employee and goods transport.
These methods will allow us to implement pinpointed reduction measures where they will have the
greatest impact.
From 2025, the Zero Impact Factory method is to replace the existing KPI system which measures the
reduction of the environmental impact of production (UEP). This represents a shift away from steering
based on purely performance-based indicators to a reduction in the environmental impact of our produc-
tion processes in absolute terms. Our goal is to achieve Zero Impact Factory status for all of our manu-
facturing plants for passenger cars and light commercial vehicles by 2050.
To support such and other programs, a management system developed in-house has been introduced at
all production sites worldwide since mid-2019, linking the main compliance issues with key environmental
management issues. This environmental compliance management system (ECMS) provides the foundation
for compliance with all external and internal rules and regulations relating to the environment.
ECMS implementation was initially concentrated on the major production and development locations,
but was extended in a second step to include Group companies whose business activities entail a lower
environmental risk. We continued to actively support, monitor and track the rollout and advisory process
in the reporting period.
We are encouraging networking and communication between the brands worldwide in order to leverage
synergies. Our environmental experts meet regularly in working groups. In addition, we provide our
managers and employees with specific training on the topic of environmental protection.
We record and catalog measures in an IT system and make these available for a Group-wide exchange of
best practices. In the reporting period, around 1,400 implemented measures in the area of environment
and energy were tracked and documented via the Maßnahmen@Web system. They serve to improve infra-
structure and production processes for passenger cars and light commercial vehicles and are incorporated
into the decarbonization index (DKI), for example. These activities have a positive effect on the Group’s
environmental indicators and are often also beneficial from an economic perspective.
GoTOzero Impact Logistics

In the joint “goTOzero Impact Logistics” initiative, Group and brand logistics departments also work
together to help achieve the goals of the goTOzero environmental mission statement. Continuous optimi-
zation of the transport network and logistics processes can reduce emissions – this includes the use of
digitalization tools. The use of new low-emission technologies for transporting production materials and
vehicles will also be continuously analyzed and accelerated.
The measures the Volkswagen Group is taking to achieve carbon-neutral logistics in the future include,
for example, moving shipments from road to rail and almost complete avoidance of CO2 through the use of
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green electricity in rail transport in Germany and other countries in collaboration with Deutsche Bahn AG
and other rail service providers. Further rail traffic in Poland was switched over to green electricity in the
third quarter of 2022, for example.
In addition, Group Logistics is using the two roll-on/roll-off (RoRo) charter ships powered by low-
pollution liquefied natural gas (LNG) for transporting vehicles across the North Atlantic. Group Logistics
plans to replace conventionally operated ships on the North Atlantic route with four more car freighters
with the same propulsion system from the end of 2023. In contrast to other LNG-fueled marine engines,
Group Logistics’ charter ships are climate-friendly because the high-pressure technology of the two-stroke
engines from MAN Energy Solutions allows almost no methane to escape. As a rule, the dual-fuel engines
will also enable non-fossil fuels – biogas (bio-LNG), e-gas (synthetic gas) from renewable sources, or biofuel
– to be used in the future so that carbon emissions can be reduced even further.
In addition, Group Logistics permanently operates two charter ships on European sea routes using
certified renewable fuel. Used cooking oils and fats – waste and residual materials from the catering and
food industries, for example, that cannot be used for further processing into food or animal feed – provide
the raw material for the biofuel, which produces less CO2 than conventional fossil fuels.
SALES AN D MARKETI NG
We regard ourselves as an innovative and sustainable mobility provider for all commercial and private
customers worldwide – with a unique product portfolio encompassing our successful brands and inno-
vative financial services.
Together with their sales partners and importers, our passenger car brands agreed on a procedure for
integrating state-of-the-art products and services into the sales network. The priority thereby is the safe and
legally compliant handling of customer data and the way in which this is processed for digital products and
services or in connection with the vehicle purchase. The legal requirements for handling customer data
have been tightened in many countries. At the same time, the Group is launching a growing number of
vehicles that are connected to the internet where available. We are increasingly investing in distribution
systems and processes with the goal of further digitalizing and improving the individual customer
experience in all distribution channels. The Volkswagen Group’s financial strength and profitability is
attributable to an extensive portfolio of strong brands. The objective of our Best Brand Equity instrument is
to continuously sharpen the brand profiles and to distinguish as clearly as possible between the customer
segments served by the brands, supplementing them as required with tailored solutions. Our aim is to
achieve high market saturation with great efficiency and a low level of brand cannibalization. Market
positioning is an essential element for increasing brand values. To this end we have established auto-
mobile-specific customer segmentation to steer the positioning of our brands which we consistently apply
throughout the strategy and product process.
As part of our NEW AUTO strategy, we have introduced strategic base initiatives for China as the largest
single market and North America as the market with the greatest growth potential due to their considerable
strategic importance for the Volkswagen Group. We used the Group strategy as the foundation for our new
functional area strategy called NEW SALES 2030, which forms the basis for transforming our sales activities
in the direction of a mobility provider. The aim of NEW SALES 2030 is to enable us to provide an even more
flexible and targeted response to our customers’ wishes and leverage additional revenue potential, for
example through digital business models.
With regard to its NEW AUTO strategy, Volkswagen hit another milestone as part of the Mobility
Solutions tech initiative in July 2022 with the closing of the transaction with Europcar. This successful joint
acquisition with two consortium partners is important in helping to drive the growth of the Volkswagen
Group in vehicle-on-demand (VoD) services. Europcar is to become a cornerstone of a product portfolio
that will cover customers’ mobility needs from vehicle sharing for a few hours to subscription for multiple
months. Our expectation is that most people will still prefer individual mobility by 2030 but the focus will
be more on using and less on owning vehicles. The Volkswagen Group is aiming to participate in the global
market for mobility services, which is expected to grow rapidly.
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Also in the area of sales and marketing, we are aware of our responsibility towards the climate and the
environment. In addition to the broad range of completely battery-electric vehicles and hybrid models, we
kicked off the goTOzero retail project that will help our sales partners to move over to a climate-neutral
business model.
Customer satisfaction, customer loyalty and customer conquest

The Volkswagen Group aims its sales activities at exciting its customers. This is our top priority, as satisfied
customers remain loyal to our brands and recommend our products and services to others. For this we
measure customer satisfaction with our brands at different customer contact points and make it a subject
of discussion at Board committee meetings. In addition to satisfaction with our products and services, we
value our customers’ emotional connection to our brands. It is important for us to retain customers and
win new ones. To measure our success in this area, we compile and analyze strategic indicators for the
passenger car-producing brands: the loyalty rate represents the proportion of customers of our passenger
car brands who have bought another Group model. Thanks to their faithful customers, the Volkswagen
Passenger Cars, ŠKODA and Porsche brands have remained in the upper loyalty rankings of the core
European markets in comparison with their competitors for a number of years. Audi was able to strengthen
its position in 2022 following a recent upward trend. Compared to other manufacturer groups, the
Volkswagen Group continues to hold a top spot in the core European markets in terms of loyalty. The
conquest rate shows the share of newly acquired passenger car customers as a proportion of a brand-
specific selection of competitors. The ŠKODA, Audi and Porsche brands revealed a stable conquest rate,
while that for Volkswagen Passenger Cars and SEAT deteriorated. By contrast, CUPRA’s conquest rate
increased.
In the core European markets, the brand image of the Volkswagen Passenger Cars brand improved in
2022 and is now above the level for the market as a whole. Confidence in the brand also continued to
improve. As in previous years, Porsche remains in top position in the image ranking.
E-mobility and digitalization in Group Sales

As part of our electrification campaign, we aim to offer our customers worldwide around 50 completely
battery-electric vehicles by 2030. This campaign will be complemented by vehicle-related, customer-
focused offerings, such as customized charging infrastructure solutions and mobile online services. The
Volkswagen Group is thus transforming from an automotive manufacturer into a mobility service provider.
This poses new challenges for Sales.
We are making very specific use of the opportunities offered by digitalization in Sales, which include an
improved customer approach. Our actions are guided by a clearly defined strategy that requires extensive
cooperation between the brands and markets to achieve the greatest possible synergies. Our aim here is to
create a completely new product experience for the customers of our brands – one which impresses with a
seamless communication process, from the initial interest in purchasing a vehicle, to servicing and
ultimately to the sale of the used car. In doing so, we are opening up new business models relating to the
connected vehicle – in particular with regard to mobility and other services. Vehicles are becoming an
integral part of the customer’s digital world of experience.
We also align our internal processes and structures to the methods and new forms of working created by
digital innovation. This results in project teams operating across different business areas, new forms of
cooperation, a more intensive relationship with the international start-up scene, a consolidation of venture
capital expertise – as a form of supporting innovative ideas and business models – and new lean systems
and cloud-based IT solutions.
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Fleet customer business

Business relationships with fleet customers are often long-term partnerships. In a volatile environment,
this customer group guarantees greater stability for sales of well-equipped, profitable vehicle models than
the private customer segment.
The Volkswagen Group has an established base of business fleet customers, especially in Germany and
the rest of Europe. Our extensive product range enables us to satisfy their individual mobility needs from a
single source.
In an overall passenger car market in Germany that rose by 1.1% in the reporting period, business fleet
customers climbed to 18.8 (16.6)% of total registrations. The Volkswagen Group’s share of this customer
segment improved to 43.5 (42.1)%. Outside Germany, the Group’s share of registrations by fleet customers in
Europe was 25.7 (26.6)%. This shows that fleet customers’ confidence in the Group remains at a high level.
After Sales and Service

In the after-sales business, we regard ourselves as a complete provider of all products and services relevant
to customers. Together with our partners, our mission is to ensure lifelong mobility for our customers and
vehicles. To this end we are continuously expanding our range of tailored services in order to improve
convenience for our customers and increase customer satisfaction. The partner businesses also offer a
comprehensive portfolio of services in all vehicle classes.
In After Sales, we are supporting the changing world of mobility and our systematic focus on e-mobility
by developing new services and innovative concepts. As the Group transforms from vehicle manufacturer
to a leading, global software-oriented mobility provider, our software company CARIAD is working on the
development of the future software architecture for our vehicles. With the resulting connectivity services,
we will also be able to generate synergies in After Sales across all the Volkswagen Group’s brands and take
advantage of new opportunities to boost customer loyalty.
In addition to individual service, the timely provision of genuine parts is essential to assure passenger
car customer satisfaction in After Sales. The genuine parts supplied by our passenger car brands and the
expertise of the service centers stand for the quality, safety and value retention of our customers’ vehicles.
With our global after sales network including more than 130 of our own warehouses, we are creating the
prerequisites to supply almost all our authorized service facilities around the world within 24 hours. Owing
to disruption in supply chains, especially for semiconductors, we were unable to fully guarantee in-time
delivery of replacement parts in certain cases during the reporting period.
In the Digital After Sales project, we are modernizing processes and IT systems in After Sales. By
adopting an approach that focuses product and service development on the individual needs of both
dealers and customers, we aim to reduce the time needed for administrative tasks at the dealers through
automated, interrelated services and also to stabilize existing IT systems and boost efficiency. In addition,
innovative digital after-sales services will improve the customer experience.
Around the world, our commercial vehicles business also prides itself on products of quality and on
customer focus. Our range of trucks, buses and engines is complemented by services that aim to guarantee
fuel efficiency, reliability and wide vehicle availability. By offering vehicles equipped with an all-electric or
hybrid drive system, we take into account both customers’ wishes and our responsibility to contribute to
emission-free transportation. Workshop service and service contracts are intended to offer customers a
high degree of certainty, in addition to a high level of quality. We are reducing servicing times and costs
with a view to the vehicles’ total operating costs.
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In the Power Engineering segment, we help our customers to secure the availability of machinery with
MAN PrimeServ. The global network of more than 100 PrimeServ locations stands for excellent customer
focus and offers, among other things, replacement parts of genuine-part quality, qualified technical service
and long-term maintenance contracts.
QUALITY
The quality of our products and services plays a key role in maintaining customer satisfaction. Customers
are satisfied and loyal particularly when their expectations of a product or service are met or even
exceeded. Appeal, reliability and service determine quality as it is perceived by the customer throughout
the entire product experience. Our objective is to positively surprise our customers and inspire enthusiasm
in all areas, and thus to win them over with our quality.
Digitalization was once again the beating heart of our work in the past fiscal year: we are continuously
sharpening our focus on software-based system development, which is a critical factor for success in respect
of customer satisfaction. Consistent application of the “Automotive SPICE” process assessment model that we
use to improve our processes is particularly important in our activities. It is a key building block for
meeting the requirements of our customers, as well as those of the regulatory and legislative bodies.
Volkswagen has been implementing cybersecurity measures across the Company for some time now.
For example, we have an independent cybersecurity network in place across all regions and Group brands
and monitor potential cyber risks. This enables us to act fast when potential threats arise. Since June 2022,
the UNECE (United Nations Economic Commission for Europe) has provided for corresponding certification
and homologation to ensure that companies can guarantee that these aspects are dealt with properly so as
to protect the users of our vehicles from potential attacks. Our Group pursues the goal of implementing
standards in the areas of both accident prevention and security. We are refining the established processes
within the framework of an Automotive Cyber Security Management System in keeping with the require-
ments of the UNECE regulation. In this context, Volkswagen is implementing comprehensive measures
across departments throughout the Group.
Strategy of Group Quality

We review our functional area strategy New Quality periodically and coordinate it with the brands. We align
our activities with our goal expressed in the motto: “We embody outstanding quality and ensure reliable
mobility for our customers worldwide.” The NEW AUTO Group strategy sets new parameters for trans-
forming the Group into a software-oriented mobility provider. Based on this, our quality strategy focuses
primarily on achieving maximum levels of customer satisfaction throughout the entire customer
experience – from ordering through to the digital ecosystem and up to aftersales and customer service.
Group Quality and the brands’ quality organizations play an active role at all stages of product emergence
and testing, making an important contribution to successful product launches, high customer satisfaction
and low warranty and ex gratia repair costs. As part of our functional area strategy, we have defined
“warranty and ex gratia repair payments per vehicle after 12 months in service” as a strategic indicator at
the top level of consideration for the major passenger car-producing brands. This shows all warranty and ex
gratia repair payments for the vehicles produced worldwide in each production year, expressed in euros per
vehicle. All vehicles from the Volkswagen Passenger Cars, Volkswagen Commercial Vehicles, ŠKODA, SEAT,
Audi and Porsche brands are included in this figure. Extraordinary items resulting from initiatives such as
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recalls to assure product safety or comply with laws are not taken into account. While the figures starting
from the 2017 production year remained at a constant low level, they have increased since the 2020
production year due to the growing use of new technologies in the vehicle and rising complexity. Actions
were taken to reduce these figures and have proven effective.
Legal and regulatory compliance

The legal and regulatory compliance of our products is paramount in our work. In our processes we employ
the principle of multiple-party verification, which involves mutual support and control between the busi-
ness units. Among other things, software development is accompanied by quality milestones at all brands,
whereby all systems, components and parts that directly influence a vehicle’s safety, type approval and
functioning and therefore require particular vigilance are included in the multiple-party verification. At the
series production stage, we see to it that the conformity checks on our products are carried out and
assessed with the participation of all business units involved. This applies particularly to checks related to
emissions and fuel consumption.
We are also dedicating attention to our quality management system, reinforcing the interdisciplinary,
process-driven approach throughout the Group. The quality management system in the Volkswagen Group
is based on the ISO 9001 standard and the official type approval requirements. These standards and
requirements must be complied with for us to obtain type approval for the manufacture and sale of our
vehicles. We conducted numerous system audits in the reporting period to verify that our sites and brands
continue to comply with these requirements. Particular focus was placed on assessing the risk of non-
compliance with defined processes. Our quality management consultants pay attention to ensuring that
these and other new requirements, as well as official regulations, are implemented and complied with; they
are coordinated and supported in this endeavor by a central office in Group Quality.
Observing regional requirements

We use a variety of feedback instruments, such as specific customer surveys, to collect information on
region-specific customer requirements. In addition, we monitor relevant internet forums and social media
postings worldwide to obtain direct customer feedback and identify sentiment and trends at an early stage.
In order to be able to make the perceived quality of our vehicles commensurate with that of our com-
petitors, we take the needs of our regional customers into account in our vehicle audits. Every brand works
together with the individual regions to decide how its product is to be positioned there. In this way, we
strengthen the brands’ responsibility. So that the vehicle audit returns comparable results, consistent
quality benchmarks apply across all brands and regions. We are continually adapting these to changing
requirements. For more than 40 years now, we have been deploying auditors around the world to assess,
from the customer’s perspective, the vehicles that are ready for delivery and to ensure that these vehicles
comply with the benchmarks defined.
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EMPLOYEES
The Volkswagen Group is one of the world’s largest private employers. On December 31, 2022, we employed
a total of 675,805 people, which includes the Chinese joint ventures. This figure represents a 0.4% increase
compared with the end of 2021. The ratio of Group employees in Germany to those abroad remained
largely stable over the past year; at the end of 2022, 293,862 (295,065) employees worked in Germany.
EMPLOYEES BY MARKET
in percent, as of December 31, 2022
Europe (excluding Germany)/ 30%

Other Markets
Germany 43%
North America 6%
South America 5%
Asia-Pacific 16%
Human resources strategy and principles of the human resources policy

For the Volkswagen Group the transformation of the workforce is defined as a key focus topic in the Group’s
NEW AUTO strategy. We have also embedded the topic in our Group-wide People & Transformation
initiative. The Group People Strategy Transform to Tech plays a key role in this context for our three brand
groups – Volume, Premium and Sport & Luxury. This strategy also enables the Volkswagen Group to
continue with key, successful approaches in human resources policy. These include the pronounced
stakeholder focus in corporate governance, comprehensive participation rights for employees, forward-
looking training opportunities, the principle of long-term service through systematic employee retention
and remuneration that is fair and transparent.
At the same time, the Group People Strategy is setting innovative trends. Employee experience is to be
improved systematically, the teams strengthened as the most important units in the company’s organi-
zation, and modern forms of working, such as agile methods, are to be developed. Our aim is to become
more attractive as an employer and take the performance of our organization to the next level.
In our Group People Strategy we have identified different dimensions with which we aim to address
employees’ needs and expectations in a holistic manner. Together, these four dimensions make up the
work experience, job satisfaction and, ultimately, the success of the work and the Group’s integration into
society.
1) “Me” (Me@Volkswagen): We strive to systematically improve the employee experience and ensure that
all employees have the best possible conditions in which to do their job. Starting with availability of
contemporary, task-specific work equipment and tools, this also entails avoidance of red tape and overly
complex process steps and includes state-of-the-art workspaces, opportunities for 360-degree feedback,
individual health coaching, and training opportunities tailored to the individual.
2) “My team” (Teams@Volkswagen): High-performance teams in the Volkswagen Group are groups that
trust each other, have a common goal and can rely on each other, yet also discuss matters critically and
speak their minds. As our transformation takes shape, the way in which teams in the Volkswagen Group
collaborate changes. Hybrid digital forms of collaboration are becoming more important. They require
modern office environments that simplify collaborative, flexible work. The same applies to opportunities
for digital collaboration – an aspect that has become even more important in the wake of the Covid-19
pandemic.
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3) “All of us at Volkswagen” (All of us@Volkswagen): The seven Volkswagen Group Essentials define the
shared underlying values across all of the Group’s brands and companies: We take on responsibility for
the environment and society, We are honest and speak up when something is wrong, We break new
ground, We live diversity, We are proud of the work we do, We not me, We keep our word. Our corporate
culture aims to create a sense of belonging for our workforce – an important aspect that is gaining in
significance particularly in times of change and in an increasingly diverse environment. We believe in the
importance of fair remuneration, which underscores our image of ourselves as an attractive employer. It
is designed to motivate and to express our appreciation for the performance of each individual. In
addition, we need to empower our leaders to contribute to a successful transformation and act as role
models. Group-wide activities such as team dialogue and the role model program are designed to
encourage employees to discuss the Group Essentials and incorporate them into all work processes. In
the role model program, managers from all brands strive to improve the corporate culture together with
their staff.
4) “Volkswagen in society” (We@Volkswagen and the world around us): We are aware that without long-
term social legitimacy at our locations and in our markets, we will not be able to carry forward our
business model in times of accelerated changes in values – this applies from an economic, environmental
and social perspective. We see our employees as representatives of the Volkswagen Group who com-
municate our values to society. Together with them, we also assume responsibility above and beyond our
core business – such as through foundation work and corporate volunteering. The topics of our social
commitment range from education to diversity, a culture of remembrance, culture, climate action and
environmental protection, and various local commitments.
The transformation has put us on a long-term path of change and renewal. It is important for us to
regularly review whether we are maintaining the course we have set and achieving our objectives. The
following strategic key performance indicators help us measure our progress and take remedial action if
necessary:
> Internal employer attractiveness: This indicator is determined by asking respondents, as part of the
Stimmungsbarometer (opinion survey), whether they perceive the respective company as an attractive
employer. The opinion survey is conducted for the majority of our Group workforce. The target for 2025
is 89.1 out of a possible total of 100 index points. A score of 86.6 index points was achieved in the
reporting period, meaning that the target for 2022 of 88.7 index points was missed. 86.8 points were
achieved in the previous year. For Volkswagen AG, the value for 2022 was 87.1 (87.7) index points.
> Diversity index: As part of our group-wide diversity management system, we report in this strategic
indicator on trends in the proportion of women in management and in the internationalization of top
management as a percentage of the active workforce (total workforce excluding vocational trainees,
employees in the passive phase of their partial retirement and employees in the withdrawal phase of their
time asset bonds) worldwide. In particular, this indicator underpins the objective of the Group People
Strategy, which is aimed at contributing to an exemplary leadership and corporate culture. The propor-
tion of women in management, comprised of management, senior management and top management
(including Group Board of Management members), amounted to 17.2% in 2022 and was 0.9 percentage
points up on the prior-year level. We aim to raise this figure to 20.2% by 2025. Our goal is to increase the
level of internationalization in top management, the uppermost of our three management tiers, to 25.0%
in 2025; in the past fiscal year this was 23.4 (20.3)%. The methodology changed in 2022: in the case of dual
nationality, both nationalities are taken into account. The figures for the proportion of women in man-
agement and the internationalization of top management are placed equally weighted in the diversity
index and the figures for the year 2016 set to an index value of 100. For 2022 we had planned to increase
this index to 136. This target was exceeded with a score of 140 (127).
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> Implementation status of strategic HR planning: Strategic HR planning supplements operational HR

planning by adding a qualitative, long-term and strategic planning perspective. It allows business units to
identify qualitative and quantitative surpluses and shortfalls at an early stage and develop necessary
qualification, training and restructuring requirements designed to help support the transformation. To
map progress in strategic HR planning, we will measure the percentage of the active workforce con-
sidered in the strategic HR planning from 2023.
> Number of training hours per employee: Due to the transformation in the automotive industry, we are
facing the biggest process of expertise and cultural change in the history of the Group. As a result,
individual opportunities for change for employees are becoming an increasingly important success
factor. By leveraging economies of scale in connection with digitalization and through the Group-wide
learning platform Degreed, which is to be gradually rolled out across the Group, Volkswagen is improving
the access to training opportunities. The goal is to increase the average number of training hours per
employee in the Volkswagen Group – based on the active workforce – by 35% before 2030 to 30 hours per
employee per year. The baseline value is 22.3 hours and represents the average for the base years 2015 to
2019. These years were chosen as the baseline due to the outbreak of the Covid-19 pandemic, which
temporarily curtailed training activities in 2020 and 2021. The target figure for the reporting period was
22 hours. With an average of 19.9 hours per employee, the target has not been met.
Training and professional development

At Volkswagen, our capacity for innovation and our competitive position largely depend on the commit-
ment and knowledge of our employees, particularly during the transformation.
Volkswagen Group employees have access to a wide range of training measures organized according to
vocational groups. These comprise all employees whose tasks are based on similar technical skills and who
require related expertise in order to perform their jobs. A skills profile lays down the specialist and
interdisciplinary skills for each job and serves as a guide for training measures. Formats range from further
training in general Company-related topics to specific training or personal development programs. Thanks
to these opportunities, Volkswagen employees are able to further develop and steadily deepen their know-
ledge throughout their working lives. The range of learning opportunities is being expanded continuously.
Degreed, the innovative learning platform that we have implemented, opens up diverse training oppor-
tunities for our employees. The platform creates a simple, customized learning experience and is aimed at
supporting the results of strategic HR planning with appropriate training programs. Another focus is
developing important and specific skills, for example in areas such as data analytics, software development,
leadership, machine learning and artificial intelligence. In addition, Volkswagen’s Faculty 73 program is
providing in-house training for the software developers who are needed for the digital transformation. The
graduates from this program largely work in departments at Group and brand IT, Technical Development
and CARIAD. In 2022, 200 students embarked on the training program, which is now in its fourth year. The
program is designed for employees and also external applicants with an affinity for IT and an interest in
software development.
Volkswagen AG, CARIAD and ŠKODA are also supporting the establishment and operation of innovative
programming schools in Wolfsburg, Berlin and Prague in cooperation with the non-profit École 42. The
training institutes have so far accepted over 400 students, who learn from and with each other following an
innovative training approach.
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AGE STRUCTURE IN YEARS OF EMPLOYEES

as of December 31, 2022; in percent
< 20 1%
20-29 16%
30-39 31%
40-49 26%
50-59 21%
60 + 5%
Vocational training and cooperative education

The core components of training at Volkswagen are vocational training and cooperative education (dual
study programs combining university studies with on-the-job training). As of the end of 2022, the Volks-
wagen Group trained 16,590 young people. We have introduced the principle of dual vocational training at
many of the Group’s international locations over the past few years and are continuously working on
improvements. Once a year, Volkswagen honors its highest-achieving vocational trainees in the Group with
the Best Apprentice Award. Even after their vocational training has been completed, young people at the
start of their careers are encouraged to continue their professional development in our Company.
Development of university graduates

Volkswagen offers two structured entry and development programs for university graduates and young
professionals. In the StartUp Direct trainee program, graduate trainees gain an overview of the Company
while working in their own department and also take part in supplementary training measures. University
graduates interested in working internationally can participate in the StartUp Cross program. The aim here
is to get to know the Company in all its diversity and to build up a broad network. During their partici-
pation in the program, young professionals become familiarized with several locations in Germany and
other countries by working in various departments. Both programs also include several weeks’ experience
working in production.
Increasing attractiveness as an employer and development programs for specific target groups
A human resources policy that promotes a work-life balance is a major component of Volkswagen’s attract-
tiveness as an employer; in particular, it contributes to greater gender equality. We are working contin-
uously to develop family-friendly working time models and to increase the number of women in manage-
ment positions. For Volkswagen AG, we have also set targets for the proportion of women in management
in accordance with German legislation. In line with the Gesetz zur gleichberechtigten Teilhabe von Frauen
und Männern an Führungspositionen (German Act on the Equal Participation of Women and Men in
Leadership Positions) and section 76(4) of the Aktiengesetz (AktG – German Stock Corporation Act), Volks-
wagen AG set targets for the period until the end of 2025 of 16.5% for the proportion of women in the
active workforce at the first level of management (senior management, top management and brand Board
of Management) and 23.4% for the second level (management). As of December 31, 2022, the proportion of
women in the active workforce (excluding employees in the withdrawal phase of their time asset bonds) at
the first level of management was 14.2% and at the second level of management it was 19.7%. The Group
Board of Management and Supervisory Board are regularly informed of the figures achieved and the
current target paths.
In order to encourage women with great potential to advance within the Company, we have set targets
relating to the development of the proportion of women in management for every Board of Management
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business area at Volkswagen AG. This approach is supported by many different measures ranging from
cross-brand mentoring programs to a quota system for the management selection procedure and targets
for the share of women among external hires.
The Group also has a large number of collective regulations in place to make it easier for employees to
balance the demands and needs of work and home life and allow staff to arrange their own individual
working model. In addition to flexible working hours and the use of working time accounts and flextime,
these include variable part-time work and shift models, leave of absence enabling employees to care for
family members, the possibility to convert salary components into paid leave, childcare services that are
associated with the company or are company-owned, and remote working. “Meine AusZeit” is a program
offered by Volkswagen AG that allows employees to take a self-financed leave of absence with an upfront
payment from the Company.
Hybrid working – a combination of remote working and working onsite – gives employees greater
flexibility in terms of when and where they work and is increasingly becoming the norm for the Volks-
wagen Group. In the reporting period, we again refined and expanded virtual and hybrid communication
and collaboration, as well as new formats of knowledge transfer and training. Major topics included:
> Design or expansion of the works agreements for remote working at Audi AG and Volkswagen AG
> Preservation of mental health
> Reinforcing the culture of leadership and trust in the context of the changing world of work (Culture and
Change Factory)
In addition, we continued developing the Guide for Digital and Hybrid Collaboration, which is intended to
provide guidance on successful communication and organization for employees, managers and teams. We
also continued working on the Office 2025 initiative, which is designed to drive the modernization of
offices and the world of work at Volkswagen AG.
The Volkswagen Group attaches particular importance to its employees being able to act with agility and
entrepreneurial drive. Together with 30 publicly traded large companies from Germany, Austria and
Switzerland, we developed a skills matrix for training and professional development in the area of agile
business processes under the umbrella of the DACH30 initiative. As part of these endeavors, the Volks-
wagen Group Academy set up an agility training portfolio.
PROPORTION OF WOMEN I N TH E VOLKSWAGEN GROUP

as of December 31
% 2022 2021
Employees 18.1 17.9

Vocational trainees1 20.3 20.1
Total management 16.8 15.9
Management 18.8 17.9
Senior management 13.5 12.5
Top management 9.8 8.3
1 Excluding Scania and Navistar
Preventive healthcare and occupational safety

Preventive healthcare and occupational safety are key elements of human resources policy in the Volks-
wagen Group.
We reformed the Volkswagen Group’s Occupational Health and Safety Policy in fiscal year 2022. In addi-
tion to complying with legal requirements, we aim to ensure the protection and promotion of physical and
mental health, taking into account psychosocial risks and their effects. We believe in providing employees
with health care that is above the standard set by law in the country in question.
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Employee participation
Codetermination and employee participation are important pillars of our human resources strategy. Volks-
wagen aims to promote high levels of expertise and a strong sense of team spirit. This includes employees’
opinions, assessments and criticism being heard.
We brief our employees extensively on upcoming changes so as to involve them in strategic decision-
making as early as possible. When shaping labor relations to embody cooperation and social peace, we are
guided by universal human rights and the standards of the International Labour Organization (ILO). Build-
ing on these principles, we have agreed various charters and declarations with the European and Global
Group Works Council which set out the principles of labor policy in the Volkswagen Group as well as
employee rights.
Employee participation in the Company’s success through the issuance of treasury shares in the form of
an employee share program is not currently offered.
By means of the opinion survey (Stimmungsbarometer), the Company regularly gathers information
regarding employee satisfaction and also surveys employees on our corporate culture. Based on the results,
follow-up processes are implemented in which measures are developed and executed. The 2022 opinion
survey covered 159 companies in 49 countries. Of the 614,142 employees in the companies surveyed,
475,778 participated. This was a participation rate of 77%. The sentiment rating calculated from 22 ques-
tions is the main parameter of the opinion survey and is used to help determine Board of Management
remuneration, among other things. It is calculated from the total of all the related answers in the survey
and, in 2022, stood at 82.4 out of a possible total of 100 index points. The score achieved in 2022 was thus
just above the previous year’s figure, which amounted to 82.3 points.
In addition, we also encourage employee involvement by means of Idea Management. Employees have
the opportunity to put their creativity and knowledge to use by contributing their ideas for making
improvements, thus contributing to streamlining workflows, further enhancing ergonomics in the work-
place, reducing costs and continuously increasing efficiency. The system also provides monetary incentives
by offering set rewards.
I N FORMATION TECH NOLOGY (IT)

The NEW AUTO strategy is playing a substantial role in driving the Volkswagen Group's transformation into
a software-oriented provider of sustainable mobility. We see technology and data competence, both in the
vehicle and within the Group, as the key to this. Digitalized supply chains, automated production processes,
data-driven sustainability and a seamless customer experience are examples of how innovative IT is the
driving force behind the future of mobility. Against this backdrop, the Volkswagen Group established the IT
Board position at the beginning of 2022. Based on an in-depth review of the situation, we defined the vision
for the NEW IT functional area strategy, which focuses on the following topics:
> Delivering highly automated enterprise processes and systems by means of a high-performance IT
infrastructure with a cost-effective cloud-first approach that is designed to be resilient to cyber threats
and ensure data protection.
> Through agile development the customer-centric development of IT products and digital services with a
short time to market will facilitate continuous improvement and refinement.
> The systematic use and provision of data across the entire organization to optimize products, processes
and corporate governance. Data is set to become a value driver for innovations, new business models,
personalized customer contact and better corporate management across all brands and companies.
The new strategy NEW IT is intended to gear the IT and data organization to the requirements of the
coming years, thus making a systematic contribution to the strategic direction of the Volkswagen Group. By
forging ties between the Group Board of Management IT division and the chief information officers (CIOs)
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of the Volume, Sport & Luxury and Premium brand groups plus Volkswagen Financial Services AG, we aim
to ensure a uniform, strategic focus and to help promote the leveraging of synergies and economies of
scale. Systematic identification and Group-wide sharing of use cases will enable effective knowledge
transfer within the Group, conserve resources and result in greater speed and efficiency. Due to the global
spread of the Covid-19 pandemic, we had already taken extended measures in previous years to protect the
workforce, such as increasing the use of remote working. In this context, the availability of the IT infra-
structure for all brands and companies is a high priority. The provision of state-of-the-art IT applications for
digital collaboration and the expansion of options for conducting business on mobile devices are designed
to improve productivity in the long term. Building on the rollout of Microsoft 365, additional functions for
simple, digital collaboration throughout the Group were implemented in 2022.
Software development
Group IT has the expertise to swiftly develop software and IT solutions for the Group based on the Group's
needs. Part of this development work takes place in the Software Development Centers (SDCs) around the
world. The strategic goal is to safeguard and successively increase the proportion of in-house services
relating to software products for the business processes.
The optimization of processes and the definition of standards for software development remain at the
forefront of our activities. Among other things, this entails international, data-driven management of
activities in the SDCs, strategic alignment of the business-critical enterprise systems in accordance with
NEW IT and safeguarding intellectual property in the form of software product source codes.
Use of digitalization and IT solutions

At Volkswagen, the Board of Management continuously monitors and supports the digital transformation.
The Group Board of Management Committee for Digital Transformation addresses the digital transfor-
mation of business processes across brands and business units in the Volkswagen Group. It manages the
Group’s IT project portfolio, supports the digital cultural change as well as innovations and fosters
synergies from the digital transformation between the Group and the brands.
Volkswagen embraces digitalization in the Company; its in-house Software Innovation Centers (SICs) are
just one example of this. They act as centers of innovation and expertise, piloting new technologies with
their know-how to fulfill the requirements of the different business areas in the Group, developing
applications relevant for the Company and making these available for productive use within the organi-
zation. Here, Group IT, research institutes, educational institutions (such as universities), technology
partners and policymakers work closely together on future trends in information technology. The SICs also
use their network with start-ups to adapt innovative solutions to Volkswagen’s needs. This allows the
experience and strategic expertise of a large company like Volkswagen to be combined with the pragma-
tism, the innovative ideas for new areas of business and the speed of young start-ups.
Highly specialized experts at the SICs in Munich and Wolfsburg are working, for example, on exploiting
the potential of quantum computing for areas that have a commercial application. The focus here is on the
optimization of traffic flows, such as ride pooling (a transport service for several passengers taking a similar
route) and optimizing the order of individual steps in a process (for example a painting sequence) to reduce
production times and improve the use of resources. Volkswagen is also investigating the optimization of
the chemical composition of batteries through the use of quantum computing.
In the field of machine learning, work is being carried out on smart management of energy use to gen-
erate sustainable savings, for example in compressed air control systems. Artificial intelligence methods
are being used in quality assurance too; for instance, audio analyses to support the quality assurance
process in transmission manufacturing.
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In addition, the SICs are used to transfer knowledge throughout the entire Company on topics such as
advanced data analytics (process for the systematic analysis of data in electronic form) and block chain
(distributed ledger technologies) to make these new technologies available to the Group. Advanced data
analytics are helping to optimize the storage of replacement parts in the after-sales business, for example.
Likewise, numerous bot projects are being implemented to automate business processes (robotic process
automation).
Production processes are also safeguarded by artificial intelligence and camera systems (computer
vision). The systems and equipment in the factories are linked together in an integrated overall system. In
conjunction with the different departments, Group IT is also contributing its expertise to the field of
research and development, one example being EU projects. For instance, digitalized work tools such as the
“virtual concept vehicle” make the product development process faster and more efficient by replacing
physical components with virtual components generated on the computer, among other things.
IT security
Safeguarding data and information throughout the Volkswagen Group worldwide is one of the main tasks
of IT and was continued in fiscal year 2022 with the Group Information Security Program. The objective of
the program is to create uniform processes and solutions across the Group to further enhance information
security. The main focus is on topics that could one day pose information security risks for the Group and
that need to be specially safeguarded as part of the Group’s digital transformation strategy, including cloud
security and industrial cybersecurity. The program’s content and orientation are reviewed annually and
updated if necessary.
We are one of the first vehicle manufacturers to require our suppliers to have passed TISAX (Trusted
Information Security Assessment Exchange) certification. This sends out a strong signal regarding the
security of cross-company information and data. TISAX certification is an assessment method developed
by the German Association of the Automotive Industry and is based on the international industry standard
and the requirements of the automotive world. The aim is for sensitive data and information to be dealt
with securely by our suppliers. CAR2X technology offers our customers protection by warning them, for
example, of traffic hazards. CAR2X technology enables direct communication from vehicle to vehicle and
from the vehicle to the transport infrastructure. This TÜV-certified technology, implemented in accordance
with European standards, has already been installed in over 700,000 vehicles, which should increase the
level of safety for our customers.
The task of automotive cybersecurity is to avert cyber attacks on our vehicles throughout the entire
product life cycle, as well as on the digital vehicle ecosystem. The Group policies in the Volkswagen Group
based on the legal requirements of the UNECE (United Nations Economic Commission for Europe) regu-
lation have been implemented. Brand-specific organizational guidelines are being specified and imple-
mented on this basis, taking the organizational circumstances into account.
The Protected Customer program addresses the requirements of the UNECE regulation. To protect our
customers against cyber attacks, and to implement our solutions in conformity with national and inter-
national legislation, we are establishing integrated, cross-brand, cross-regional security management
systems for information and cybersecurity. These were validated through UNECE CSMS certification in
2021. Safeguarding of the complete life cycle of our vehicles and digital mobility services was transferred to
standard operations after the program ended in 2021, where it continues to be pursued.
Key central information security processes have been audited in line with the international ISO 27001
framework and were recertified in 2022. This is the most important cross-sectoral standard for information
security and is our basis for building an appropriate information security management system for
handling all sensitive information in the Group.
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In recent years, the introduction of the data protection management system and the data protection
management organization has thus established the infrastructure for implementing and complying with
data protection requirements at Volkswagen AG in the long term. Increasing digitalization and intercon-
nectedness of business processes, new legislation in the planning with data protection relevance and the
sharp rise in the extent of international data protection legislation continue to require a high level of
attention if ongoing compliance with data protection requirements is to be ensured. Continuously raising
awareness among the workforce and further standardizing and automating processes remain the focus of
activities. Compliance requirements are already being integrated into the design of IT solutions and
infrastructure decisions.
SEPARATE NON FI NANCIAL GROUP REPORT

The combined separate nonfinancial report of Volkswagen AG and the Volkswagen Group in accordance with
sections 289b and 315b of the Handelsgesetzbuch (HGB – German Commercial Code) for fiscal year 2022 will
be available on the website https://www.volkswagenag.com/presence/nachhaltigkeit/documents/sustain-
ability-report/2022/Nichtfinanzieller_Bericht_2022_d.pdf in German and at https://www.volkswagenag.com/
presence/nachhaltigkeit/documents/sustainability-report/2022/Nonfinancial_Report_2022_e.pdf in English
by no later than April 30, 2023.
REPORT ON POST BALANCE SH EET DATE EVENTS

There were no significant events after the end of fiscal year 2022.
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Group Management Report EU Taxonomy
EU Taxonomy
Doing business in an environmentally sustainable way is one of the central challenges of our time.
The EU has defined criteria for determining the degree of a company's environmental
sustainability. With our taxonomy-aligned investments in development activities and in property,
plant and equipment, we are today already shaping the future in an environmentally sustainable
way as envisaged by the EU Taxonomy.
BACKGROUN D AN D OBJ ECTIVES

As part of the European Green Deal, the European Union (EU) has placed the topics of climate protection,
the environment and sustainability at the heart of its political agenda in order to achieve climate neutrality
by the year 2050. The finance sector is expected to make an important contribution to realizing this objec-
tive. In this context, the EU published the “Strategy for Financing the Transition to a Sustainable Economy”
in 2021. Aimed at supporting the financing of the transition to a sustainable economy, the published
strategy contains proposals relating to transition finance, inclusiveness, resilience and contribution of the
financial system, and global ambition. It is based on the EU’s action plan on Financing Sustainable Growth
of 2018. In addition to “Disclosures” and “Tools”, another key module is the EU Taxonomy (Regulation (EU)
2020/852 and associated delegated acts).
The EU Taxonomy is a classification system for sustainable economic activities. An economic activity is
considered taxonomy-eligible if it is listed in the EU Taxonomy and can therefore potentially contribute to
realizing at least one of the following six environmental objectives:
> Climate change mitigation
> Climate change adaptation
> Sustainable use and protection of water and marine resources

> Transition to a circular economy
> Pollution prevention and control
> Protection and restoration of biodiversity and ecosystems.

An activity is only considered environmentally sustainable, i.e. taxonomy-aligned, if it meets all three of
the following conditions:
> The activity makes a substantial contribution to one of the environmental objectives by meeting the
screening criteria defined for this economic activity, e.g. level of CO2 emissions for the climate change
mitigation environmental objective.
> The activity meets the Do-No-Significant-Harm (DNSH) criteria defined for this economic activity. These
are designed to prevent significant harm to one or more of the other environmental objectives, e.g. from
the production process or by the product.
> The activity is carried out in compliance with the minimum safeguards, which apply to all economic
activities and relate primarily to human rights and social and labor standards.
206
The Volkswagen Group supports the EU’s overarching goal. We are committed to the Paris Climate Agree-
ment and align our own activities with the 1.5 degree goal. We aim to achieve net carbon neutrality by 2050.
REPORTI NG FOR FISCAL YEAR 2022

Under the EU Taxonomy, the Volkswagen Group is required to report on the climate change mitigation and
climate change adaptation environmental objectives for fiscal year 2022; the EU has not yet defined the
disclosure requirements for the other four environmental objectives. The figures reported on sales revenue,
capital expenditure and operating expenditure relate to the companies consolidated in the Volkswagen
Group’s financial statements. Volumes and financial data for our Chinese joint ventures are therefore
excluded.
The wording and terminology used in the EU Taxonomy are still subject to some uncertainty in inter-
pretation, which could lead to changes in the reporting when it is subsequently clarified by the EU. Ulti-
mately, there is a risk that the key performance indicators presented as taxonomy-aligned would need to be
assessed differently. Our interpretation is set out below.
ECONOMIC ACTIVITI ES OF TH E VOLKSWAGEN GROUP

With the Group strategy NEW AUTO – Mobility for generations to come, we are preparing ourselves for the
global changes in mobility and thus playing a substantial role in driving Volkswagen’s transformation into
a software-oriented company. In so doing, we pay particular attention to the use of resources and the
emissions of our product portfolio, as well as those of our sites.
The Volkswagen Group’s activities in its vehicle-related business with passenger cars, light commercial
vehicles, trucks, buses and motorcycles cover the development, production and sale of vehicles and extend
to our financial services and other vehicle-related products and services. Activities in these areas are suited
under the EU Taxonomy to making a substantial contribution to the environmental objective of climate
change mitigation by increasing clean or climate-neutral mobility.
The Volkswagen Group’s activities in the Power Engineering Business Area comprise the development,
design, production, sale and servicing of machinery and equipment. These activities also fall under the
environmental objective of climate change mitigation.
An analysis of our economic activities in the context of the EU Taxonomy has not revealed any activities
that contribute specifically to the environmental objective of climate change adaptation.
The table below sets out the allocation of our activities in the vehicle-related business and in Power
Engineering to the economic activities listed in the EU Taxonomy under the environmental objective of
climate change mitigation. Changes may be made to the economic activities in future as the rules around
the EU Taxonomy dynamically evolve.
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Economic activity in accordance with the EU Taxonomy Description of economic activity Allocation in the Volkswagen Group
Environmental objective: climate change mitigation

3. Manufacturing
3.2 Manufacture of equipment for the production Manufacture of equipment for the production and Power Engineering
and use of hydrogen use of hydrogen.
3.3 Manufacture of low-carbon technologies for Manufacture, repair, maintenance, retrofitting, Vehicle-related business
transport repurposing and upgrade of low-carbon vehicles,
rolling stock and vessels.
3.6 Manufacture of other low-carbon technologies Manufacture of technologies aimed at substantial Power Engineering
greenhouse gas emission reductions in other
sectors of the economy, where those technologies
are not covered by other economic activities in the
manufacturing sector.
9. Professional, scientific and technical activities
9.1 Close to market research, development and Research, applied research and experimental Power Engineering
innovation development of solutions, processes, technologies,
business models and other products dedicated to
the reduction, avoidance or removal of greenhouse
gas emissions for which the ability to reduce,
remove or avoid greenhouse gas emissions in the
target economic activities has at least been
demonstrated in a relevant environment,
corresponding to at least Technology Readiness
Level 6.
Economic activities in vehicle-related business

Economic activity 3.3 Manufacture of low-carbon technologies for transport
We allocate all activities in our vehicle-related business associated with the development, production, sale
(including financial services), operation and servicing of vehicles to this economic activity. This includes all
passenger cars, light commercial vehicles, trucks, buses and motorcycles manufactured by us, irrespective
of their powertrain technology, and also includes genuine parts.
In our vehicle-related business, we have detailed the vehicles manufactured by us by model and power-
train technology and analyzed the CO2 emissions associated with them in accordance with the current
regulations. In this way, we have identified those vehicles among all of our taxonomy-eligible vehicles that
meet the screening criteria and with which the substantial contribution to climate change mitigation is
measured. These include all of the Volkswagen Group’s all-electric vehicles. Until December 31, 2025, they
also include passenger cars and light commercial vehicles with CO2 emissions of less than 50 g/km in accor-
dance with the WLTP. This encompasses the majority of our plug-in hybrids. Buses meeting the EURO VI
standard (Stage E) were also included until December 31, 2022.
At this stage, other activities that are directly associated with the primary vehicle-related business and
that in our view should also be allocated to this economic activity have not yet been included or have been
interpreted as not yet being taxonomy-eligible. This is because, as the rules of the EU Taxonomy currently
stand, it is still unclear where to record them in accordance with the EU Taxonomy. These activities
particularly include the sale of engines and powertrains, as well as parts deliveries, the sale of non-Group
products and production under license by third parties. Based on current assumptions, hedging trans-
actions and individual activities that we present primarily under Other sales revenue in the consolidated
financial statements cannot be classified as economic activities under the EU Taxonomy, and we have
therefore initially classified them as not being taxonomy-eligible.
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Economic activities in Power Engineering

In the Power Engineering Business Area, we have analyzed our activities with respect to their classification
under the EU Taxonomy and, with the exception of the heavy fuel oil engine new building business and
individual components for the extraction and processing of fossil fuels, have identified them as taxonomy-
eligible.
Economic activity 3.2 Manufacture of equipment for the production and use of hydrogen
Our activities relating to the manufacture of equipment for the production and use of hydrogen that meet
the screening criteria and make a substantial contribution to the climate change mitigation objective are
taxonomy-eligible. One example is the use of green hydrogen. At Volkswagen, the activities cover the
power-to-X technology for the production of low-carbon or carbon-neutral synthetic fuels, as well as
components for the storage of hydrogen.
Economic activity 3.6 Manufacture of other low-carbon technologies

The description of this economic activity means that only those technologies manufactured for the
purpose of reducing greenhouse gas emissions substantially in other sectors of the economy are taxon-
omy-eligible. At Volkswagen, this comprises all new-build activities that enable the use of gas and climate-
neutral synthetic fuels (e.g. manufacturing of gas and dual-fuel engines), all industrial solutions for energy
storage and sector coupling (e.g. heat pumps) and all solutions for carbon capture, storage and usage; it also
includes subsea compression (a solution close to the wellhead for the extraction of natural gas). These
activities are rounded off by the service and after-sales business, comprising the upgrading and moderni-
zation of existing equipment. For example, we retrofit existing maritime fleets with technology that makes
it possible to reduce CO2 emissions.
Economic activity 9.1 Close to market research, development and innovation

The description of this economic activity includes applied research in technologies for the reduction or
avoidance of greenhouse gas emissions. We allocate our licensing business to this economic activity. In the
course of such business we provide our development services in the form of production documents, based
on which our licensees are authorized to manufacture corresponding gas and/or dual-fuel engines.
With regard to economic activity 3.2 Manufacture of equipment for the production and use of hydrogen,
we meet the screening criteria that determine whether a substantial contribution has been made to the
mitigation of climate change. As the reporting obligations and the complex requirements specified therein,
such as for life cycle analyses, were not introduced until very recently, it has not yet been possible to
provide corresponding proof of economic activities covered by 3.6 Manufacture of other low-carbon
technologies and 9.1 Close to market research, development and innovation.
DO NO SIGN I FICANT HARM (DNSH)

The DNSH criteria were analyzed in the reporting year for economic activities covered by 3.3 Manufacture
of low-carbon technologies for transport and 3.2 Manufacture of equipment for the production and use of
hydrogen.
In the vehicle-related business, an analysis was performed for each vehicle production site where pas-
senger cars, light commercial vehicles, trucks and buses are or will be produced that meet the screening
criteria for the substantial contribution of economic activity 3.3 Manufacture of low-carbon technologies
for transport, or that are to meet them in future according to our five-year planning, and based on current
regulations. Of the approximately 40 sites included, the majority are located in the EU, with some in the
United Kingdom, Türkiye, South Africa, the USA, Mexico, Brazil, Argentina and China. In addition to these,
we also included the sites that manufacture specific components for electric vehicles.
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For the Power Engineering Business Area, an analysis was performed for each site that produces relevant
components for systems or is responsible for supply chains that meet the screening criteria for the sub-
stantial contribution of economic activity 3.2 Manufacture of equipment for the production and use of
hydrogen, or that are to meet them in future according to our five-year planning. There are three such sites
in Germany and one in Sweden.
Below, we set out our interpretation and describe the main analyses we used to examine whether there
was any significant harm to the other environmental objectives. The wording and terminology used in the
EU Taxonomy are subject to some uncertainty in interpretation and supposedly go beyond the regulations
to be applied in regular business operations. In addition, the application of the EU Taxonomy to sites
outside the EU leads to particular challenges due to the possibility of diverging legislation. We took
applicable laws as well as external and internal regulations and guidelines as the basis for our assessments,
which confirm that we meet the requirements of the DNSH criteria in the reporting period for the vehicle-
related business and the Power Engineering sites.
Climate change adaptation

We performed a climate risk and vulnerability assessment to identify which production sites may be
affected by physical climate risks. The physical climate risks we identified were assessed on the basis of the
lifetime of the relevant fixed asset.
Volkswagen’s climate-based DNSH assessment is based on Representative Concentration Pathway (RCP)
scenario 8.5 to the year 2050 and thus assumes the highest concentration of CO2 according to the
Intergovernmental Panel on Climate Change (IPCC). The relevance of the identified threats was assessed for
the local environment and, if appropriate, the measures needed to mitigate the risk were developed.
Sustainable use and protection of water and marine resources

We evaluated our economic activities with respect to the sustainable use and protection of water and
marine resources looking at the three following criteria: preserving water quality, avoiding water stress, and
an environmental compatibility assessment (EIA or comparable process). Risks identified in an EIA are
examined during the approval process and, if relevant, result in measures and regulatory requirements. We
based the analysis primarily on ISO 14001 certificates, information from site approvals and other external
data sources related to sites with a high risk exposure.
Transition to a circular economy

Environmentally compatible waste management in the manufacturing process, reuse and use of secondary
raw materials and a long product lifespan are a major part of Volkswagen’s environmental management
system. Volkswagen defines clear and unambiguous guidelines on the circular economy in its environ-
mental principles, in its overall factory white paper and in its goTOzero strategy.
The product-related requirements for passenger cars and light commercial vehicles are taken into
account through implementation of the statutory end-of-life vehicle requirements in conjunction with the
type approval of the vehicle models. In addition to this, each brand has targets and measures for the use of
recycled materials in new vehicles.
For trucks and buses, a review was conducted at the level of each brand to establish the extent to which
local legislation or internal rules and regulations cover the specific requirements.
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Pollution prevention and control

To be considered environmentally sustainable, an economic activity must not significantly increase air,
water or soil pollutant emissions as compared with the situation before the activity started. The DNSH
criteria for this environmental objective require that the economic activity in question does not lead to the
manufacture, distribution or use of substances listed in a variety of EU chemical regulations and directives
or product-specific rules and regulations. In this context, we also consider the use of alternative substances
in our analyses and assessments. Overall, the automotive sector is tightly regulated already, as demon-
strated, for example, by the publicly accessible Global Automotive Declarable Substance List (GADSL).
Approval and monitoring processes have been implemented with the aim of ensuring compliance with the
legal requirements and internal rules and regulations applicable to regular business operations. This also
ensures compliance with the legislation specified in the DNSH criteria. For this purpose, we applied the
requirements applicable to regular business operations in the European Union in 2022. Outside of the EU
we applied the regulations specific to the country in question.
Protection and restoration of biodiversity and ecosystems

In order to verify adherence to the requirements on biodiversity and ecosystems, the relevant areas were
identified. Where biodiversity-sensitive areas are located close to a production site, we checked whether a
nature conservation assessment had been performed and whether nature conservation measures had been
defined in the environmental approvals and subsequently implemented. We also checked whether changes
had occurred in an area’s conservation status.
MI N IMUM SAFEGUARDS
The minimum safeguards consist of the OECD Guidelines for Multinational Enterprises, the United Nations
Guiding Principles on Business and Human Rights, the Fundamental Conventions of the International
Labour Organization (ILO) and the International Bill of Human Rights.
The Volkswagen Group accepts its corporate responsibility for human rights, fully recognizes these con-
ventions and declarations and reaffirms its agreement with the contents and principles stated therein.
Below, we describe the main analyses we used to examine whether the minimum safeguards are
adhered to.
The Volkswagen Group has conducted and completed human rights risk assessments for 802 controlled
Group companies worldwide; this includes all sites that were also examined under the DNSH criteria. This
risk analysis takes into account the prior-year results and risk assessments. The companies were given risk-
specific measures to counteract the risks identified in the analysis, and were required to implement these.
The status of implementation of the respective measures is continuously monitored by the Group.
Relationships with our business partners are based on the Code of Conduct for Business Partners. We
review compliance with the binding requirements defined in the Code, using sustainability ratings for
relevant suppliers. We address existing sustainability risks and violations of sustainability principles by
systematically defining and implementing measures to correct the violations; this also includes the
upstream supply chain. We implemented a Human-Rights-Focus-System in 2022 to comply with inter-
national frameworks and requirements and specifically the Lieferkettensorgfaltspflichtengesetz (LkSG –
German Supply Chain Due Diligence Act). The system aims to identify particularly high risks in our supply
chain in connection with human rights violations and the environment and to manage these appropriately.
The assessments confirm that we meet the requirements of the minimum safeguards in the reporting
year.
211
KEY PERFORMANCE I N DICATORS I N ACCORDANCE WITH TH E EU TAXONOMY REGULATION

The EU Taxonomy defines sales revenue, capital expenditure and operating expenditure as the key per-
formance indicators that must be reported on. We explain these below. The tables required by the EU
Taxonomy are included at the end of the section.
The financial figures relevant for the Volkswagen Group are taken from the IFRS consolidated financial
statements for fiscal year 2022. As we differentiate between economic activities, we have avoided double
counting. Where possible, the figures have been directly allocated to an economic activity. In our vehicle-
related business, for example, we compiled the financial figures based on the vehicle model and powertrain
technology. This applies both to the vehicles themselves and to the corresponding financial services and
other services and activities. Only where this was not possible for capital expenditure and operating expen-
diture were allocation formulas used based on the planned vehicle volumes. In the Power Engineering
Business Area, we used allocation formulas based on planned sales revenue. This data and planning form
part of the medium-term financial planning for the next five years on which the Board of Management and
Supervisory Board have passed a resolution.
Sales revenue
The definition of turnover in the EU Taxonomy corresponds to sales revenue as reported in the IFRS con-
solidated financial statements. This amounted to €279.2 billion in fiscal year 2022 (see also note on “Sales
revenue” in the notes to the consolidated financial statements).
Of this total, €254.5 billion, or 91.1% of Group sales, was attributable to economic activity 3.3 Manufacture
of low-carbon technologies for transport, and was classified as taxonomy-eligible. This includes sales
revenue after sales allowances from the sale of new and used vehicles, including motorcycles, from genuine
parts, from the rental and lease business, and from interest and similar income, as well as sales revenue
directly related to the vehicles, such as workshop and other services.
Of the taxonomy-eligible sales revenue, €26.1 billion meet the screening criteria used to measure the
substantial contribution to climate change mitigation. This includes all of our all-electric vehicles, the
majority of the plug-in hybrids, and the buses meeting the EURO VI standard (Stage E). In 2022, there were
596 thousand such vehicles, 6.5% more than in the previous year. Their share of the relevant sales volume –
excluding the vehicles from the Chinese joint ventures – rose to 11.1 (10.1) %. Passenger cars and light
commercial vehicles made up the bulk at 594 thousand vehicles; trucks and buses recorded a nine-fold
increase year-on-year. Sales of all-electric vehicles were up significantly.
Taking into account the DNSH criteria and minimum safeguards, €26.1 (21.1) billion of the sales revenue
generated from our vehicle-related business, equating to 9.4 (8.5) % of consolidated sales revenue, was
taxonomy-aligned. Of this amount, €19.6 billion, or 7.0% of consolidated sales revenue, was attributable to
our all-electric models (BEVs). In 2022, compliance with the DNSH criteria was also demonstrated for truck
and bus sites.
In the Power Engineering Business Area, the majority of our taxonomy-eligible sales revenue was attri-
butable to economic activity 3.6 Manufacture of other low-carbon technologies (€2.5 billion). A further
€35 million was contributed by economic activity 9.1 Close to market research, development and innova-
tion. Our activities that fall under economic activity 3.2 Manufacture of equipment for the production and
use of hydrogen generated taxonomy-aligned sales revenue of €18 (5) million, taking into account the
DNSH criteria and minimum safeguards. The increase in taxonomy-aligned sales revenue is attributable to
the expansion of business and above all to the initial consolidation of H-TEC SYSTEMS GmbH.
212
Of the Volkswagen Group’s total sales revenue in fiscal year 2022,

> €257.0 (227.8) billion, or 92.1 (91.0) %, was taxonomy-eligible sales revenue and
> €26.1 (21.2) billion, or 9.4 (8.5) %, was taxonomy-aligned sales revenue.
SALES REVEN UE 2022
SUBSTANTIAL COMPLIANCE COMPLIANCE

CONTRIBUTION TO WITH WITH
CLIMATE CHANGE DNSH MINIMUM TAXONOMY-ALIGNED
SALES REVENUE MITIGATION CRITERIA SAFEGUARDS SALES REVENUE
Economic activities € million %1 € million %1 Y/N Y/N € million %1
A. Taxonomy-eligible activities 257,043 92.1 26,145 9.4 Y Y 26,145 9.4

Vehicle-related business
3.3 Manufacture of low-carbon
technologies for transport 254,502 91.1 26,128 9.4 Y Y 26,128 9.4
of which taxonomy-aligned BEVs Y Y 19,589 7.0
Power Engineering
3.2 Manufacture of equipment for the
production and use of hydrogen 18 0.0 18 0.0 Y Y 18 0.0
3.6 Manufacture of other low-carbon
technologies 2,488 0.9 - - - - - -
9.1 Close to market research,
development and innovation 35 0.0 - - - - - -
B. Taxonomy-non-eligible activities 22,189 7.9
Total (A + B) 279,232
1 All percentages relate to the Group’s total sales revenue.
213
Capital expenditure
Capital expenditure for the purposes of the EU Taxonomy refers to the following items in the IFRS consoli-
dated financial statements: additions to intangible assets, additions to property, plant and equipment, and
additions to lease assets and investment property. These are reported in the notes to the 2022 consolidated
financial statements in the notes on “Intangible assets”, “Property, plant and equipment” and “Lease assets
and investment property”. Additions from business combinations, each of which is reported under
“Changes in consolidated Group”, are also included. By contrast, additions to goodwill are not included in
the calculation.
In fiscal year 2022, additions in the Volkswagen Group as defined above amounted to
> €11.7 billion from intangible assets,
> €12.9 billion from property, plant and equipment and
> €24.1 billion from lease assets (mainly vehicle leasing business) and investment property.
Other additions to be included resulted from changes in the consolidated Group, amounting to €0.4 billion
in fiscal year 2022. Total capital expenditure to be included in accordance with the EU Taxonomy therefore
came to €49.1 billion.
All capital expenditure attributable to our vehicle-related business is associated with economic activity 3.3
Manufacture of low-carbon technologies for transport. Taxonomy-eligible capital expenditure for the
vehicle-related business amounted to €48.8 billion, or 99.4% of the Group’s capital expenditure.
To determine the substantial contribution in the vehicle-related business, we compiled the financial
figures based on the vehicle model and powertrain technology in the same way as for sales revenue. Where
possible, capital expenditure was directly attributed to vehicles. It was included if the vehicles in question
make a substantial contribution to the climate change mitigation objective. Any capital expenditure directly
attributable to vehicles that do not meet the screening criteria was not included. Capital expenditure that
was not clearly attributable to a particular vehicle was taken into account on a proportionate basis using
allocation formulas. In our vehicle-related business, we developed allocation formulas based on planned
vehicle volumes for the Group companies. In the sales companies, for example, we used allocation formulas
related either to individual vehicle brands or to all vehicle brands, depending on the primary business
activity, while site-based allocation formulas were used for production companies. This means that capital
expenditure was counted in full via the allocation formulas for sites that according to our medium-term
planning will only produce vehicles meeting the screening criteria for the substantial contribution in the
next five years. In contrast, capital expenditure on sites that only produce vehicles not meeting the
screening criteria was not counted under the allocation formula. Calculated in this way, capital expenditure
relating to vehicles that meet the screening criteria for the substantial contribution amounted to
€16.9 billion.
Taking into account the DNSH criteria and minimum safeguards, capital expenditure of €16.9 (14.2) bil-
lion was taxonomy-aligned. This represented 34.5 (26.2) % of the Group’s total capital expenditure. Of this
figure, €5.8 billion was attributable to intangible assets, €5.7 billion to property, plant and equipment and
€5.4 billion to lease assets and investment property. The figure includes additions to capitalized
development costs of €4.4 billion and additions to property, plant and equipment of €5.4 billion for our all-
electric vehicles (BEVs). The increase in taxonomy-aligned capital expenditure – both the absolute value
and the proportion – is attributable to the growing number of environmentally sustainable vehicle projects
under the EU Taxonomy.
214
In the reporting period, we refinanced taxonomy-aligned capital expenditure from fiscal year 2021 based
on the Green Finance Framework updated in October 2022 by issuing green bonds in the amount of
€2.5 billion. Only capital expenditure in connection with all-electric vehicles was included here.
Also in 2022, Scania issued a green bond totaling SEK3.0 billion to finance research and development
activities relating to battery-electric vehicles. €178 million of this total was used in the year under review
already, of which €98 million was attributable to taxonomy-aligned capital expenditure. Adjusted for this
figure, taxonomy-aligned capital expenditure attributable to the vehicle-related business accounted for
34.3% of total capital expenditure in accordance with the EU Taxonomy.
€27 million of the taxonomy-eligible capital expenditure in the Power Engineering Business Area is attri-
butable to economic activity 3.2 Manufacture of equipment for the production and use of hydrogen and
€60 million is attributable to economic activity 3.6 Manufacture of other low-carbon technologies. For the
latter, operating expenditure was broken down based on planned sales revenue.
Taxonomy-aligned capital expenditure for the manufacture of equipment for the production and use of
hydrogen was disclosed for the first time in the amount of €27 million, almost two thirds of which was
attributable to intangible assets and around one third to property, plant and equipment. The expenditure
relates predominantly to the initial consolidation of H-TEC SYSTEMS GmbH.
Of the Volkswagen Group’s total capital expenditure in fiscal year 2022,

> €48.9 (53.6) billion, or 99.6 (99.2) %, was taxonomy-eligible capital expenditure and
> €16.9 (14.2) billion, or 34.5 (26.2) %, was taxonomy-aligned capital expenditure.
CAPITAL EXPEN DITU RE 2022

CAPITAL EXPENDITURE MITIGATION CRITERIA SAFEGUARDS CAPITAL EXPENDITURE

of which additions to capitalized
development costs for BEVs Y Y 4,415 9.0
of which additions to property, plant
and equipment for BEVs Y Y 5,398 11.0
Power Engineering
technologies 60 0.1 - - - - - -
development and innovation - - - - - - - -
B. Taxonomy-non-eligible activities 205 0.4
Total (A + B) 49,078
1 All percentages relate to the Group’s total capital expenditure.
215
Operating expenditure
The operating expenditure reported by us for the purposes of the EU Taxonomy comprises non-capitalized
research and development costs, which can be taken from the note on “Intangible assets”. We also include
the expenditure for short-term leases recognized in our consolidated financial statements, which can be
found in the note on “IFRS 16 (Leases)”, and expenditure for maintenance and repairs.
The allocation of operating expenditure to the economic activities followed the same logic as that
described for capital expenditure.
All operating expenditure attributable to the vehicle-related business is associated with economic activity
3.3 Manufacture of low-carbon technologies for transport and has been classified as taxonomy-eligible.
Where possible, non-capitalized research and development costs were directly attributed to vehicles.
They were included if the vehicles in question make a substantial contribution to the climate change
mitigation objective. We did not include any non-capitalized research and development costs directly
attributable to vehicles that do not meet the screening criteria. Non-capitalized research and development
costs that were not clearly attributable to a particular vehicle were taken into account on a proportionate
basis using allocation formulas. For these and other operating expenses, allocation formulas were used,
similarly to capital expenditure. Of the taxonomy-aligned operating expenditure of €4.9 (3.3) billion, 85.8%
was attributable to non-capitalized research and development costs. The increase in taxonomy-aligned
operating expenditure – both the absolute value and the proportion – is attributable to the growing
number of environmentally sustainable vehicle projects under the EU Taxonomy.
Including the share of the bond issued by Scania attributable to taxonomy-aligned operating expen-
diture, the share of taxonomy-aligned operating expenditure declined from 42.7 (32.7) % to 42.0% of total
operating expenditure in accordance with the EU Taxonomy.
€4 million of the taxonomy-eligible operating expenditure in the Power Engineering Business Area is attri-
butable to economic activity 3.2 Manufacture of equipment for the production and use of hydrogen and
€199 million is attributable to economic activity 3.6 Manufacture of other low-carbon technologies. For the
latter, operating expenditure was broken down based on planned sales revenue.
Taxonomy-aligned operating expenditure for the manufacture of equipment for the production and use
of hydrogen was disclosed for the first time in the amount of €4 million, which was attributable to non-
capitalized research and development costs and related predominantly to the initial consolidation of
H-TEC SYSTEMS GmbH.
216
OPERATI NG EXPEN DITURE 2022

OPERATING EXPENDITURE MITIGATION CRITERIA SAFEGUARDS OPERATING EXPENDITURE

Power Engineering
technologies 199 1.7 - - - - - -
development and innovation - - - - - - - -
B. Taxonomy-non-eligible activities 131 1.1
Total (A + B) 11,525
1 All percentages relate to the Group’s total operating expenditure.
217
CAPEX PLAN UN DER TH E EU TAXONOMY

The EU Taxonomy requires the reporting to state the extent to which taxonomy-aligned capital and oper-
ating expenditures a) relate to assets or processes associated with environmentally sustainable economic
activities or b) are part of a plan to expand taxonomy-aligned economic activities or to allow taxonomy-
eligible economic activities to become taxonomy-aligned (CapEx plan). A CapEx plan under the EU Taxon-
omy shows the total capital expense, i.e. the sum of capital and operating expenditures expected to be
incurred in the reporting period and during the five-year medium-term planning to expand taxonomy-
aligned economic activities or allow taxonomy-eligible economic activities to become taxonomy-aligned.
For the vehicle-related business, the CapEx plan drawn up under the EU Taxonomy relates to economic
activity 3.3 Manufacture of low-carbon technologies for transport within the climate change mitigation
environmental objective.
Additions from lease assets (mainly vehicle leasing business) are based on existing environmentally
sustainable activities and have therefore not been included in the CapEx plan. We allocated additions from
intangible assets and property, plant and equipment as well as non-capitalized research and development
costs to the CapEx plan if they allow taxonomy-eligible economic activities to become taxonomy-aligned or
lead to the expansion of taxonomy-aligned economic activities. For this we compared the average
taxonomy-aligned production volume from the medium-term planning with the taxonomy-aligned
vehicles from the reporting period and allocated the taxonomy-aligned capital expenditure according to
this ratio whereby we considered the share exceeding the current taxonomy-aligned production volume.
As a result, €9 billion of the taxonomy-aligned capital expenditure and €3 billion of the taxonomy-
aligned operating expenditure in the reporting period is attributable to the CapEx plan under the EU
Taxonomy. The total capital expense from the CapEx plan under the EU Taxonomy that is expected to be
incurred in the reporting period and during the five-year medium-term planning amounts to €100 billion.
In the Power Engineering Business Area, the CapEx plan under the EU Taxonomy relates to economic
activity 3.2 Manufacture of equipment for the production and use of hydrogen listed in the climate change
mitigation environmental objective. Based on the ratio of sales revenue in the reporting period to the
average sales revenue envisaged in the medium-term planning, we allocated €26 million of the taxonomy-
aligned capital expenditure and €4 million of the taxonomy-aligned operating expenditure to the CapEx
plan. The total capital expense from this CapEx plan under the EU Taxonomy that is expected to be incurred
in the reporting period and during the medium-term planning amounts to approximately €300 million.
218
TABU LAR PRESENTATION I N ACCORDANCE WITH TH E EU TAXONOMY
SALES REVEN UE 2022
CRITERIA FOR A SIGNIFICANT CONTRIBUTION DNSH CRITERIA (DO NO SIGNIFICANT HARM)
Absolute sales revenue
Minimum safeguards
Transition activities
Taxonomy-aligned
Taxonomy-aligned
Proportion of sales
proportion of sales
proportion of sales
Enabling activities
Circular economy2
marine resources2
Circular economy
marine resources
and ecosystems2
and ecosystems
Climate change
Climate change
Climate change
Climate change
revenue 2022
revenue 2021
Biodiversity
Biodiversity
adaptation
adaptation
mitigation
mitigation
Water and
Water and
Pollution2
Pollution
category
category
revenue
Code(s)
Economic activities € (m) %1 %1 %1 %1 %1 %1 %1 Y/N Y/N Y/N Y/N Y/N Y/N Y/N %1 %1 E T
A. Taxonomy-eligible activities
A.1 Environmentally sustainable activities (taxonomy-

aligned)
Manufacture of low-carbon technologies for transport 3.3 26,128 9.4 9.4 - - - - - Y Y Y Y Y Y 9.4 8.5 E
Manufacture of equipment for the production and use of

hydrogen 3.2 18 0.0 0.0 - - - - - Y Y Y Y Y Y 0.0 0.0 E
Sales revenue from environmentally sustainable activities
(taxonomy-aligned) (A.1) 26,145 9.4 9.4 - - - - - 9.4 8.5
A.2 Taxonomy-eligible but not environmentally sustainable

activities (not taxonomy-aligned activities)
Manufacture of low-carbon technologies for transport 3.3 228,374 81.8
Manufacture of other low-carbon technologies 3.6 2,488 0.9
Close to market research, development and innovation 9.1 35 0.0
Sales revenue from taxonomy-eligible but not

environmentally sustainable activities (not taxonomy-
aligned activities) (A.2) 230,898 82.7
Total (A.1 + A.2) 257,043 92.1
B. Taxonomy-non-eligible activities
Sales revenue from taxonomy-non-eligible activities (B) 22,189 7.9
Total (A + B) 279,232 100.0
1 All percentages relate to the Group’s total sales revenue.

2 Criteria for a significant contribution to the environmental objective not yet defined.
219
CAPITAL EXPEN DITU RE 2022
Minimum safeguards
Proportion of capital
proportion of capital
proportion of capital
Enabling activities
Circular economy2
marine resources2
Circular economy
marine resources
Taxonomy-aligned
Taxonomy-aligned
and ecosystems2
Absolute capital
expenditure 2022
expenditure 2021
and ecosystems
Climate change
Climate change
Climate change
Climate change
expenditure
expenditure
Biodiversity
Biodiversity
adaptation
adaptation
mitigation
mitigation
Water and
Water and
Pollution2
Pollution
category
category
Code(s)

aligned)

hydrogen 3.2 27 0.1 0.1 - - - - - Y Y Y Y Y Y 0.1 - E
Capital expenditure of environmentally sustainable

activities (taxonomy-aligned) (A.1) 16,943 34.5 34.5 - - - - - 34.5 26.2

Manufacture of other low-carbon technologies 3.6 60 0.1
Close to market research, development and innovation 9.1 - -
Capital expenditure of taxonomy-eligible but not

Total (A.1 + A.2) 48,873 99.6
Capital expenditure for taxonomy-non-eligible activities (B) 205 0.4
Total (A + B) 49,078 100.0
1 All percentages relate to the Group’s total capital expenditure.

220
OPERATI NG EXPEN DITURE 2022
proportion of operating
proportion of operating
operating expenditure
Minimum safeguards
Absolute operating
Taxonomy-aligned
Taxonomy-aligned
Enabling activities
Circular economy2
marine resources2
expenditure 2022
expenditure 2021
Circular economy
marine resources
and ecosystems2
and ecosystems
Climate change
Climate change
Climate change
Climate change
Proportion of
expenditure
Biodiversity
Biodiversity
adaptation
adaptation
mitigation
mitigation
Water and
Water and
Pollution2
Pollution
category
category
Code(s)

aligned)

hydrogen 3.2 4 0.0 0.0 - - - - - Y Y Y Y Y Y 0.0 - E
Operating expenditure for environmentally sustainable

activities (taxonomy-aligned) (A.1) 4,926 42.7 42.7 - - - - - 42.7 32.7

Manufacture of other low-carbon technologies 3.6 199 1.7
Close to market research, development and innovation 9.1 - -
Operating expenditure of taxonomy-eligible but not

Total (A.1 + A.2) 11,395 98.9
Operating expenditure for taxonomy-non-eligible activities

(B) 131 1.1
Total (A + B) 11,525 100.0
1 All percentages relate to the Group’s total operating expenditure.

221
Group Management Report Report on Expected Developments
Report on Expected Developments

The global economy is expected to grow in 2023, albeit at a slower pace. Global demand
for passenger cars will probably vary from region to region and increase noticeably year-on-year.
With our brand diversity, broad product range, technologies and services, we believe we are well
prepared for the future challenges in the mobility business.
In the following, we describe the expected development of the Volkswagen Group and the general frame-
work for its business activities. Risks and opportunities that could represent a departure from the forecast
trends are presented in the Report on Risks and Opportunities.
Our assumptions are based on current estimates by third-party institutions. These include economic
research institutes, banks, multinational organizations and consulting firms.
DEVELOPMENTS I N TH E GLOBAL ECONOMY

Our planning is based on the assumption that global economic output will grow overall in 2023 albeit at a
slower pace. The persistently high inflation in many regions and the resulting restrictive monetary policy
measures taken by central banks are expected to increasingly dampen consumer spending. We continue to
believe that risks will arise from protectionist tendencies, turbulence in the financial markets and struc-
tural deficits in individual countries. In addition, growth prospects will be negatively impacted by ongoing
geopolitical tensions and conflicts, with risks continuing to arise from the Russia-Ukraine conflict. It
cannot be ruled out that risks may also arise if new variants of the SARS-CoV-2 virus occur, particularly
regional outbreaks and the associated measures. We assume that both the advanced economies and the
emerging markets will show positive momentum on average, even with below-average growth in gross
domestic product (GDP).
We also expect the global economy to recover in 2024 and continue a path of stable growth until 2027.
In Western Europe, we expect a comparatively low rate of economic growth in 2023. The relatively high
overall level of inflation, which is projected to taper off as the year goes on, poses a major challenge for
consumers and companies alike.
Likewise, we anticipate comparatively low growth rates in Central Europe in 2023 with continuous price
increases; however, economic output in Eastern Europe is not expected to recover following the slump in
the reporting period as a result of the Russia Ukraine conflict.
For Türkiye we expect positive, albeit slower growth than in the reporting period given high inflation
and a weak local currency. The South African economy will probably be characterized by political uncer-
tainty and social tensions again in 2023 resulting from high unemployment, among other factors. Here we
anticipate only slight growth.
222
Germany
We expect GDP in Germany to grow only slightly in 2023 and inflation to remain high averaged over the
year. The labor market situation is likely to see some deterioration in 2023.
North America
We anticipate only slight economic growth in the USA in 2023, accompanied by a worsening labor market
situation. The US Federal Reserve is expected to essentially end the spate of key interest rate hikes that it
began in the reporting period. Further inflationary trends will play a decisive role in possible adjustments
to the key interest rate, as will developments in the labor market and in the general economic situation.
Economic growth in Canada is also likely to be at a relatively low level, while economic output in Mexico is
expected to expand at a somewhat faster pace.
South America
In all probability, the Brazilian economy will record a slightly positive rate of growth in 2023. Economic
output in Argentina is likewise expected to see no more than a slight improvement amid continued
extremely high inflation and depreciation of the local currency.
Asia-Pacific
The Chinese economy is likely to grow at a relatively high level in 2023 after a comparatively moderate
expansion rate in the reporting period. We likewise expect a relatively high rate of positive GDP growth for
the Indian economy in 2023. A slight rise in economic output is anticipated in Japan.
TREN DS I N TH E MARKETS FOR PASSENGER CARS AN D LIGHT COMMERCIAL VEH ICLES

The trend in the automotive industry closely follows global economic developments. We assume that
competition in the international automotive markets will intensify further. Uncertainty may arise from
continued shortages of intermediates and commodities. These may be further exacerbated by the conse-
quences of the Russia-Ukraine conflict and, in particular, lead to rising prices and declining availability of
energy.
We predict that trends in the markets for passenger cars in the individual regions will be mixed in 2023.
Overall, the global volume of new car sales is expected to be noticeably higher than in the previous year. We
are forecasting growing demand for passenger cars worldwide in the period from 2024 to 2027.
Trends in the markets for light commercial vehicles in the individual regions will also be mixed; on the
whole, we expect a noticeable increase in the sales volume for 2023. For the years 2024 to 2027, we expect
demand for light commercial vehicles to increase globally.
For 2023, we anticipate that the volume of new passenger car registrations in Western Europe will be
significantly above that recorded in the reporting period. Limited vehicle availability as a result of the
shortages of intermediates and commodities may continue to weigh on the volume of new registrations.
We also predict significant growth in 2023 for the major individual markets of France, the United Kingdom,
Italy and Spain.
For light commercial vehicles, we expect the volume of new registrations in Western Europe in 2023 to
be strongly up on the previous year’s level. Limited vehicle availability as a result of the shortages of
223
intermediates and commodities may continue to weigh on the volume of new registrations. We predict a
strong increase in France, the United Kingdom and Spain, and noticeable growth in Italy.
Sales of passenger cars in 2023 are expected to significantly exceed the prior-year figures in markets in
Central and Eastern Europe – subject to the further development of the Russia-Ukraine conflict. In the
region’s principal markets, a significant to sharp rise in the number of new registrations is expected.
Registrations of light commercial vehicles in 2023 are expected to fall noticeably short of the prior-year
figures in markets in Central and Eastern Europe – subject to the further development of the Russia-Ukraine
conflict.
The volume of new registrations for passenger cars in Türkiye in 2023 is projected to be significantly
above the previous year’s level. In South Africa, the market volume in 2023 is likely to be up slightly year-
on-year.
The volume of new registrations for light commercial vehicles in 2023 is expected to be noticeably
higher in Türkiye and significantly higher in South Africa compared with the respective prior-year figure.
Germany
In the German passenger car market, we expect the volume of new registrations in 2023 to noticeably
exceed the prior-year figure.
We anticipate that the number of registrations of light commercial vehicles will be very strongly up on
the previous year.
North America
The sales volume in the markets for passenger cars and light commercial vehicles (up to 6.35 tonnes) in
North America overall and in the USA in 2023 is likely to be noticeably higher than the previous year’s level.
Demand will probably remain highest for models in the SUV and pickup segments. New registrations of all-
electric vehicles are also estimated to increase at a higher-than-average rate. In Canada, too, a noticeable
increase is expected in the number of new registrations compared to the previous year. For Mexico, we
expect a slight increase in new registrations compared with the reporting period.
South America
Owing to their dependence on demand for raw materials worldwide, the South American markets for
passenger cars and light commercial vehicles are heavily influenced by developments in the global
economy. We anticipate a significant increase overall in new registrations in the South American markets in
2023 compared with the previous year. Strong growth is expected in the market volume in Brazil compared
with 2022. We anticipate that the volume of new registrations in Argentina will be significantly higher year-
on-year.
Asia-Pacific
The passenger car markets in the Asia-Pacific region are expected to be noticeably up on the prior-year level
in 2023. We estimate that the market volume in China will be slightly higher than the comparative figure
for 2022. Attractively priced entry-level models in the SUV segment in particular should still see strong
demand. The continuing parts supply shortages, possible measures to halt the spread of the SARS-CoV-2
virus and intensification of geopolitical tensions could act as a drag on demand. As long as there is no
resolution in sight, the trade dispute between China and the United States is likely to continue to weigh on
business and consumer confidence. We anticipate that the Indian market will perform slightly better than
in the previous year. Japan should see noticeable growth in market volume in 2023.
The volume of new registrations for light commercial vehicles in the Asia-Pacific region in 2023 will
probably be slightly higher than the previous year’s figure. We are likewise expecting demand in the
224
Chinese market to be slightly higher than the prior-year level. For India, we are forecasting that the volume
in 2023 will be on a level with the reporting period. In the Japanese market, we estimate that volumes will
be noticeably lower year-on-year.
TREN DS I N TH E MARKETS FOR COMMERCIAL VEH ICLES

For 2023, we expect a noticeable upwards trend in new registrations for mid-sized and heavy trucks with a
gross weight of more than six tonnes compared with the previous year, with variations from region to
region, in the markets that are relevant for the Volkswagen Group.
Noticeable market growth is expected for the 27 EU countries excluding Malta, but plus the United
Kingdom, Norway and Switzerland (EU27+ 3) because it has so far not been possible to fully satisfy the high
demand for trucks due to continuing supply bottlenecks. We anticipate that Türkiye will see a significant
drop in demand. In South Africa, we expect demand to be on a level with the previous year. The truck
market in North America is divided into weight classes 1 to 8. We expect a noticeable increase in new regis-
trations in the segments relevant for Volkswagen – Class 6 to 8 (8.85 tonnes or heavier). We estimate that
demand in Brazil will be slightly lower than in the previous year.
On average, we anticipate a slight decrease in the relevant truck markets for the years 2024 to 2027.
A significant increase in overall demand, with regional variations, is expected for 2023 in the bus markets
relevant for the Volkswagen Group. We anticipate slight year-on-year market growth in the EU27+ 3
countries. Here, we are assuming that the coach segment will recover and that we will receive orders in the
context of government-funded programs. We expect a very sharp increase in the school bus segment in the
USA and Canada. For the bus market in Mexiko, we anticipate a sharp rise. In Brazil, new registrations are
expected to decline significantly after the strong prior-year growth.
Overall, we expect a slight increase in the demand for buses in the relevant markets for the period from
2024 to 2027.
TREN DS I N TH E MARKETS FOR POWER ENGI N EERI NG

In the Power Engineering Business Area, we generally expect market conditions to remain difficult
– although we believe they will improve slightly – in 2023. The impact of the Russia-Ukraine conflict, the
trend in energy and commodity prices as well as the possible repercussions of the Covid-19 pandemic are
generating continued uncertainty in nearly all market segments.
Based on estimates of a higher volume of sea trade, combined with calls for high energy efficiency and
low pollutant emissions, the 2023 market volume in the merchant shipping segment is expected to reach a
slightly higher level than in the reporting year. The market segments excluding merchant shipping are also
expected to reach a slightly higher level than in 2022. An improvement is likewise anticipated in the cruise
ship segment as travel continues to return to normal levels. The passenger ferry sub-market is also
expected to grow slightly. We continue to anticipate a high level of stable demand for government vessels.
In the offshore sector, further new order volumes for special applications are expected, such as for special
offshore ships for wind turbines. Overall, we predict that the marine market will reach a somewhat higher
level than that seen in the reporting year, with sustained competitive pressure.
Exceedingly challenging conditions are projected for the energy generation market in 2023. The Russia-
Ukraine conflict and its impact on energy and commodity prices as well as inflation are creating continued
uncertainty, which in turn is affecting investment decisions. Dependence on Russian gas and the associated
shortages are generating increased readiness to invest in technologies that will enable medium- to long-
term autonomy. Solutions such as power-to-X and balancing facilities to support grids for renewable
energy will be essential here, leading to rising demand for these technologies going forward. Demand for
decentralized, sustainable gas power plants will continue, but with the clear requirement that these can
subsequently be retrofitted for renewable fuels. Growth in the power generation market will be driven by
renewable energy in particular. The irregularity of power produced in this way will require an increase in
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energy storage systems and control reserve facilities, which will result in a corresponding expansion of the
market for engines, turbocompressors and turboexpanders.
We are expecting a sustained high level of demand for turbomachinery in 2023 due to an investment
backlog and strong demand for raw materials amid rising prices. It is expected that the production plants of
market participants will be well utilized. This should result in a continuous relaxation of the competition
which had been intensified by the pandemic.
Both in the after-sales market for engines in the marine and power plant business, and in the after-sales
market for turbomachinery, we expect healthy demand in 2023 above the level prior to the Covid-19 pan-
demic, though the energy sector and the geopolitical situation in Eastern Europe will generate uncertainty.
For the period 2024 to 2027, we expect to see growing demand in the power engineering markets.
However, the extent and timing of this growth will vary in the individual business fields. It also remains to
be seen how long the market will be impacted by the major influential factors: the Russia-Ukraine conflict,
trends in the energy sector and the Covid-19 pandemic.
TREN DS I N TH E MARKETS FOR FI NANCIAL SERVICES

We anticipate that automotive financial services will prove highly important to global vehicle sales in 2023.
The continuing shortages of intermediates and commodities may generate uncertainty, exacerbated by the
consequences of the Russia-Ukraine conflict. Furthermore, the increased interest rates will put pressure on
the demand for financial services. We expect demand to rise in emerging markets where market
penetration has so far been low. Regions with already established automotive financial services markets
will probably see a continuation of the trend towards enabling mobility at the lowest possible total cost.
Integrated end-to-end solutions, which include mobility-related service modules such as insurance and
innovative packages of services, are likely to become increasingly important for this. Additionally, we
expect that demand will increase for new forms of mobility, such as rental and car subscription (Auto-Abo)
services, and for integrated mobility services, for example parking, refueling and charging, and that the
shift initiated in the European financial services business with individual customers from financing to
lease contracts will continue. Especially in the Chinese market, we anticipate an increase in the importance
of direct business between manufacturers and customers. The seamless integration of financial services
into the online vehicle offering will take on increasing importance in efforts to promote this type of
business. We estimate that this trend will also persist in the years 2024 to 2027.
In the mid-sized and heavy commercial vehicles category, we anticipate rising demand for financial
services products in emerging markets. In these countries in particular, financing solutions support vehicle
sales and are thus an essential component of the sales process. In the developed markets, we expect to see
increased demand for telematics services and services aimed at reducing total cost of ownership in 2023.
This trend is also expected to persist in the period 2024 to 2027.
EXCHANGE RATE TREN DS

In 2022, the euro weakened against the US dollar on an annual average. The general strength of the US
dollar benefited from expansion of the interest rate differential and the considerable uncertainty
surrounding developments in the global economy. Specific factors in the eurozone such as safeguarding the
energy supply as a consequence of the Russia-Ukraine conflict additionally weighed on the euro. The euro
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was almost unchanged against pound sterling on an annual average, partly because fiscal policy decisions
in the United Kingdom generated movement in the financial markets and caused the euro to appreciate at
the end of the year. Changes in the euro against the currencies of the emerging markets were mixed. In
particular, the Turkish lira and the Argentinian peso lost value against the European single currency. By
contrast, the Brazilian real and the Mexican peso were on average significantly stronger than the European
single currency than in the year 2021. Other currencies that appreciated against the euro year-on-year were
the Chinese renminbi along with the currencies of several emerging markets in Asia, in addition to the
South African rand. For 2023, our planning anticipates that the euro will stabilize against the US dollar and
gain slight ground against pound sterling and the Chinese renminbi. We assume that the Argentinian peso,
Brazilian real, Mexican peso, South African rand and Turkish lira will depreciate to varying degrees. For
2024 to 2027, we expect that the euro will be stable against the key currencies, while the comparative
weakness of the currencies in the aforementioned emerging markets will probably continue. However,
there is still a general event risk, defined as the risk arising from unforeseen market developments.
I NTEREST RATE TREN DS

The challenging macroeconomic situation as a consequence of the Russia-Ukraine conflict and the Covid-19
pandemic, but especially the high inflation rates, prompted a turnaround in monetary policy in many
countries, with global interest rates reaching a relatively high level in fiscal year 2022. National central
banks in nearly all of the major Western industrialized nations made corresponding adjustments to their
key interest rates to counteract the comparatively high price increases in some cases. Interest rates were
also raised in many emerging markets. The interest rate hikes by the US Federal Reserve and the European
Central Bank were more extensive and quicker than anticipated at the beginning of the year. Whether there
will be further changes in key interest rates in 2023 in the respective countries will depend firstly on further
inflationary trends and secondly on the severity of a possible economic downturn. Overall, we expect
interest rates to remain relatively high in 2023. For the years 2024 to 2027, we estimate that interest rates
will persist at a relatively high level.
COMMODITY PRICE TREN DS

In the commodity markets, the Russia-Ukraine conflict was one of the contributory factors to in some cases
significant price increases particularly during the first four months, while over the rest of the year the
dampened global economic outlook put pressure on prices. As a consequence of the resulting imbalance
between supply and demand, the increase in the price of many commodities and input materials during
2022 was comparatively high. In particular, energy prices in Europe recorded a sharp rise, due mainly to the
high dependence of some European countries on Russian gas but also as a result of regional extreme
weather in the summer months. Compared with the previous year as a whole, there was also a rise in the
average prices of the commodities lithium, coking coal, crude oil, nickel, cobalt and aluminum. Exchange
rate effects played a role in some cases, leading average euro prices for natural rubber, lead and copper to
rise, while the price in US dollars fell somewhat. The price of the precious metals rhodium, palladium and
platinum decreased on average over the year. Particularly given the continued uncertainty about future
trends in the global economy, we expect the prices of many commodities to fall in 2023 with only isolated
price rises. For 2024 to 2027, we expect the prices of most commodities to decline compared with 2023.
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N EW MODELS I N 2023
The Volkswagen Passenger Cars brand will conduct a product initiative focused on all-electric vehicles in
2023. The ID.3 will be significantly enhanced and the ID.7 saloon will be rolled out simultaneously in
Europe and China. The T-Cross and Touareg SUVs, which feature conventional drive systems, will receive
technology and design updates. In China, Volkswagen will bring out a new notchback entry-level model
powered by a combustion engine. The Track, a particularly attractive entry-level model from the important
Polo series, will be launched in Brazil. A GTS model will round off the series at the upper end of the scale.
The Audi brand will update its top-of-the-range Q8 model. The all-electric Q8 e-tron and Q8 Sportback
e-tron will be upgraded with cutting-edge technology and will have even more range.
Lamborghini will roll out the newly designed successor to the Aventador in 2023.
Porsche will present a completely new variant from its 911 family in 2023. The Cayenne series will be
extensively updated.
The TRATON GROUP will drive e-mobility further, with Scania rolling out all-electric solutions for regional
distribution transport in 2023.
MAN will enhance its truck range in 2023 in terms of fuel consumption, driver assistance systems and
connectivity. In the bus segment, MAN is preparing for the launch of the Lion’s Chassis E on international
markets.
Navistar will be the second brand of the TRATON GROUP to introduce the integrated 13-liter powertrain.
Volkswagen Truck & Bus will adjust its Delivery, Constellation and Meteor models to comply with the
new emissions legislation in Brazil.
Ducati will redesign the popular Scrambler family from the ground up, launching the new generation of
the Icon, Nightshift and Full Throttle models in 2023. The Multistrada V4 Rally will expand the Multistrada
family and the Ducati Diavel will be available as a V4. The Monster SP, Panigale V4 R and new versions of the
Streetfighter V4 will further supplement Ducati’s product range.
I NVESTMENT AN D FI NANCIAL PLAN N I NG

To meet people’s needs for individual, sustainable, fully connected mobility and thus increase the Volks-
wagen 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 lever-
aging 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 tool-
kits, 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 develop-
ment 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 %.
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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 stan-
dardized 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 facto-
ries, 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.
TARGETS FOR VALU E-BASED MANAGEMENT

Based on long-term interest rates derived from the capital market and the target capital structure (fair value
of equity to debt = 2:1), the minimum required rate of return on invested capital defined for the Auto-
motive Division remains unchanged at 9%.
Despite continuing bottlenecks in the supply of parts, including as a consequence of the Russia-Ukraine
conflict and the resulting gloomier economic outlook, the ROI was 12.0 (10.4)% in the reporting period. Due
to earnings-related reasons, this exceeded both the prior-year figure and our minimum required rate of
return on invested capital of 9% (for more information, please see the headline “Return on investment
(ROI) and value contribution in the reporting period” in the “Results of Operations, Financial Position and
Net Assets” chapter). Invested capital will rise further in 2023 as a result of investment in new models, in
the development of alternative drivetrains and further development of the modular and all-electric toolkits
and platforms, and in technologies of the future. We expect the return on investment (ROI) in the Auto-
motive Division for 2023 to be between 12% and 15%.
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SUMMARY OF EXPECTED DEVELOPMENTS

believe that risks will arise from protectionist tendencies, turbulence in the financial markets and
structural deficits in individual countries. In addition, continuing geopolitical tensions and conflicts are
weighing on growth prospects; risks continue to be associated with the Russia-Ukraine conflict. Further-
more, it cannot be ruled out that risks may also arise if new variants of the SARS-CoV-2 virus occur, par-
ticularly with regard to regional outbreaks and the measures associated with these. We assume that both
the advanced economies and the emerging markets will show positive momentum on average, but with
below-average growth in gross domestic product (GDP).
competition in the international automotive markets will intensify further. Uncertainty may arise from the
continued shortage of intermediates and commodities. This may be further exacerbated by the fallout
from the Russia-Ukraine conflict and, in particular, lead to rising prices and declining availability of energy.
Overall, the global volume of new car sales is expected to be noticeably higher than in the previous year. For
2023, we anticipate that the volume of new passenger car registrations in Western Europe will be signifi-
cantly above that recorded in the reporting period. In the German passenger car market, we predict a notice-
able increase in the volume of new registrations in 2023 compared with the previous year. Sales of passen-
ger cars in 2023 are expected to significantly exceed the prior-year figures in markets in Central and Eastern
Europe – subject to the further development of the Russia-Ukraine conflict. The volume of sales in the
markets for passenger cars and light commercial vehicles (up to 6.35 tonnes) in North America in 2023 is
forecast to be noticeably higher than the level seen the previous year. We anticipate a significant increase
overall in new registrations in the South American markets in 2023 compared with the previous year. The
passenger car markets in the Asia-Pacific region are expected to be noticeably up on the prior-year level in
2023.
whole, we expect a noticeable increase in the sales volume for 2023.
For 2023, we expect to see a noticeable upwards trend in new registrations for mid-sized and heavy
trucks with a gross weight of more than six tonnes compared with the previous year in the markets that are
relevant for the Volkswagen Group, with variations from region to region. A significant increase in overall
demand is anticipated for 2023 in the bus markets relevant for the Volkswagen Group, whereby this will
vary depending on the region.
We assume that automotive financial services will prove highly important to global vehicle sales in
2023.
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We anticipate that, amid challenging market conditions, deliveries to customers of the Volkswagen Group
in 2023 will stand at around 9.5 million vehicles. This assumes that the shortages of intermediates and
commodities and the bottlenecks in logistics will become less intense.
Challenges will arise in particular from the economic situation, the increasing intensity of competition,
volatile commodity, energy and foreign exchange markets, and more stringent emissions-related require-
ments.
We expect the sales revenue of the Volkswagen Group in 2023 to be 10% to 15% higher than the prior-
year figure and the operating return on sales to lie between 7.5% and 8.5%. In the Passenger Cars Business
Area, we forecast an increase of 7% to 13% in sales revenue compared with the previous year, with an
operating return on sales of between 8% and 9%. For the Commercial Vehicles Business Area, we anticipate
an operating return on sales of 6% to 7% amid a 5% to 15% year-on-year increase in sales revenue. In the
Power Engineering Business Area, we expect sales revenue to be slightly above the prior-year figure and
operating profit to be in the low triple-digit million euro range. For the Financial Services Division, we
forecast a strong increase in sales revenue compared with the prior year and an operating result in the
range of €3.5 billion.
In the Automotive Division, we expect the R&D ratio to come in at around 8% in 2023 and the ratio of
capex to sales revenue to be around 6.5%. 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. We antici-
pate a return on investment (ROI) of between 12% and 15%. Our declared goal remains unchanged, namely
to continue with our robust financing and liquidity policy.
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Group Management Report Report on Risks and Opportunities
Report on Risks and Opportunities

( C O N TA I N S T H E R E P O R T I N A C C O R D A N C E W I T H S E C T I O N 2 8 9 ( 4 ) O F T H E H G B )
Promptly identifying the risks and opportunities arising from our business activities and taking
a forward-looking approach to managing them is crucial to our Company’s long-term success.
A comprehensive risk management system and an internal control system help the
Volkswagen Group deal with risks in a responsible manner.
In this section, we first explain the objective and structure of the Volkswagen Group’s Risk Management
System (RMS) and Internal Control System (ICS) and describe these systems, also with regard to the finan-
cial reporting process. We then outline the main risks and opportunities arising in our business activities.
OBJ ECTIVE OF TH E RISK MANAGEMENT SYSTEM AN D I NTERNAL CONTROL SYSTEM AT VOLKSWAGEN

Only by promptly identifying, accurately assessing and effectively and efficiently managing the risks and
opportunities arising from our business activities can we ensure the Volkswagen Group’s long-term
success. The aim of the RMS and ICS is to identify potential risks at an early stage so that suitable counter-
measures can be taken to avert the threat of loss to the Company, and any risks that might jeopardize its
continued existence can be ruled out.
Assessing the likelihood of occurrence and extent of future events and developments is, by its nature,
subject to uncertainty. We are therefore aware that even the best RMS cannot foresee all potential risks and
even the best ICS can never completely prevent irregular acts.
STRUCTU RE OF TH E RISK MANAGEMENT SYSTEM AN D I NTERNAL CONTROL SYSTEM AT VOLKSWAGEN

The organizational design of the Volkswagen Group’s RMS and ICS is based on the internationally recog-
nized COSO framework for enterprise risk management (COSO: Committee of Sponsoring Organizations of
the Treadway Commission). The purpose of structuring the RMS/ICS in accordance with the COSO frame-
work for enterprise risk management is so that potential risk areas are covered in full. Uniform Group
principles are used as the basis for managing risks in a standardized manner. Opportunities are not
recorded in the RMS processes.
232
Another key element of the RMS and ICS at Volkswagen is the Three Lines Model, which is required by,
among other bodies, the European Confederation of Institutes of Internal Auditing (ECIIA). In line with this
model, the Volkswagen Group’s RMS and ICS has three lines designed to protect the Company from signifi-
cant risks occurring.
The minimum requirements for the RMS and ICS, including the Three Lines Model, are set out in guide-
lines for the entire Group and are regularly reviewed and refined. In addition, regular training is offered on
the RMS and ICS.
A separate Group Board of Management Committee for Risk Management deals with the key aspects of
the RMS and ICS every quarter. Its tasks are as follows:
> to further increase transparency in relation to significant risks to the Group and their management,
> to discuss specific issues where these constitute a significant risk to the Group,
> to make recommendations on the further development of the RMS and ICS,
> to support the open approach to dealing with risks and promote an open risk culture.
First line: Operational risk management and ICS

The first line comprises the operational risk management and internal control systems at the individual
Group companies and business units. The RMS and ICS are integral parts of the Volkswagen Group’s struc-
ture and workflows. Events that may give rise to risk are identified and assessed locally in the divisions and
at the investees. Countermeasures are introduced, the remaining potential impact is assessed, and the
information incorporated into the planning in a timely manner. Material risks are reported to the relevant
committees on an ad hoc basis. The results of the operational risk management process are incorporated
into planning and financial control on an ongoing basis. The targets agreed in the planning rounds are
therefore continually reviewed in revolving planning updates. At the same time, the results of risk mitiga-
tion measures are promptly incorporated into the monthly forecasts regarding further business develop-
ment. This means that the Board of Management also has access to an overall picture of the current risk
situation via the documented reporting channels during the year.
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Second line: Group Risk Management and ICS

Each quarter, in addition to the ongoing operational risk management, the Group Risk Management depart-
ment sends standardized surveys regarding the risk situation and the implementation of countermeasures
– through the quarterly risk process (QRP) – to all Group brands and significant Group companies. The risks
are identified and approved in a multiple-party verification process and then checked for plausibility by
Group Risk Management.
A score is calculated for each risk by multiplying the likelihood of occurrence (Prob) by the potential
extent of the damage. This enables comparison of the risks. The extent of the damage is calculated from the
criteria of financial loss (Mat) and reputational damage (Rep) and the potential threat to adherence to
external legal requirements (Req). A score between 0 and 10 is assigned to each of these criteria. The mea-
sures taken to manage and control risk are taken into account in the risk assessment (net perspective).
The score for a likelihood of occurrence of more than 50% in the analysis period is classified as high; for
a medium classification, the likelihood of occurrence is at least 25%. For the criterion of financial loss, the
score rises in line with the loss; the highest score of 10 is reached when the potential loss is upwards of
€1 billion. The criterion of reputational damage can have characteristics ranging from local erosion of
confidence and loss of trust at local level to loss of reputation at regional or international level. The poten-
tial threat to adherence to external legal requirements is classified based on the potential impact on the
local company, the brand or the Group.
In addition to strategic, operational and reporting risks, risks arising from potential compliance viola-
tions (compliance risks) and from sustainability issues (ESG) are also integrated into this process.
Volkswagen Financial Services AG and Volkswagen Bank GmbH have implemented their own RMS and
ICS processes and regularly report to Group Risk Management.
To review the Volkswagen Group’s risk-bearing capacity, Group Risk Management uses the risk reports
for a regular comparison of the aggregated risk situation and risk-bearing capacity. A simulation is used to
check whether individual risks might become a going-concern risk if they are aggregated. There were no
indications of insufficient risk-bearing capacity at the Volkswagen Group in the 2022 fiscal year.
Risk reporting to the committees of Volkswagen AG depends on materiality thresholds. Risks with a risk
score of 40 or more or potential financial loss of €1 billion or more are presented quarterly to the Board of
Management and the Audit Committee of the Supervisory Board of Volkswagen AG. In addition, the
reporting includes all risks from the QRP with a risk score of 20.
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In addition, significant changes to the risk situation that can arise in the short term, for instance from
unexpected external events, are reported to the Board of Management as required. This is necessary if the
risk may lead to potential financial loss of €1 billion or more and the likelihood of occurrence is estimated
at greater than 50%.
In recent years, a standardized ICS to better protect against process risks has also been developed and
put in place in significant companies. It continues to be introduced at further companies each year. The ICS
thereby goes significantly beyond the requirements for the accounting-related ICS. In 25 catalogs of con-
trols, the Group companies within its scope are presented with requirements in respect of the process risks
and control objectives to be covered in order to protect the value chain in a standardized manner.
In addition to financial reporting issues, for example, they address process risks in development or pro-
duction, as well as in the areas of compliance and sustainability. The catalogs of controls are checked at
regular intervals to verify that they are up to date and are regularly expanded.
Key controls to cover process risks and control objectives are also tested for their effectiveness; any sig-
nificant weaknesses identified are reported to the responsible bodies at Volkswagen AG and resolved in the
departments.
Like the QRP, the standardized ICS is supported by the Risk Radar IT system.
We regularly optimize the RMS and ICS as part of our continuous monitoring and improvement pro-
cesses. In the process, we give equal consideration to both internal and external requirements. As a compo-
nent of the RMS, our Compliance Management System (CMS) is also subject to these control and adjust-
ment mechanisms. External experts assist in the continuous enhancement of our RMS, CMS and ICS on a
case-by-case basis.
Third line: Review by Group Internal Audit

Group Internal Audit helps the Board of Management to monitor the various divisions and corporate units
within the Group. It regularly checks the risk early warning system and the structure and implementation
of the RMS, ICS and compliance management system (CMS) as part of its independent audit procedures.
The audit plan adopted by the Board of Management includes the first and second lines, i.e. the risk-
mitigating functions in addition to the operational units.
RISK EARLY WARN I NG SYSTEM

The Company’s risk situation is ascertained, assessed and documented and therefore also complies with
legal requirements. The requirements for a risk early warning system are met by means of the RMS and ICS
elements described above (first and second line). Independently of this, the external auditors check both
the processes and procedures implemented in this respect and the adequacy of the documentation on an
annual basis. The plausibility and adequacy of the risk reports are examined via spot checks in detailed
interviews with the divisions and companies concerned. The auditor examines the risk early warning
system integrated in the Risk Management System with respect to its fundamental suitability to being able
to identify risks that might jeopardize the Company's continued existence at an early stage and assesses the
functionality of the risk early warning and monitoring system in accordance with section 317(4) of the HGB.
In addition, scheduled examinations as part of the audit of the annual financial statements are con-
ducted at companies in the Financial Services Division. As a credit institution, Volkswagen Bank GmbH,
including its subsidiaries, is subject to supervision by the European Central Bank, while Volkswagen Leasing
GmbH as a financial services institution and Volkswagen Versicherung AG as an insurance company are
subject to supervision by the relevant division of the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin
– the German Federal Financial Supervisory Authority). As part of the scheduled supervisory process and
unscheduled audits, the competent supervisory authority assesses whether the requirements, strategies,
processes and mechanisms ensure solid risk management and solid risk cover. Furthermore, the Prüfungs-
verband deutscher Banken (Auditing Association of German Banks) audits Volkswagen Bank GmbH from
time to time.
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Volkswagen Financial Services AG operates a risk early warning and management system. Its aim is to ensure
that the locally applicable regulatory requirements are adhered to and at the same time to enable appropri-
ate and effective risk management at Group level. Important components of it are regularly reviewed as
part of the audit of the annual financial statements.
Monitoring the effectiveness of the Risk Management System and the Internal Control System
Reporting to the Board of Management and Supervisory Board of Volkswagen AG includes the results of the
continuous monitoring and improvement of the RMS and ICS along with the evaluation of the Company-
wide risk situation based on the QRP and the presentation of the results of the internal control process
based on the standardized ICS and downstream control systems at individual brands.
On this basis, an overall conclusion is reached once a year on the adequacy and effectiveness of our RMS,
CMS and ICS at a Volkswagen AG Board of Management meeting. The Board of Management has received
no information to indicate that our RMS or ICS as a whole were inadequate or ineffective in fiscal year 2022.
Nevertheless, there are inherent limits to the effectiveness of any risk management, compliance man-
agement and control system. Even a system judged to be adequate and effective cannot, for example, ensure
that all actually materializing risks will be identified in advance or that any process disruptions will be ruled
out under all circumstances.
TH E RISK MANAGEMENT AN D I NTEGRATED I NTERNAL CONTROL SYSTEM I N TH E CONTEXT OF TH E

FI NANCIAL REPORTI NG PROCESS
The accounting-related part of the RMS and ICS that is relevant for the financial statements of Volkswagen AG
and the Volkswagen Group as well as its subsidiaries comprises measures intended to ensure that the infor-
mation required for the preparation of the financial statements of Volkswagen AG, the consolidated finan-
cial statements and the combined management report of the Volkswagen Group and Volkswagen AG is
complete, accurate and transmitted in a timely manner. These measures are designed to minimize the risk
of material misstatement in the accounts and in external reporting.
Main features of the Risk Management and integrated Internal Control System in the context of the
financial reporting process
The Volkswagen Group’s accounting is essentially organized along decentralized lines. For the most part,
accounting duties are performed by the consolidated companies themselves or entrusted to the Group’s
shared service centers. In principle, the financial statements of Volkswagen AG and its subsidiaries prepared
in accordance with the IFRSs and the Volkswagen IFRS Accounting Manual are transmitted to the Group in
encrypted form. A standard market product is used for encryption.
The Volkswagen IFRS Accounting Manual, which has been prepared in line with external expert opinions
in certain cases, is intended to ensure the application and assessment of uniform accounting policies based
on the requirements applicable to the parent. In particular, it includes more detailed guidance on the
application of legal requirements and industry-specific issues. Components of the reporting packages that
are required to be prepared by the Group companies are also set out in detail there, and requirements have
been established for the presentation and settlement of intragroup transactions and the balance reconcili-
ation process that is based on these.
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Control activities at Group level include analyzing and, if necessary, adjusting the data reported in the
financial statements presented by the subsidiaries, taking into account the reports submitted by the
auditors and the outcome of the meetings on the financial statements with representatives of the indi-
vidual companies. These discussions address both the plausibility of the single-entity financial statements
and specific significant issues at the subsidiaries. Alongside plausibility checks, other control mechanisms
applied during the preparation of the single-entity and consolidated financial statements of Volkswagen AG
include the clear delineation of areas of responsibility and the application of the "four eyes" principle.
The effectiveness of the Internal Control System in the context of the accounting process is systemat-
ically assessed in significant companies as part of the standardized ICS. This begins with a risk analysis and
definition of controls with the aim of identifying significant risks for the financial reporting process. Regu-
lar tests based on samples are performed to evaluate the effectiveness of the controls. These form the basis
for a self-evaluation of whether the controls are appropriately designed and effective.
The combined management report of the Volkswagen Group and Volkswagen AG is prepared – in accor-
dance with the applicable requirements and regulations – centrally but with the involvement of and in con-
sultation with the Group units and companies.
In addition, the accounting-related Internal Control System is independently reviewed by Group Internal
Audit in Germany and abroad.
Integrated consolidation and planning system

The Volkswagen consolidation and corporate management system (VoKUs) enables the Volkswagen Group
to consolidate and analyze both Financial Reporting’s backward-looking data and Controlling’s forward-
looking data. VoKUs offers centralized master data management, uniform reporting, an authorization
concept and the required flexibility with regard to changes to the legal environment, providing a technical
platform that benefits Group Financial Reporting and Group Controlling in equal measure. To verify data
consistency, VoKUs has a multi-level validation system that primarily checks content plausibility between
the balance sheet, the income statement and the notes.
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RISKS AN D OPPORTUN ITI ES

In this section, we outline the main risks and opportunities arising in our business activities. In order to
provide a better overview, we have grouped the risks and opportunities into categories. At the beginning of
each risk category, we state the most significant risks in order of their importance as identified using the
risk score from the QRP. We then describe the individual risks in no particular order. Unless explicitly men-
tioned, there were no material changes to the specific risks and opportunities compared with the previous
year even though the weighting of individual risks has changed.
The assessment of the Volkswagen Group’s risk categories and the reports to the Board of Management
include amongst other items all risks reported to the Group Risk Management department with a risk score
of 20 or more for the units included from the QRP. The risk categories are plotted based on the average scores.
In the reporting year, no risks with such scores were reported for the “Financial risks” and “Risks from
mergers & acquisitions and/or other strategic partnerships/investments” risk categories.
We use analyses of the competition and the competitive environment in addition to market studies to
identify not only risks but also opportunities that have a positive impact on the design of our products, the
efficiency with which they are produced, their success in the market and our cost structure. Where they can
be assessed, risks and opportunities that we expect to occur are already reflected in our medium-term
planning and our forecast. The following therefore reports on internal and external developments as risks
and opportunities that, based on existing information, may result in a negative or positive deviation from
our forecast or targets.
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Risks and opportunities from the macroeconomy, the sector, markets and sales
For this risk category, the likelihood of occurrence is classified as high (previous year: high) and the poten-
tial extent of damage is classified as medium (previous year: medium).
The most significant risks from the QRP arise from a negative influence on markets and unit sales driven
among other factors by restrictions on trade and increasingly protectionist tendencies.
Macroeconomic risks and opportunities

We believe that risks to positive growth in global economic output arise primarily from a further escalation
of the Russia-Ukraine conflict, turbulence in the financial, energy and commodity markets, supply short-
ages in connection with imbalances between supply and demand, increasingly protectionist tendencies,
structural deficits, which pose a threat to the performance of individual advanced economies and emerging
markets, and a failure to contain the Covid-19 pandemic in a lasting way. In addition, there are increasing
environmental challenges that affect individual countries and regions to varying degrees. The worldwide
transition from an expansionary to a more restrictive monetary policy together with persistently high
inflation also presents risks for the macroeconomic environment. High private- and public-sector debt in
many countries is clouding the outlook for growth and may likewise cause markets to respond negatively.
Demographic change may also inhibit growth. A decline in growth in key countries and regions often has
an immediate impact on the state of the global economy and therefore poses a central risk.
The economic development of some emerging economies is being hampered primarily by dependence
on energy and commodity prices and capital inflows, but also by socio-political tensions. Corruption, inad-
equate government structures and a lack of legal certainty can also pose risks.
Geopolitical tensions and conflicts, along with signs of fragmentation in the global economy, are a
further major risk factor to the performance of individual countries and regions. In light of the existing,
strong global interdependence, local developments could also have adverse effects on the world economy.
Any escalation of the conflicts in the Middle East or Africa, and particularly of the conflict between Russia
and Ukraine since February 2022, for example, could cause upheaval on the global energy and commodity
markets and exacerbate migration trends. An aggravation of the situation in East Asia could also put a
strain on the global economy. The same applies to violent conflicts, terrorist activities, cyber attacks and the
spread of infectious diseases, which may suddenly result in unexpected market reactions.
Overall, we expect the world economy to grow with a weaker momentum in 2023. However, due to the
risk factors mentioned, as well as cyclical and structural aspects, another slump in the global economy or a
period of below-average growth rates is also possible.
The macroeconomic environment may also give rise to opportunities for the Volkswagen Group if actual
developments turn out to be more positive than expected.
Sector-specific risks and market opportunities/potential

Western Europe, especially Germany, and China are our main sales markets. A drop in demand in these
regions due to the economic climate would have a particularly strong impact on the Company’s earnings
including financial services. We counter this risk with a clear, customer-oriented, innovative and synergistic
product and pricing policy. To diversify our main sales markets, we are pursuing a long-term growth stra-
tegy in the USA.
Outside the current main sales markets, delivery volumes are spread widely across the key regions:
Central and Eastern Europe, North America and South America. In addition, we either already have a strong
presence in numerous existing and developing markets or are working systematically towards this goal.
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Particularly in smaller markets with growth potential, we are increasing our presence with the help of
strategic partnerships in order to cater to local requirements.
The growth markets of Central and Eastern Europe, South America and Asia are particularly important
to the Volkswagen Group. These markets harbor considerable potential; however, the underlying condi-
tions in some countries in these regions make it difficult to increase unit sales figures there. Examples of
these are customs regulations or minimum local content requirements for production. At the same time,
wherever the economic and regulatory situation permits, there are opportunities above and beyond
current projections. These arise from faster growth in the emerging markets where vehicle densities are
currently still low.
Price pressure in established automotive markets for new and used vehicles as a result of high market
saturation is a further risk for the Volkswagen Group as a supplier of volume and premium models. Com-
petitive pressures are likely to remain high in the future. Individual manufacturers may respond by
offering incentives in order to meet their sales targets, putting the entire sector under additional pressure.
There is a risk that excess capacity in global automotive production may lead to a rise in inventories and
therefore an increase in tied-up capital. With a decline in demand for vehicles and genuine parts, auto-
motive manufacturers may adjust their capacities or intensify measures to promote sales. This would lead
to additional costs and greater price pressure.
Supply chain disruption may give rise to the risk of underutilization of capacity in global automobile
production, meaning that existing demand can in some instances not be met and instead moves on.
The demand that built up in individual established markets in times of crisis could result in a significant
recovery if the economic environment eases more quickly than expected.
In Europe, there is a risk that further municipalities and cities will impose a driving ban on vehicles with
combustion engines in order to comply with emission limits. China imposed a so-called “new energy vehi-
cle quota” in 2019, which means that battery-electric vehicles, plug-in hybrids and fuel cell vehicles will
have to account for a certain proportion of a manufacturer’s new passenger car fleet. In the United States,
California has for some years imposed a regulation followed by other US states and which tightens the legal
requirements on manufacturers each year for the sale of zero-emission vehicles. To ensure compliance with
emissions standards, we continuously tailor our range of vehicle models and engines to the conditions in
the relevant markets. These requirements may lead to higher costs and consequently to price increases and
declines in volumes.
Economic performance may vary from region to region. The resulting risks for our trading and sales
companies, such as in relation to efficient inventory management and a profitable dealer network, are sub-
stantial and are being responded to with appropriate measures on their part. However, financing business
activities through bank loans remains difficult. Our financial services companies offer dealers financing on
attractive terms with the aim of strengthening their business models and reducing operational risk. We
have installed a comprehensive liquidity risk management system so that we can promptly counteract any
liquidity bottlenecks at the dealership end that could hinder smooth business operations.
We continue to approve loans for vehicle financing on the basis of the same cautious principles applied
in the past, for example by taking into account the regulatory requirements of section 25a(1) of the Kredit-
wesengesetz (KWG – German Banking Act); in particular, this counters the risk of loan defaults.
Volkswagen maintains a selective distribution system. Within the European Union, dealers and service
partners are selected – where permissible – using qualitative and quantitative-qualitative criteria in accor-
dance with the provisions of EU Regulations 461/2010 and 720/2022. The previously relevant EU Regu-
lation 330/2010 was revised by the European Commission and replaced by the new, successor EU Regu-
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lation 720/2022, which entered into force on June 1, 2022. As things stand at present, this revised EU
regulation does not require any changes to be made to the current distribution system of Volkswagen AG.
The “Supplementary guidelines on vertical restraints in agreements for the sale and repair of motor
vehicles and for the distribution of spare parts for motor vehicles”, which accompany EU Regulation
461/2010, are currently being revised by the European Commission, with the new rules due to enter into
force on June 1, 2023. A final evaluation of whether and to what extent the distribution system of Volks-
wagen AG will be specifically affected by the changes will only be definitively possible once the new guide-
lines have been adopted.
Competition law requirements, including the Block Exemption Regulation 461/2010 and EU Regu-
lations 2018/858 and 2021/1244, aim to ensure and promote effective competition in the motor vehicle
aftermarket. Volkswagen AG, too, is exposed to this competitive pressure and associated risks in respect of
its servicing and maintenance offering.
In Germany, legislation entered into force on December 2, 2020 to restrict or abolish design protection
for repair parts through the introduction of a repair clause. In addition, the European Commission is
evaluating the market with regard to existing design protection and has presented a draft to amend the
directive on the legal protection of designs and models. A possible restriction or abolition of design protec-
tion for visible replacement parts, including at European level, could adversely affect the Volkswagen
Group’s genuine parts business.
The automotive industry is facing a process of transformation with far-reaching changes. Electric drives,
connected vehicles and autonomous driving are associated with both opportunities and risks for our
vehicle sales, our after-sales business and our dealerships. In particular, more rapidly evolving customer
requirements, swift implementation of legislative initiatives, including in connection with the achieve-
ment of climate protection targets, and the market entry of new competitors from outside the industry will
require changed products at a faster pace of innovation as well as adjustments to business models and cost
structures. There is uncertainty regarding the widespread use of electric vehicles and the availability of the
necessary charging infrastructure.
There is also a risk of freight deliveries worldwide being shifted from trucks to other means of transport,
and of demand for the Group’s commercial vehicles falling as a result.
Below, we outline the regions and markets with the greatest growth potential for the Volkswagen Group.
> China
Demand for vehicles is expected to increase in the coming years due to the need for individual mobility.
This also affects e-mobility, a market that is already dominated by high-volume domestic manufacturers,
among others. It is also expected that demand will shift from the coastal metropolises to the country’s
interior and that competitive pressure from local manufacturers will generally increase. In order to
leverage the considerable opportunities offered by this market – especially with regard to e-mobility –
and to defend our strong market position in China over the long term, we are continuously expanding
our product range to include models that have been specially developed for this market. We are further
expanding our production capacity in this growing market, for example with the new plants for electric
vehicles in Anhui and Changchun.
> India
The demand for new vehicles is likely to increase over the coming years in this important future market,
partly due to demographic change. The Volkswagen Group has consolidated its activities in India and
launched a model initiative with new models tailored to customers’ needs: the Taigun from the Volks-
wagen Passenger Cars brand and the ŠKODA Kushaq and Slavia.
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> USA
In the saturated US market, the proportion of light trucks (particularly SUVs and pickups) is likely to
further increase slightly in the coming years. In addition, the electrification of mobility is expected to
accelerate due to support measures and legally prescribed fleet emission and fuel consumption targets.
The latter factors still depend, however, on which administration is in office. In the USA, Volkswagen
Group of America is steadfast in its pursuit to become a full-fledged volume supplier and expand its
market share. The expansion of local production capacity – including production for electric vehicles
since 2022 – will allow the Group to better serve the market in the North America region. We are also
working intensively on offering additional products specifically tailored to the US market. As part of our
electrification campaign, we founded a company in the United States in the reporting year with which we
aim to tap the market for electric vehicles in the SUV segment with the US brand Scout.
> Brazil
Due to the need for individual mobility, demand for vehicles in Brazil is expected to increase in the
coming years, particularly in the low-price, small-vehicle segments. Given existing trade barriers, local
production is an important factor in ensuring competitiveness. The growing number of automobile
manufacturers with local production has resulted in a sharp increase in price pressure and competition.
To strengthen our competitive position in Brazil, we offer vehicles tailored specially to this market that
are locally produced, such as the Saveiro and the Nivus.
> Middle East
Political and economic uncertainty in the region weigh on the passenger car markets. In spite of this
volatility, the Middle East region offers short-term and long-term growth potential. We aim to leverage
the potential for growth with a range of vehicles that has been specifically tailored to this market, without
having our own production facilities there.
Power Engineering
Global economic trends such as digitalization and the increasing interest in emissions-reducing technol-
ogies associated with decarbonization are expected to continue. Growing global energy needs call for inno-
vation in the industry and a growing willingness on the part of governments to invest in line with the
global climate policy.
The development of the marine market continues to carry risk given the current uncertainty regarding
future fuel and emissions regulations. The continuing uncertain geopolitical and macroeconomic situation
holds additional risks, but also offers opportunities, for example in the navy and offshore wind energy
business.
In turbomachinery, there is the risk that planned projects and orders will be scaled back or postponed
due to negative developments in sales markets or individual applications.
We are countering these risks by constantly monitoring the markets, focusing on less strongly affected
market segments, working closely with all business partners such as customers and licensees, and intro-
ducing new and improved technologies.
We are working systematically to leverage market opportunities across the world, for example by posi-
tioning ourselves as a solution provider for reduced-CO2 drive and energy generation technologies such as
large-scale heat pumps, storage technologies and hydrogen production or carbon dioxide capture. More-
over, significant potential can be leveraged in the medium term by enhancing our after-sales business
through the introduction of new digital products and the expansion of our service network. The require-
ments for occupational safety, which will continue to increase in the future, the availability of the plants
that are already in operation, their efficient operation and the increase in environmental compatibility,
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together with the large number of engines and plants, will provide the basis for growth. Digital service
solutions, for instance for remote plant surveillance, offer further growth potential.
As part of the capital goods industry, the Power Engineering business is affected by fluctuations in the
investment climate. Even minor changes in growth rates or growth forecasts, resulting from geopolitical
uncertainties or volatile commodities and foreign exchange markets, for example, carry the risk of signifi-
cant changes in demand or the cancellation of already existing orders.
The measures we use to counter the substantial economic and extraordinary risks include flexible pro-
duction concepts and cost flexibility by means of temporary external personnel, working time accounts
and Kurzarbeit (short-time working), and the necessary structural adjustments.
Sales risks
There is a risk that the Volkswagen Group could experience decreases in demand, possibly exacerbated by
media reports or insufficient communication. Other potential consequences include lower margins in the
new and used car businesses and a temporary increase in funds tied up in working capital.
The Volkswagen Group’s multibrand strategy may weaken individual Group brands if there are overlaps
in customer segments or the product portfolio. This effect may be reinforced by the Volkswagen Group’s
common-parts strategy, as this strategy means that, in some cases, the differences in product substance
between the brands are small. As a result, there could be a risk of internal cannibalization between the
Group brands, higher marketing costs, or repositioning expenses. By sharpening the brand identities as
part of our Best Brand Equity instrument, we are working to minimize these risks.
The fleet customer business continues to be characterized by increasing concentration and internationali-
zation, accompanied by the risk that the loss of individual fleet customers may result in relatively high
volume losses. Viewed over an extended period, the fleet customer business is more stable than the busi-
ness with retail customers. The Volkswagen Group is well positioned with its broad portfolio of products
and drive systems, as well as its target-group-focused customer care, and counteracts a concentration of
default risks at individual fleet customers or markets. The consistently high market share in Europe shows
that fleet customers still have confidence in the Group.
Consumer demand is shaped not only by real factors such as disposable income, but also by psycho-
logical factors that cannot be planned for. For example, households’ worries about the future economic
situation may lead to unexpected buyer reluctance, as is currently the case due to high energy costs. This is
particularly the case in saturated automotive markets such as Western Europe, where demand could drop
as a result of owners holding on to their existing vehicles for longer. We are countering the risk of buyer
reluctance with our attractive range of models and our strict policy of customer orientation.
A combination of buyer reluctance in some markets as a result of the crisis, and increases in some
vehicle taxes based on CO2 emissions – which have already been observed in many European countries –
may shift demand towards smaller segments and engines, for example. We counter the risk that such a shift
will negatively impact the Volkswagen Group’s financial situation by constantly developing new, fuel-
efficient vehicles and alternative drive technologies, based on our drivetrain, fuel and mobility strategies.
Automotive markets around the world are exposed to risks from government intervention such as tax
increases, which curb private consumption, and from restrictions on trade and protectionist tendencies
such as tariffs and sanctions. Furthermore, there are future risks from the sale of electrified vehicles if the
minimum requirements for local content under free trade agreements cannot be achieved. Sales incentives
may lead to shifts in the timing of demand.
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Commercial vehicles are capital goods: even minor changes in growth rates or growth forecasts may
significantly affect transport requirements and thus demand. The resulting risk of production fluctuations
calls for a high degree of flexibility from the manufacturers. Although production volumes are significantly
lower, the complexity of the trucks and buses range does in fact significantly exceed the already very high
complexity of the passenger cars range. Key factors for commercial vehicle customers are total cost of
ownership, vehicle reliability and the service provided. Furthermore, customers are increasingly interested
in additional services such as freight optimization and fleet utilization, which we offer in the commercial
vehicle segment through the digital brand RIO, for example.
Power Engineering’s two-stroke engines are produced exclusively by licensees, particularly in South
Korea, China and Japan. The global demand for ships is increasing due to the overall positive development
in world trade; however, the volatility in new shipbuilding orders poses the risk of declining license reve-
nues. Due to changes in the competitive environment, especially in China, there is also the risk of losing
market share.
Russia-Ukraine conflict
The ongoing Russia-Ukraine conflict continues to hold risks for the performance of the global economy, for
growth in the industry and for the business activities of the Volkswagen Group, in particular with regard to
rising prices and declining availability of energy.
The Volkswagen Group does not have any material subsidiaries and equity investments in Ukraine.
In relation to the net assets, financial position and results of operations of the Volkswagen Group, the
business activities of the Volkswagen Group in these two countries are insignificant.
Other factors
In addition to the risks outlined in the individual risk categories, there are other factors that cannot be
predicted and whose repercussions are therefore difficult to control. Should these transpire, they could
have an adverse effect on the further development of the Volkswagen Group. In particular, such occur-
rences include natural disasters, climate-induced extreme weather events, pandemics (such as the spread of
the SARS-CoV-2 virus), violent conflicts (such as the current Russia-Ukraine conflict), terrorist attacks and
interruptions to the energy supply.
There is a risk that the Covid-19 pandemic could intensify again, due to reasons such as changes in the
virus. All areas of the Volkswagen Group are affected by the pandemic. There are risks arising in particular
from a fall in demand and an increasing intensity of competition. In production, there are risks especially
with regard to stable supply chains and protecting the health of our staff. We have put in place increased
hygiene and protective measures that we can fall back on where necessary to ensure that plants can operate.
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Research and development risks

The most significant risks from the QRP result from the inability to develop products in line with
demand and requirements, especially with regard to e-mobility and digitalization.
Risks arising from research and development

The automotive industry is undergoing a fundamental transformation process. For multinational corpo-
rations like Volkswagen, this means risks in the areas of customer/market, technological advancements and
legislation. One risk posed is the implementation of ever more stringent emission and fuel consumption
regulations, such as C6 in China or EU7 in Europe from 2025. New test procedures and test cycles (e.g. the
Worldwide Harmonized Light Vehicles Test Procedure, WLTP), and their progressive tightening, as well as
compliance with approval processes (homologation) are becoming increasingly complex and time-con-
suming. The test specifications and homologation procedures also vary greatly from country to country.
On a national and international level, there are numerous legal requirements regarding the use, handling
and storage of substances and mixtures (including restrictions concerning chemicals, heavy metals, bio-
cides, persistent organic pollutants). There is therefore a risk of non-conformity in the manufacture, pro-
curement and introduction of products such as automobiles or replacement parts.
The economic success and competitiveness of the Volkswagen Group depend on how swiftly we are able
to tailor our portfolio of products and services to changing conditions. Given the intensity of competition
and speed of technological development, for example in the fields of digitalization and automated driving,
there is a risk of failing to identify relevant trends early enough to respond accordingly.
We use the latest findings from the world of physics and other areas of science to plot our course. In
addition, we conduct research such as trend analyses and customer surveys and examine the relevance of
the results for our customers. We counter the risk that it may not be possible to develop modules, vehicles,
or services – especially in relation to e-mobility, digitalization and software – within the specified time
frame, to the required quality standards, or in line with cost specifications, by continuously and system-
atically monitoring the progress of all projects.
To reduce the risk of patent infringements, we conduct thorough analyses of third-party industrial
property rights; increasingly also in relation to communication technologies.
We regularly compare the results of all these analyses with the respective project targets; in the event of
any discrepancies, we introduce appropriate countermeasures. Our end-to-end project organization fosters
cooperation across all of the departments involved in the process, ensuring that specific requirements are
incorporated into the development process as early as possible and that their implementation is planned in
good time.
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Risks and opportunities from the modular toolkit strategy

We are continuously expanding our modular toolkits, focusing on future customer requirements, legal
requirements and infrastructural requirements.
However, with higher volumes there is a higher risk that supply chain disruption – for example due to a
shortage of semiconductors – or quality problems may affect an increasing number of vehicles.
The Modular Transverse Toolkit (MQB) is an extremely flexible vehicle architecture that was created to
allow conceptual dimensions – such as the wheelbase, track width, wheel size and seat position – to be
harmonized throughout the Group and utilized flexibly. Other dimensions, for example the distance from
the pedals to the middle of the front wheels, are always the same, ensuring a uniform system in the front
end of the car. Thanks to the resulting synergies, we are able to reduce both development costs and the
necessary one-time expenses, as well as manufacturing times. The toolkits also allow us to produce
different models from different brands in varying quantities, using the same equipment in a single plant.
This means that our capacities can be used with greater flexibility throughout the entire Group, enabling us
to achieve efficiency gains.
We have also transferred this principle of standardization with maximum flexibility to the Modular
Electric Drive Toolkit (MEB) and Premium Platform Electric (PPE), concepts developed for all-electric drives.
The synergies and efficiency gains offered by the modular toolkit strategy are enabling us to bring e-mobil-
ity into mass production worldwide with the MEB- and PPE-based vehicles. In future, we aim to reinforce
these synergistic effects by combining the MEB and PPE in the Scalable Systems Platform (SSP).
Operational risks and opportunities

The most significant risks from the QRP lie particularly in volatile procurement markets, here primarily
in relation to the supply of parts, as well as in cyber security and new regulatory requirements regarding IT,
and in quality problems.
Risks from extraordinary events in the Volkswagen Group’s procurement and production network
Extraordinary events beyond our control including natural disasters, climate-induced extreme weather
events, pandemics – such as the spread of the SARS-CoV-2 virus – and other events, for example violent
confrontations – such as the current conflict between Russia and Ukraine – fires, explosions, or the leakage
of substances hazardous to health or the environment, may result in supply risks in procurement and
heavily impair production. As a consequence, bottlenecks or even outages in production may occur, thus
preventing the planned production volumes from being achieved.
Early warning systems help to identify supply risks and prevent assembly line stoppages. Furthermore,
we counteract other risks with measures such as fire protection and hazardous goods management, and we
take out corresponding insurance coverage where this makes economic sense.
Due to the uncertainty arising from the further development of the Covid-19 pandemic, the Russia-
Ukraine conflict and associated sanctions, and the further development of the energy market, there is a risk
throughout the automotive industry that looming supply breakdowns may not be recognized early enough
and that countermeasures may not be initiated in time to maintain production.
Countermeasures to stabilize global production include, for example, monitoring the spread of
infection and the measures taken to contain the pandemic, analyzing the impact on suppliers and supply
and transport chains, finding alternatives where suppliers are unavailable and organizing special processes.
Procurement, working together with all Group departments and the supplier network, was able to put these
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measures to the test in 2022, particularly in securing purchased parts from Ukraine. Through our organi-
zation, we are also keeping other global and local risks under observation and aim to be able to respond
quickly to factors throughout the entire supply chain as a result.
Risks and opportunities from Procurement and Technology

Current trends in the automotive industry such as e-mobility and automated driving are resulting in an
increased need for financing among suppliers, presenting them with considerable challenges. These are
being exacerbated by the current commodity price situation and the limited availability of semicon-
ductors. The supplier risk management department in Procurement at the Volkswagen Group evaluates
suppliers, and particularly their financial situation, before they are entrusted with the implementation of
projects. Procurement takes into account the recommendations of the supplier risk management depart-
ment.
The risk of supply shortages and disruption to supply continues to exist, particularly given the current
global geopolitical and macroeconomic situation. Examples include the continuing constraints in the
supply of semiconductor components and the direct and indirect effects of the Russia-Ukraine conflict,
including potential temporary interruptions to the energy supply.
Supply risks are identified in Procurement by means of early warning systems and task force and miti-
gation structures have been created to reduce these risks. In addition, strategic measures are to be taken to
avoid future impacts in the long term.
A global economic slowdown exacerbated by trade disputes and the consequences of the Covid-19
pandemic, including sharply increased commodity and energy prices, is impacting the financial situation
of many suppliers. This, too, is giving rise to the risk of bottlenecks and disruption in supply.
Procurement employees specialized in restructuring and supply reliability constantly monitor the
financial situation of our suppliers throughout the world, taking measures designed to counter the risk of
possible supply disruptions.
Demand for resources, possible speculations on the market and current trends in the automotive
industry, such as the growing share of electrified vehicles, may affect the availability and prices of certain
raw materials. Trends in raw materials and demand are continuously analyzed and assessed on an inter-
disciplinary basis to enable steps to be taken at an early stage in the event of potential bottlenecks.
The risks in battery cell production relate particularly to the rising demand for battery cells and the
resulting reliance on suppliers, from technological change and from the service life of battery cells.
Additional risks may arise from long-term ties to cell manufacturers and the direct responsibility of Volks-
wagen in the supply chain. To counter these risks, the Volkswagen Group maintains multiple strategic
supplier relationships while extending the scope of its own activities along the value chain (raw material
extraction, cell production) at the same time.
Commodity risks can be partially mitigated through backward integration of the value chain. For
example, partnerships and long-term supply agreements with commodity suppliers can be used to ensure
the supply of the relevant material while also achieving competitive prices.
Quality problems may necessitate technical intervention involving a substantial financial outlay if the
cost cannot be passed on to the supplier or can only be passed on to a limited extent. Assuring quality is of
fundamental importance, all the more so in the US, Brazilian, Indian and Chinese markets, for which we
develop vehicles specific to the country and where local manufacturers and suppliers are established,
particularly as it may be difficult to predict the impact of regulations or official measures. We constantly
analyze the conditions specific to each market and adapt our quality requirements to their individual
needs. We counter the local risks we identify by continuously developing measures and implementing
them locally, thereby preventing quality defects in the supply chain from arising.
247
It is not possible at present to rule out the possibility of a further increase in recalls of various models
produced by a variety of manufacturers in which certain airbags manufactured by Takata were installed.
This could also affect Volkswagen Group models.
Specialists in Procurement systematically investigate risks resulting from antitrust violations by
suppliers and file claims for any losses that may arise.
Risks in the supply chain may also arise from the non-fulfillment of statutory duty of care in respect of
human rights and the environment, which might result in supply shortages. The requirements are com-
pared with existing processes with the help of gap analyses, and processes are developed and implemented
to fill in any gaps. In order to meet our duty of care in respect of human rights, and to identify, counteract
and prevent the associated risks in the value chain, we developed a responsible supply chain system
in 2022.
Production risks
Volatile developments in the global automotive markets, accidents at suppliers and disruptions in the
supply chain, which could be exacerbated by Covid-19 lockdowns and the Russia-Ukraine conflict, may
cause fluctuations in production volumes affecting both vehicle models and plants. In specific markets we
are seeing a trend away from orders for conventional vehicles with combustion engines and towards
increased orders for electric vehicles. We use established tools, such as flexible working time models, to
address possible risks related to fluctuations in the mix of vehicle types. The international production
network enables us to respond flexibly at the sites. “Turntable concepts” adjust capacity utilization
between production facilities. Volatility and assembly line stoppages, for example due currently to the
Russia-Ukraine conflict and possible temporary interruptions in the energy supply, can be balanced across
brands at multibrand sites.
Potential disruption to our own operating ability or to the supply of inputs crucial for operation that is
caused by extreme weather events in the form of flooding and drought, severe storms or similar may lead
to production stoppages with financial ramifications for the Group. The Group counters this risk by
systematically analyzing the impacts of climate change on its production sites in order to gauge the poten-
tial risks and recommend action in response.
Sudden changes in customer demand for specific equipment features in our products, and the
decreasing predictability of demand, may lead to supply bottlenecks. We minimize this risk, for example, by
continuously comparing our available resources against future demand scenarios. If bottlenecks in the
supply of materials are indicated, we can introduce countermeasures far enough in advance.
Production capacity is planned several years in advance based on long-term sales planning for all vehicle
projects. This involves a degree of risk as it is subject to market momentum and changes in demand. If
forecasts are too optimistic, there is a risk that capacity will not be fully utilized. However, forecasts that are
too pessimistic pose a risk of undercapacity, as a result of which, it may not be possible to meet customer
demand. In the event of short-notice fluctuations in demand beyond the technical capacity that has been
installed, Volkswagen or its suppliers may be unable to meet demand that goes beyond the available tech-
nical flexibility. We counter such risks by matching demand and capacity at frequent intervals and issuing
program scheduling guidelines where necessary.
The diversity of our models, the reduced product life cycles and the use of complex processes and
technical systems are associated with the risk of a delay to the start of production of a vehicle. We address
this risk by drawing on the experience of past production starts and identifying weaknesses at an early
stage so as to ensure – to the highest degree possible – that production volumes and quality standards are
met during the start of production of our vehicles throughout the Group.
248
Legal changes, for instance in the context of the changeover to the WLTP test procedure, may impact
production. For one thing, a temporary reduction in the range causes demand to focus on the available
variants. Moreover, gaps in production can occur if model variants have not been approved. These fluctu-
ations necessitate measures to stabilize production, such as the temporary storage of vehicles until official
approval.
Risks arising from long-term production

In the case of large projects within the Power Engineering Business Area, risks may arise that are often only
identified over the course of the project. They may result in particular from contract design errors,
inaccurate or incomplete information used in costing, post-contract changes in the economic and technical
environment, weaknesses in project management, quality defects and unnoticed product malfunctions,
product emergence, or poor performance by subcontractors. Most notably, omissions at the start of a proj-
ect, overshooting of the development budget or timeframe, and legislative changes are usually difficult to
correct or compensate for and often entail substantial additional expenses. The current disproportionate
increases in commodity prices, energy prices and freight rates, and the limited availability of semicon-
ductor products, may have a detrimental impact on production costs and revenue recognition.
By constantly optimizing the project control process across all project phases and by using a lessons-
learned process and regular project reviews, we aim to identify these risks at an early stage, particularly
during the bidding and planning phase of large upcoming projects, and take appropriate measures to
eliminate or minimize them.
Quality risks
We strive to identify and rectify quality problems at an early stage during the development of our products
to avoid, among other things, delays to the start of production. As we are using an increasing number of
modular components as part of our platform strategy, it is particularly important when malfunctions do
occur to identify the cause quickly and eliminate the faults. Nonconformity of internally or externally
sourced parts, components or functions may necessitate time-consuming and cost-intensive measures,
leading to recalls and therefore damage to the Volkswagen Group’s image. In addition, the resulting finan-
cial impact may exceed provisions. To meet our customers’ expectations and minimize warranty and ex
gratia repair costs, we are continuously optimizing the processes at our brands with which we can prevent
these faults.
If quality management is ineffective, there is a risk of losing ISO 9001 and KBA certification. This would
lead directly to a loss of type approval from one or more authorities. We counter this risk by continuously
training the Group’s system auditors, while our quality management system and process quality undergo
internal audits.
We also check the conformity of series products (conformity of production – CoP) in vehicle production
plants as part of system audits with a CoP component. Further risks are associated with discrepancies
identified in conformity of production measurements and in-service-conformity (ISC) measurements. We
have established an effective system for monitoring the conformity of CoP and ISC measurements for
manufactured vehicles. To ensure that the results of the emissions CoP and ISC measurements are analyzed
systematically, we have implemented an IT system throughout the Group. This is used for status reporting
and documenting the results of the series of measurements.
Vehicle registration and operation criteria are defined and monitored by national and, in some cases,
international authorities. Furthermore, several countries have special – and in some cases new – rules
aimed at protecting customers in their dealings with vehicle manufacturers. We have established quality
processes so that the Volkswagen Group brands and their products fulfill all respective applicable require-
249
ments and local authorities receive timely notification of all issues requiring reporting. By doing so, we
reduce the risk of customer complaints or other negative consequences.
With the increasing technical complexity of vehicles due to their internal and external connectivity, and
the platforms and toolkit systems in use across brands, the quality of the parts and software components
supplied must be assured. This is lending ever greater importance to cyber security. To better monitor and
manage the risk of cyber attacks on our vehicles in the future, we are establishing an Automotive Cyber
Security Management System in all Group brands. Harmonized processes across the Group, such as the car
security incident process, enable a fast reaction speed across the brands in the event of an attack so that any
weaknesses in our products can be promptly eliminated. The Automotive Cyber Security Management
System is an integral part of our quality management system, which helps us leverage synergies with
already existing structures. This approach serves to fulfil the legal requirements of the UNECE regulation on
cyber security, which have applied since mid-2022.
We have established the Ausschuss Produktsicherheit (APS – Product Safety Committee) to compre-
hensively evaluate and efficiently resolve product safety risks for customers as the product users. In the
event of safety defects, doubts about compliance with legal requirements, or issues relating to the brand or
corporate image, the APS examines the matter concerned and decides on how to respond. In this context,
the APS is also responsible for managing related inquiries from authorities. The cross-divisional Car
Security Board (CSB) provides support with regard to cyber security issues. We have also created and
established central units within the organization, which are responsible for managing incoming infor-
mation on APS- and CSB-related topics. In 2021, a universal, transparent management and tracking system
was established to follow up on all such information across the Group without employee involvement,
right through to the APS decision. In addition, numerous events and training courses are held to improve
awareness of safety risks and products’ legal conformity among all employees. These activities aim to avoid
risks from delayed, erroneous or a lack of reporting and preliminary analyses. The entire APS process is,
moreover, subject to regular review in the form of internal and external audits, aimed at minimising risks
arising from delayed, erroneous or a lack of decisions and measures on the part of the APS or CSB.
IT risks
At Volkswagen, a global, software-oriented mobility provider, the information technology (IT) used in all
business units Group-wide is assuming an ever more important role. IT risks exist in relation to the three
protective goals of confidentiality, integrity and availability, and comprise in particular unauthorized access
to, modification and extraction of sensitive electronic corporate or customer data as well as limited systems
availability as a consequence of downtime, disasters and the volatile geopolitical situation. Proper handling
of data is a key factor for data integrity, and for the functionality of error-free systems.
The high standards we set for the quality of our products also apply to the way in which we handle our
customers’ and employees’ data. There is a risk of cyber attacks, particularly on our digital offerings relating
to our mobility services. Legal regulations including the UNECE cyber security regulation (R155) define the
requirements for our vehicle and software development. These also have a large impact on our IT systems.
We therefore work on an interdisciplinary basis to protect our connected vehicles and mobility services.
Our guiding principles are data security, transparency, informational self-determination and the safety and
security of the customer when using our services.
250
We counter the risk of unauthorized access to, modification or extraction of corporate and customer data
by using IT security technologies such as modern security systems for detecting malware and malicious
behavior.
We achieve additional protection by restricting the allocation of access rights to systems and central
administration, including periodic identity checks. Based on business impact analyses, we counter data
destruction or disruption to operation by designing systems with redundancy and implementing backup
strategies.
An overarching committee with members from Information Security, Data Protection, Group Security,
Legal Affairs and other parties involved handles interdisciplinary information security and reports directly
to the Group Board of Management. This enables a rapid response and the efficient coordination of
measures in the event of a possible incident. The technical measures are complemented by a wide range of
awareness-raising measures and training courses for employees that create and deepen awareness of
information security issues.
We use commercially available technologies to protect our IT landscape, adhering to standards applic-
able throughout the Company. We future-proof our IT through continual standardization and updates.
Continuously increasing automation enhances process reliability and the quality of processing.
The further development and Group-wide use of IT governance processes, particularly the further
standardization of the risk management process for IT and information security, also help to identify
weaknesses at an early stage and to reduce or avoid risks effectively.
Another focus is the continuous advancement of Group-wide security measures to detect, avert and deal
with cyber threats.
Risks from media impact

The image of the Volkswagen Group and its brands is one of the most important assets and forms the basis
for long-term business success. Our policy and strategic orientation on issues such as integrity, ethics,
sustainability and climate protection are in the public focus. One of the basic principles of running our
business is therefore to continuously check and pay particular attention to compliance with legal require-
ments and ethical principles. However, we are aware that misconduct or criminal acts by individuals and
the resulting reputational damage can never be fully prevented. In addition, media reactions can have a
negative effect on the image of the Volkswagen Group and its brands. This impact also depends signifi-
cantly on the effectiveness of our communication during times of crisis.
Environmental and social risks

For this risk category, the likelihood of occurrence is classified as medium (previous year: high) and the
potential extent of damage is classified as high (previous year: medium).
The most significant risks from the QRP arise from non-fulfillment of CO2-related requirements.
Personnel risks
We use a range of instruments to counter economic risks as well as changes in the market and the com-
petitive situation and shortages of supplier components. These help the Volkswagen Group to remain
flexible in terms of staff deployment when faced with a fluctuating order situation – whether orders are in
decline, or there is an increase in demand for our products. These instruments include time accounts to
which hours are added when overtime is necessary and from which hours are deducted in quiet periods,
enabling our factories to adjust their capacity to production volume with measures such as extra shifts,
closure days, flexible shift models and legally regulated instruments such as Kurzarbeit (short-time
working). The use of temporary workers also allows us to be more flexible in our planning. All of these
measures help the Volkswagen Group to generally maintain a stable permanent workforce, even when
orders fluctuate.
251
The technical expertise and individual commitment of employees are indispensable prerequisites for the
success of the Volkswagen Group. We counter the risk of not being able to develop sufficient expertise in
the Company’s different vocational groups with our strategically oriented and holistic human resource
development, which gives all employees attractive training and development opportunities. By boosting
our training programs, particularly at our international locations, we are able to adequately address the
challenges of technological change and the structural transformation of the automotive industry.
To counter the potential risk of a shortage of skilled specialists – especially in the areas of digitalization
and IT – we continuously expand our recruitment tools. Our systematic talent relationship management,
for example, enables us to make contact with talented candidates from strategically relevant target groups
at an early stage and to build a long-term relationship between them and the Group. In addition to the
standard dual vocational training, programs such as our integrated degree Studium im Praxisverbund and
traineeship scheme, Faculty 73 and the Volkswagen-sponsored non-profit École 42 in Wolfsburg, Berlin and
Prague, ensure a pipeline of highly qualified and motivated employees. By systematically increasing our
attractiveness as an employer, we are able to gain talented people in areas that are crucial for the future,
such as electrical engineering, chemistry or information technology. With tools such as these, we want to
ensure that our demand for qualified new staff is covered, even amid a shortage of skilled labor.
We counter the risks associated with employee fluctuation and loss of knowledge as a result of retire-
ment with intensive, department-specific succession planning and training.
The advancing digitalization of our human resources processes entails risks arising from the processing
of personal data, but also system-based improvements so that Volkswagen can ensure compliance with
data protection laws when processing personal data. Volkswagen is aware of its responsibility in the pro-
cessing of this data. To make processing compliant with data protection requirements, we address risks as
part of our data protection management system by implementing a wide range of measures.
The basis of successful occupational health and safety is complying with legal requirements, identifying
and assessing work-related risks, determining appropriate measures and monitoring their effectiveness.
This makes a positive contribution to maintaining the health of our employees as part of society. The
spread of the SARS-CoV-2 virus underlines the high importance of effective health protection in the work-
place. We aim to effectively reduce infection risks for the workforce and thereby minimize the risk of
process disruptions and production stoppages.
Environmental protection regulations

The specific emission targets for all new passenger car and light commercial vehicle fleets for brands and
groups in the EU for 2020 and subsequent years are set out in Regulation (EU) No 2019/631. This regulation
is a material component of the European climate protection policy and therefore forms the key regulatory
framework for product design and marketing by all vehicle manufacturers selling in the European market.
Adopted and published by the EU in 2019, the regulation states that, from 2021 onward, the average
emissions of European passenger car fleets must be no higher than 95 g CO2/km. Up to and including 2020,
European fleet legislation was complied with on the basis of the New European Driving Cycle (NEDC). From
2021 onward, the NEDC target value was replaced by a WLTP target value through a process defined by
lawmakers; this change has not led to additional tightening of the target value. A similar approach applies
to light commercial vehicles, where a target of 147 g CO2/km applied to the entire fleet from 2021 onward.
252
The targets are expected to be tightened as from 2025 (subject to publication in the EU Official Journal): for
new European passenger car fleets, a reduction of 15% in CO2 emissions will therefore be required from
2025 and a reduction of 55% from 2030. For new light commercial vehicle fleets, the required reductions
will be 15% from 2025 and 50% from 2030. For 2035, a CO2 reduction target of 100% will then apply to new
passenger car and light commercial vehicle fleets. In each case, the starting point is the WLTP fleet value in
2021. These targets can only be achieved through a growing proportion of electric vehicles within the fleet.
If the respective fleet-wide target is not fulfilled, the Commission may impose an excess emissions
premium, amounting to €95 per excess gram of CO2 per newly registered vehicle.
At the same time, regulations governing fleet fuel consumption of new vehicles are also being developed
or introduced outside the EU27 (plus Norway and Iceland), for example in Brazil, Canada, China, India,
Japan, Mexico, Saudi Arabia, South Korea, Switzerland, Taiwan, the United Kingdom and the USA. Fuel
consumption regulations in China are being gradually tightened with a fleet average target of 4.6 l/100 km
(WLTP) for 2025. More stringent rules are expected for the period after 2025. In addition to this legislation
on fleet consumption, a new energy vehicle quota applies in China. This requires every manufacturer to
increase the share of electric vehicles in its total production or import volumes. For 2022, this quota was
16% and had to be fulfilled through battery-electric vehicles, plug-in hybrids, or fuel cell vehicles. For 2023,
it is increasing by two percentage points to 18%, and a further rise is under discussion for 2024 and 2025.
There is no indication as to possible targets after 2025.
In the USA, the annual CO2 and efficiency targets to be fulfilled by the fleet for new passenger cars and
light commercial vehicles are defined by the Greenhouse Gas legislation (GHG) and Corporate Average Fuel
Economy legislation (CAFE). In December 2021, the current administration published new CO2 fleet targets
for the period from 2022 to 2026. The industry-wide fleet average for passenger cars and light commercial
vehicles is to reduce from 137 g CO2/km in 2022 to 106 g CO2/km in 2026, reversing the relaxation of the
targets by the previous government. The same applies to the CAFE efficiency targets for 2024 to 2026,
which were announced in spring 2022. The fleet targets to be achieved will therefore become more
stringent each year in the period up to 2026. The current government has set a goal for 50% of new vehicle
sales to be electric by 2030. This is expected to be reflected in ambitious targets in future GHG and CAFE
regulations. In addition to this, in California and the user states in the US, the regulations of the Californian
zero-emission vehicle mandate must be adhered to, which prescribes annually increasing electrification
rates for the new vehicle fleet. The aim is to fully electrify passenger cars and light commercial vehicles by
2035.
The tightening of fleet-based CO2 emissions and fuel consumption regulations makes it necessary to use
the latest mobility technologies in all affected markets. Above all, electrified and also purely electric
drivetrains are becoming increasingly common. The Volkswagen Group closely coordinates technology and
product planning with its brands so as to avoid breaches of fleet values, for example, which would entail
severe payment obligations. Whether the Group meets its fleet targets depends crucially on its technolo-
gical and financial capabilities, which are reflected in, for example, our drivetrain and fuel strategy.
Alongside technical and portfolio electrification measures, it is also possible to use local statutory mech-
anisms such as the creation of emission pools in Europe, for example, or the trading of emission credits in
the United States and China. Legislation provides further region-specific flexibility to aid target achieve-
ment. For example:
> Additional innovative technologies in the vehicle that apply outside the test cycle to reduce consumption
(eco-innovations and off-cycle credits) can be taken into consideration
> Particularly efficient vehicles qualify for super-credits
> Special rules are in place for small-series producers and niche manufacturers
253
In the EU, a new test procedure has applied to all new vehicles since September 2018 with the WLTP. Other
challenges arise in connection with stricter processes and requirements regarding WLTP, such as from test
criteria and homologation (achievement of vehicle type approvals).
The Real Driving Emissions (RDE) Regulation for passenger cars and light commercial vehicles is
another of the main European regulations. New, uniform limits for nitrogen oxide and particulate emis-
sions in real road traffic have applied to new vehicle types across the EU since September 2017. This makes
the RDE test procedure fundamentally different from the Euro 6 standard still in force, which stipulates
that the limits on the chassis dynamometer are authoritative. The RDE regulation is intended primarily to
improve air quality in urban areas and areas close to traffic, leading to stricter requirements for exhaust gas
aftertreatment in passenger cars and light commercial vehicles. Stricter RDE processes and requirements
have resulted in certain challenges, for example relating to test criteria and homologation. The debate on
successor emissions legislation (Euro 7) began at European level in late 2022. A final regulation is not
expected before 2023 or early 2024. It is anticipated that this successor regulation will enter into force in
the middle of the decade.
The other main EU regulations affecting the automotive industry include:
> The Car Labeling Directive 1999/94/EC
> The Fuel Quality Directive (FQD) 2009/30/EC updating the fuel quality specifications and introducing
energy efficiency specifications for fuel production
> The Renewable Energy Directive (RED) (2009/28/EC) introducing sustainability criteria; the follow-up
regulation (RED2) contains higher quotas for advanced biofuels
> The revised Energy Taxation Directive 2003/96/EC updating the minimum tax rates for all energy
products and electricity
Commercial vehicles are increasingly subject to ever stricter environmental regulations all around the
world, particularly to regulations relating to climate change and vehicle emissions. For example, with Regu-
lation (EU) 2019/1242 of June 20, 2019, which specifies CO2 emission standards for new heavy commercial
vehicles with a permitted gross weight of over 16 tonnes, the EU has set manufacturers very ambitious
targets for reducing CO2 emissions within the next decade. The CO2 emissions from such vehicles must be
reduced by 15% by 2025 and 30% by 2030 compared to a reference value for a monitoring period from July
2019 to June 2020. If emissions exceed these targets, vehicle manufacturers will be liable to substantial
premiums, amounting to €4,250 per excess gram of CO2/tonne-kilometer (tkm) per vehicle for the period
from 2025 to 2029 and €6,800 per excess gram of CO2/tkm per vehicle for the period from 2030 onward.
The target of a greenhouse gas emissions reduction of 30% by 2030 set out in the regulation was revised at
the beginning of 2023. The European Commission proposes a 45% CO2 emissions reduction compared to
the reference value by 2025, scaling up to 65% by 2035 and 90% by 2040.
In the European Green Deal, the Commission defined the goal of achieving climate neutrality by 2050.
Targeting a general reduction in EU CO2 emissions of at least 55% (previously 40%) compared to 1990 levels
by 2030, this represents a big challenge for the entire transport sector. The revision of CO2 emission
requirements for heavy-duty vehicles planned in the EU for spring 2023 and the proposals for a new Euro 7
standard that have already been published could further exacerbate these challenges.
Commercial vehicle manufacturers in Brazil will face newer regulations on reducing pollutant emis-
sions from 2023. In the United States, emission regulations for CO2 and nitrogen oxide (NOx) are also likely
to be tightened further for heavy-duty vehicles. CO2 reductions based on 2016 emission levels have already
been defined for 2024 and 2027. The United States is finalizing a new NOx regulation that is due to enter
into force in 2027.
254
Adapting commercial vehicles to new emission standards is technologically complex and expensive,
especially given the often technically contradictory regulations applicable to CO2 and other pollutant emis-
sions from internal combustion engines. To meet the targets for the different markets, it is imperative to
reduce CO2 and exhaust gas emissions through new technologies. This is why we are making substantial
investments in climate-friendly alternative drive systems – especially battery-electric commercial vehicles
and buses.
The debate around driving bans for diesel vehicles in Germany has lost some of its heat given the strong
improvements in air quality measurements. There were only two cities that failed to comply with the air
pollutant limits for nitrogen dioxide (NO2) immissions in 2022. In some cases, these issues have been, and
continue to be, the subject of legal proceedings. Individual cities throughout Germany have already
imposed zonal traffic bans for older vehicles such as Euro 4/IV diesel. It is argued that only driving bans for
diesel vehicles can bring about the necessary short-term reduction in NO2 immissions. The aforemen-
tioned debate could negatively affect sales of diesel vehicles and result in financial liabilities and possible
official requirements.
Local bans on the use of diesel vehicles are already also in place in a number of other countries, though
these mainly affect older vehicles with lower emissions standards. Regulations in Belgium that successively
ban older vehicles from larger cities are one example. In addition to major cities such as Paris and London,
countries like the United Kingdom are now discussing future bans on vehicles with internal combustion
engines.
A number of special environmental protection requirements apply to the Power Engineering segment.
For example, the International Maritime Organization has issued the International Convention for the
Prevention of Pollution from Ships (MARine POLlution – MARPOL), which applies to ship engines. The
permitted emissions are being lowered in phases under MARPOL ANNEX VI. A reduction of the sulfur
content in marine fuel has been implemented globally in recent years. Particularly stringent environmental
regulations apply in emission control areas in Europe and the USA/Canada. Expansion to further regions
such as the Mediterranean or Japan is being planned; other regions or territories such as the Black Sea,
Alaska, Australia or South Korea are also in discussion. Moreover, emission limits are in force under Regu-
lation (EU) 2016/1628 and in accordance with the regulations of the US Environmental Protection Agency
(EPA), for example.
We are pushing for a maritime energy transition in specialist bodies and also promote this to the general
public. In a first step, we are supporting the switch to liquefied natural gas (LNG) as a fuel for maritime
applications, and offer dual fuel and gas-powered engines for new and retrofitted vessels. For long-term,
climate-neutral operation of seagoing vessels, we advocate power-to-X technology, in which excess sustain-
ably generated electricity is converted into carbon-neutral gas or liquid fuel, especially hydrogen, methanol
or ammonia.
As regards stationary equipment, there are a number of national rules in place worldwide that limit
permitted emissions. On December 18, 2008, the World Bank Group set limits for gas and diesel engines in
its Environmental, Health, and Safety Guidelines for Thermal Power Plants. These guidelines, which are
currently being revised, are required to be applied in countries that have adopted no national requirements
of their own or have requirements that are less stringent. In addition, the United Nations adopted the
Convention on Long-range Transboundary Air Pollution back in 1979, setting limits on total emissions as
well as nitrogen oxide for the signatory states (including all EU states, other countries in Eastern Europe,
the USA and Canada). These are also due for revision. Enhancements to the product portfolio in the Power
Engineering segment focus on improving the efficiency and emissions reduction of equipment and
systems. While adhering to current and future emissions requirements, we are advancing a series of inno-
vative energy solutions to actively shape the climate transition.
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Legal risks
For this risk category, the likelihood of occurrence is classified as medium (previous year: medium) and the
potential extent of damage is classified as high (previous year: medium).
The most significant risks from the QRP are associated with the diesel issue.
Litigation
Volkswagen AG and the companies in which it is directly or indirectly invested are involved in a substantial
number of legal disputes and governmental proceedings in Germany and abroad. Such legal disputes and
other proceedings occur, among other things, in connection with products and services or in relation to
employees, public authorities, dealers, investors, customers, suppliers, or other contracting parties. For the
companies in question, these disputes and proceedings may result in payments such as fines or in other
obligations or consequences. In particular, substantial compensatory or punitive damages may have to be
paid and cost-intensive measures may have to be implemented. In this context, specific estimation of the
objectively likely consequences is often possible only to a very limited extent, if at all.
Various legal proceedings are pending worldwide, particularly in the USA, in which customers are
asserting purported product-related claims, either individually or in class actions. These claims are as a rule
based on alleged vehicle defects, including defects alleged in vehicle parts supplied to the Volkswagen Group.
Compliance with legal or regulatory requirements is another area in which risks may arise. This is
particularly true in gray areas where Volkswagen and the relevant public authorities may interpret the law
differently.
In connection with their business activities, Volkswagen Group companies engage in constant dialogue
with regulatory agencies, including the Kraftfahrt-Bundesamt (KBA – German Federal Motor Transport
Authority). It is not possible to predict with assurance how government regulators will assess certain issues
of fact and law in a particular situation. For this reason, the possibility that certain vehicle characteristics
and/or type approval aspects may in particular ultimately be deemed deficient or impermissible cannot be
ruled out. This is fundamentally a question of the regulatory agency’s specific evaluation in a concrete
situation.
A comparable challenge results from the tension between divergent national and international statu-
tory or regulatory requirements regarding obligations to transfer information or documents, on the one
hand, and privacy mandates under national and international data protection law on the other. Volkswagen
is advised by outside law firms on these issues so as to preclude compliance violations as far as possible
despite the sometimes unclear state of the law.
Litigation may furthermore result from demands for more extensive climate protection measures or
from allegedly incomplete disclosures regarding the impact of climate change. The response of the Volks-
wagen Group to this risk includes, among other things, certification of its self-imposed decarbonization
targets through independent and internationally respected organizations and systematic alignment of its
non-financial reporting with the requirements of the law and the capital markets.
Risks may also result from actions for infringement of intellectual property, including infringement of
patents, brands, or other third-party rights, particularly in Germany and the USA. If Volkswagen is alleged
or determined to have violated third-party intellectual property rights, it may for instance have to pay
damages, modify manufacturing processes, or redesign products, and may be barred from selling certain
products; this may result in delivery and production restrictions or interruptions.
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Criminal acts by individuals, which even the best compliance management system can never completely
prevent, are another potential source of legal risks.
Appropriate insurance has been taken out to cover these risks where they were sufficiently definite and
such coverage was economically sensible. Where necessary based on the information currently available,
identified and correspondingly measurable risks have been reflected by recognizing provisions in amounts
considered appropriate or disclosing contingent liabilities, as the case may be. As some risks cannot be
assessed or can only be assessed to a limited extent, the possibility of material loss or damage not covered
by the insured amounts or by provisions cannot be ruled out. This is, for instance, the case with regard to
the legal risks assessed in connection with the diesel issue.
Unless otherwise explicitly stated, the amounts disclosed for the litigation being reported on refer only
to the respective principal claim. Ancillary claims, such as for interest and litigation expense, are generally
not considered.
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 emis-
sions tests on certain Volkswagen Group vehicles with 2.0 l diesel engines in the USA. In this context, Volks-
wagen 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 discrep-
ancies 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 Environ-
mental 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 man-
ageable overall considering the business activities of the Volkswagen Group. This assessment by Volks-
wagen 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.
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The AUDI AG Board of Management members in office at the time in question have likewise stated that they
had no knowledge of the use of “defeat device” software that was prohibited by US law in the type V6 3.0 l TDI
engines until the EPA issued its November 2015 “Notice of Violation.”
Within the Volkswagen Group, Volkswagen AG has development responsibility for the four-cylinder
diesel engines and AUDI AG has development responsibility for the six- and eight-cylinder diesel engines.
As a consequence of the diesel issue, numerous judicial and regulatory proceedings were initiated in
various countries. Volkswagen has in the interim succeeded in making substantial progress and ending
many of these proceedings. In the USA, Volkswagen AG and certain affiliates reached settlement agree-
ments with various government authorities and private plaintiffs, the latter represented by a Plaintiffs’
Steering Committee in a multidistrict litigation in the US state of California. The agreements in question
include various partial consent decrees as well as a plea agreement that resolved certain civil claims as well
as criminal charges under US federal law and the laws of certain US states in connection with the diesel
issue. Although Volkswagen is firmly committed to fulfilling the obligations arising from these agreements,
a breach of these obligations cannot be completely ruled out. In the event of a violation, significant
penalties could be imposed as stipulated in the agreements, in addition to the possibility of further
monetary fines, criminal sanctions and injunctive relief.
In agreement with the respective responsible authorities, the Volkswagen Group is making technical
measures available worldwide for virtually all diesel vehicles with type EA 189 engines. For all clusters
(groups of vehicles) within its jurisdiction, the KBA determined that implementation of the technical mea-
sures would not result in any adverse changes in fuel consumption, CO2 emissions, engine output, maxi-
mum torque, and noise emissions.
Following the studies carried out by AUDI AG to check all relevant diesel concepts for possible irregu-
larities and retrofit potential, measures proposed by AUDI AG have been adopted and mandated by the
KBA in various recall orders pertaining to vehicle models with V6 and V8 TDI engines. AUDI AG continues
to anticipate that the total cost, including recall expenses, of the ongoing largely software-based retrofit
program that began in July 2017 will be manageable and has recognized corresponding balance-sheet risk
provisions. AUDI AG has in the meantime developed software updates for many of the affected powertrains
and, after approval by the KBA, already installed these updates in the vehicles of a large number of affected
customers. KBA approval is still expected for the small number of software updates that are still pending.
In connection with the diesel issue, potential consequences for Volkswagen’s results of operations,
financial position and net assets could emerge primarily in the following legal areas:
1. Criminal and administrative proceedings worldwide (excluding the USA/Canada)

Criminal investigations, regulatory offense proceedings, and/or administrative proceedings have been
commenced in some countries. Criminal investigations into the core factual issues are being conducted by
the Offices of the Public Prosecutor in Braunschweig and Munich.
In January 2021, the criminal proceedings regarding alleged market manipulation relating to capital
market disclosure obligations in connection with the diesel issue were terminated by the Braunschweig
Regional Court provisionally as regards the former Chair of the Board of Management and definitively as
regards the corresponding regulatory offense proceeding against Volkswagen AG. The Braunschweig Office
of the Public Prosecutor has in the meantime filed a motion with the Braunschweig Regional Court to
reopen the proceedings against the former Chair of the Board of Management. A final ruling on this
motion is still pending.
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In September 2020, the Braunschweig Regional Court allowed the indictment of the same former Chair of
the Board of Management of Volkswagen AG to proceed on charges that include fraud in connection with
the diesel issue involving type EA 189 engines. The proceedings against this former Chair of the Board of
Management of Volkswagen AG have since been severed from the other cases. The trial of the other defen-
dants began in September 2021.
The Braunschweig Office of the Public Prosecutor is continuing its investigations on suspicion of fraud
in connection with type EA 288 engines.
In June 2020, the Munich II Regional Court accepted the substantially unchanged indictment of the
Munich II Office of the Public Prosecutor, which also names a former Chair of the Board of Management of
AUDI AG, and opened the main trial proceedings on charges of, among other things, fraud in connection
with the diesel issue involving 3.0 l and 4.2 l TDI engines. Trial proceedings commenced in September 2020.
In August 2020, the Munich II Office of the Public Prosecutor issued a further indictment charging three
former members of the Board of Management of AUDI AG and others with, among other things, fraud in
connection with the diesel issue involving 3.0 l and 4.2 l TDI engines. The criminal investigation conducted
by the Stuttgart Office of the Public Prosecutor against a member of the Board of Management of Dr. Ing.
h.c. F. Porsche AG and others on suspicion of fraud and illegal advertising relating to the diesel issue has in
the interim been terminated at the end of April 2022, as regards inter alia the Board of Management mem-
ber, against payment of a sum set by the court.
As the type approval authority of proper jurisdiction, the KBA is moreover continuously testing Audi,
Volkswagen, and Porsche brand vehicles for problematic functions. If certain functions are deemed imper-
missible by the KBA, the affected vehicles are recalled pursuant to a recall order or they are brought back
into compliance by means of a voluntary service measure.
In judgments rendered in July and November 2022, the European Court of Justice (ECJ) ruled that a so-
called thermal window (i.e. a temperature-dependent exhaust gas recirculation) in the range of 15°C and
33°C outside temperature represents a defeat device. In this context, the ECJ has developed a new, unwritten
criterion according to which a thermal window, even if it serves to prevent sudden and extraordinary
damage, is impermissible if it is active “for most of the year under real driving conditions prevalent in the
territory of the European Union.” Volkswagen Group is assessing the effects of this new vehicle engineering
criterion. The KBA has commenced formal administrative proceedings relating to certain first generation
type EA 896 engines deployed in certain older vehicle models. Volkswagen Group is in discussion with the
KBA on this issue.
At the end of February 2023, the Schleswig Administrative Court in a court of first instance judgment
upheld a lawsuit brought by Deutsche Umwelthilfe (Environmental Action Germany) against the KBA and
ordered the KBA to revoke the release notice for the software update for certain older Golf Plus models,
insofar as the release notice relates to the thermal window. Volkswagen will review the decision once the
written reasoning is available and decide on further measures.
Moreover, additional administrative proceedings relating to the diesel issue are ongoing in other juris-
dictions.
The companies of the Volkswagen Group are cooperating with the government authorities.
Risks may furthermore result from possible decisions by the European Court of Justice construing EU
type approval provisions.
Whether the criminal and administrative proceedings will ultimately result in fines or other conse-
quences for the Company, and if so what amounts these may entail, is currently subject to estimation risks.
According to Volkswagen’s estimates, the likelihood that a sanction will be imposed is 50% or less in the
majority of these proceedings. Contingent liabilities have therefore been disclosed where the amount of
such liabilities could be measured and the likelihood of a sanction being imposed was assessed at not less
than 10%.
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2. Product-related lawsuits worldwide (excluding the USA/Canada)

A general possibility exists that customers in the affected markets will file civil lawsuits or that importers
and dealers will assert recourse claims against Volkswagen AG and other Volkswagen Group companies.
Besides individual lawsuits, various forms of collective actions (i.e. assertion of individual claims by plain-
tiffs acting jointly or as representatives of a class) are available in various jurisdictions. Furthermore, in a
number of markets it is possible for consumer and/or environmental organizations to bring suit to enforce
alleged rights to injunctive relief, declaratory judgment, or damages.
Customer class action lawsuits and actions brought by consumer and/or environmental organizations
are pending against Volkswagen AG and other Volkswagen Group companies in a number of countries
including Belgium, Brazil, England and Wales, France, Germany, Italy, the Netherlands, Portugal, and South
Africa. Alleged rights to damages and other relief are asserted in these actions. The pending actions include
in particular the following:
In Belgium, the Belgian consumer organization Test Aankoop VZW has filed a class action to which an
opt-out mechanism has been held to apply. Given the opt-out rule, the class action potentially covers all
vehicles with type EA 189 engines purchased by consumers on the Belgian market after September 1, 2014,
unless the right to opt out is actively exercised. The asserted claims are based on purported violations of
unfair competition and consumer protection law as well as on alleged breach of contract.
In Brazil, two consumer protection class actions are pending. In the first class action, which pertains to
some 17 thousand Amarok vehicles, the Superior Court of Justice in August 2022 rejected in part the appeal
filed by Volkswagen do Brasil against the May 2019 judgment at the first appeals level that had initially
reduced the damage liability of Volkswagen do Brasil considerably to around BRL172 million. Volkswagen
do Brasil has appealed this decision. The judgment therefore remains non-final. The plaintiff in the second
class action, which pertains to roughly 67 thousand later generation Amaroks, has appealed the trial court’s
October 2021 judgment dismissing the complaint.
The financialright GmbH filed consolidated actions before various German courts asserting claims
assigned to it by customers in Germany, Slovenia, and Switzerland against Volkswagen Group companies.
Following the withdrawal of numerous motions for relief, approximately 33 thousand claims are currently
still pending. Some cases have in the meantime moved to the first or second appeals level. In Germany, the
Bundesgerichtshof (BGH – Federal Court of Justice) rendered a judgment in June 2022 holding, in a case
involving the damage claims of Swiss vehicle purchasers, that the assignment of claims to financialright
GmbH was valid. The BGH did not address the merits of the claims.
In England and Wales, the roughly 91 thousand claims of the group litigation against the Volkswagen
Group were settled out of court in May 2022 for the sum of £193 million as well as a separate amount for
the plaintiffs’ attorney fees and other costs.
In addition, in late 2021 a new lawsuit was filed in court against Volkswagen AG, Volkswagen Financial
Services (UK) Limited, and other Volkswagen Group companies in connection with certain diesel vehicles
leased or sold in England, Wales, and Northern Ireland since 2009 and various other diesel engine types.
In France, a class action is pending that was filed by the French consumer organization Confédération de
la Consommation, du Logement et du Cadre de Vie (CLCV) against Volkswagen Group Automotive Retail
France and Volkswagen AG for up to 1 million French owners and lessees of vehicles with type EA 189
engines. This is an opt-in class action.
In Italy, a trial level judgment in favor of the plaintiffs by the Venice Regional Court in the class action
brought by the consumer association Altroconsumo on behalf of Italian customers was announced in July
2021; the judgment requires Volkswagen AG and Volkswagen Group Italia to pay damages to some
63 thousand consumers in an aggregate amount of roughly €185 million. Volkswagen AG and Volkswagen
Group Italia have appealed this decision.
In the Netherlands, an opt-out class action is pending that was brought by Stichting Volkswagen Car
Claim seeking declaratory rulings for up to 165 thousand customers. A declaratory judgment partially
granting the relief sought was issued in July 2021. In the opinion of the court, Volkswagen AG and the other
defendant Group companies acted unlawfully with respect to the original engine management software.
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The court moreover held that consumers are entitled to a purchase price reduction from the defendant
dealerships. No specific payment obligations result from the declaratory judgment. Any individual claims
would then have to be established afterwards in separate proceedings. Volkswagen AG and the other
defendant Group companies have appealed the decision. Furthermore, an opt-out class action lawsuit
brought by the Diesel Emissions Justice Foundation (DEJF) seeking monetary damages on behalf of Dutch
consumers is also pending; the action involves vehicles with type EA 189 engines, among others. The court
rendered an interlocutory judgment in March 2022 holding the new class action regime – which permits
damage awards in addition to declaratory judgment on the existence of claims – to be inapplicable to the
instant lawsuit. The interlocutory judgment further finds that the Amsterdam court lacks jurisdiction to
hear lawsuits brought by consumers outside the Netherlands. The DEJF appealed this judgment. The court
then suspended the trial level proceedings pending a decision by the appellate court.
In Portugal, a Portuguese consumer organization has filed an opt-out class action. The class action
potentially affects up to approximately 70 thousand vehicles with type EA 189 engines. The complaint
seeks vehicle return and alleges damages as well.
In South Africa, an opt-out class action seeking damages is pending; the action pertains to some
80 thousand vehicles, including vehicles with type EA 189 engines.
Furthermore, individual lawsuits and similar proceedings are pending against Volkswagen AG and other
Volkswagen Group companies in various countries; most of these lawsuits are seeking damages or rescis-
sion of the purchase contract.
In Germany, roughly 40 thousand individual lawsuits relating to various diesel engine types are
currently pending against Volkswagen AG or other Group companies, with the plaintiffs suing for damages
or rescission of the contract in most cases.
In 2020, the BGH issued a series of fundamental judgments deciding legal issues of major importance
for the litigation still pending with regard to vehicles with type EA 189 engines. The BGH held that buyers
who had purchased vehicles prior to public disclosure of the diesel issue could return their vehicles to
Volkswagen AG and receive a refund of the purchase price paid, less a deduction for the benefit derived
from using the vehicle. However, buyers have no tort-based claim for damages if they purchased their
vehicles after the ad hoc announcement of September 22, 2015 or if they raise claims based solely on a
temperature-dependent exhaust gas recirculation (so-called thermal window) in the engine. In February
2022, the BGH issued further fundamental judgments concerning vehicles with EA 189 motors affirming
that buyers of new vehicles of the Volkswagen brand were entitled to residual damage claims against Volks-
wagen AG after the knowledge-based limitation period has expired; the BGH had previously held that
purchasers of used cars lacked such claims. The BGH held that buyers must return their vehicles in order to
claim payment and that such payment was reduced by the benefit derived from using the vehicle and by
the dealer profit margin. In an additional fundamental judgment rendered in July 2022 concerning vehicles
with EA 189 engines, the BGH held that buyers of new vehicles of other Group brands have no claim for
residual damages against Volkswagen AG.
Volkswagen estimates the likelihood that the plaintiffs will prevail to be 50% or less in the great majority
of cases: customer class actions, complaints filed by consumer and/or environmental organizations, and
individual lawsuits. Contingent liabilities are disclosed for these proceedings where the amount of such
liabilities can be measured and the chance that the plaintiff will prevail was assessed as not remote. Given
the early stage of the proceedings, it is in some cases not yet possible to quantify the realistic risk exposure.
Furthermore, provisions were recognized to the extent necessary based on the current assessment.
At this time, it cannot be estimated how many customers will choose to file lawsuits in the future in
addition to those already pending and what prospect of success such lawsuits might have.
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3. Lawsuits filed by investors worldwide (excluding the USA/Canada)

Investors from Germany and abroad have filed claims for damages against Volkswagen AG – in some cases
along with Porsche Automobil Holding SE (Porsche SE) as joint and several debtors – based on purported
losses due to alleged misconduct in capital market communications in connection with the diesel issue.
The vast majority of these investor lawsuits are currently pending before the Braunschweig Regional
Court. In August 2016, the Braunschweig Regional Court issued an order referring common questions of
law and fact relevant to the investor lawsuits pending before it to the Higher Regional Court in Braun-
schweig for binding declaratory rulings pursuant to the Kapitalanleger-Musterverfahrensgesetz (KapMuG –
German Capital Investor Model Declaratory Judgment Act). In this proceeding, common questions of law
and fact relevant to these actions are to be adjudicated by the Braunschweig Higher Regional Court in a
single consolidated proceeding (model case proceedings). The investor lawsuits pending against Volks-
wagen AG in Germany are stayed pending resolution of the common issues, unless the cases can be
dismissed for reasons independent of the common issues that are to be adjudicated in the model case
proceedings. The resolution in the model case proceedings of the common questions of law and fact will be
binding for the pending cases that have been stayed as described. The model case plaintiff is Deka Invest-
ment GmbH. Oral argument in the model case proceedings before the Braunschweig Higher Regional Court
began in September 2018 and is continuing at subsequent hearings. The latest indication from the court
was that it may hear witness testimony on certain points.
Further investor lawsuits have been filed with the Stuttgart Regional Court against Volkswagen AG, in
some cases along with Porsche SE as joint and several debtor. A further investor action for model decla-
ratory judgment is pending before the Stuttgart Higher Regional Court against Porsche SE; Volkswagen AG
is involved in this action as a third party intervening in support of a party to the dispute. The Wolver-
hampton City Council, Administrating Authority for the West Midlands Metropolitan Authorities Pension
Fund, has been appointed model case plaintiff. Oral argument in this case began in July 2021 and continued
in subsequent hearings. The court has scheduled a hearing in the spring of 2023 at which it will deliver its
decision.
Excluding the United States and Canada and following the withdrawal of various actions, claims in
connection with the diesel issue totaling roughly €9.5 billion are currently pending worldwide against
Volkswagen AG in the form of investor lawsuits, judicial applications for dunning and conciliation
procedures, and claims under the KapMuG. Volkswagen AG remains of the opinion that it duly complied
with its capital market obligations. Therefore, no provisions have been recognized for these investor law-
suits. Contingent liabilities have been disclosed where the chance of success was estimated to be not less
than 10%.
4. Proceedings in the USA/Canada

In the USA and Canada, the matters described in the EPA’s “Notices of Violation” are the subject of various
types of lawsuits and requests for information that have been filed against Volkswagen AG and other Volks-
wagen Group companies, in particular by customers, investors, and various government agencies in
Canada and the United States.
In January 2017, Volkswagen entered into a Third Partial Consent Decree with the DOJ and the EPA,
which the federal court in the multidistrict litigation approved in April 2017. The Third Partial Consent
Decree resolved claims for civil penalties and injunctive relief under the Clean Air Act related to the 2.0 l
and 3.0 l TDI vehicles, and imposed a civil penalty as well as monitoring, auditing, and compliance
obligations. In July 2017, the court furthermore approved the Third California Partial Consent Decree, in
which Volkswagen agreed with the California Attorney General and CARB to pay civil penalties and cost
reimbursements. Subsequently, Volkswagen sought to terminate both consent decrees on the basis that all
requirements had been met, and the US and California authorities agreed to the termination, which the
court granted in September 2022.
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The Texas attorney general and some municipalities continue to pursue actions in state and federal courts
against Volkswagen AG, Volkswagen Group of America, Inc., and certain affiliates, alleging violations of
environmental laws. In January 2022, the Texas Supreme Court granted the February 2021 petition of the
State of Texas for review of the Texas appellate court decision that had dismissed the environmental claims
of Texas against Volkswagen AG and AUDI AG for lack of personal jurisdiction.
In November 2021, the US Supreme Court denied petitions by Volkswagen requesting that it review both
a decision by the US Court of Appeals for the Ninth Circuit declining to dismiss certain claims brought by
Hillsborough County, Florida, and Salt Lake County, Utah, and a decision by the Ohio Supreme Court
declining to dismiss certain claims brought by the State of Ohio.
In January 2022, Volkswagen settled environmental claims brought by Ohio.
In March 2019, the US Securities and Exchange Commission (SEC) filed a lawsuit against, among others,
Volkswagen AG, Volkswagen Group of America Finance, LLC, and VW Credit, Inc., asserting claims under US
federal securities law based, among other things, on alleged misstatements and omissions in connection
with the offer and sale of certain bonds and asset-backed securities. In August 2020, the US District Court
for the Northern District of California dismissed, among other things, all claims against VW Credit, Inc.
relating to asset-backed securities. In September 2020, the SEC filed an amended complaint that, among
other things, removed the dismissed claims. The pre-trial discovery phase is still ongoing.
As to private civil law matters, the Superior Court of Quebec approved the settlement of an environ-
mental class action lawsuit seeking punitive damages on behalf of the residents of the Province of Quebec
in June 2022; an appeal of that approval on the limited subject of counsel fees has been dismissed in the
meantime so that the settlement may now proceed.
In line with IAS 37.92, no statements have been made concerning estimates of financial impact or
regarding uncertainty as to the amount or maturity of provisions and contingent liabilities in relation to
proceedings in the USA/Canada. This is so as to not compromise the results of the proceedings or the
interests of the Company.
5. Special audit
In a November 2017 ruling, the Higher Regional Court of Celle ordered, upon the request of three US funds,
the appointment of a special auditor for Volkswagen AG. The special auditor was supposed to examine
whether the members of the Board of Management and Supervisory Board of Volkswagen AG breached
their duties in connection with the diesel issue from June 22, 2006 onwards and, if so, whether this resulted
in damages for Volkswagen AG. Volkswagen AG had filed a constitutional complaint with the German
Federal Constitutional Court against this decision, which was originally unappealable as a formal matter.
Volkswagen AG also filed a constitutional complaint against the subsequent (and likewise formally
unappealable) decision by the Higher Regional Court of Celle to appoint a special auditor other than the
one initially appointed. In rulings announced in November 2022, the Federal Constitutional Court found
both constitutional complaints to be meritorious and held that the decisions of the Higher Regional Court
of Celle violated the constitutional rights of Volkswagen AG in multiple respects. The decisions of the
Higher Regional Court were vacated and the case was remanded to this court. Volkswagen AG had in
addition previously filed an action before the Braunschweig Regional Court seeking to enjoin the special
auditor from performing the audit as long as he had not furnished sufficient proof of his independence.
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The Braunschweig Regional Court dismissed the action for injunctive relief in the summer of 2022; Volks-
wagen AG then appealed this decision to the Braunschweig Higher Regional Court.
A second motion seeking appointment of a special auditor for Volkswagen AG to examine matters
relating to the diesel issue was filed with the Regional Court of Hanover. This proceeding was stayed
pending the decision by the Federal Constitutional Court in the initial special auditor litigation. No deci-
sion whether to resume the proceeding has as yet been issued.
6. Risk assessment regarding the diesel issue

An amount of around €1.4 (2.1) billion has been included in the provisions for litigation and legal risks as
of December 31, 2022 to account for the currently known legal risks related to the diesel issue based on the
presently available information and the current assessments. Where adequately measurable at this stage,
contingent liabilities relating to the diesel issue have been disclosed in the notes in an aggregate amount of
€4.2 (4.3) billion, whereby roughly €3.6 (3.6) billion of this amount results from lawsuits filed by investors
in Germany. The provisions recognized, the contingent liabilities disclosed, and the other latent legal risks
in the context of the diesel issue are in part subject to substantial estimation risks given the complexity of
the individual relevant factors, the ongoing coordination with the authorities, and the fact that the fact-
finding efforts have not yet been concluded. Should these legal or estimation risks materialize, this could
result in further substantial financial charges. In particular, adjustment of the provisions recognized in
light of knowledge acquired or events occurring in the future cannot be ruled out.
In line with IAS 37.92, no further statements have been made concerning estimates of financial impact
or regarding uncertainty as to the amount or maturity of provisions and contingent liabilities in relation to
the diesel issue. This is so as to not compromise the results of the proceedings or the interests of the Com-
pany.
Additional important legal cases

In 2011, ARFB Anlegerschutz UG (haftungsbeschränkt) filed a claim for damages against Volkswagen AG
and Porsche SE for allegedly violating disclosure requirements under capital market law in connection with
the acquisition of ordinary shares in Volkswagen AG by Porsche SE in 2008. The damages being sought
based on allegedly assigned rights currently amount to approximately €2.26 billion plus interest. In late
September 2022 the 1st Antitrust Chamber of the Higher Regional Court of Celle issued a model case ruling
by which all of the plaintiffs' objects of declaratory judgment were either dismissed or declared to be
irrelevant. The legal positions of the model case defendants were thus upheld in their entirety. Under the
court's decision, Volkswagen AG is not liable because, among other things, the plaintiffs failed to make a
sufficient showing that the Board of Management of Volkswagen AG had knowledge of the capital market
information that was allegedly incorrect or subject to disclosure. The court further held that, even
assuming members of the Supervisory Board to have had knowledge as alleged, such knowledge could not
be imputed to the Board of Management. Two appeals alleging error of law in the model case ruling have
been received, one of which is also directed against Volkswagen AG.
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In Brazil, the Brazilian tax authorities commenced tax proceedings against Volkswagen Truck & Bus (for-
merly: MAN Latin America); at issue in these proceedings are the tax consequences of the acquisition
structure chosen for Volkswagen Truck & Bus in 2009. In December 2017, an adverse administrative appeal
ruling was rendered against Volkswagen Truck & Bus. Volkswagen Truck & Bus challenged this ruling before
the regular court in 2018. Estimation of the risk in the event the tax authorities prevail on all points is
subject to uncertainty because of differences in the amount of penalties and interest that might then apply
under Brazilian law. However, a positive outcome for Volkswagen Truck & Bus remains the expectation.
Should this not occur, a risk of about BRL3.5 billion could result for the contested period from 2009
onwards; this amount has been included in contingent liabilities in the notes.
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 Com-
mission 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 appealed this
judgment to the European Court of Justice in April 2022. 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 or contingent liabilities disclosed for these cases
as most of them are still in an early stage and currently cannot be assessed for this reason. In other cases,
the chance of a decision by a court of last resort awarding antitrust damages against MAN or Scania
currently appears remote.
In July 2021, the European Commission assessed a fine totaling roughly €502 million against Volks-
wagen AG, AUDI AG, and Dr. Ing. h.c. F. Porsche AG pursuant to a settlement decision. Volkswagen declined
to file an appeal, hence the decision became final in 2021. The subject matter scope of the decision is
limited to the cooperation of German automobile manufacturers on individual technical questions in con-
nection with the development and introduction of SCR (selective catalytic reduction) systems for passenger
cars that were sold in the European Economic Area. The manufacturers are not charged with any other
misconduct such as price fixing or allocating markets and customers.
The Korean competition authority KFTC is analyzing potential violations based on the facts of the EU
case. The final report of the appointed KFTC case handler was issued in November 2021. Volkswagen, Audi,
and Porsche have replied to this report. In February 2023, the KFTC published a press release stating that an
administrative fine decision would be issued against four automobile manufacturers in the SCR context.
According to the press release, no fine is to be imposed on Volkswagen AG and the decision would not affect
Porsche AG. However, an administrative fine decision would be issued against AUDI AG in the SCR matter.
The competition authority’s final decision and the grounds thereof have not yet been served; service is
currently expected in the first half of 2023. The Turkish competition authorities, who investigated similar
matters, issued a final decision in January 2022 in which they determined anticompetitive behavior to
allegedly exist, but found that it had no effect on Türkiye, for which reason they refrained from imposing
fines on the German automakers. Volkswagen, Audi, and Porsche are currently considering whether to file
an appeal. Based on comparable matters, the Chinese competition authority has instituted proceedings
against Volkswagen, Audi, and Porsche, among others, and issued requests for information.
In connection with the amended antitrust class action, which was initially dismissed with prejudice by
the Northern District of California and which alleged that several automobile manufacturers, including
Volkswagen AG and other Group companies, had conspired to unlawfully increase vehicle prices in
violation of US antitrust and consumer protection law, the Ninth Circuit Court of Appeals in January 2022
denied plaintiffs’ motion (filed at the end of 2021) for rehearing on the decision in which the court had
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affirmed the judgment of the US District Court. In February 2022, the District Court also denied plaintiffs’
motion to set aside its judgment and to be allowed to file a new complaint. In June 2022, the US Supreme
Court denied the petition filed by the plaintiffs seeking review of this decision.
Plaintiffs in Canada filed claims with similar allegations on behalf of putative classes of purchasers
against several automobile manufacturers, including Volkswagen Group Canada Inc., Audi Canada Inc., and
other Volkswagen Group companies. Neither provisions nor contingent liabilities are stated because the
early stage of the proceedings makes an assessment of the realistic risk exposure currently impossible.
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
vans up to 3.75 tons). 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 viola-
tion 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. Volkswagen Group UK is cooperating with the CMA. In this matter, CMA has furthermore issued
requests for information to Volkswagen AG. In July 2022, Volkswagen AG filed an action for judicial 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 court’s decision may still
be appealed by the CMA. Concurrent therewith, Volkswagen AG continues to examine the possibilities for
reasonable cooperation.
In addition, a few national and international authorities have initiated antitrust investigations. Volks-
wagen is cooperating closely with the responsible authorities in these investigations. An assessment of the
underlying situation is not possible at this early stage.
Porsche AG has discovered potential regulatory issues relating to vehicles for various markets worldwide.
There are questions as to the permissibility of specific hardware and software components used in type
approval measurements. Differences compared with production versions may also have occurred in certain
cases. Based on the information presently available, current production is not affected, however. The issues
are unrelated to the defeat devices that were at the root of the diesel issue. Porsche AG is cooperating with
the relevant authorities including the Stuttgart Office of the Public Prosecutor, which is investigating the
matter in Germany. Based on the available information, no formal criminal investigation has been opened
against the company, however. Porsche’s own internal investigations are still in progress.
266
In November 2022, the US District Court for the Northern District of California granted final approval of
a USD80 million class action settlement resolving claims brought against Volkswagen AG, Dr. Ing. h.c. F.
Porsche AG, and Porsche Cars North America, Inc. that certain Porsche gasoline vehicles allegedly used
software and/or hardware that resulted in increased emissions and/or overstated fuel economy estimates
as compared to the results of certification testing.
The final Profit Sharing Settlement Agreement entered into by Navistar in December 2021 to resolve
disputes concerning the calculation of profit sharing amounts for purposes of Navistar’s corporate retiree
healthcare commitments received final approval from the relevant court in June 2022. In the reporting
period, Navistar paid the entire amount of all remaining sums required to fulfill the agreement of about
€0.4 billion.
In November 2021, three claimants accompanied by Greenpeace filed a lawsuit against Volkswagen AG
before the Braunschweig Regional Court. The action seeks to compel Volkswagen to initially reduce in
stages and by 2029 completely cease its production and placement into the stream of commerce of vehicles
with internal combustion engines as well as to reduce greenhouse gas emissions from development, pro-
duction, and marketing (including third party vehicle use). The lawsuit further seeks to compel Volkswagen
to exercise influence over Group companies, subsidiaries, and joint ventures so as to cause them to fulfill
these demands as well. In February 2023, the Braunschweig Regional Court dismissed the action as
unfounded. In addition, another action with similar requests for relief and by and large the same rationale
has been filed against Volkswagen AG by an organic farmer with the support of Greenpeace before the
Detmold Regional Court. This action was dismissed by the Detmold Regional Court also as unfounded in
February 2023.
Provisions were recognized by Volkswagen Bank GmbH and Volkswagen Leasing GmbH for possible claims
in connection with financial services provided to consumers. These relate to actions involving certain
features of customer loan and leasing agreements that may toll the running of the statutory cancellation
time periods.
In September 2022, GT Gettaxi Ltd. discontinued the lawsuit it had filed against Volkswagen AG and
another defendant, alleging in particular large damage claims. In August 2021, the lawsuit had been dis-
missed at the trial level on the grounds that the Cypriot courts lacked jurisdiction, but GT Gettaxi Ltd.
appealed this decision to the Supreme Court, the court of final appeal in Cyprus.
In line with IAS 37.92, no further statements have been made concerning estimates of financial impact or
regarding uncertainty as to the amount or maturity of provisions and contingent liabilities in relation to
additional important legal cases. This is so as to not compromise the results of the proceedings or the
interests of the Company.
Tax risks
Volkswagen AG and its subsidiaries have operations worldwide and are audited by local tax authorities on
an ongoing basis. Amendments to tax laws and changes in legal precedent and their interpretation by the
tax authorities in the respective countries may lead to tax payments that differ from the estimates made in
the financial statements.
Risks arise particularly from tax assessment of the cross-border supply of intragroup goods and services.
Through organizational measures, such as the implementation of an advance pricing agreement, as well as
the monitoring of transfer prices, Volkswagen constantly monitors the development of tax risks, as well as
the impact thereof on the consolidated financial statements.
267
Tax provisions were recognized for potential future payments of taxes for former years, while other
provisions were recognized for ancillary tax payments arising in this connection.
Financial risks
No risks with a score of 20 or more were reported for this risk category in the reporting year.
Strategies for hedging financial risks

In the course of our business activities, financial risks may arise from changes in interest rates, exchange
rates, raw material prices, or share and fund prices – but also from unforeseeable events such as the Russia-
Ukraine conflict and the Covid-19 pandemic. Management of these financial risks and of liquidity risks is
the central responsibility of the Group Treasury department, which reduces these risks using nonderivative
and derivative financial instruments. The Board of Management is informed of the current risk situation at
regular intervals.
Interest rate risk refers to potential losses that could arise as a result of changes in market interest rates.
It occurs because of interest rate mismatches between asset and liability items in a portfolio or on the
balance sheet. We hedge interest rate risk – where appropriate in combination with currency risk – and risks
arising from fluctuations in the value of financial instruments by means of interest rate swaps, cross-
currency interest rate swaps and other interest rate contracts with generally matching amounts and matu-
rities. The principle of matching amounts and maturities applies to financing arrangements within the
Volkswagen Group in the Automotive Division. In the Financial Services Division, the risk of changes in the
interest rate is managed on the basis of limits using interest rate derivatives as part of the defined risk
strategy.
Foreign currency risk is reduced in particular through natural hedging, i.e. by adapting our production
capacity at our locations around the world, establishing new production facilities in the most important
currency regions and also procuring a large percentage of components locally. We hedge the residual
exchange rate risk using hedging instruments. These mainly comprise currency forwards and currency
options. We use these transactions to limit the exchange rate risk associated with forecasted cash flows
from operating activities, intragroup financing and liquidity positions in currencies other than the
respective functional currency, for example as a result of restrictions on capital movements. The currency
forwards and currency options can have a term of up to ten years. We use these to hedge our principal
foreign currency risks, mostly against the euro and primarily in Australian dollars, Brazilian real, Canadian
dollars, Chinese renminbi, Czech koruna, Hong Kong dollars, Hungarian forints, Indian rupees, Japanese
yen, Mexican pesos, Norwegian kroner, Polish zloty, pounds sterling, Singapore dollars, South African rand,
South Korean won, Swedish kronor, Swiss francs, Taiwan dollars and US dollars.
Recently, existing hedges for the Russian ruble that are in some cases expiring have no longer been
replaced by new hedges and have for the most part been closed out through offsetting transactions.
The hedging of commodity prices entails risks relating to the availability of raw materials and price
trends. Particularly against the backdrop of the Russia-Ukraine conflict, we continuously analyze potential
risks arising from changes in commodity and energy prices in the market so that immediate action can be
taken whenever these arise. We limit these risks particularly by entering into forward transactions and
swaps. We have used appropriate contracts to hedge some of our requirements for commodities such as
aluminum, coal, copper and lead over a period of up to six years. We have also entered into price hedges for
cobalt and coal with maximum terms of less than three years. In the case of nickel, the strategic hedging
horizon is up to ten years, although existing hedges focus particularly on the next six years. Appropriate
contracts have also been put in place to hedge electricity and gas prices and ensure availability.
268
The precious metals platinum, palladium and rhodium have shorter hedging periods, generally amounting
to a maximum of up to three years. For selected commodities, this may also involve increases in physical
inventories. We have also entered into transactions in order to supplement and improve allocations of CO2
emission certificates as part of the European Union Emissions Trading System (EU ETS).
Special funds, in which we invest surplus liquidity, entail equity price risks and fund price risks in
particular. We reduce these risks through the diversified investment of funds and through minimum values
set out in the respective investment guidelines. In addition, exchange rates are hedged when market con-
ditions are appropriate.
In the notes to the consolidated financial statements we explain our hedging policy, the hedging rules
and the default and liquidity risks, and quantify the hedging transactions mentioned. We also disclose
information on market risk within the meaning of IFRS 7 in the same section.
Risks arising from financial instruments

Channeling excess liquidity into investments and entering into derivatives contracts gives rise to counter-
party risk. Partial or complete failure by a counterparty to perform its obligation to pay interest and repay
principal, for example, would have a negative impact on the Volkswagen Group’s earnings and liquidity. We
counter this risk through our counterparty risk management, which we describe in more detail in the
section entitled “Principles and Goals of Financial Management” in the “Results of Operations, Financial
Position and Net Assets” chapter. The financial instruments held for hedging purposes give rise to both
counterparty risks and balance sheet risks, which we limit using hedge accounting.
By diversifying when selecting business partners, we work to limit the impact of a default and keep the
Volkswagen Group solvent at all times, even in the event of a default by individual counterparties.
The use of financial instruments may result in losses if the hedging exchange rates are less favorable
than the rates achievable on the market at the maturity of the financial instrument.
Risks arising from trade receivables and from financial services are explained in more detail in the notes
to the consolidated financial statements.
Liquidity risk
Volkswagen is reliant on its ability to adequately cover its financing needs. There is a potential liquidity risk
that we will be unable to cover existing capital requirements by raising funds or unable to finance the
Group on reasonable terms, which in turn can have a substantially negative impact on Volkswagen’s busi-
ness position, assets, financial position and earnings.
In principle, the Automotive Division and Financial Services Division refinance themselves inde-
pendently of one another. However, they are subject to very similar refinancing risks. In the Automotive
Division, the Company’s solvency is primarily safeguarded through retained, non-distributed earnings, by
drawing down on credit lines and by issuing financial instruments on the money and capital markets. The
capital requirements of the financial services business are covered mainly by raising funds in the national
and international financial markets, as well as through customer deposits from the direct banking busi-
ness.
One of the ways in which Volkswagen finances its projects is with loans provided by national develop-
ment banks such as Kreditanstalt für Wiederaufbau (KfW) or Banco Nacional de Desenvolvimento
Econômico e Social (BNDES), or by supranational development banks.
269
In addition to confirmed credit lines, unconfirmed lines of credit from commercial banks supplement our
broadly diversified refinancing structure.
Financing opportunities can be hindered by worsening financial and general market conditions – also as
a consequence of the Russia-Ukraine conflict and the Covid-19 pandemic –, a worsening credit profile and
outlook or a downgrade or withdrawal of the credit rating. The increasing relevance of ESG ratings to
investors is also of growing significance in this context. In such cases, there is a risk of a fall in demand
from market participants for securities issued by Volkswagen, which may additionally have a detrimental
effect on the interest rates payable and restrict access to the capital market.
Risks and opportunities in the financial services business

While carrying out our financial services activities, we are primarily exposed to residual value risks and
credit risks.
A residual value risk arises when the expected fair value for the disposal of the lease or finance asset may
be lower than the residual value set at contract conclusion. However, there is also a possibility that disposal
of the asset will generate more income than calculated for the residual value.
Referring to the bearer of residual value risk, a distinction is made between direct and indirect residual
value risks. A direct residual value risk means that our financial services companies directly bear this risk
(as outlined in the contract). An indirect residual value risk occurs when, based on a residual value
guarantee, the residual value risk has passed to a third party, such as a dealer. In such cases, there is an
initial counterparty default risk associated with this third party (the residual value guarantor). If the guar-
antor defaults, the residual value risk passes to our financial services companies.
Management of the residual value risk is based on a defined control cycle, which ensures that risks are
fully assessed, monitored, responded to and communicated. This process structure enables us to manage
residual risks professionally and also to systematically improve and enhance the way we handle residual
value risks.
As part of our risk management efforts, the appropriateness of the risk provision is assessed regularly, as
is the residual value risk potential. In the process, we compare the contractually agreed residual values with
the obtainable fair values. These are determined utilizing data from external service providers and our own
marketing data. We do not take possible gains on residual market values into account when recognizing
risk provisions. Based on the resulting potential residual value risk, a variety of measures are initiated in
order to limit this risk. With regard to new business, the residual value recommendation must take into
account current market circumstances and factors that might have an influence in future.
Credit risk describes the risk of losses due to defaults in customer transactions, specifically by the
borrower or lessee. Default occurs when the borrower or lessee is unable or unwilling to make the pay-
ments due. This includes late or partial payment of interest and principal on the part of the contracting
party.
Credit checks on borrowers are the primary basis for lending decisions. Rating and scoring systems are
used to provide an objective decision-making basis for granting loans and leases and for recognizing risk
provisions.
An opportunity may arise if the losses from the lending and leasing business are lower than the
previously calculated expected losses and the risk provision recognized on this basis. Particularly in those
countries in which we take a conservative approach to risk due to the uncertain economic situation, the
realized losses may be lower than the expected losses if the economy stabilizes and borrowers’ credit
ratings improve as a result.
270
Risks are managed and monitored within the framework of corresponding processes relating to economic
circumstances and collateral, adherence to limits, contractual obligations, and conditions stipulated both
by outside parties and the company itself. As such, commitments are managed according to the degree of
risk involved (standard, intensified and problem loan management).
More information on risks in the financial services business can be found in the 2022 annual reports of
Volkswagen Financial Services AG and Volkswagen Bank GmbH.
Opportunities and risks from mergers & 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 trans-
formation 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 infrastruc-
ture. 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 pro-
cess. By entering into partnerships at a local level, we aim to identify regional customer needs more pre-
cisely, 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 invest-
ments, 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.
271
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.
OVERALL ASSESSMENT OF TH E RISK AN D OPPORTUN ITY POSITION

The Volkswagen Group’s overall risk and opportunity position results from the specific risks and oppor-
tunities shown above. We have established a comprehensive risk management system to ensure that these
risks are controlled. The most significant risks to the Volkswagen Group across all risk categories arise from
a negative trend in markets and unit sales, with regard to quality and cyber security, and from an inability
to develop products in line with demand and requirements, especially in view of e-mobility and digitali-
zation. The Volkswagen Group continues to be exposed to risks from the diesel issue. In 2023, an adverse
effect may result from the continued limited availability of parts, energy and other raw materials, as well as
from geopolitical tensions and conflicts, including from the Russia-Ukraine conflict. Taking into account all
the information known to us at present, no risks exist which could pose a threat to the continued existence
of significant Group companies or the Volkswagen Group.
This annual report contains forward-looking statements on the business development of the Volkswagen Group. These statements are based on assumptions relating to the development
of the economic, political and legal environment in individual countries, economic regions and markets, and in particular for the automotive industry, which we have made on the basis of
the information available to us and which we consider to be realistic at the time of going to press. The estimates given entail a degree of risk, and actual developments may differ from
those forecast. Any changes in significant parameters relating to our key sales markets, or any significant shifts in exchange rates, energy and other commodities or the supply of parts
relevant to the Volkswagen Group, or deviations in the actual effects of the Covid-19 pandemic from the scenario presented in this report will have a corresponding effect on the
development of our business. In addition, there may be departures from our expected business development if the assessments of the factors influencing sustainable value enhancement
and of risks and opportunities presented in this annual report develop in a way other than we are currently expecting, or if additional risks and opportunities or other factors emerge that
affect the development of our business.
272
Group Management Report Prospects for 2023
Prospects for 2023
believe that risks will arise from protectionist tendencies, turbulence in the financial markets and struc-
tural deficits in individual countries. In addition, continuing geopolitical tensions and conflicts are
weighing on growth prospects; risks continue to be associated with the Russia-Ukraine conflict. Further-
more, it cannot be ruled out that risks may also arise if new variants of the SARS-CoV-2 virus occur, par-
ticularly with regard to regional outbreaks and the measures associated with these. We assume that both
the advanced economies and the emerging markets will show positive momentum on average, but with
below-average growth in gross domestic product (GDP).
competition in the international automotive markets will intensify further. Uncertainty may arise from the
continued shortage of intermediates and commodities. This may be further exacerbated by the fallout
from the Russia-Ukraine conflict and, in particular, lead to rising prices and a declining availability of
energy.
Overall, the global volume of new car sales is expected to be noticeably higher than in the previous year. For
2023, we anticipate that the volume of new passenger car registrations in Western Europe will be signifi-
cantly above that recorded in the reporting period. In the German passenger car market, we predict a notice-
able increase in the volume of new registrations in 2023 compared with the previous year. Sales of passen-
ger cars in 2023 are expected to significantly exceed the prior-year figures in markets in Central and Eastern
Europe – subject to the further development of the Russia-Ukraine conflict. The volume of sales in the
markets for passenger cars and light commercial vehicles (up to 6.35 tonnes) in North America in 2023 is
forecast to be noticeably higher than the level seen the previous year. We anticipate a significant increase
overall in new registrations in the South American markets in 2023 compared with the previous year. The
passenger car markets in the Asia-Pacific region are expected to be noticeably up on the prior-year level in
2023.
whole, we expect a noticeable increase in the sales volume for 2023.
273
Group Management Report Prospects for 2023
For 2023, we expect to see a noticeable upwards trend in new registrations for mid-sized and heavy trucks
with a gross weight of more than six tonnes compared with the previous year in the markets that are relevant
for the Volkswagen Group, with variations from region to region. A significant increase in overall demand
is anticipated for 2023 in the bus markets relevant for the Volkswagen Group, whereby this will vary
depending on the region.
We assume that automotive financial services will prove highly important to global vehicle sales in
2023.
We anticipate that, amid challenging market conditions, deliveries to customers of the Volkswagen
Group in 2023 will stand at around 9.5 million vehicles. This assumes that the shortages of intermediates
and commodities and the bottlenecks in logistics will become less intense.
Challenges will arise in particular from the economic situation, the increasing intensity of competition,
volatile commodity, energy and foreign exchange markets, and more stringent emissions-related require-
ments.
We expect the sales revenue of the Volkswagen Group in 2023 to be 10% to 15% higher than the prior-
year figure and the operating return on sales to lie between 7.5% and 8.5%. In the Passenger Cars Business
Area, we forecast an increase of around 7% to 13% in sales revenue compared with the previous year, with
an operating return on sales of between 8% and 9%. For the Commercial Vehicles Business Area, we antici-
pate an operating return on sales of 6% to 7% amid a 5% to 15% year-on-year increase in sales revenue. In
the Power Engineering Business Area, we expect sales revenue to be slightly above the prior-year figure and
operating profit to be in the low triple-digit million euro range. For the Financial Services Division, we
forecast a strong increase in sales revenue compared with the prior year and an operating result in the
range of €3.5 billion.
In the Automotive Division, we expect the R&D ratio to come in at around 8% in 2023 and the ratio of
capex to sales revenue to be around 6.5%. 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 trans-
formation. 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. We antici-
pate a return on investment (ROI) of between 12% and 15%. Our declared goal remains unchanged, namely
to continue with our robust financing and liquidity policy.
Wolfsburg, February 21, 2023

The Board of Management
274

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4

G ROUP MANAG EMENT R EPORT

100 Goals and Strategies

Goals and Strategies

TH E 12 GROUP I N ITIATIVES OF TH E N EW AUTO STRATEGY

MECHATRON ICS – BACKBON E AN D SCALABLE SYSTEMS PLATFORM

SOFTWARE – CARIAD: ON E E 3 PLATFORM AN D AUTONOMOUS DRIVI NG (AD) STACK

BATTERY & CHARGI NG – CELL AN D BATTERY STRATEGY

BATTERY & CHARGI NG – CHARGI NG AN D EN ERGY SERVICES

MOBI LITY SOLUTIONS

ESG, DECARBON IZATION AN D I NTEGRITY

BUSI N ESS MODEL 2.0

NORTH AMERICA (NAR) REGION

GROU P STEERI NG MODEL

PEOPLE & TRANSFORMATION

STRATEGIC FI NANCIAL KEY PERFORMANCE I N DICATORS 1

2015 Target 2025

Operating return on sales2 6.0% 8 to 9%

Internal Management System and

I NTERNAL MANAGEMENT PROCESS I N TH E VOLKSWAGEN GROUP

CORE PERFORMANCE I N DICATORS I N TH E VOLKSWAGEN GROUP

Structure and Business Activities

OUTLI N E OF TH E LEGAL STRUCTU RE OF TH E GROU P

ORGAN IZATIONAL STRUCTU RE OF TH E GROU P

MATERIAL CHANGES I N EQUITY I NVESTMENTS

LEGAL FACTORS I N FLU ENCI NG BUSI N ESS

GROU P CORPORATE GOVERNANCE DECLARATION

Disclosures Required under

SHAREHOLDER RIGHTS AN D OBLIGATIONS

SHAREHOLDI NGS EXCEEDI NG 10% OF VOTI NG RIGHTS

COMPOSITION OF TH E SU PERVISORY BOARD

STATUTORY REQUI REMENTS AN D REQUI REMENTS OF TH E ARTICLES OF ASSOCIATION WITH REGARD TO

POWERS OF TH E BOARD OF MANAGEMENT, I N PARTICU LAR CONCERN I NG TH E ISSU E OF N EW SHARES

MATERIAL AGREEMENTS OF TH E PARENT COMPANY I N TH E EVENT OF A CHANGE OF CONTROL

DEVELOPMENTS I N TH E GLOBAL ECONOMY

EXCHANGE RATE MOVEMENTS FROM DECEMBER 2021 TO DECEMBER 2022

TREN DS I N TH E MARKETS FOR PASSENGER CARS AN D LIGHT COMMERCIAL VEH ICLES

TREN DS I N TH E MARKETS FOR COMMERCIAL VEH ICLES

TREN DS I N TH E MARKETS FOR POWER ENGI N EERI NG

TREN DS I N TH E MARKETS FOR FI NANCIAL SERVICES

N EW GROUP MODELS I N 2022

VOLKSWAGEN GROUP DELIVERI ES

VOLKSWAGEN GROUP DELIVERI ES 1

Passenger Cars 7,957,288 8,610,702 –7.6

GLOBAL DELIVERI ES BY TH E PASSENGER CARS BUSI N ESS AREA

VOLKSWAGEN GROUP DELIVERIES BY MONTH

Deliveries in Europe/Other Markets

WORLDWIDE DELIVERIES OF THE MOST SUCCESSFUL GROUP MODEL RANGES IN 2022

Deliveries in North America

Deliveries in South America

Deliveries in the Asia-Pacific region

PASSENGER CAR DELIVERI ES TO CUSTOMERS BY MARKET 1

DELIVERIES (UNITS) CHANGE

2022 2021 (%)

Europe/Other Markets 3,297,402 3,698,948 –10.9

COMMERCIAL VEH ICLE DELIVERI ES

COMMERCIAL VEH ICLE DELIVERI ES TO CUSTOMERS BY MARKET 1

DELIVERIES (UNITS) CHANGE

2022 2021 (%)